In December 2015, Vermont-based integrated utility Green Mountain Power announced a new departure in the US electricity distribution market: The selling—and leasing—of Tesla Powerwall storage batteries to its customers as a beyond-the-meter offering. The utility’s portfolio is also being supplemented with solar photovoltaics (PV) services, with demand-response offerings as a possible next step.
Green Mountain’s move maps out a possible roadmap for others. Like many utilities, Green Mountain was seeing its regulated energy consumption-based revenues eroded by evolving customer behaviors, enabled by new technologies. In allowing the utility to expand beyond the meter, the regulator was effectively allowing it to trade off lost income from regulated activities for fresh revenue streams from new competitive services.
Given the wider transformation under way in power grids, this new path may soon become well-trodden. Historically, beyond-the-meter services have typically been more closely associated with the competitive retail, rather than distribution area of the business—for a few reasons.
First, initially the beyond-the-meter concept applied mostly to customer-facing services such as helping drive higher energy efficiency or greater in-home automation. Second, and more fundamentally, the distribution network has historically been planned, built and paid for as a long-term asset for delivering one-way flow of power from centralized power stations to consumers. Armed with increasing distributed energy resource options, combined with new technologies to adjust and optimize consumption, consumers now have a choice in how they want to utilize the distribution assets. And utilities need to think about those assets in a different way. One leading utility executive, who exemplifies the changing mindset, is encouraging her colleagues to stop focusing on “usage on the network” (based on traditional consumption and cost recovery metrics) and instead pivot to focus on “uses of the network.” It’s a brand new ballgame.
Technology advances such as consumer storage, distributed generation (including solar and wind energy) and digitally enabled demand-response solutions are challenging traditional models for planning and operating distribution networks. Utilizing the flexibility in supply and demand from end consumers can help support distribution optimization and provide value to the utility, the customer and the broader society.
For example, the costs of integrating distributed generation are increasing in many countries as the distribution network’s existing “distributed generation hosting capacity” gets used up. So distribution companies have to reinforce the network, even though the additional distributed generation may only place excessive strain on the network for a few hours a year. Utilizing demand response, remote distributed generation controls or energy storage operations can help the utility defer expensive reinforcement, reducing network costs, speeding up distributed generation deployment and potentially providing a new income stream to end consumers.
That’s why interest and activity in beyond-the-meter services is expanding from retail utilities into the distribution domain. As our most recent Digitally Enabled Grid global research study confirms, distribution utilities have spotted the opportunities. As the figure below illustrates, most distribution utilities globally are already or expect to be buying optimization services from a range of third parties in the future, in areas including storage and demand response.
Also, as next figure demonstrates, many distribution utilities expect to be offering a range of beyond-the-meter services by 2020, with almost half targeting remote load control, and other high-priority areas including demand-response services, electric vehicle charging and home energy management. While just 30 percent are targeting end-customer energy storage, this number may grow rapidly if storage costs continue to decrease.
Distribution utilities are aware that they don’t necessarily need—or will even be allowed—to be the primary contact for the end consumer. In the current increasingly diverse energy ecosystem, there are growing opportunities to collaborate with a wide array of third parties to source and sell beyond-the-meter services, including energy retailers, demand-response aggregators and, potentially, new virtual power plant operators. Through such partnerships, distribution utilities could build a portfolio of beyond-the-meter products and services that specifically support distribution networks without compromising their regulatory position.