Comments Off on Integrate to zero: Policies for on-site, on-road, on-grid distributed energy resource integration
To meet decarbonisation goals, global renewable power capacity will need to more than triple by 2030, according to leading energy agencies. Centralised renewable generation will not deliver this level of change on its own, nor should it. Distributed energy resources (DERs) such as heat pumps, electric vehicles, small-scale solar generation and battery storage are essential to ensuring that clean power is the most affordable and reliable option for all countries.
Distributed energy resources must be effectively integrated with the grid if they are to fulfil their potential. Integration allows them to be used flexibly to draw power from or feed power into the grid according to the value their flexibility provides to the electricity system. This reduces carbon emissions from fossil generation used to meet peaks in electricity demand, increases system resilience, and benefits all consumers through the lower prices resulting from avoided generation and network capacity costs.
RAP sets out four key policy approaches that will help promote the effective integration of behind-the-meter distributed energy resources:
A strong set of enabling policies can remove barriers to DER integration. Together, they augment the flexibility potential of DERs and enable their participation in power system optimisation.
Price signals should reflect power system optimisation needs. Payments for energy services should vary in proportion to how much, when and where they are used or delivered.
Cost-reflective price signals should be combined with fair market access for distributed energy resources. With nondiscriminatory access to energy service markets and with pricing that reflects the full value of DERs, third-party service providers can shield consumers from price volatility in return for flexible management of DERs within agreed boundaries.
International collaboration among policymakers and regulators can spread best practice. Cross-border knowledge transfer among regulators is a growing phenomenon and can help each place to find its own way, guided by local circumstances, politics and experience.
The authors explore each of these insights in greater detail. They also highlight best practices from around the world, with contributions from RAP colleagues Raj Addepalli, Max Dupuy and Jessica Shipley.
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Comments Off on Decarbonization of Electricity Requires Market-Based Demand Flexibility
To effectively decarbonize the electric sector, utilities will need to address the growing load shape challenges driven by the variability of many renewable resources. Behind-the-meter solutions, such as energy efficiency, demand response, electrification and storage, will play an important role in grid stability, but only if they can deliver changes in demand that meet the time and locational needs of the grid. Smart meter interval data, combined with open-source methods and software, can provide transparent measurement of savings load shapes (resource curves) that enable the integration of demand flexibility into energy, capacity and carbon markets, and as a transmission and distribution resource. This allows utilities to procure demand flexibility in the same way they procure other resources by leveraging a price signal and pay-for-performance to drive innovation and attract private investment.
This article (subscription or purchase required) was part of a special issue of Electricity Journal on the topic of energy optimization, guest-edited by RAP staff.
Comments Off on Market-based instruments for energy efficiency: a global review
There is an increasing interest in the role so-called market-based instruments (MBIs) can play to deliver energy efficiency across the world. Their rising popularity among policymakers owes, in part, to their characteristics. They tend to be less prescriptive than traditional regulations and grants because they focus on the energy savings versus the means of delivery. Furthermore, policymakers’ objectives can potentially be met more cost-effectively through the direct involvement of profit-maximising companies, either as obligated parties or auction bidders. In the case of obligations, the costs to utilities do not appear on government balance sheets, as utilities pass on their costs to consumers through energy prices.
While these characteristics can also create some challenges for policymakers, the uptake of MBIs has not yet slowed as a result. The freedom given to private sector actors to discover the most cost-effective means of generating energy savings can lead to delivery through a concentration of particular technology types, especially if their costs decline quickly. This puts a premium on good programme design, with regular evidence-based reviews and, in many cases, limits on the amount of energy savings that can be claimed by individual technologies. Another issue related to obligations is that instruments funded through energy prices are potentially more regressive than those funded through general taxation, given that poorer households tend to consume more energy as a proportion of their incomes. A number of programmes have elements targeted at fuel poor households, while other policymakers have employed explicit redistribution policies aimed at lowering the energy bills paid by poorer households.
In a groundbreaking effort, the authors provide a global assessment of the impact of MBIs for energy efficiency in terms of investment, energy savings, and cost-effectiveness. Our analysis of 52 different instruments from across the world shows that MBIs are becoming increasingly important in terms of their number, global coverage, energy savings, and investment triggered.
Comments Off on Next-Generation Performance-Based Regulation: Volume 1 (Introduction—Global Lessons for Success)
This report, the first of three volumes of Next-Generation Performance-Based Regulation: Emphasizing Utility Performance to Unleash Power Sector Innovation, examines the concept of performance-based regulation (PBR) and how it can provide a framework to connect goals, targets, and measures to utility performance or executive compensation. It examines leading examples of PBR from around the world, including the United Kingdom’s Revenue = Incentives + Innovation + Outputs (RIIO) program, New York’s Reforming the Energy Vision (REV), and other successful initiatives in Denmark, Mexico, and South Africa. It also examines what regulators have learned from experience with early forms of PBR, finding that incentive measures need to be simply designed, predictable, clearly measurable, and sized in alignment with desired results. Rewards or penalties may be set too high or low initially, so a successful PBR program also needs to be adjustable.
The Next-Generation Performance-Based Regulationfull report was published in 2017 as a collaboration between the National Renewable Energy Laboratory and RAP, part of the 21st Century Power Partnership initiative.
Comments Off on Next-Generation Performance-Based Regulation: Volume 2 (Primer—Essential Elements of Design and Implementation)
This report, the second of three volumes of Next-Generation Performance-Based Regulation: Emphasizing Utility Performance to Unleash Power Sector Innovation, focuses on best practices for design, development, and implementation of performance-based regulation mechanisms. It begins by laying the groundwork for understanding the incentives inherent in institutional arrangements, especially utility composition and ownership structure. It then builds on that understanding to outline best practices for the development and design of successful performance-based regulation (PBR) mechanisms. There is no “cookbook” to create a PBR mechanism, because specific jurisdictional considerations require modification and thought, but the report lists various PBR design elements that could be incorporated into specific jurisdictions.
The Next-Generation Performance-Based Regulationfull report was published in 2017 as a collaboration between the National Renewable Energy Laboratory and RAP, part of the 21st Century Power Partnership initiative.
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