America’s Power Plan’s submission to SEPA’s 51st State Challenge was featured at the 51st State Summit in San Diego, CA on April 27. An “Innovation Review Panel” selected three papers to be featured at the Summit, including “An Adaptive Approach to Promote System Optimization,” by Michael O’Boyle and the experts of America’s Power Plan. The 51st State Challenge called for utility stakeholders to take a “fresh” look at electricity policy in a state with no preexisting regulations or market structure. Submissions came from utilities, clean energy companies, policy consultants, advocates, and independent researchers.
The paper examines fundamental principles of rate design and market structure that can be adapted to fit any political climate, resource mix, and technology evolution. The proliferation of new resources behind the meter has subjected the traditional distribution utility to unprecedented competition, challenging the notion that it remains a “natural monopoly.” But there is still a role for a central system manager to coordinate and optimize the system and a single owner for the system of poles and wires, although they need not be the same entity. Given the pace of technological innovation and the myriad solutions to improve grid efficiency, regulation in the 51st State must constantly adapt to support an ever-improving, competitive electricity system. Recognizing that answers depend on the idiosyncrasies of any state, the paper advocates for a reorientation of regulation toward the outcomes consumers want most from the electricity system: affordable, reliable, environmentally clean electricity service.
The paper consolidates the recommendations into four principles of rate design and market structure:
The other two featured papers largely converged with the fundamental principles articulated in the America’s Power Plan submission. The “Sharing Utility”: Enabling & Rewarding Utility Performance, envisioned a utility that transitioned into a platform for users and power producers to share resources in an optimal way maximizing customer benefits and minimizing costs. It went further than other papers to examine the incremental steps, including the stakeholder process, to enable a transition to a highly distributed future that seemlessly integrates new technologies at the grid edge. The other featured paper, The 51st State of Welhuton: Market Structures for a Smarter, More Efficient Grid, examined an end-state where individual users’ interactions with the grid were fully automated by an “energy box” software/hardware package. The paper envisions a future in which the distribution system is operated, but not owned, by an independent distribution system operator (IDSO) that acts much like RTOs on the bulk system today. In Welhuton, the IDSO ensures many of the fundamental principles in the Adaptive Approach are implemented through a marketplace that sends price signals to individual customers in real time.
With adaptation as a central policy goal, Energy Innovation and America’s Power Plan hope that the 51st State can be a model for technology and innovation that helps all states find ways to promote an optimized electricity system.