There’s an interesting experiment going on in New Hampshire right now, as we figure out how to shift our electric utilities to some sort of futuristic energy-providing thingamajig that can help us create a world of distributed energy.
The experiment involves New Hampshire Electric Cooperative, a small power provider that serves a number of communities throughout the state, including some north and east of Concord.
NHEC can experiment because it is a rural electric cooperative rather than a regulated utility like Eversource, Liberty Utilities or Unitil. Regulated utilities have worked well for a century, but their need to get government permission to do many things makes it hard for them to cope with swift change.
And change is swift these days. The explosive growth of small energy systems owned by customers, notably solar panels, is starting to eat into the traditional model of utilities overseeing electricity created by relative few but very large power plants. Some fear this change will undermine business models and a financial “death spiral” for power companies, crippling the electric system we count on.
Cooperatives, which are less regulated and usually smaller than utilities, can try more stuff in an attempt to avoid this death spiral. That’s what NHEC is doing in two ways, both through technology and through post-net-metering prices.
First the technology, which is more fun.
Turning down the peak load
As soon as this spring, said Seth Wheeler, NHEC spokesman, the cooperative will make use of the “smart meters” it has installed in recent years and roll out a three-step program to get people to use less electricity during peak periods, such as a summer heat wave.
Under the most innovative program, volunteers will have load-control devices put on certain power-hungry appliances, such as the hot water heater and air conditioner, so the devices can be remotely turned off as necessary. In return, they’ll get a seasonal break on bills.
This would allow NHEC to actively reduce its power load as needed, rather than depending on customers’ actions. It will be the first such program for residences in the state, although utilities use “demand response” programs for corporate and industrial customers that operate on the same model, just not necessarily using load-control devices.
Under the second NHEC program coming this year, volunteers can sign up for a rate-based initiative, under which electricity costs more during peak periods such as late afternoon, when everybody comes home and turns on the air conditioning or heat. Such “time-of-day pricing” is an incentive for people to shift certain usage, such as drying clothes and taking showers and plugging in the Tesla, to off-peak times.
There will also be a much more expensive “critical peak” rate that Wheeler said could be called a maximum of 15 times a year, lasting five hours each time, if NHEC anticipates it might hit its monthly or annual peak demand.
Customers would be notified via email or text in advance so they could plan. “The incentive is there to really curtail your usage during those periods,” said Wheeler.
The third program will be totally voluntary, in which NHEC will send emails to all its members asking them to cut back on electricity use for a certain period, with no direct incentive except the goodness of their hearts – and the possibility that they might drive down rates by reducing peak demand.
Why all this effort? Because a surprising amount of utilities’ costs all year long depend on how much power they need to keep the lights on for everybody at absolutely maximum demand, “which usually occurs the second or third day of a heat wave in the summer,” as Wheeler put it. This includes transmission costs to bring power over other people’s lines, which are partly calculated on that peak demand.
And why charge more all year for such rare usage? To ensure that the transmission capacity, such as wires and substations, are there.
“We need to be able to have that power delivered if we need it, even if it’s just for one hour a year,” Wheeler said. “That cost is then recovered in the regional-access charge.”
One of the great promises of distributed energy and efficiency programs involves reducing that peak usage, the maximum amount of electricity needed, because it can reduce the need for expensive line upgrades or special power plants that only get turned on occasionally.
Price after net metering
The other experiment involves a topic of more short-term importance and political debate: net metering.
Net metering is the program that lets solar panel owners take any excess electricity (e.g., on a sunny day when you’re at work and not using much power at home) and sell it back to the utility, effectively running the electric meter backwards. Without it, solar panels take much, much longer to cover their initial cost through lower electric bills.
When net metering was established in New Hampshire, a cap was set on the total amount that could take place because of concern about its effect on utilities’ operation. We’ve pretty much hit that cap of 50 megawatts and there’s a fight about what to do next, which is why NHEC’s experiment is so interesting.
(The cap will probably be doubled to 100 megawatts while the Public Utilities Commission debates the program’s future this year.)
NHEC hit its net-metering cap last spring, but the board of directors decided it would like to keep giving a financial incentive for members to put up panels. The question was how much that incentive would be.
It wanted to trim it back from the full retail rate under metering, to reduce the cost to NHEC members without solar.
To a layman, the answer of how much to pay seems simple: When NHEC buys electricity from a solar panel, just pay the cost of creating the electrons, not the cost of building and maintaining the wires and poles and substations they move on.
But as is usually the case when somebody without much knowledge makes a suggestion that includes the adverb “just,” this layman’s statement overlooks all the important details.
Those costs are incredibly entangled, as was indicated in the peak-load discussion above, and the expense of delivering an electron can vary tenfold or more depending on circumstances.
A 13-page NHEC staff study wrestled with this, including such delightful details as “banked” and “netted” energy, compliance requirements, wholesale vs. retail costs, sale of financial instruments called RECs, and linear-regression analysis of regional access cost vs. kilowatts, and finally recommended a rate halfway between the full retail rate under net metering and basic wholesale rate.
This reduces the amount small homeowner systems are paid by about one quarter. Rather than 12.9 cents per kilowatt-hour of the full retail rate this year, new installations get 9.6 cents, which will add several years to the pay-back period for putting panels on your roof. (Rates are slightly less for systems over 20 kilowatts in size; a single home system is rarely larger than 5 kilowatts.)
The report admits this isn’t an objectively absolute perfect figure but rather, as I said before, a sort of experiment: “We recommend setting the unrecovered delivery service factor at 50 percent as a fair and equitable starting point,” it said.
The board of directors agreed, but the figures will be revisited each year.
Lots of places are wrestling with this issue. Maine is considering a completely different method of paying for distributed electricity, which is either brilliant or a boondoggle, depending on whom you listen to, while New York state is trying to reinvent utilities entirely with microgrids and other wholesale changes.
It’s interesting that NHEC is leading this effort because it is pretty small and scattered. It has just 83,000 meters handling a peak output of only 180 megawatts, or less than one-fifth of Seabrook Station’s output, and serves mostly rural bits of 115 towns all over the state. Its service map looks like it was designed by Jackson Pollock.
My guess is that NHEC’s approach will prove flawed in some important way because unintended consequences are unavoidable when you’re breaking new ground.
But I also guess it will prove valuable and helpful. Time, as they say, will tell.
(David Brooks can be reached at 369-3313, email@example.com, or on Twitter @GraniteGeek.)