Electric utilities are encountering a number of market challenges that are causing them to undertake business and operational transformations. And it’s only getting tougher as regulators and consumers ask them to integrate wind, solar, and energy storage into their energy arsenals.
Keeping the lights on is still priority number one, but it’s no longer enough to simply ensure a reliable power supply. Pressure is building — from regulators and customers — for innovative approaches to energy management and smart investments in alternative energy sources.
In New York, California, and three New England states, public utilities are now required to give non-wire alternatives (NWAs) consideration when searching for grid solutions. However, in states where it’s not mandatory, innovative utility leaders are proactively considering non-traditional solutions.
NWAs — such as distributed generation, energy storage, and demand response — can help a utility defer investment over time, reduce the risk of stranded assets, stimulate local market opportunities, and reduce environmental impact. There are roughly 100 NWA projects in planning stages across the United States, according to a recent report from a consortium of energy nonprofits. Global spending on alternatives is expected to increase 10-fold in the next decade.
But we haven’t reached a point where NWAs are the default option for grid capacity or resilience challenges. There are still situations where a more traditional approach is necessary, whether it’s because of reliability concerns, market density, geography, or other factors. It’s clear that utilities need to be equipped to thoroughly examine available options — wire and non-wire — and determine with confidence which one is the best fit. This requires experience, broad engagement, and a structured approach.
Having been involved in a number of these evaluations over the past decade, I have seen utilities manage NWA projects well — and not so well. Based on those experiences, here are three tips for grid operators when they are considering NWAs:
1. Pinpointing the precise problem is the first step toward effective solutions
It’s crucial for utilities to nail down the problem they’re trying to solve — with as much specificity as possible — before they can effectively analyze potential solutions. I’ve seen projects overspend and underperform because utilities were looking for solutions to the wrong problem.
The questions are familiar to utility experts: what are the requirements during peak demand? What is demand during the rest of the year? What are the unique features of the geographic area? What are the regulatory and safety constraints? And what will the answers be 10 years from now?
Each of these questions should be part of a clear and consistent framework to determine when and which NWAs are suitable for a system need, and whether any of them is preferable to traditional approaches.
This problem statement forms the basis of a utility’s requests for proposal, which should convey exactly what is needed in terms of societal benefit, cost, demand, minimum standards, and local regulations. For anyone requesting proposals, it’s important to do the necessary market research or to find partners who can engage companies most likely to have the expertise and capacity to deliver what you need. Start asking the questions you need to know until you’re satisfied that you understand the options and can create a short list.
2. Engage your potential critics early to build a broad consensus
Broad conversations about public investment can be messy, but there is enormous value in getting consensus before a project gets underway. That’s especially true with renewable energy, when the outcomes are central to the aims of various public interest groups and government agencies.
Before starting conversations with the wider community, utilities need to reach internal consensus on what options are viable. It’s important to determine which options — if any — meet the needs of the engineers, who demand reliability and hate risk, while also achieving the economic and policy goals of the utility, which may want to push the envelope.
Once there’s agreement within the utility, engage people outside and listen to their concerns. Go beyond the regulators or agencies who you are required to meet with. Get insight from potential market players. Engage environmental and commerce officials.
Hold public meetings to tell customers what options are on the table and find out what they want. It’s always better to hear community members out early on, rather than being surprised by problems down the project pathway.
3. Ensure that all parties share the same vision of success
Managing expectations is part of the public process. If you are seeking cost savings, how long will it take to achieve notable savings and how significant will they be? If it’s a question of efficiency, how will you track emissions and how much will they decrease in the coming years?
The answer to most of these questions is bound to be inexact and it’s important to be honest about that. There still needs to be clear criteria, both internally and externally, that will allow your utility to gauge success and adapt when you’re off track.
Part of what has people excited about NWAs is that they are more flexible and adaptable than transmission lines, which don’t move for decades once they are built and have the same capacity every hour of every day. And so, the criteria for success with NWAs also includes how much the utility can accommodate growth and uncertainty, both in demand and technology.
Adapting these three steps to your search for energy solutions may or may not lead you to a NWA in the end, but it will ensure that the project meets your needs and secures support from those who will build, maintain, and benefit from it.
As the world of energy alternatives expands, utilities that establish a clear framework for reviewing proposals will have a central role in facilitating innovation. When vendors know exactly what utilities need, today and in the future, they will be positioned to deliver.