Chapter Three: New York’s REV and California’s DRP

Chapters One and Two provide context and background supporting this chapter

California was not the only state grappling with an influx of distributed resources on electric utility systems.  The State of New York faced a similar but distinct set of challenges, in part driven by the extensive damage and widespread outages caused by Hurricane Irene in 2011 and Superstorm Sandy in 2012.  Energy regulators at the New York Public Services Commission (NYPSC) saw a need to “transition the grid to a flexible system that can respond to future technologies, support clean energy integration and minimize outages during major storms and events. The grid for the 21st century should seamlessly incorporate distributed generation, microgrids, and plug-in electric vehicles (PEVs).”

Governor Andrew Cuomo and the NYPSC also saw the opportunity to tie together a number of policy imperatives that in many ways mirrored California’s diverse efforts over the prior decades to increase renewable energy, accelerate energy efficiency, reduce greenhouse gas emissions and provide for economic development and customer choice of energy alternatives.   

The resulting governor-driven initiative was called Reforming the Energy Vision (REV), and it was launched coincidentally to the California rulemaking on DRP in August 2014. Foregoing utility planning, REV appeared to take as a starting point the potential restructuring of the utility business model, setting out a construct of a distribution service platform, managed by an operator (DSO) somewhat similar to the independent high-voltage network operators.  The DSO compensation would be determined, not on rate-based assets as under the traditional utility model, but by selling value-added services to customers and earning “platform service revenues” for their role in facilitating the distributed marketplace.

The contrast between California’s DRP and New York’s REV might be described as the difference between making incremental adjustments to the existing system versus reimagining and restructuring the established business model. California also focused on developing analytical tools that would better characterize the utility distribution network – Integrated Capacity Analysis, Locational Net Benefit Analysis and Load Growth Scenarios [to be further explored in a subsequent chapter] – and identify where new investments should be made.

“Those three are important foundational pieces,” observed Sky Stanfield, attorney for IREC. “That basic vision works well for creating a whole new level of radical transparency. What does the grid look like? And what might it look like in the future?”  

“Every state is different,” noted Paul De Martini, “with different starting points and policies and customer adoption of distribution technologies. How do you plan for what you are aiming for? California was effective at doing this. The New York effort didn’t originally have sufficiently clear objectives for where it wanted to go. There was a lack of clarity for stakeholders.”  De Martini has also advised NY policy makers in the REV program, but saw major shortcomings with their original approach.  California “didn’t try to hang the windows before deciding what kind of house to build,” he said.

Picker, who ascended to becoming President of the CPUC in December 2014, was initially skeptical of REV, largely because New York utilities had not adopted technologies – like advanced metering infrastructure, aka “smart meters” – that he considered fundamental to a new distribution system. 

“We have moved incrementally,” Picker admitted. “Measured by a benchmark of progress against New York, we’re not doing so bad. There they don’t have core infrastructure like AMI. Our instinct to be incremental has been positive.  The hope in New York was to get larger market procurement [of DER]. It’s been a struggle for them.”

Scott Murtishaw was a policy advisor to President Picker at the time.   Murtishaw concurs that system analytics were, and should be, a first priority for effective change. “You cannot develop procurement mechanisms at optimal locations unless you know where DER can interconnect relatively cheaply and easily, where they would offer the most benefits.  Picker’s approach was ‘Walk, Don’t Run.’ Without analytics you cannot get far. New York can spend years talking about a vision, but California would focus on the analytics.”

Lorenzo Kristov, formerly with the California Independent System Operator, who participated in a REV advisory group as well as participating in California’s DRP.  “With REV, from the beginning, New York articulated a vision of the future based on a distribution-level market concept. They were going straight to markets, while planning and operations seemed to be taken for granted. California’s practical decision was to focus on the technical foundation. Fundamentally the system has to work and planning has to support reliable operations.”  Both approaches have merit, Kristov said, and it is possible that by staying out of the discussion about utility business models and structure, “California has been deferring an important conversation about how to align structures with markets.”

Not everyone shares these perspectives on the relative merits of approaches.  Ted Ko, now with Stem, a provider of energy storage services, believes, “REV was a huge vision for the distribution grid. There was a whole process about how to get to that vision. The utilities would have to plan to comport with that vision. [California’s] DRP took the opposite approach, incrementalism.  ‘We’re going to incrementally evolve the utility model bit by bit. We’re not going to do anything revolutionary. There’s no room for bold revolutionary ideas in DRP,” he said. “So, while California has led the way on topics like hosting capacity, DER interconnection, DER participation in wholesale markets and DERs vs traditional peakers, New York has been more innovative, leading in Value of DER, non-wires alternatives, new rate structures and an actually useful energy storage roadmap.”In all fairness, neither California nor New York has fully realized their visions as quickly or completely as hoped.  Proponents of the New York approach to push for DER competition to displace new utility investment can point to a recent “success story” in a ConEd utility decision to procure smaller scale resources from the market instead of making a large substation improvement project in Brooklyn.Meanwhile, other non-wires procurement efforts have sputtered.

On the other hand, despite mixed results from pilots and demonstrations solicitations that were part of the DRP process, California is also seeing solar and storage becoming viable alternatives to traditional utility generation replacement or substation upgrades –albeit in forums other than DRP.  [More on these efforts in a subsequent article]

The two states’ approaches offer a case study in extremes. California dove into an analytical channel without making progress on how to translate the results to market. New York was ready to go to market but lacked the foundational analytics. Combining the two approaches may be a more effective way to go.“We’re trying to do something really major here, important things are at stake,” said IREC’s Stanfield. “You cannot have unrealistic expectations about what can happen quickly.”