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Modernizing Gas Utility Planning: New Approaches for New Challenges

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Significant new uncertainties and options for the gas industry are creating new challenges for regulators who are responsible for ensuring that utility investments are in the public interest.

Many of the unknowns relate to the potential for customers to switch from gas to electricity for heating and other uses and the potential for utilities to replace fossil methane with alternative gases. Gas customers could face higher costs if their numbers decline in favor of electrification or if investments in alternative gases far exceed current resource costs.

Yet current typical tools and processes for regulating gas distribution utilities do not give regulators complete information on which to make decisions about long-term utility investments in this context.

Commissions across the country are recognizing the need to review and update their planning approaches. This paper surveys current efforts to modernize gas utility planning and draws lessons for those considering similar work. At the heart of the paper are five principles for redesigning planning to restore confidence that utility investments will be in the public interest:

  1. Build equity into planning so decisions are made with equitable service and distribution of costs and benefits in mind.
  2. Consider an expanded range of investment and resource options.
  3. Establish integrated gas planning by combining integrated resource planning practices with gas distribution system planning.
  4. Use combined energy planning to take the broadest possible view of emissions reduction opportunities.
  5. Foster collaboration with state agencies that have expertise in emissions reduction.

EU can stop Russian gas imports by 2025

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The Russian government’s decision to invade Ukraine puts into sharp contrast the deep entanglement between energy, security and geopolitics. Now more than ever, the European Union needs unity and resolve in its response and a focus on resilience in the face of interlinking crises.

Authors from Ember, E3G, Bellona and RAP have collaborated to identify the indispensable role clean energy solutions play in rapidly ending the EU’s reliance on fossil gas imports from Russia.

Key findings of our analysis:

  • Clean energy and energy efficiency can replace two-thirds of Russian gas imports by 2025. Europe can cut Russian gas imports by 66% by delivering the EU’s Fit for 55 package and accelerating the deployment of renewable electricity, energy efficiency and electrification. This is equivalent to a total reduction by 101 billion cubic meters. An urgent uplift in policy is now required to achieve the necessary level of implementation.
  • New gas import infrastructure is not required. Security of supply and reduction of Russian gas dependence does not require the construction of new EU gas import infrastructure such as liquified natural gas terminals. Alternatively sourcing 51 billion cubic meters of gas imports via existing assets is sufficient.
  • Coal power does not need to be extended. The above measures would enable the EU to achieve the necessary decrease in fossil gas demand without slowing the decline of coal-fired electricity generation.

To achieve urgent reductions in the use of fossil gas in Europe, it is important for decision-makers to identify and tackle counterproductive policies. The authors recommend 10 key measures to realise the additional potential for reducing gas use identified in this analysis:

  • Increase ambition and fast track adoption of the “Fit for 55” package. This is relevant in particular for the Renewables Directive, Energy Efficiency Directive, Emissions Trading System and the Energy Performance in Buildings Directive.
  • Clarify financial resources to support clean energy solutions. Ensure that allocated funding under the EU’s Recovery and Resilience Facility is used to that effect. Establish a facility for early, front-loaded release of Multiannual Financial Framework funds where the delivery of gas savings can be accelerated.
  • Make energy efficiency an energy security priority and scale action. Energy efficiency has the largest potential to reduce cost impacts on consumers. Consider opening existing funding resources such as the Connecting Europe Facility for scaling national energy efficiency programmes.
  • Remove any incentives that currently deepen or perpetuate gas consumption. Examples include financial support for gas heating systems and special tax regimes or exemptions for industry. Replace them with investment support for clean heating, in particular for low- and middle-income families. Innovative schemes such as on-bill financing, tax credits or heating appliance lease schemes should be supported.
  • Support the rollout of renewables and heat pumps. Establish concrete investment programmes, reduce administrative burdens and accelerate support for critical enablers such as grid infrastructure, demand-side flexibility and better use of transmission networks and storage. Integrated regional markets can buffer fluctuating renewable resources across larger regions.
  • Make low-carbon supply chains an energy security priority. A skilled workforce and input materials to the low-carbon supply chain are critical to delivering this vision. The EU can enhance and scale Member States’ efforts and can establish a cooperative approach with the United States and other partners on scaling supply chains.
  • Ensure equity in the energy response. Governments must ensure the costs and benefits of the transition are shared fairly among consumers. Increased carbon revenues or windfall profit taxes can be earmarked for investments in renewables and efficiency, as well as bill support for vulnerable customers. Enabling access to energy services can unlock bill savings for low-income families. Regulators should address energy poverty by designing fair network tariffs and ensuring suppliers of last resort are properly financed.
  • Put in place a European Commission task force. This could drive and monitor a whole economy approach so that supply chain bottlenecks can be anticipated and efforts streamlined across different parts of the Commission.
  • Conduct analysis to identify latent potential that can be fast tracked. In particular, analysis should be identified for industrial end use of gas, or inefficiencies in gas use (transformation losses, methane leakage) to line up even higher gas savings post 2025.
  • Avoid gas infrastructure or contractual gas lock-in. The “substitution” effect from Russian gas to other sources is expected to decline sharply after 2025, meaning that additional import or other gas infrastructure will face rapidly declining utilisation.

Participating in Power: How to Read and Respond to Integrated Resource Plans

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To address climate and equity challenges, utilities will have to transform the way they plan – ensuring that a full range of resources are considered to meet utility customers’ needs. One of the most important opportunities to ensure such outcomes is via integrated resource plans, or IRPs, which regulated utilities submit to their public utility commission (PUC) to demonstrate how they plan to meet consumer needs over longer time scales of 10 to 20 years. PUC processes need public input, but participation has historically been limited because of the technical and legal expertise required. A new guidebook from RAP and the Institute for Market Transformation (IMT) aims to address that barrier. “Participating in Power: How to Read and Respond to Integrated Resource Plans” is intended as an educational resource for local governments and other entities who are advocating for advancing clean energy and equity priorities via intervention in the IRP process.

In an interactive webinar, staff from IMT and RAP talked through the guidebook’s advice for reading, analyzing, and developing comments in response to an IRP. The presenters discussed how stakeholders can gain an understanding of IRP modeling and the process, so that they can effectively engage with PUCs and offer alternative solutions to the traditional, fossil-fuel-based assumptions that the utility may present. Meg Jamison, director of the Southeast Sustainability Directors Network, also joined to answer questions about local-level engagement in IRP processes.

Under Pressure: Gas Utility Regulation for a Time of Transition

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(Note: A shorter summary version of this report can be found here.)

The way we use fossil gas as a fuel for heating buildings and other end uses is rapidly changing. Efficiency gains and improved electric end-use technologies are constraining demand for gas. At the same time, the urgency to address climate change is increasing, with the new U.S. national target to cut greenhouse gas emissions by more than half by 2030 adding to existing state-level decarbonization policies. Increased awareness of the health and safety risks of fossil gas is also accelerating the transition to other sources of energy. These shifts are happening as gas utility distribution systems in many places are aging — meaning that utilities may be seeking approval for major investments while the size of their customer base is poised to shrink. Regulators and utilities that do not get ahead of these trends may face the need to impose unsustainable rate increases on customers, likely imposing high costs on those who can least afford it.

These changes mean that the current paradigm for gas utility regulation is coming under pressure, and regulators need a range of practical options to consider as they confront the changing circumstances. This paper offers recommendations that can serve as building blocks to facilitate the gas transition in an efficient and equitable way. Our recommendations fall into three categories:

  • Revitalizing gas planning through a robust stakeholder process, dynamic system mapping, scenario analysis and short- and long-term transition plans.
  • Enhancing energy efficiency and electrification programs by removing barriers to fuel-switching, expanding and coordinating programs, considering non-pipeline alternatives, and targeting electrification geographically.
  • Reforming gas rate-making by lowering the risk of rate impacts, updating cost allocation and rate design, and better aligning utility incentives with customer objectives and public policy goals.

Regulators can use these policy tools to enable a smooth transition that maintains the safety and reliability of the gas system, addresses possible impacts to disadvantaged communities, and supports access to crucial energy services at reasonable rates for everyone.

Making a Clean-Energy Future an Equitable Future

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Our jobs, comforts, and ability to survive all depend on something most people take for granted until it goes missing: energy. It powers our lighting, our appliances, our cell phones – our entire daily lives. We need it to search for jobs or work from home, to access essential goods, to cook and store food, to keep our homes at safe temperatures, to access water, and to connect with loved ones. For those who are medically dependent on electricity, access to energy can keep them out of our hospitals—currently overwhelmed by the COVID-19 pandemic—and out of harm’s way. Yet one unfortunate reality of energy is that it is not equitable, and this is a problem that directly harms public health.

Americans in low-income households, communities of color, small towns, and many rural areas do not have equal or affordable access to reliable energy. What’s more, the environmental cost of producing and delivering energy — the pollution of our air, water, and ground — tend to be concentrated in some of those same places.

The coronavirus has further revealed the extent to which these inequities affect vulnerable households. While some states have stepped in to block utilities from disrupting service for nonpayment during the pandemic, in others people who are now unemployed and struggling to afford basic needs amid the crisis must also worry about their electricity or gas being cut off. And new research is pinpointing the extent to which air pollution may have put residents of some communities more at risk of serious respiratory illness and mortality from COVID-19.

While achieving energy equity would require new policies, the time is right. Rapid changes in the power sector present real opportunities for improvement. Renewable energy development is becoming much less expensive, as are technologies such as energy storage that can make the power grid more flexible, cleaner, and more affordable. Coal plants are retiring, and states are encouraging the electrification of home heating and vehicles. But without attention to affordability and access, this transition runs the risk of once again  leaving many Americans  behind.

In a new report produced with the support of the Robert Wood Johnson Foundation, Synapse Energy Economics, RAP and Community Action Partnership take an in-depth look at the disparate impacts of electric and natural gas infrastructure on economic, social, and health outcomes — and consider how to ensure that a clean-energy future is a more equitable future. The report finds a variety of opportunities for policymakers:

  • Improve access to energy. Utility customers should be better protected against having their service shut off when they fall behind on payments. Incentives to invest in distributed energy resources, like combined solar and storage systems, can expand the reach of these innovations.
  • Make energy easier to afford. Clean-energy technologies must be affordable and accessible, while electricity rate designs should protect low-income households from paying more than their share of the costs to integrate these technologies into the electric grid. Communities served by cooperative utilities need resources to work with utility management to affordably transition away from coal.
  • Reduce environmental hazards. Energy and environmental regulators need to align their work to recognize the full value that clean-energy technology brings to controlling pollution from energy infrastructure. Communities can also use clean energy to build greater resilience in the face of extreme-weather events. And as carbon allowance trading markets expand, states participating in them should invest the revenues with environmental justice goals in mind.
  • Put people to work on the energy transition. Workers and communities that depend on the fossil-fuel industry need a path to training and secure, well-paid new employment, and the clean-energy workforce needs to become more diverse.

The report includes case studies from municipalities, states, and regions across the country that are working to achieve the goals described above. The small city of Bloomfield, Iowa, has taken charge of its energy future, transforming its approach to resource planning, investing in efficiency and solar power, and spurring local development. In Ohio, a statewide arrearage management program provides a model for protecting customers from utility shutoffs. In Minnesota, Xcel Energy and the state’s utility regulators are working together to implement performance-based regulation, with benchmarks for improving customer service quality and workforce diversity. And the 10 northeastern states that participate the Regional Greenhouse Gas Initiative are reducing carbon dioxide emissions (and other pollution) from power plants, improving community conditions and health outcomes.

Despite these innovations, policymakers need a better understanding of how to improve energy resiliency and reduce environmental impacts in low-income communities, rural areas, and communities of color. Projects undertaken thus far are not on a large enough scale to fill the equity gap. Integrated resource planning, which considers in detail the cost and environmental impacts of a given energy resource, could be a helpful tool to evaluate communities’ options. It can help decide when an expensive investment can be avoided in favor of cleaner alternatives, such as building a microgrid instead of a transmission line. The intersection of energy infrastructure with water, broadband, and transportation also needs consideration. For example, expanding broadband service to rural communities can enable access to “smart grid” energy technology.

Fortunately, this period of rapid change in the energy sector is accompanied by growing awareness of the need to address the sector’s disparate impacts. Community advocates are speaking out, and in some states legislatures and regulators are taking steps to build equity into the energy transition — and providing examples that can be replicated elsewhere. And the ongoing crisis of COVID-19 adds new urgency to getting this transition right — we know more starkly than ever before that the “old normal” is no longer sustainable. The time is now to ensure that a transformed energy sector does not leave rural and low-income communities and communities of color behind — but, instead, empowers them to be partners in creating more affordable and healthier outcomes.

Support for this study was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation.

Energy Infrastructure: Sources of Inequities and Policy Solutions for Improving Community Health and Wellbeing

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In this report, produced with the support of the Robert Wood Johnson Foundation, Synapse Energy Economics, RAP and Community Action Partnership take an in-depth look at the disparate impacts electric and natural gas infrastructure have on economic, social, and health outcomes — and consider how to ensure that a clean-energy future is a more equitable future. The report finds a variety of opportunities for policymakers, including policies to make energy more affordable for vulnerable communities, expand access to energy, reduce environmental hazards, and create jobs in the clean energy transition.

The report also includes case studies from municipalities, states, and regions across the country that are working to achieve these goals. The small city of Bloomfield, Iowa, has taken charge of its energy future, transforming its approach to resource planning, investing in efficiency and solar power, and spurring local development. In Ohio, a statewide arrearage management program provides a model for protecting customers from utility shutoffs. In Minnesota, Xcel Energy and the state’s utility regulators are working together to implement performance-based regulation, with benchmarks for improving customer service quality and workforce diversity. And the 10 northeastern states that participate in the Regional Greenhouse Gas Initiative are reducing carbon dioxide emissions (and other pollution) from power plants, improving environmental conditions and community health outcomes. This report highlights these successes and provides policymakers with insights into how to create a successful – and economically inclusive – transition to a clean energy future.

Power Sector Transformation in State Utility Regulation: To Boldly Go Where No Regulator Has Gone Before

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A decarbonized energy sector’s many benefits include lower prices, grid resiliency and cleaner energy. However, in order to attain this goal, regulators will need to actively engage in regulatory reforms that align utilities’ actions with the public good. Tools that can advance this objective include rate design reforms, decoupling, performance-based ratemaking and other structural changes that encourage the deployment of distributed energy resources.

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.

国际电力市场改革季报

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国际电力改革季报回顾近期全球电力行业政策和监管的最新进展,并摘选一些我们认为对中国电力市场改革特别相关的进展,以供参考。

 

纽约:将碳成本纳入电力批发市场和调度过程:负责监管批发市场并在该州扮演“调度中心”和 “现货市场交易中心”角色的纽约独立系统运营商(NYISO)正在开发一种机制,将碳成本纳入系统运营。新机制将建立在已经使用的“经济调度”方法的基础上。和以前一样,NYISO将收集与每个可用资源相关的可变成本的信息,进行实时更新调度的“优先顺序” – 但现在NYISO将基于“社会的全部成本”,通过估算碳成本来增加每个化石能源发电机组的出价。如果该提案获得批准,纽约ISO市场将是第一个采用这种具体方法的区域批发市场。然而,作为碳排放限额和贸易计划的一部分,东北部许多州和加利福尼亚州已经在调度决策中包含了碳成本。从这个角度看,这与中国改革电力调度工作高度相关,实施现货市场的工作应以经济调度为中心。经济调度的核心逻辑是按照可变成本(理想的算法是可变成本包括社会排放成本)来安排调度。

英国:更新电网公司的商业模式:英国监管机构OFGEM最近一直在就输配电监管征求公众意见。多年来,英国已经开发了一个名为RIIO(收入=激励+创新+产出)的框架,其中包括几个重要的指标,如客户服务,网络拥堵成本和减排,激励电网公司通过良好绩效来盈利。现在, RIIO-2包含了额外的机制,鼓励电网公司追求终端用户能源效率项目的投资,作为“电杆和电线”投资的低成本替代方案。这种方法也在包括美国各州在内的世界其他地区采用,在输配电电价改革不断取得进展的中国也值得考虑。

美国西部:区域批发市场发展:美国西部有超过35个传统上独立的平衡区域,而且许多区域相当小。从2014年开始,这些平衡区域逐渐融入新的区域“能源不平衡市场”(EIM),实现了在更大的地域范围内平滑可再生能源出力波动性及消纳可再生能源。到目前为止,EIM已经是一个实时(小时内)市场,但最近几个月,政府机构和利益相关方也一直在努力建立一个日前区域市场(可能会在15分钟内进行)。在中国,开展广泛的区域(多省)综合现货市场也可能降低成本并促进可再生能源的消纳。

印度:全国电力现货市场的新推动力中央电力监管委员会(CERC)已着手重建国家电力现货市场。 CERC的提案旨在优化现有国家资产的使用,如发电厂,输电线路和可再生能源发电,从而降低电力采购成本,提高效率,并整合更高的可再生能源发电份额。印度的市场改革工作对解决中国的问题有着启示作用,包括转向经济调度的需求和避免依赖“物理”性长期合同而阻碍电力部门的运营灵活性。

美国:照明能效标准的潜在挫折:2月,美国能源部(DOE)发布了一项计划,要求撤销之前扩大灯泡能效标准的计划。提高照明效率的措施通常可以为客户节省资金,并为整个社会带来净经济效益。美国能源效率经济委员会批评了这项新计划,并预估这种倒退将使每个家庭每年支出约100美元,还将产生由空气污染造成的健康问题,以及由此带来的碳排放量约等于700万辆汽车的典型排放量等负面影响。能源部的新计划可能会面临美国法院的挑战。与此同时,中国的节能标准和能效项目的持续改进彰显其全球领导地位,且已经看到显著节能成果。

弗吉尼亚州:综合资源规划检验最低成本资源选择:在美国,综合资源规划(IRP)始于20世纪80年代,许多州现在以各种形式开展IRP。在IRP下,“公共事业单位”(电力公司)通过在平等的基础上评估可用的供给侧和需求侧资源,为满足客户能源服务需求制定了具有成本效益的计划。将需求侧资源(尤其是终端能效)纳入流程至关重要,因为用户节能项目通常是新建发电厂的低成本和更清洁的替代方案。去年12月,弗吉尼亚州政府电力监管委员会拒绝了该州主要公共事业单位的IRP草案,并要求该单位对“最低成本”方案进行更细致的分析,包括能效资源。这只是一个IRP流程的例子而已,我们提出这个例子是因为IRP 逻辑是一个电力改革的基本原则。中国国家能源局于2016年发布的《电力规划管理办法》为中国的规划工作指明了这些原则

PJM:市场监测机构要求联邦能源监管委员会修改市场规则:2月,PJM的独立市场监测机构向FERC正式提出修改市场规则的具体要求,以减少发电商操纵市场(市场力)的特定手段。市场监测机构在PJM和其他“RTO / ISO”市场(大致类似于中国正在开发的现货市场)中发挥着重要作用。这条新闻展示一个典型例子:在市场监测机构的所有权力和责任外,他们可以直接要求某些市场流程和规则的改变,以保证市场具有竞争性且运作良好。 监测机构通常以公开报告,与“RTO / ISO“官员和利益相关者的讨论或对FERC的正式请求的形式进行此操作。中国目前正在建设现货市场,可以考虑建立独立的市场监测机构

3月14日, Monitoring Analytics 有限责任公司(PJM独立市场监测机构)发布了2018年PJM市场状况报告。该报告是独立市场监测报告对PJM在13个州和哥伦比亚特区管理的批发电力市场竞争力的评估。该报告包括对每个PJM市场的市场结构,参与者行为和市场表现的分析。年度“市场状况报告”包含关于PJM市场运作的海量数据,它解释了数据透明度对于市场成功运作至关重要,这一点对于中国建设电力市场有重要的参考意义。美国所有的区域“ISO/RTO”批发市场都有内部或者外部的市场监测机构,负责发布季度或年度分析报告。

欧盟:欧洲理事会支持使欧洲的电力市场更具竞争力和以消费者为中心:欧盟正在更新其电力市场规则,以改善市场的运作,赋予消费者更多的权利,并为清洁能源转型铺平道路。欧盟成员国于2019年1月18日批准了与欧洲议会就电力市场设计的指令和监管达成的两个协议。电力指令的主要内容包括为用户更积极地参与市场提供更多机会,价格准备金。储能参与市场和所有权问题。电力监管包含促进电力跨境贸易的电力交易规则,以及成员国建立共同容量机制的条件。中国也在开展电力零售市场竞争,欧盟在维护公平开放的市场竞争秩序的同时给消费者更多市场机会的做法对中国有借鉴意义。

Leading Utility Regulatory Reform: Process Options and Lessons From Oregon

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Unprecedented changes are underway in the electricity sector, and regulatory reform efforts aimed at responding to these changes are being initiated across the country. These efforts represent an opportunity for states to undertake new kinds of stakeholder engagement that are not typical of traditional public utility commissioner proceedings. States have many options when designing this engagement, and this paper lays out some of the key elements of a successful stakeholder process, including:

  • A well-defined scope of the potential reforms being considered;
  • Creative process elements that deepen and broaden discussions;
  • Involvement and engagement of a wide range of stakeholders; and
  • Discussion tools designed for a specific purposes.

The paper looks in particular at how stakeholder engagement has played out in Oregon, where many of the elements described above were successfully used in the SB 978 stakeholder process in 2018. RAP and the Rocky Mountain Institute served during this process as facilitators and advisors to the Oregon PUC, which completed the process by delivering a well-received report to the Legislature. Some of the recommendations in this paper, in turn, were informed by the process and outcomes of SB 978.