New York REV, Demo Projects Point Toward 21st Century Electricity System

This post is one in a series of feature stories on trends shaping advanced energy markets in the U.S. and around the world, drawn from Advanced Energy Now 2017 Market Report, which was prepared for AEE by Navigant Research.

Utilities and electricity regulators in the United States and Europe are facing new electricity market realities: flat load growth, rapid adoption of distributed energy resources (DERs), emission reduction requirements, and ambitious goals for renewable energy deployment. In Q2 2016 alone, regulators across 42 states took more than 100 different regulatory actions addressing DER adoption, positively or negatively including measures on fixed charges, net metering, solar valuation, third-party ownership, and community solar. New York’s Reforming the Energy Vision proceeding (REV), launched in 2014, stands out as an example of a regulatory strategy that promotes more efficient energy use, better integration of renewables and onsite power, and more customer choice.

Specifically, REV is part of a broader push to achieve the following energy goals for New York’s electricity system by 2030:

• 40% reduction in energy sector greenhouse gas (GHG) emissions from 1990 levels, ultimately decreasing total carbon emissions 80% by 2050;
• 50% of all electricity generated by renewable energy sources;
• 23% decrease in energy consumption in buildings from 2012 levels.

REV looks to fundamentally reorient the way electric utilities operate and make money. Under REV, regulated utilities will become operators of a Distributed System Platform (DSP), not just delivering power to customers from central power plants but also facilitating transactions between customers and third-party providers of DER products and services. Through this platform, customers large and small will be able to actively participate in electricity markets and connect with a range of service providers that can help them manage their electricity use and generate power themselves.

Under this construct a new valuation framework would allow DERs to compete in the marketplace based on the value of the benefits that they provide. In November 2016, the New York Department of Public Service (DPS) described the process this way: 

The modernization of New York’s electric system will involve a variety of products and services that will be developed and transacted through market initiatives. Products, rules, and entrants will develop in the market over time, and markets will value the attributes and capabilities of all types of technologies. As Distributed System Platform capabilities evolve, procurement of DER attributes will develop as well, from a near-term approach based on requests for proposals and load modifying tariffs, toward a more sophisticated auction approach.

The value flowing from the participation of these DERs would be shared by all the participants in the system. As a result, REV is attempting to transform DER from a growing threat to utilities’ bottom line to a central element of the electricity system transformation that aligns interests of utilities, third party service providers, and customers. If successful, New York would set an important precedent for other states.

Although much of the REV vision is still to be realized, 12 demonstration projects have been approved, with the purpose of testing new business models; creating new relationships between utilities, customers, and third-party service providers; and promoting innovation within utilities. These projects are intended to show how new products and services might capture latent value on the grid, and how new business models can monetize and distribute that value across third parties, utilities, and customers. As the demonstration projects roll out, and the DSP begins to take shape, other utilities and other states are expected to follow suit. The following table shows approved pilots and what they are testing.

NY REV Demonstration Projects

There is a long way to go in REV’s remaking of the utility business model for facilitating new customer options, many of which have not yet been imagined. REV has caught the attention of many other utilities facing similar challenges, and as a first-mover in many ways, will undoubtedly face years of refinement. But these dozen demonstration projects signal the start of experimentation about what a truly modern 21^st century electricity system can offer.

Find out more about this year's advanced energy trends and the full size of the advanced energy market by downloading Advanced Energy Now 2017 Market Report, available for free at the link below: