Scaling clean energy: A partner model

Scaling clean energy: A partner model
Sep 19, 2022
4 MIN. READ

Decarbonization of the electric industry requires unlocking customer distributed energy resource (DER) flexibility at greater speed and scale than today’s demand response programs to achieve a 100% clean energy vision. However, much of the discussion in the industry is focused not on how to scale efficiently, but rather debating who should be able to do certain functions or on ensuring that DERs have a path to the wholesale market. This narrow line of discussion risks missing the forest for the trees. Given the need to move the needle towards net-zero, it’s time to acknowledge that utilities are the decarbonization fulcrum the industry urgently needs—but they can’t do it alone.

As the energy industry continuously innovates, policy makers, regulators, utilities, service providers, and stakeholders are reckoning with new models to drastically accelerate the clean energy transition and to open up new channels for DER contributions at scale. As a result, new services, programs, and business models are proliferating with the goal of chasing heretofore elusive DER value. At the same time, stakeholders and regulators are questioning the utility’s role to unlock that value.

There’s no simple answer, but the objective deserves to be framed correctly based on the problem society is seeking to address. The primary objective is to decarbonize and electrify at scale, while ensuring reliability, affordability, and equitable electric service. Given the magnitude of this challenge, models that enable equitable electrification and clean energy technologies for all customers should take priority.

There are potentially tens of millions of devices/vehicles to be integrated and orchestrated within any given metro area by 2035. Various entities are positioning to stake their claim to this developing market opportunity to aggregate residential customer-sided DERs (including smart thermostats, home automation, electric vehicles, stationary batteries, etc.), enabled through sophisticated control platforms. These entities include demand response aggregators, solar/storage developers, and manufacturers (e.g., autos, home automation, back-up generation, etc.). It’s far too early to be picking winners and losers based on who can play a role in unlocking customer DER flexibility.

As such, there is a need to consider a scalable model to enable and manage customer-sided DER to achieve our decarbonization objective. This includes understanding the respective value proposition that the various service providers, including utilities, can bring to this opportunity. One concept that has been missing in the discussion, is understanding comparative advantage of the various entities. That is, what capabilities do each provider bring that can effectively address the opportunity?

For example, some entities have an advantage in the DER technology implementation and related control platforms, other entities have financing expertise, and yet others have efficient customer acquisition capabilities and customer care capabilities. No one entity has all of the expertise and scalable capabilities to execute efficiently and profitably with residential DER aggregation. This has been a business fact of life over the past 20 years as more traditional residential aggregators, like Comverge, have come and gone. Traditional residential aggregation is a difficult business model with a significant number of business risks that are better shared through partnerships. Better yet, the aggregation model itself needs to be recast altogether.

The need for a new, scalable model is particularly acute as the affordability of clean energy technologies is out of reach for many customers, creating a barrier to the economy-wide decarbonization and resiliency goals. Clearly, the industry has struggled to provide viable, affordable, and scalable solutions that meet the needs of a diverse coterie of grid stakeholders and customers. Considering the work that needs to be done, this lack of alignment on “who is doing what, for whom and why” is preventing meaningful progress on multiple fronts. It is time to focus on how policy and regulation can enable effective partnerships—including utilities—to explore sustainable residential aggregation business models that can support policy goals, including equity, affordability, and decarbonization.

Ideally, DER aggregation should enable multi-service use of customer-sided devices in a way that addresses clean energy, reliability, and resiliency goals as primary objective functions. Several core questions need to be addressed to understand the implications of “how to best aggregate DERs and for what purpose,” including whether utilities can work in tandem with third-party aggregators or implementers in delivering flexible load management programs:

  • What partnerships and business models are needed to enable this complex ecosystem of technology most efficiently and cost-effectively?
  • How can customers be imperceptibly served by this ecosystem vs. being conscripted to serve the grid through, for example, historically complex dynamic pricing, lackluster TOU constructs, or arbitrage optimization?
  • What societal value could be derived if utilities provided a channel to partner with DER providers and program aggregators/implementers to accelerate the deployment of clean energy technologies?
  • What value could utilities derive—and pass on to all customers equitably and with public commission transparency—if the utility itself were to serve as an aggregator of DERs?

In order to achieve the scale required for decarbonization goals, we need to ask whether we continue down the path of limiting utilities from enabling DER aggregation or do we allow utilities and various services providers to develop effective partnerships that mutually benefit customers and achieve business sustainability. We believe customers will be well-served by regulators who enable a utility-partnership ecosystem—and associated foundational operational capabilities—to develop. Absent these types of partnerships, the clean energy transition will likely continue to be slow and fractious—with all of us facing the climate consequences.

Meet the author
  1. Patty Cook, Senior Vice President, Market Development, Distributed Flexibility Solutions

    Patty is a strategic leader with over 25 years of experience in energy, environmental policy, and management consulting. View bio

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