Philip Mihlmester, Utility Dive
The United States is at an energy crossroads. There’s a significant movement underway, led by innovative private sector entities and a few forward-thinking regulators, that’s capturing the attention of Americans looking increasingly toward energy sources outside the traditional utility purview to power their homes and offices. That’s why it is time for regulators to empower utilities to incorporate more distributed energy resources (such as distributed solar, energy storage, energy efficiency and demand response) into a modern grid that reliably powers the everyday life of their customers.
Indeed, the basic regulatory model for electric utilities has been relatively unchanged for about a century. It was originally based on a system that delivered one-way power flows from large, remote central station generating plants to end-use customers scattered across a large service territory. This model necessitated features such as central planning by the utility to serve the needs of its monopoly distribution service territory, for which they received a guaranteed rate of return on utility invested capital in generation, transmission and distribution assets.
But, all that is being challenged as we speak. To facilitate the grid of the future, this century-old model must adapt to the modern realities of alternative distributed energy availability, environmental concerns, customer connectivity, and a rapidly growing demand for consumer choice. The new model should allow utilities to invest in modernizing America’s power grid to facilitate the increased beneficial use of distributed energy resources (DER) and to earn a reasonable return on that investment. Increasingly, grid modernization proceedings are becoming the vehicle for the utilities to request the investments needed to support greater integration of DER.