The biggest gold rush in the history of New York state’s energy markets will begin in the next several years.
The question is: Who will be the big winners?
The state Public Service Commission, which regulates electric utilities, has proposed a dramatic change in how consumers get their electricity.
Today, the relationship between consumers and the energy they use is pretty simple. When a light is turned on, for example, electricity generated by a large power plant far away is sent by a utility, which later sends a bill based on relatively fixed prices. The relationship doesn’t go much beyond that.
But a new initiative, Reforming the Energy Vision, or REV, would give that a jolt. What if you could pay less for your electricity at night, when there is less demand? Or earn money by turning off appliances during heat waves? What if you could get paid to install solar panels on your home? Would any of this make you feel more in control of your energy bill?
That’s the hope of the Cuomo administration. It believes the changes could lead to lower electric bills and new opportunities for clean-tech companies and other industries where energy matters.
The hope is that opening up the electric grid to more types of competition and small-scale generation, such as solar panels and fuel cells, will accelerate innovation and drive down prices – much like when the government broke up the phone company monopolies.
The move might hold down the rise in electric bills that would come as the state’s utilities invest $30 billion over the next decade to replace aging infrastructure. Instead, a large portion of that money could be re-deployed on innovative, lower-cost energy solutions.
And while utilities would still own the grid, new products and services would be offered to help consumers manage, control – and perhaps generate – their electricity.
“Reforming the Energy Vision will fundamentally transform the way electricity in New York is bought, sold and delivered,” said Richard Kauffman, who heads energy policy in the state for Gov. Andrew Cuomo. “The really good news is New Yorkers will be able to reap the benefits of these new energy systems with greater economic growth and new job opportunities.”
The business world is already taking notice. Companies like IBM and Wal-Mart are already weighing in on how the new system will work, in addition to dozens of renewable energy companies that could reap huge rewards as well.
And utilities in New York, several of them owned by multinational conglomerates, are also looking at the opportunities the initiative presents for new revenue streams.
Beyond lower bills and the expansion of markets, it’s believed that REV will also strengthen the electric grid and make it more resistant to large storms and outages. That’s because the addition of small generation projects and battery systems across the state will effectively create “micro-grids” that make towns and cities less dependent on far-away power plants and the massive transmission system that delivers power.
“We believe that distributed generation – including fuel cells – will be a key component of New York’s future energy infrastructure and is starting to spring up in other parts of the U.S. as well,” said Todd Alhart, a spokesman for GE Global Research Center. “As the Public Service Commission has acknowledged, these resources can improve the efficiency and reliability of the state’s electric system while also delivering new and valuable services to customers.”
The systems can be as simple as having electric cars in garages sending power from their batteries back to the grid during outages or at times when the system is under strain – for a premium. In essence, the homeowner becomes a participant in the energy market.
One of the keys for making that happen will be large, industrial batteries like those used in electric vehicles or as back-up power for cellphone towers. Much electricity is wasted because it cannot be stored, which is why batteries hold such promise.
Bill Acker, executive director of NY-BEST, an Albany-based group that represents the battery and energy storage sector, says REV “will open markets” for the industry, which has yet to reach its potential.
“These products benefit the electric grid by making it more efficient, more reliable, allowing greater penetration of renewables,” Acker said. They also help avoid the need to build so-called “peaker” power plants that are turned on at times of peak electric demand such as hot summer days and are expensive to run.
Despite all the hope that opening up new markets will provide, the industry says the changes New York and the PSC are considering are a long way off. It is also unclear what the changes will look like once they are implemented, which is why so many companies are participating in the process, including SolarCity of San Mateo, Calif., the largest solar installation company in the United States. SolarCity recently announced plans to spend $5 billion over 10 years to expand its operations in the state as part of a plan to have the state build it a $900 million solar panel factory in Buffalo. How the state’s energy markets are designed is likely to have a huge impact on SolarCity reaching that goal.
“SolarCity embraces a future where the greatest number of entities (have the incentive) to deploy and facilitate a clean, distributed and resilient distribution system,” SolarCity wrote in a July letter to the PSC as part of the REV case. “Market design that fosters fair and robust competition should be the cornerstone of this undertaking.”
Some companies, including SolarCity, are worried that utilities will be given too much control of the electric grid and its operation under the new model. Details have yet to be worked out, but utilities at the least are expected to retain ownership of the systems.
Anne Reynolds, executive director of the Alliance for Clean Energy New York, an Albany-based trade group, says many companies are getting involved in the process to help shape the state’s policies. She said they worry that renewable energy companies could lose business if utilities are put in charge of installing solar panels and other forms of distributed generation. There are also questions about how large-scale wind projects will fit into the new policies.
“This vision is excellent from a clean-energy perspective,” said Reynolds. “But the details will show whether the benefits materialize.”
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