Will REV Be New York’s Key to Implementing the EPA’s Carbon Reduction Plan?

Under President Obama and the EPA’s new carbon reduction plan, which is the first ever national standard on carbon reductions, New York is now required to cut its carbon emissions by 44 percent by 2030. The EPA’s new rule comes just over a month after Governor Cuomo and the New York State Public Service Commission (PSC)’s April 24, 2014, announcement of their Reforming the Energy Vision (REV) initiative, which aims to develop a new energy paradigm in New York. Under the EPA’s new rule, every state has a great deal of flexibility in developing their implementation plans. REV aims to fundamentally restructure the way New Yorkers buy and use energy, and perhaps will become a main driver of how New York meets its newly federally required carbon emission standards.

Under REV, the PSC will begin a comprehensive overhaul of its regulatory scheme primarily with the creation of Distributed System Platform Providers (“DSPP”). A DSPP will essentially play the role of a local franchise utility (ConEd, O&R, CHP&G, Nat Grid, etc.) — but with more responsibilities. DSPPs would be tasked with planning and redesigning the local grid in order to integrate more distributed energy and demand response.

Though not yet a final plan, REV offers ESCOs, utilities and consumers an exciting opportunity as the traditional role of utilities expands beyond distributing electricity, maintaining local power lines, and billing customers. Additionally, aligning utility interests with increased distributed renewable energy and energy efficiency is an innovative revelation. Some are calling this expansion of the utility model a revolution. So, who implements REV, what are the opportunities and how will the role of ESCOs, energy consumers and other participants in the energy industry be impacted?

PSC envisions that DSPPs will accommodate advances in power generation, energy distribution, and information management technologies. DSPPs will act as an interface between consumers and power generators and serve as the local balancing authority in its service area, “forecasting load and dispatching resources in real time to meet customer needs.” It remains to be seen how this will precisely work. However, this shift towards a market-based and decentralized approach may open the door for smaller production facilities to come online and generate power from a range of new energy sources. The full details of the announcement are presented in this 66-page report.

Barriers to Implementation & The Role of ESCOs

Customer participation is a major obstacle for the PSC, DSPPs, and the overall success of the REV to overcome. The REV initiative requires the development of a comprehensive strategy to attract the interest and participation of New York end users in distributed energy and demand response technologies. Energy is increasingly being marketed by retail suppliers known as Energy Service Companies (ESCOs) in New York. Part of the REV proceeding is an exploration of how much of it will be implemented by ESCOs (i.e., energy marketers) developing and selling innovative products to their retail electric/natural gas customers.

While many ESCOs currently provide commodity service for larger users of electricity, ESCOs can capitalize on the PSC’s market-based approach to energy and use the distributed energy model to more effectively promote a wider range of products to a wider range of consumers. Under the new model, ESCOs can market value-added elements like real-time reporting of renewable power usage, or use smart grid technology to allow consumers to purchase variable rate services with a more comprehensive awareness of periods of peak demand.

Governor Cuomo and the PSC believe REV will have an overall positive impact on the local economy and provide increased reliability. The polar vortex and skyrocketing natural gas prices are certainly not a distant memory. Further, as dirty coal-fired power plants are forced to close, increasing capacity from renewables and incorporating distributed sources of power into the state’s energy portfolio may prove to be a long-term economic solution.

PSC is also encouraging microgrids under REV. A microgrid is basically a connected group of electric users that can operate autonomously if necessary (such as New York University). By using local generation, consumers can create a mini grid that remains connected to the larger grid, and can be especially useful during blackouts. Before microgrids expand beyond the single owner campus model and into communities, there are some outstanding regulatory issues that must be resolved. For more on how this works and the main legal hurdles to microgrids, see here.

How REV Will Work Going Forward

The PSC has broken down the regulatory development of REV into two Tracks. Track 1 is focused on the design and operation of DSPPs and how to get customers engaged and informed on their energy management. Track 2 is focused on regulatory changes and long term ratemaking issues that would seem to evolve from the conclusions of Track 1. A collaborative meeting hosted by the PSC recently occurred on May 12th, and the PSC gave a presentation where it stated that REV would be put into practice beginning with utilities filing Track 1 implementation plans in 2015. The presentation from that meeting is available here.

Further, a public symposium entitled “An Energy Agenda for the Future” regarding REV’s Track 1 issues was held at Albany Law School on May 22, where panelists discussed global and domestic energy needs, systemic challenges to implementation, and models for the future.  While specific reference to ESCOs was notably absent from much of the discussion, the topic of distributed generation through independent power producers was present throughout the event. Mark McGranahan, the PSC’s Vice President of Power Delivery and Utilization, [ppt] focused on improving the transmission-distribution interface and establishing advanced technical requirements for maintaining real-time balancing on the grid; while other speakers discussed the [ppt] “functional unbundling” of production and distribution in order to encourage an open and non-discriminatory market. This should prove a boon for ESCOs, who can take advantage of new opportunities for competition created by the reformed energy marketplace and work with their customers to aggregate power through innovative products and programs, while reducing costs.

Co-written with Natara Feller

Lead image: New York via Shutterstock

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Benjamin Falber is a project manager on the energy storage team at NYSERDA.

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