In Transition to Decarbonization

Energy Efficiency Stakeholders Embrace New Paradigms

GridFWD 2019, hosted by Grid Forward (formerly Smart Grid Northwest), convened energy service professionals from across the Pacific Northwest in Seattle to focus on advanced solutions to modernize the regional energy system. In a series of articles, Cadmus presents some key themes that emerged regarding innovations in grid decarbonization and the different pathways, priorities, and solutions discussed as next steps in moving decarbonization and grid modernization forward.

By Samantha Teal

A common theme emerged at the GridFWD 2019 conference: decarbonization, electrification, and energy efficiency activities are intensifying and utilities, governments, and industries are looking for a path to harmonize their energy and climate goals. Washington, California, New Mexico, and Hawaii are among the states in the West leading the transition from an energy efficiency standard to a clean energy standard. Other states, including Oregon and Colorado, have parallel energy efficiency and decarbonization goals.

Traditional energy efficiency follows a fairly linear structure in which regulatory bodies establish cost-effectiveness and efficiency savings targets; utilities contract with program implementers to meet those targets, and they deploy measures and incentives designed to reduce baseline energy consumption across the customer base. The next wave of programs—like direct load control, building system electrification, and behavioral demand response—are about more than encouraging customers to follow the high-efficiency stickers when purchasing replacement appliances and systems. These programs require deeper consumer education and real-time engagement between the grid and consumers. The emerging drive for decarbonization is even more complex and less linear.

A confluence of diverse motivators—including legislation, consumer advocacy, market transformation, emerging technology, grid capacity constraints, aging infrastructure, and utility revenue potential—are driving the transition from energy efficiency-based goals to decarbonization goals. Multi-pronged approaches will be necessary to achieve decarbonization goals, and speakers at GridFWD discussed the critical first steps: internal operational change within utilities and increased cross-industry coordination.

Internal Collaboration and Innovation

As Avista’s John Gibson put it, “If we don’t disrupt our own business, someone else will.” Many utilities have built their demand-side teams around program sectors and customer segments, and over decades, these groups have calcified into silos. Several of the GridFWD 2019 speakers discussed that data and project learnings often aren’t shared outside of the group that manages them. This creates expensive duplicative efforts and sequesters applicable insights. But in the face of a new energy paradigm, companies are taking steps to remove these legacy barriers.

Larry Bekkedahl of Portland General Electric (PGE) described that by restructuring—essentially combining groups that were previously siloed—and by refocusing roles and titles on mission-driven problem solving, PGE is cultivating collaboration at every level of the organization. PGE is also bringing in new members to the company leadership team who share the vision for innovation, which Mr. Bekkedahl notes is critical.

Another approach is to designate a group to serve as the hub for innovation. Sage McLoughlin of the Duke Innovation Center shared the way her company is prioritizing and creating space for idea-sharing. While many companies struggle because employees don’t know where or how to propose innovative concepts, the Innovation Center serves as a beacon for employees to engage with others on these concepts.

The Culture of Innovation track made it clear that many utilities are undergoing an identity shift in response to industry changes. PGE describes itself as “not your grandparent’s electric utility.” Ryan Fedie of Bonneville Power Administration described the traditional utility role as the equivalent of requesting “more cowbell,” or more of the same solution to a given problem. The decarbonization and distributed resources landscape, by contrast, creates ample opportunity for utilities to “act more like conductors of a symphony”—an apt metaphor reinforced by the event’s venue space, which is home to Seattle’s own orchestra.

Executive buy-in, distributed creative license, innovative purpose, and structural transparency and collaboration are necessary for utilities to have the flexibility to adapt in this quickly changing energy landscape.

External Alignment

In contrast to start-ups with the cultural flexibility to experiment and fail quickly, utilities struggle to justify the risk inherent in innovating in the market, both for their own business case and to the regulators and ratepayers to whom they’re accountable. An example here is transportation electrification. For a long time, it wasn’t clear how—or whether—utilities should be involved in this space. When utilities stepped up and took a stake in the market, they helped reduce the barriers to adoption by increasing visibility and putting incentive dollars to work, made progress toward decarbonizing the transportation sector, developed next-generation creative applications for vehicle-to-grid capacity, and created new revenue streams through charging assets and new electrified load.

The proliferation of assets across the energy landscape requires more engagement between stakeholders, including utilities, consumers, property owners, municipal operators, manufacturers, and policymakers. Each of these organizations has customer-side priorities, functional needs, and assets—including data. As Emeka Anyanwu of Seattle City Light described, collaboration within and across these channels is critical for the decision-making process to revitalize grid infrastructure. A linear or piecemeal approach just won’t cut it.

Regulatory Alignment

Abigail Anthony of the Rhode Island Public Utilities Commission and Danny Waggoner of Advanced Energy Economy discussed the challenge of proposing new approaches or revenue streams without knowing what evidence is needed to validate the idea or how the decisions get made. There are learnings to be applied here from the energy efficiency world, which suffered similarly from the chicken or the egg problem: companies need funding for offerings in order to motivate markets and generate the proof points that would justify the funding.

The business case to justify decarbonization solutions is different than for energy efficiency. The scale of a cost-benefit analysis goes well beyond utility and consumer benefit. In the new clean energy paradigm, this analysis may consider local economic growth, improved health and safety, and avoided costs of unmitigated climate change. Washington state, with the passage of the Clean Energy Transformation Act, has worked with stakeholders to redefine cost-effectiveness in this manner to include the social cost of carbon. Many speakers agreed that utilities and regulators will need to work together to define metrics of success, validate methods for measuring performance, and develop effective implementation guidelines while considering commensurate risk and reward for shareholders, ratepayers, and the environment.

The New Customer Stakeholder

Emeka Anyanwu reiterated that the nature of a public utility’s mission is to deliver value to the customer-owners, and that customer choice is a critical part of the mission moving forward. Heather Rosentrater from Avista discussed how much there is to be learned from early adopters. Early adopters show us where to respond to—rather than drive—market changes. In the decarbonization landscape, consumers are even more impassioned. Martin Milani of Sunverge put it this way: “Consumers will drive the shift from economic dispatch to environmental dispatch by the desire for clean energy.”

There is a unique opportunity for utilities and industries to leverage the vocal consumer platform. Utilities can bring end-users into the conversations with regulators to demonstrate proactive, collaborative decision-making and the need for solutions to meet this new kind of demand. David Fanous of Southern California Edison has seen this work in practice. His group works directly with consumers and regulators to help build new program approaches. When utilities prioritize these goals and walk the talk, their customers see them as a partner in combating the climate crisis, which improves satisfaction and salience. Furthermore, when measures and programs are designed to meet a customer need rather than motivate an action, the economics of incentives change, making more room for targeted incentives to disadvantaged populations.

Investing in Dialogue

The speakers at GridFWD 2019 emphasized that whether we are partners to customer stakeholders, conductors of a grid symphony, nimble innovators, allies combating the climate crisis, or all of the above, achieving success will depend on defining what success actually looks like on both sides of the meter.

Their themes were calls to action: promote education at every level of decision making; leave room to fail when exploring new solutions; and foster collaboration and collective effort. By sharing thought leadership and lessons learned in the multidisciplinary GridFWD venue, participants are responding to the call and taking steps to ensure that we succeed in building a decarbonized future.

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