clean energy: structure and role of regulators

Clean Energy: Structure and

Roles of Regulators

Owen Zinaman

U.S. National Renewable Energy Laboratory

1

Brief Profile

Owen Zinaman is an International Power

Sector Analyst at the U.S. National

Renewable Energy Laboratory based in

Colorado (USA), focusing on deploying

the next generation of energy planning,

policy, and regulatory constructs. He has

worked in a diverse range of countries on

economic, financial and policy aspects of

renewable energy development, including

in Africa, Asia, and the Americas.

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Outline

Brief Overview of Power Sector Transformation

The Evolving Role of the Power Sector Regulator

An Overview of Variable Renewable Energy Regulatory Issues

Moving Forward: CERI Resources

3

Outline





4

Power Sector Transformation is Happening

Today

• How countries envision, plan, and regulate the power system is evolving.

• Long-held beliefs are evolving:

• Renewables are now a cost-effective resource in many locations and have been proven not to require 1-to-1 reserves.

• Distributed generation is not tantamount to the “utility death spiral.”

• Planning, operational, and regulatory strategies must evolve but do not necessarily cost more to implement.

• Networks can be cost-effectively expanded from the bottom up.

• Utilities can sell more than just electrons. Source: GridWise Alliance, U.S. Department of Energy

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Trends Driving Power System Evolution

Adapted from: Zinaman et al. (2015). Power Systems of the Future. 6

Outline





7

The Evolving Role of the Power Sector

Regulator

Available:

http://www.nrel.gov/docs/fy14osti/61570.pdf

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• Power sector regulators are frequently “where the rubber hits the road”

• Regulators seek to:– understand emerging trends in policy, technology, planning,

operations, and finance

– understand the technology implications of executing a policy goal

– evaluate new technology solutions and how they impact existing and emerging objectives

– navigate a multitude of evolving objectives (both legacy and new)

• The objectives (and therefore the role!) of regulators is quickly evolving

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• Evolving regulatory objectives drive a new

role for regulators

– Existing objectives are growing more

complicated

– New suite of emerging objectives poses a

novel set of challenges

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A Constellation of Objectives

Design and Manage Electricity Tariffs

Meet Demand Growth and Expand Electricity Access

Ensure Financial Health of Utilities

Facilitate Private Investment

Protect the Interests of the Poor

Support Technical Safety and

Reliability of the Power System

Enhance Energy Security and Manage

Risk

Reduce Health and Environmental

Impacts of Power System Operation

Meet Rapidly Growing Demand While Minimizing

Environmental Impacts and Risk

Support Procurement of

Renewable Energy

Integrate Renewable and Distributed

Generation Resources to Grid

Incentivize Energy Efficiency, Demand Side Management

and Smart Grid Technologies

Utilize Microgrid Technology to

Bolster Reliability and/or Access

Facilitate Consumer Participation in Power Markets

Enhance Cybersecurity and Protect Consumer

Privacy

Manage Increased Interactions with

Other Sectors

Existing Objectives Emerging Objectives

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Ex: Distributed Solar Programs









Risk






Renewable Energy









Privacy


Other Sectors


Pressing Objectives:

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Ex: Minigrid-based Electrification









Risk






Renewable Energy









Privacy


Other Sectors



13

Ex: Demand Response Program









Risk






Renewable Energy









Privacy


Other Sectors



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• Prioritization and harmonization of a multitude objectives is the essential challenge of power sector regulation

• Emerging trends in policy, technology, planning, operations, and finance are driving an evolution of regulatory objectives– The “information asymmetry” is evolving as well

• Regulators are uniquely positioned to accelerate modernization/transformation

Key Messages

15

Outline





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An Overview of Variable Renewable Energy

Regulatory Issues

Available:


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• vRE Generation Procurement

• Ensuring Adequate Grid Infrastructure

• Ensuring Short-term Security of Supply (Flexibility)

• Ensuring Long-term Security of Supply (Resource Adequacy)

Framework for Categorizing vRE Regulatory Issues

vRE

Generation

Grid

Infrastructure

Resource

AdequacyFlexibility

The Four Main Categories of

VRE Regulation

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• Early Stages– Normally less than 5%

VRE annual penetration

• Intermediate Stages– Typically between 5-

20% VRE annual penetration

• Advanced Stages– As VRE surpasses

20% annual penetration

3 Stages of vRE Regulation

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vRE

Generation

Grid

InfrastructureFlexibility Adequacy

Early Stage

(vRE approx. < 5%)

Establish appropriate VRE

support mechanisms

Establish queue

management

Establish efficient siting

processes

Simplify interconnection

protocols

Initiate data collection

efforts that will facilitate

formal grid integration

studies

Initiate data collection

efforts that will facilitate

formal grid integration

studies

Intermediate Stage

(vRE approx. 5-20%)

Refine VRE support

mechanisms if necessary

Refine siting and queue

management

Establish VRE grid codes

and designated

transmission zones

Coordinate generation and

grid planning

Establish distribution

network standards for VRE

Initiate formal grid

integration study

Improve forecasting

Broaden balancing-area

footprints

Improve system operation

methods


integration study, with

capacity credit or resource

adequacy components as

needed

Advanced Stage

(vRE approx. >20%)

Encourage alignment

between demand and VRE

production

Incentivize VRE

dispatchability

Expand grid

interconnection and market

coupling

Employ locational pricing

Incentivize active

network management

Employ advanced system

operation

Incentivize demand

response (DR)

Incentivize flexible

generation and/or storage

Improve adequacy

mechanism in accordance

with predominant paradigm

(e.g., capabilities market;

strategic reserve

requirement; full scarcity

pricing)

Issues & Actions at Different Stages of vRE Deployment

Increased

Interdependency= Priority Area =

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Early Stage vRE Regulatory Issues

Early Stage

(vRE approx. < 5%)

vRE

Generation

Grid


Establish

appropriate VRE

support

mechanisms

Establish queue

management

Establish efficient

siting processes

Simplify

interconnection

protocols

Initiate data

collection efforts

that will facilitate

formal grid

integration studies

Initiate data

collection efforts

that will facilitate

formal grid

integration studies

= Priority Area

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• 2006 series of legal and regulatory clarifications for vRE under 5 MW:– Interconnection processes

– Remuneration schemes; cost allocations

– Equipment standards

• Harmonizing interconnection procedures with robust technical standards can encourage investment while maintaining reliability

Snapshot – Guatemala Distributed vRE Interconnection

Source: CNEE (2006)

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Intermediate Stage vRE Regulatory Issues

Intermediate Stage

(vRE approx. 5-20%)

vRE

Generation

Grid


Refine VRE

support

mechanisms if

necessary

Refine siting and

queue

management

Establish VRE

grid codes and

designated

transmission

zones

Coordinate

generation and

grid planning

Establish

distribution

network standards

for VRE


integration study

Improve

forecasting

Broaden

balancing-area

footprints

Improve system

operation

methods


integration study,

with capacity

credit or resource

adequacy

components as

needed

= Priority Area

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• High-quality wind resources are distant from large load centers, exacerbating a“co-investment conundrum”

• Intensive stakeholder consultations helped identify CREZ regions;

• Transmission investments financed by utility customers

Snapshot – Texas “Competitive RE Zones”

Source: SNLFinancial24

Advanced Stage vRE Regulatory Issues

Advanced Stage

(vRE approx. >20%)

vRE

Generation

Grid


Encourage

alignment

between demand

and VRE

production

Incentivize VRE

dispatchability

Expand grid

interconnection

and market

coupling

Employ locational

pricing

Incentivize active

network

management

Employ advanced

system operation

Incentivize

demand response

(DR)

Incentivize flexible

generation and/or

storage

Improve adequacy

mechanism in

accordance with

predominant

paradigm

(e.g., capabilities

market; strategic

reserve

requirement; full

scarcity pricing)

Increased

Interdependency

= Priority Area

=

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• Ordered: 1,325 MW of storage in operation by 2024 for three California Investor Owned Utilities

• No more than 50% of capacity owned by Utilities

• Intention: Create a mature storage market that doesn’t require targets

Snapshot – CPUC Energy Storage Decision

Source: CPUC (2013)

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• Unique forces at play in each regulatory context

• Common issues and key ideas emerge across contexts and at each stage of vRE deployment and integration

• Regulating vRE presents a novel landscape of challenges and opportunities

Key Takeaways

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Outline





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Ask-an-Expert: Our Experts in Action

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Engaging with CERI

Visit our website for more

information about CERI

publications, resources, and

current activities:

http://www.leonardo-

energy.org/projects/ceri-clean-

energy-regulators-initiative

CERI Webinar Programme:

http://www.leonardo-

energy.org/webinar/clean-

energy-regulators-initiative-

webinar-programme

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http://www.leonardo-energy.org/projects/ceri-clean-energy-regulators-initiative

http://www.leonardo-energy.org/webinar/clean-energy-regulators-initiative-webinar-programme

Thank you to the International Copper

Association for your support of this work, as

well as our partners at Leonardo Energy!!

http://copperalliance.org/

http://www.leonardo-energy.org/

Thank You!

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http://copperalliance.org/

http://www.leonardo-energy.org/