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Distributed Generation Complicates Resource Planning for Utilities

Distributed generation is complicating the previously straightforward task of resource planning, a Dominion (NYSE:D) official told a Washington, D.C., gathering Feb. 20.

“Even in Virginia, where the sun doesn’t shine like it does in Arizona,” and rates are relatively low, more customers are choosing to produce power during daylight hours via rooftop solar, said David Shuford of Dominion Resource Services.

Shuford, the company’s vice president of policy and business evaluation, said this further complicates utility integrated resource planning. Regulated utilities already use an analytical “crystal ball” to predict population growth and economic trends.

Now, however, utilities also have to estimate how many people in their regulated territory might employ distributed generation through rooftop solar in coming years.

Shuford appeared at the National Press Club in Washington, D.C. as part of a presentation sponsored by ICF International, a technology, policy and management consulting firm. ICF dubbed the presentation, “Barbarians at the Gates or Utility 2.0.”

Shuford drew laughter when he said that neither he nor Dominion picked the title for the session and doesn’t consider DG proponents “barbarians.”

“The vast majority of our customers do not choose to self-generate,” Shuford said. Nevertheless, guessing wrong on DG estimates could cause a utility to either over-build or under-build generation.

This situation complicates the traditional utility compact where regulated electric monopolies provided power to captive customers, typically through centralized power plants, Shuford said.

Even customers who install rooftop solar still get most of their electricity from the power company’s generation assets.

If self-generating customers are no longer obligated to buy power from the regulated utility, it affects the utility business, Shuford said.

Shuford believes the current setup allows distributed generation participants to use the utility’s network of wires and infrastructure “as a battery.” The Dominion official also said the current package of legal incentives tends to grant DG customers a break from some of the expenses that go into reliable electric infrastructure.

With more customers looking into self-generation, it has created some talk of a “utility death spiral” where the regulated companies’ cost of maintaining infrastructure remains high while profit potential erodes, Shuford said.

“In the long term as prices come down, you may see to see utilities change their business dramatically,” to avoid stranded assets, Shuford said. “We are nowhere close to that point yet” and it might not happen in certain parts of the country.

Shuford expects utilities might react by lobbying for tweaks to the regulatory setup at the state level. This could include everything from modifying ‘net metering’ policy to requesting a higher return on equity to outright “decoupling” of assets.

Companies could also develop more utility-scale renewable energy on their own. That could be easier said than done, given that renewable energy advocates might not be impressed that solar panels are being installed in a field on the other side of the state, Shuford said.

Also some people favor self-generation because they want to be less reliant on a centralized utility. For example, in Georgia, solar advocates joined forces with the Tea Party to push more renewables, Shuford said.

Virginia, where most of Dominion’s regulated customers are located, does not have a renewable portfolio standard. Nevertheless, utility Virginia Electric Power is participating in rooftop solar programs and looking to develop some of the nation’s first commercial offshore wind generation in the Atlantic Ocean near Virginia and Maryland, Shuford said.

This article was originally published on GenerationHub and was republished with permission.

Lead image: Solar and wind via Shutterstock

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