What’s in store for the future of energy resourcing and management? At the core is sustainability. In order to achieve a future with net-zero emissions, alternative clean energy sources are becoming larger players in the market. They are also shaking up the landscape when it comes to how utilities operate.
Changes in energy consumption are being pushed by consumer behaviors, alternative energy providers, utilities, and governments. Government policy is one of the major drivers of change, enabling us to reach a future where we use energy more efficiently and sustainably.
It’s important to keep up with the latest regulatory standards shaping the utility industry. In this article, we’ll take a look at the energy regulation and policy proposals in North America (focused on the U.S. and Canada) and how utilities can respond to future evolution.
- Across North America, governments are introducing energy regulatory standards that aim to achieve net-zero emissions in the next 15 years.
- In the U.S., President Biden has proposed a huge investment in clean energy and technology deployments, which is a great incentive for utilities companies to adapt.
- In Canada, Prime Minister Trudeau has also proposed a combination of carbon taxation to lower emission and investment in clean energy production. Federal and provincial policies will support distributed energy resources to enter the market and support sustainability.
- To keep up with energy regulation policy changes, utilities need to: invest in smart technology, improve coordination with new players in the market and adjust pricing in a competitive and appropriate way.
Energy Regulation Policy Proposals
Across North America, lowering emissions and shifting to more renewable energy sources are priorities on the horizon. These priorities are reflected in the national energy policies of the U.S. and Canada, where combating climate change is central—with good reason. Both President Joe Biden and Prime Minister Justin Trudeau have pledged to attain net-zero emissions in their countries by 2050. Rapid changes are taking place that will require utility companies to adapt.
President Biden campaigned on a plan for clean energy. This includes a promise of legislation that requires polluters to bear the cost of carbon pollution they emit. Several points in President Biden’s policy platform may impact utility companies, including a $400 billion USD investment in clean energy over 10 years and an acceleration of clean technology deployment to reduce the carbon footprint by 50% by 2035.
These policies create incentives for on-site clean power generation, as well as appliance electrification and efficiency. It’s a clear message (backed by financial support) for utilities to invest in technology and processes that will enable the use of renewable and distributed energy sources. If there was any concern about the risks associated with shifting away from legacy systems, Biden’s campaign reassures that this is the time to move forward on making energy efficiency possible.
What do policy changes look like at the national and state levels?
In the U.S., the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) are the primary agencies for energy regulation. In 2020, FERC approved Order 2222, which allows distributed energy resource (DER) aggregators to participate in regional organized wholesale electric markets. According to FERC, this will enhance overall competition, encourage innovation and lower costs for consumers by enabling new technologies to join and participate in an equitable way.
Individual states in the U.S. also regulate energy within their borders. California and New York are among the states that are most highly regulated. Both have introduced policies that are intended to improve smart grid interoperability.
California’s CPUC’s Electric Rule 21 allows energy resources, such as solar power and energy storage, to interconnect to the power grid in California. Rule 21 functions as a tariff that provides customers access to the grid while protecting the safety and reliability of the system. Investor-owned utilities are responsible for administering Rule 21 in their service areas.
And in New York, IEEE 2030 was developed to provide guidelines that standardize smart grid interoperability, building on the technologies used by utilities to communicate, monitor, and analyze energy consumption, while also addressing the need to reduce energy transmission’s carbon footprint.
To transition to clean energy successfully, utilities need to be aware of the opportunities being created both through national and state level policies. Overall, this means coordinating with new players entering the market and making an investment in technology that enables visibility with distributed energy resources. Fortunately, these needs are being supported by financial incentives from regulatory bodies.
Like President Biden, Prime Minister Trudeau pledged to tackle climate change when he came into office in 2015. Since then, he has faced opposition from the fossil fuel industry and oil-rich provinces like Alberta.
Prime Minister Trudeau has recently proposed more than tripling the existing carbon tax to $170 CAD (approximately $138 USD) per metric ton within a decade. This will help fund the $15 billion CAD in planned spending for low-emission energy production, electric vehicle production and a greater use of hydrogen in transportation and home heating. The federal carbon tax would only be levied in provinces determined by the government to have inadequate emissions-reduction plans.
What do policy changes look like at the federal and provincial levels?
The Department of Natural Resources Canada (NRCan) is responsible for energy, natural resources and more. Under NRCan, the Canadian Energy Regulator (CER) is the agency responsible for regulating inter-provincial/territorial matters with gas, oil, and electric utilities, while the Canadian Nuclear Safety Commission (CNSC) regulates nuclear power.
In 2015, the federal and provincial governments made an agreement for cooperating in boosting the country’s energy industry while transitioning to a low-carbon economy, and this remains a policy objective today.
Canada holds a lot of potential for transitioning to renewable energy sources. According to NRCan, Canada is among the world’s leaders in producing hydroelectricity, which makes up 59.3% of the country’s electricity supply. It’s also a major producer of uranium, natural gas, and crude oil. Other sources of energy include coal, biomass, solar, geothermal, wind, nuclear and marine. Quebec is the country’s leading province for hydroelectric energy production.
From a policy standpoint, the Canadian Electricity Association (CEA) is working to modernize regulatory frameworks to better reflect the energy market and enable new players to contribute to decarbonization and economic growth. As they state in their mission, “It used to be true that the electricity marketplace was the sole domain of electrical utilities, but now most any business can generate and sell electricity with such technology as rooftop solar panels and electric vehicle chargers.” These casual players also introduce the need for utilities to adjust to changing demand, price energy accordingly, and gain visibility into energy supply from distributed sources so they can manage the grid efficiently.
How Utilities Can Respond to Energy Regulation
So with the trend towards a policy that promotes clean, renewable energy in order to stem emissions long term, what are the impacts on utilities? How should utility companies make space for new players and address changes in consumer habits and energy choices? Overall, renewable energy technologies will continue to become more accessible, so the question for utilities is how do they keep up with regulatory changes and consumer demands?
Enable a sustainable energy system: In order to deliver more low-carbon energy, power grids need to support incoming energy supply from sustainable sources, including solar panels, energy storage, and wind turbines. This may also involve evaluating existing contracts, regulators, and investors with the intention of transitioning away from fuel.
Invest in smart grid technology: Technology is the key to enabling visibility into distributed energy sources from casual players and consumers (such as residential solar panels, generators or batteries). The right technology investments can enable programs and processes that require more bandwidth, but will ultimately enhance communication, visibility and optimization of power supply.
Local solutions are key to sustainability: Energy reliability is one of, if not, the highest priorities for utilities as outages can have a dire impact on customers reliant on the utility power supply. Local energy means investing in the “edge” of the grid, the last few miles between the hub and end customers. As DER proliferates, their ability to supply the grid in times of outage, as well as support critical grid infrastructure in times of high demand, will help to build both sustainability and availability into energy systems—so long as the resources can be coordinated effectively.
Factor in consumer energy sources to pricing and demand: As customers seek to decarbonize their consumption, as well as manage their own reliability, they adopt EVs, PVs, storage and even backup generation. These resources need not all require utility approval; however, the utility may benefit from considering them in its plans. For example, the customer’s backup storage or generating resource may be used to enhance grid operation in times of peak demand in exchange for a payment that subsidizes the customer’s resource.
Adjust costs and incentives to reflect the changing market: Reliably supplying all customers while meeting the demands of changing technology gives the utility opportunity to innovate its business models. Those innovations center around systems and market coordination to facilitate vehicle and building electrification, as well as a move toward renewable resources. Long-term, those innovations will mitigate rate increases as coordinated resource operation will reduce the cost to safely operate the grid amidst new customer demands.
Energy regulation is continuously evolving to reflect the changing market, especially the proliferation of DER and the drive for lower emissions. While it’s important to stay up to date with the latest policies released on the national and state/province levels, it’s clear that sustainability is a key part of the future for energy distributors.
Fortunately, energy grid software can enable greater visibility and agility. With the right technology investments, utilities can continue to deliver the reliability that consumers expect and need, while coordinating with new energy players who will ultimately support that availability, lower carbon emissions, and improve sustainability.
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