Electric Power Sector: Market Design

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Order Adopting a Ratemaking and Utility Revenue Model Policy Framework

New York Public Service Commission (NYPSC) released a new order as part of its Reforming the Energy Vision, which includes ambitious language on performance-based compensation and improved rate design. Specifically, the NYPSC adopts an outcome-based approach to measuring performance, focusing on peak demand reduction and energy efficiency as key metrics to tie to revenue in the short term.

A Review of Alternative Rate Designs

This review offers a comprehensive meta-analysis of utility programs and industry research on time-based and demand charge rates. The research identifies key design decisions and their effect on outcomes such as peak reduction, total load reduction, and customer acceptance. The review provides detailed and broad empirical evidence to guide conversations as different regulators consider changes to net energy metering or other peak reduction programs.

Utility Regulatory and Business Model Reforms for Addressing the Financial Impacts of Distributed Solar on Utilities

This study highlights some of the challenges and opportunities for the distributed solar PV (DPV) market arising from recent rate reform efforts, particularly demand charges and fixed charges. For example, it finds that immediate elimination of net energy metering (NEM) in all states could reduce residential DPV deployment 30 percent by 2050, while universal availability of NEM would increase residential deployment by roughtly 40 percent.

Going Deep on Performance-Based Regulation

Performance-based regulation shifts utility focus away from capital investment and sales volume, putting focus instead on delivering value for customers—in the form of an affordable, reliable, and clean power system. Performance-based regulation has been gaining momentum in several states. To support those states and others considering this regulatory change, we have produced several papers and briefs that offer perspective on more of the details of performance-based regulation.

Designing a Performance Incentive Mechanism for Peak Load Reduction: A Straw Proposal

This white paper is the first in our Incentive Mechanism Design series, which offers perspective on how regulators might decide to design performance incentive mechanisms for success. The paper examines a straw proposal for a new performance incentive to motivate utilities to reduce peak demand–a driver of investment in the electricity system–improving the affordability and environmental performance of the electricity system.

A customer-centric view of electricity service

This chapter in Future of Utilities – Utilities of the Future explores the nature of the customer-grid interface from the point of view of the customer. Customers are reconsidering the compromises they make given their new options for distributed energy services. This chapter exposes the underlying nature of the transactions happening at the customer/grid interface. The chapter uses analogies from the commerce and finance world to describe the currency-like features of electricity, and proposes ways of integrating new transactions into a future “fractal” grid.

The Market Design Initiative: Enabling Demand-Side Markets

This paper offers a set of recommendations for enabling demand response in order to fully participate in Europe’s wholesale markets. In the short term, it recommends electricity prices should begin to reflect time-varying value of energy, and wholesale markets should establish a right for demand response to participate. In the long term, policymakers should mandate time-varying pricing for all customers; adopt codes and standards encouraging smart appliances, EVs, and in-home automation; reform utility business models to encourage demand response; and improve local value signals via integrated distribution system planning.

Teaching the Duck to Fly: Second Edition

This report is an update to a 2014 analysis that shows how grid managers can address the so-called “duck curve” caused by high penetrations of solar and wind power. A “flying duck” refers to shifting the late-afternoon and morning peaks to decrease the need for fast-ramping resources. The report outlines 10 strategies, including demand response, storage, time-variant rates, and retiring inflexible generators with high minimum run requirements.

California 2030 Low Carbon Grid Study

This study investigates how California’s electric sector can help achieve deep reductions in greenhouse gas emissions. Modeling results from Phase I of the study reveal that the state can reduce emissions by more than 50 percent below 2012 levels with minimal rate impact, minimal renewables curtailment, and at not cost to reliability. Phase II adds new insight, adding detailed flexibility analyses and examining the effects of drought and different resource mixes on the grid.

Rooftop Solar Photovoltaic Technical Potential in the United States: A Detailed Assessment

This study finds the total national technical potential of rooftop solar PV equates to 39 percent of total national electric sector sales, nearly doubling previous estimates. Because the results are estimates of technical potential, they do not consider what would be required to integrate all the potential PV-generated energy into the power system. In practice, the integration of a significant quantity of rooftop PV into the national portfolio of generation capacity would require a flexible grid, supporting infrastructure, and a suite of enabling technologies.

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