The Regulatory Future of Clean, Reliable Energy: Increasing Distributed Generation
| Publication year | 2011 |
| Pages | 31 |
| Citation | Vol. 40 No. 10 Pg. 31 |
2011, October, Pg. 31. The Regulatory Future of Clean, Reliable Energy: Increasing Distributed Generation
October 2011
Vol. 40, No. 10 [Page 31]
About the Authors
Dennis L. Arfmann is a partner with Hogan Lovells LLP, focusing on environmental practice-(720) 352-3900, dennis.arfmann@hoganlovells.com. Tiffany Joye is an associate with Hogan Lovells LLP, focusing on environmental practice-(303) 454-2548, tiffany.joye@hoganlovells.com. She is licensed to practice law in Illinois and Washington, DC and is awaiting Colorado Bar exam results. Eric Lashner is an associate with Hogan Lovells LLP, focusing on energy practice-(202) 637-4820, eric.lashner@hoganlovells.com. He works in the firm's Washington, DC office.
This article examines the policy and regulatory issues surrounding the implementation of distributed generation. It is important for the United States to implement an effective regulatory framework right to avoid falling further behind in global efforts to de-carbonize electric power.
In 2010, carbon dioxide (CO2) emissions from energy production were the highest in history.(fn1) The International Energy Agency (IEA) estimates that 44% of CO2 emissions in 2010 came from coal, 36% from oil, and 20% from natural gas.(fn2) The IEA estimates that 80% of the power sector emissions are locked in for 2020 and will arise from existing central generation and new central generation construction.(fn3) One alternative to centralized generation from these fossil fuels is distributed generation (DG) from renewable energy.
DG can be defined as electric power generation occurring within distribution networks or on the customer side of the substation, as opposed to occurring in the large, centralized generation facilities built outside the distribution network on the transmission grid. The main DG electric-generating technologies include combined heat and power (CHP), small wind installations, small solar plants, fuel cells, and other forms of decentralized power sources that either generate electricity or displace fossil fuel generation. DG has three key aspects: storage, renewable generation, and renewable following natural gas plants.
DG has the potential to support the future of clean, reliable energy and the de-carbonization of electric power by increasing the feasibility of local renewable generation and offering benefits, such as additional overall system generation capacity and increased transmission efficiency. DG encounters barriers in the current regulatory framework, which does not allow the full realization of DG's benefits. Because state policies and incentives drive renewable energy generation,(fn4) the regulatory scheme plays an important role in helping or hindering the implementation of DG.
These DG resources constitute what one author calls one of the promising "Great Power Shifts" away from centralized fossil fuel generation.(fn5) However, the regulatory framework for DG is still in flux. This article addresses several current DG projects and the DG regulatory framework in the United States, and suggests future policies to enable DG resources.
DG Background
Historically, central station power plants generate the majority of electricity used in the United States. Electricity is transferred from power plants by the transmission and distribution (TandD) system to customers. Electricity comes predominately from fossil fuels: in 2009, coal provided 45% of centralized electricity generation, natural gas provided 23%, nuclear power provided 20%, and hydroelectric provided 7%.(fn6) The remaining 5% of generation came from other sources, some of which are renewable resources.(fn7)
In 2009, approximately 2,115 million metric tons (mmt) of CO2 were produced as a result of the electric power generation from coal (1,742 mmt) and natural gas (373 mmt).(fn8) Total emissions from electric power generation were approximately 2,160 mmt,(fn9) making coal and natural gas responsible for more than 97% of the CO2 emissions produced from electricity. Demand for renewable energy generation grows as the awareness of environmental benefits from clean generation spreads. Due to increased pressure for clean generation, a 2% decrease in the share of electricity produced by burning coal is expected by 2035.(fn10)
Accordingly, the U.S. Energy Information Administration (EIA) expects electricity generated from renewable distribution to increase to a total share of 14% to 16% by 2035.(fn11) Sophisticated "Active Distributed Power Networks" projects in Denmark, "Localized Portfolio Standards" in Boulder, and increasing city and citizen pressures in the United States suggest that local or distributed renewable generation could provide up to 50% of electricity to particular areas of the country by 2020.(fn12) Colorado clean energy businesses are actively engineering DG projects throughout the world. One example is Fort Collins's Fort ZED, which has a goal of a net Zero Energy District of DG by 2020.(fn13)
Similarly, Spirae, Inc., a Fort Collins renewable and distributed energy company, has proven through its work in Fort ZED and in Denmark that 50% renewable DG by 2030-and even 100% renewable DG-is achievable:
The EIA's projected 14% to 16% share of overall 2035 U.S. electricity generation still falls significantly behind the 50% projected capabilities in Denmark Fort Collins, Boulder, California, and other parts of the United States[A] 100 percent renewable energy supply based on domestic resources is physically possible, and ... the first step toward 2030 is feasible to Danish society.(fn14)
DG would involve shifting the local, state, and federal policy focus away from centralized power and transmission facilities and toward distributed, localized resources to increase efficiency and decrease CO2 emissions and costs. Although most states and the federal government already have implemented policies aimed at facilitating the growth of renewable resources, a lack of regulatory uniformity remains for DG.(fn15) This regulatory uncertainty poses a challenge not only to continued implementation of new renewable energy facilities, but also to the integration of one of the most dynamic methods of reducing greenhouse gases (GHGs)-electricity storage.
As the technology of electric storage evolves, the regulatory regime will be playing catch-up to be effective. Similarly, although the current regulatory regime contains some interconnection standards, many of these standards have resulted in long wait lists and imposed restrictions on applicability.(fn16) To promote and encourage renewable DG, this article examines the regulatory, legislative, and policy initiatives available and necessary to enhance the full use of DG capabilities.
Benefits and Technical Challenges
The Los Angeles Department of Water and Power (LADWP) touted DG in its 2010 Power Integrated Resource Plan. It stated:
The promise of DG is to provide electricity to customers at a reduced cost and more efficiently than the traditional utility central generating plant with transmission and distribution wire losses. Other benefits that DG could potentially provide, depending on the technology, include reduced emissions, utilization of waste heat, improved power quality and reliability and deferral of transmission or distribution upgrades.(fn17)
Itron's 2010 "Impacts of Distributed Generation: Final Report" to the California Public Utility Commission (CPUC) states:
Compared to the rest of the United States, California has a significant amount of DG installed on the grid, particularly solar... . [A]s yet there are no noticeable impacts on the distribution and transmission infrastructure, based on performed studies.(fn18)
Itron then identified future issues for continued evaluation of DG's impacts on distribution feeders and DG's contribution to reducing peak demand through both existing technology and technologies under development. Lists of potential benefits and technical challenges appear below.
Potential benefits include:
* directly connecting DG into substations or behind the meter
* adding generation capacity at the customer site for continuous power and backup supply
* adding overall system generation capacity
* freeing up additional system generation, transmission, and distribution capacity
* relieving transmission and distribution bottlenecks
* supporting maintenance and restoration for power system operations by providing potential generation of temporary backup power
* reducing load and replace peakers
* providing greater control of the grid
* providing greater localized power and local ownership of energy issues
* improving efficiency
* providing greater capacity control
* democratizing the electricity system
* allowing local control over the economics of power supply.
Potential technical challenges include:
* problems and/or delays with interconnection regulations
* problems attempting to connect with the utility transmission system or grid
* problems seeking to net meter, particularly with multiple DG sources
* increased pressure on utilities to balance generation and demand
* Volt-Var management, Watt-Volt management, curtailment, Watt-frequency management, voltage Sag ride-through, and dynamic grid stabilization (inertia)
* potential to eventually strand existing centralized generation assets
* impacts of variable renewable resources on distribution feeder voltage and harmonic levels
Despite a number of policies geared toward supporting renewable energy and DG, some of which are discussed below, the lack of uniformity and other...* redesign of distribution system as a supply source.(fn19)
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