Power Sector Transformation

Tectonic shifts are rocking the power grid.  The price of solar and storage have fallen 80 percent in five years, and the cost of wind power has been reduced by more than half.  Technology is turning buildings into thermal batteries that can conserve power with the flip of a switch.  New businesses are entering the power industry, shifting a historically monopolistic sector into a highly competitive age.  A changing climate is making extreme weather more common, testing the resilience of critical infrastructure.

citypowerPolicymakers now face the difficult task of balancing three must-haves for the power sector: affordability, reliability, and environmental performance.

It’s a tall order to get this right—and getting it wrong gravely imperils the economy.

Energy Innovation works with national and regional decision makers to develop policies that will manage the grid’s transition to a cleaner, lower-carbon resource mix.  Our largest project in this realm is America’s Power Plan.

The Power of System Optimization

As information technology (IT) makes its way onto the power grid, it is opening up amazing opportunities for system optimization.

This capability comes at an opportune time.  Our electricity supply is becoming more variable because solar and wind resources only exist during certain times of the day, and because natural gas is not always available for power generators.  At the same time, energy demand is becoming easier to control through modern technology.

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A smart combination of IT and physical solutions can allow us to optimize across a broad portfolio of technologies on both the supply and demand side. The net result: affordable, reliable, clean power.In this new paradigm of system optimization, flexibility becomes ever more important.  Luckily, we have several options available to provide flexibility today.

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Energy Innovation’s Power Policy Areas

Energy Innovation works on four broad topics within the power sector:

  1. Ratemaking and utility business models require innovation because the current approaches almost universally fail to incentivize energy companies to optimize renewable energy and demand-side resources.  Utilities will need to accept and embrace their new role of service provider and system optimizer in order to stay afloat through the power system’s evolution. At the same time, regulatory models will need an update to reward utilities based on how well they perform in their new role. Electricity bills must also be designed to reflect the value customers recieve from the system as well as the value they provide to it.See more.
  2. Planning for transmission and distribution is another necessary piece to reduce the energy sector’s emissions, keep costs low, and enhance reliability.  A more robust transmission network that is coordinated over large regions can effectively integrate a high share of renewables onto the grid, but the institutions that manage these regional systems need better models for coordination and cost allocation. Distribution-level planning should start with the services needed, and establish a level playing field for all resources to meet the system’s needs.See more.
  3. Wholesale market design is crucial for setting accurate, long-term price signals that incentivize energy conservation and promote low-carbon electricity production.  Good market design properly values the capabilities that are needed to achieve a cleaner, more efficient power sector, unlocking competition to drive the most optimal allocation of power resources.
    See more.
  4. System optimization has now become a central principle of grid management. The electricity system must be optimized across a portfolio of technologies, across diverse geographies, between the distribution and transmission systems, and across various timescales. See more.

Our Work in the Power Sector

Energy Innovation has worked with several U.S. state Public Utilities Commissions that are considering innovative approaches to updating their operations.

America’s Power Plan, based on the collective knowledge and advice of more than 150 electricity experts, provides a toolkit for decision makers in the power sector who are tasked with addressing these imminent challenges.

Internationally, Energy Innovation has collaborated with experts in Europe and Asia to help them apply the appropriate policies to their countries’ specific power sector issues.