I was driving my 12-year-old daughter to her first day of seventh grade. I love those moments because it’s a time when the conversation just flows. ‘I don’t think the world is going to outlast my generation,’ she said. I thought, ‘Wait, what?! Where is this coming from?’ I tried to remember what was on my mind at 12. I think it was excitement to see my friends after the summer.
She had read an Instagram post about the Amazon burning and it stuck with her in a profound way. She is aware of climate change and is more accepting of the science than many of our business and political leaders. Or maybe she feels so sickened by the potential consequences that she’s willing to move past uncertainty and on to solutions. Kids seem to have an incredible ability to bring a clarity and purity of thought to problems adults find complicated.
"The problems of tomorrow will require utilities to create true transparency so that better energy decisions can be made by customers and new solutions can be developed by providers to serve emerging needs"
It got me thinkingmore about the energy sector, one of the largest contributors to greenhouse gas emissions. Why can’t we solve this problem? Luckily a range of solutions exist to green our energy supply. We may not like every option on the table, but they do exist.
As a representative of the New York Power Authority (NYPA), I recently sat in a session with one of my favorite stakeholder groups, the NY Advanced Energy Group. Businesses, nonprofits, and government agencies meet to discuss practical solutions that we can implement today to mitigate greenhouse gas emissions. More often than not we spend time talking about soft costs – the boring stuff like how to set prices, how to make contracting easier, how to lower customer acquisition costs. And I realized that’s the nut to crack.
Utilities like to pilot technologies, but where is the emphasis on simplicity, speed and scalability? If utilities make it easier for new technology to come to market then the demand for that technologyis more likely to grow further expanding the market. Utilities are in the unique position to directly serve customers because we know where and how much energy is used, where load is constrained, and what customers are willing to pay. It positions us to vet solutions, simplify contracting and pricing, and bring products to market.
In my day-to-day work life at the nation’s largest state-owned utility, I focus on the rather mundane aspects of how to bring new products to market that can scale fast. Speed is important because we are in a race against the climate change clock. NYPA is testing out new contracting structures, new financing mechanisms, and different procurement arrangements to bring greenhouse gas-reducing solutions to market that will be delivered by the private sector.
Why do we need to be in the middle? Because we de-risk the transaction for the customer. Many customers don’t have the time or knowledge to vet solutions or compare apples to apples. Customers are also weary of contracting directly with technology providers. What if the provider goes out of business or is acquired? For the provider, they want customers fast. If we can lower customer acquisition costs and establish a standard contract then we free up providers to focus on what they do best – delivering products that serve the customer.
On top of the greenhouse gas reduction challenge is a major information asymmetry in the New York energy market that can be intimidating to the average customer. The value from reducing energy usage requires fluency with tariffs that are hard to decipher and can change with new regulations (try explaining the revenue decoupling mechanism to a customer). The providers playing in the market change quickly. And the need to protect data and manage against cyber risk makes customers nervous.
Yet the mandate to green our energy supply is clear. New York Governor Andrew M. Cuomo has laid out his Green New Deal and it requires 6000 MW of distributed solar by 2025 and 3000 MW of energy storage by 2030, enough power for 5 to 6 million homes.The newly passed Climate Leadership and Community Protection Act, which requires the state to achieve a carbon free electricity system by 2040 and reduce greenhouse gas emissions 85 percent below 1990 levels by 2050, will continue to drive investment in clean energy solutions.
Under yesterday’s regime, NYPA would have established an incentive fund to create demand for renewables. Instead, NYPA has established a team of advisors that work with governmental customers to deploy renewables. We answer questions such as “Is the site big enough?”“Will an installation produce enough energy to be economically viable?”“Can an array get interconnection approval?” “Will neighbors push back against an installation?”
We come up with an initial design, develop a bid package, and run a procurement process for the market to bid on. And the twist? Customers don’t pay our fees, developers do, because we lower their customer acquisition costs 30-50 percent. And why do our customers use us? Because we know the energy market and can negotiate good terms.
We have shifted our business model from an incentive program to a revenue-generating arm of our business that delivers better pricing, faster time to market, and more growth. The result of this shift is that in two years NYPA hasbuilt one of the largest distributed solar pipelines in the state.
The problems of tomorrow will require utilities to create true transparency so that better energy decisions can be made by customers and new solutions can be developed by providers to serve emerging needs. The path to a sustainable future is not easy, but it is possible.