Getting ahead of the changes

pv magazine: At pv magazine, we have previously covered Green Mountain Power’s (GMP’s) deployment of Tesla Powerwall batteries at the homes of your customers. Can you tell us how that is going, and what GMP has learned from this deployment?

Mary Powell: It’s going very, very well. Two things that we have really been thrilled about: One is just incredible customer interest. Our customers seem to be really clamoring for these new kinds of technological solutions, which are a huge part of building out what we see as a community, home, and business-based energy system for the future.

The second thing is that the devices are performing even better than we expected so far. To put a point on that, we have about 102 customers already with the devices in their homes as a part of our new program. And when we needed to call on those storage devices for a peak event, tapping into 102 Powerwalls has had the equivalent of taking 500 homes off the grid.

So, we are really seeing that once we get this to a greater scale, and this initial program is about 2,000 customers, you can obviously tell this is going to have a really beneficial effect for all of our customers.

Everything that Green Mountain Power does in its innovation space is about how to transform in a way that makes the grid more affordable for everybody while we move to a more independent energy system.

pv magazine: This talk of a more independent energy system and ­everything that I’ve heard you say at conferences is very ­interesting to us. It’s clear that you take a very different approach to behind-the-meter resources than other utilities. Why does GMP take such a different approach? And are you not subject to the same economic drivers as other utilities?

Powell: We absolutely are subject to the same economic drivers. But I think it is how you look at it from a much broader perspective. I would say that the approach we are taking is about long-term affordability – it’s about long-term environmental strength and stability for our customers.

We take this focus because we are customer-obsessed. We look at our charge as how do we think more innovatively – more transformatively – about the technologies that are available, and how we lead a transformation to a much more cost-effective, long-term sustainable energy system.

The reality is that the external factors in a very rural state are different than in some of the more densely populated urban areas. We see the solutions for us around energy transformation really being about leading in the context of this transformation to, like I have said, a community, home, and business-based energy system. And trying to shed some of the burdens of the hundreds of millions of dollars of costs that Vermonters pay to have our primary system be one that is provided through the regional grid.

Also, with climatic events, I feel like I could be talking to you any week of the year and we would be preparing for a significant weather event. It is to the point where every few months you are preparing for another kind of climatic event that could be destructive to the age-old energy system.

We see this transformation with innovation as a key way to move forward to a low-cost, low-carbon, incredibly reliable delivery system.

pv magazine: What is interesting about this is that you speak about the ability to defer these very expensive investments, and yet many of the regulatory models for compensating utilities have been based on making investments and allowing utilities to make a profit on that.

pv magazine: But given that, how can utilities deliver value to their shareholders with distributed energy resources cutting into demand under net metering, but also reducing the need for infrastructure investments?

Powell: Over the next 5 or 10 years, since we have this big bulk infrastructure system already, I don’t see anything yet bending the cost curve back against those big investments.

If anything, because you have so many large-scale renewable projects going online, you are going to be seeing more intensity on traditional investment. On a bad day it is highly concerning, on a good day it begs the question: How do we continue to look for the opportunity in Vermont to carve ourselves out of that cost pressure by decreasing our peak. There are over $3 billion dollars of transmission projects slated to happen in the New England grid area over the next four or five years. Cybersecurity has layered on new costs. Reliability has layered on new costs. The intermittency of renewables has layered on new costs. I don’t see that fundamentally changing dramatically.

What is also happening at the same time is that demand isn’t growing over the old-fashioned system commensurate with infrastructure spending. Simply put, our view is that just to maintain our system, we are going to have to make infrastructure investments. So that model is still needed for a number of years, because there still is this remaining demand.

What we are really focused on – how do we earn our way into new value propositions for customers? We are thinking about energy as a service, we are creating ways in which we can add value in that world of energy as a service, and in exchange for that create new sources of revenue that stay within the regulated business so that they support the infrastructure spending and the new model.

So that is the piece that we are really focused on, and doing some really interesting work in. We are not doing our work outside of the regulated model to create additional value streams for our investors directly, because we believe that at any day any investor will do the best if the company delivers on customer value. So we are really focused on the customer side of the equation. And we have great confidence that we are going to continue to earn our way into new value streams.

pv magazine: Interesting. When you say earn your way into new value streams, how much is due to regulatory changes such as through Vermont’s grid modernization initiative?

Powell: I hope that there is going to continue to be around the country flexibility in regulatory models to allow innovation, to then fast-adopt changes that are supportive of the transformation that is needed for customers. What we feel fortunate about being in Vermont, is that we are part of an energy community that is more forward-looking.

So whether that is at the legislative level or the regulatory level, there has been some acknowledgement of the changes happening, and some encouragement of not just Green Mountain Power but any of the utility companies thinking creatively and in a comprehensive way as we move into the future. In fact, we had legislative changes a couple of years ago which encouraged the energy companies to start doing work around carbon reduction in heating and transportation.

We are moving together as a state to figure out not only how do we reduce carbon, but how do we do it in a cost-effective and reliable way.

pv magazine: So when we talk about regulatory flexibility, does this mean utilities moving away from primarily making a return on the investments that they make, and towards other compensation mechanisms, and is that happening right now?

It is something where we have to work together in this messy middle, where we have to figure out how to work together, to make sure that the grid remains viable while we make this transformation to this very, very messy system.

pv magazine: So obviously we have talked more in generalizations than specifics. If you had to name three specific things that you expect to see in the utility space in New England over the next decade, what would they be?

Powell: Definitely continued pressure on transformation. When you look at New England, we have some challenges from a socioeconomic perspective, in terms of population challenges and economic challenges.

I see increased pressure on utilities from a cost perspective. I do see continued loss of traditional service. I see small C&I customers moving more rapidly than people expect to independent energy system solutions.

And certainly in the next 5 – 10 years I expect to see Vermont continuing to lead in terms of innovating to a different model, and hopefully saving Vermonters tens of millions of dollars.

pv magazine: When we talk about small C&I customers moving to independent solutions, I think of net metered solar and battery storage. How do you maintain profitability and even growth for a utility when customers are reducing the revenue going back to the utility, if not going off the grid entirely?

Powell: I think that is what most are going to do. People talk very bullish, but in reality most people have their landlines but they don’t use them a lot. Again, that is exactly why we are doing the work we are doing. So we are working actively with all of those customers to be part of the solution.

And we won’t be universally part of that solution with every customer. But we expect to be with a large number of them. Particularly around the combination of solar and storage, this is very powerful in terms of creating partnerships with customers, where we have the ability to make things more affordable to them to adopt those kinds of technologies. Because we can then use those same technologies to lower the overall operation and cost of the grid.

The easiest example of that is our effort to take Green Mountain Power from a utility that is a 730 MW peak utility, and our goal is over the next two to three years to flatten that to no more than 600 MW year-round.

When we accomplish that it will be because we have partnered with a lot of customers, both at the residential level and the commercial level, so that we are leveraging their transformation in a way that benefits all the other customers, and we are making their transformation more affordable to them because of that shared value. In a nutshell your question is a huge part of why we are doing what we are doing. We see this amazing future, where we can keep the cost of grandpa’s grid affordable while at the same time we move to this very distributed home, community, and business-based energy system.