Governing Green Power III: Refining Plans for the Electricity Grid of the Future

University of Hawai‘i at Mānoa
East West Center — Pacific Room (directions and map)

GGP’s goal is to hasten a fair and efficient transformation to renewable energy by focusing on necessary institutional changes. Earlier conferences focused on inefficiencies of current policies, the need for improved rate design to incentivize load shifting and demand response, and challenges with aligning utility and public interests. This year GGP will hone in on steps that may help move policies toward those favored by experts and some specific obstacles to ideal practice, both in Hawaii and other regions experiencing rapid renewable energy transitions.

Each panel will begin with about 35 minutes of opening statements by panelists, followed by about 20 minutes of moderated question and answer by session organizers, and another 35 minutes of moderated discussion by all participants.

KEYNOTE: Richard Schmalensee. Issues/challenges/policy considerations brought about by intermittent renewable energy and storage, all put in context with historical evolution of electricity regulation and markets. Comparisons between Hawai’i and California will be emphasized.

Thursday November 7, 2019
8:00 amContinental Breakfast
8:45 amWelcome and opening remarks. Michael Roberts, UHERO & Sea Grant
9:00-10:30 amManaging Obstacles to Major Institutional Transitions.
This session will examine challenges associated with transitioning to the grid of the future. To help frame this conversation we posit an “ideal” grid. To create this “ideal” system we sought opinions from 11 experts from the Mainland and the Islands. We asked each expert for three or more key elements that an electricity system should have if it draws a large share of its energy from clean and renewable sources. The resulting system, compiled from merging their responses, is included on the last page of this agenda. We want to avoid debate over the merits of this particular system. We recognize that opinions differ even among the experts polled. Rather, we wish to fix a clear endpoint so as to focus squarely on the processes – legal, political, technical, and other – that must occur to accelerate the development of such a system.

Organizers: Richard Pratt and Carl Bonham
Panelists: Lorraine Akiba, Blue Planet Foundation & former Commissioner Hawaii PUC Severin Borenstein, Professor, Haas School of Business, UC Berkeley David Spence, Professor, Law and Business Schools, UT Austin Jim Lazar, Regulatory Assistance Project Robert Harris, Sunrun
10:30–10:45 amBreak
10:45 – 12:15 amCarbon Taxes: Challenges, Impacts, and Interaction with State Policies.
Many states are considering carbon taxes and/or cap-and-trade programs to limit greenhouse gas emissions in lieu of national policies that may not be forthcoming. What are the challenges of implementing local carbon taxes, especially with regard to trade in energy and other goods with other states, and appropriately accounting for the life-cycle of emissions? What are the best ways to recycle revenues from carbon taxes to minimize economic impact and maximize fairness? How can these policies be thoughtfully integrated with existing policies designed to limit greenhouse gas emissions, like renewable portfolio standards (RPS) and renewable energy tax credits?

Organizers: Makena Coffman & Michael Roberts
Panelists: Carolyn Fischer, Professor, University of Ottawa Seth Colby, Department of Taxation, State of Hawaii Henry Curtis, Life of the Land Paul Bernstein, UHERO Jim Roumasset, UHERO
12:15 – 1:30 pmLunch
1:30 – 3:00 pmMaking Greenhouse Gas Emissions Reductions Fair and Equitable
How can policies that encourage growth of renewables and reduced greenhouse gas emissions be more equitable? Tax credits, net metering agreements, and energy efficiency subsidies have implicitly favored the wealthy. Policies intended to direct benefits to lower income families have largely failed. Would more efficient policies be more equitable? (e.g., carbon tax, higher customer charges, and ‘true value’ pricing of solar backfeeding.) Should equity be a focus of energy/environmental policy, or should inequities be addressed separately (e.g., energy assistance payments to low-income households)? Are the worst inequities a fundamental characteristic of this kind of change or a byproduct of politically acceptable policies?

Organizers: Makena Coffman & Michael Roberts
Panelists: Severin Borenstein, Professor, Energy Institute, UC Berkeley Dean Nishina, Consumer Advocate, State of Hawaii Jim Lazar, Regulatory Assistance Project Caroline Carl, Hawaii Energy
3:00 – 3:15 pmBreak
3:15 – 3:45 pmBreakout Session
1. What were the most important, most novel, and most interesting take home messages from today’s panels?
2. Given panel topics today and those listed for tomorrow, what key topics are missing and would benefit from a similar panel discussion?
3:45 – 4:00 pmReport back to whole group. Directions and organize for dinner transport.
6:30 – 8:30 pmGroup Dinner, TBA
Keynote AddressRichard Schmalensee, Professor and Dean Emeritus, MIT.
In the context of the historical evolution of regulated electricity markets, Dr. Schmalensee will explore issues, challenges, and policy considerations brought about by intermittent renewable energy and storage. Policies in Hawai’i and California will be compared.

Friday November 8, 2019
8:30–9:00 amContinental Breakfast
9:00-10:30 amIntegrated Resource Planning
Planning high-renewable systems is more complex than traditional fossil systems. New models and software are needed to simultaneously optimize: (i) a portfolio of intermittent and flexible generation resources, (ii) storage, (iii) demand response and other distributed resources, and (iv) transmission. The relationship between operating decisions and long-term investment decisions is critical in a high-renewable system. Yet, performance-based mechanisms focused on operating costs (price/revenue caps) may conflict with incentives for better long-run investment. How can policymakers motivate and implement the best integrated solutions? How does this differ in places with and without markets (like Hawai‘i)?

Organizers: Matthias Fripp & Makena Coffman
Panelists: Mark Ahlstom, NextEra Jim Bushnell, UC Davis Colton Ching, HECO Maria Tome, Hawaii State Energy Office Mike Wallerstein, Public Utilities Commission, State of Hawaii
10:30–10:45 amBreak
10:45–12:15 pmRate of Return Regulation: What are the Alternatives?
Cost-of-service or rate-of-return regulation (RRR) underpins most capital investment by investor-owned regulated utilities. There is growing recognition that inefficiencies of RRR become more acute with increasingly complex planning and investment decisions that surround high-penetration renewables. If the rate of return is set too high, the utility has an incentive to overinvest and/or misinvest, while simultaneously under-utilizing independent generation and distributed resources. If the rate of return is set too low, bankruptcy could ensue, and there may be State liability under Supreme Court precedent. Are there viable alternatives to RRR in places where markets are not viable (e.g., distribution and small-scale systems like Hawai’i’s)? Have performance-based incentives been helpful, or simply a way to boost utility profit? If RRR is unavoidable, how can perverse incentives be minimized? How can we get the allowed rate of return “right”—as close as possible to the true cost of capital?

Organizers: Isaac Moriwake & Mark Glick
Panelists: Doug Codiga, Sclack Ito LLC Scott Seu, HECO Karl Rábago, former Texas PUC Commissioner Frank Wolak, Stanford Kyle Datta, Finistere Ventures
12:15–1:30 pmLunch
1:30–3:00 pmManaging Obsolescence and Stranded Assets
New technology often renders old assets obsolete. In regulated environments, however, obsolescence is as much a policy decision as an economic one. The structure of wholesale markets, subsidies for certain types of power (e.g., renewables or nuclear), or top-down regulatory and utility decisions, all factor into whether assets are kept online, the revenues assets receive, and who pays. How should we decide which assets to retire and when to retire them? How should revenues to assets be determined? What’s wrong with current rules governing these decisions, and how can these rules be improved? In the event of substantial grid defection, who pays for the stranded assets, including the grid of unused or partially used wires?

Organizers: Carl Freedman & Richard Wallsgrove
Panelists: Shelee Kimura, HECO David Spence, UT Austin Eric Gimon, Energy Innovation Richard Schmalensee, MIT Jeff Mikulina, Blue Planet Foundation
3:00–3:15 pmBreak.
Discuss: What were the most important, most novel, and most interesting take home messages from the second day? What is the single most important ‘next step’ in policy surrounding the renewable energy transition?
3:15–3:30 pmReport to group:
1. Your most salient take home message from the conference.
2. Your single most important next step.
Pau HanaCharacteristics of an “Ideal” Grid of the Future
A market that dispatches all available grid resources—generation, storage, reserves, demand response, etc.—regardless of ownership, whether centralized or distributed, on a least cost basis.
Low barriers to interconnection for new renewable resources and storage that reduce the overall cost of power and grid services.
Smart systems govern commercial, industrial, and perhaps residential users, enabling automated demand response and curtailment.
Rate design and pricing informed by location- and time-specific marginal costs to provide optimal price signals for storage and load-shifting technology investments.
Utility costs not covered by revenues derived from rates based on marginal costs should be recovered via fixed charges.
Negative impact of charges on low-income customers is reduced through low-income and vulnerable customer protection programs, such as through reduced fixed charges.
Transparent operation and dispatch of the system with improved customer access to and control over data.
Customers can choose from a range of rate schedules, services, and levels of reliability.

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