The energy landscape is constantly changing as markets evolve and new technologies gain momentum. Gabel Associates is directly involved in emerging issues that are transforming the energy industry. The following summarizes some emerging issues that Gabel Associates is addressing:
- Electric Vehicles
- Energy Storage
- RTO Capacity Market Restructuring
- EPA’s Clean Power Plan
- Green Power Procurement
Automobile manufacturers are introducing affordable electric vehicles (EVs) into the middle market at an accelerating pace, paving the way for the transformation of both our electric infrastructure and the way we travel. The proliferation of EVs promises to drive high-impact innovation that will deliver lower electricity costs, significant greenhouse gas reductions, and numerous benefits from reduced petroleum use. Gabel Associates is helping to restructure policy and regulatory approaches to accelerate the growth of the EV market and the realization of these benefits.
Gabel Associates has significant experience in energy analysis and policy development, and provides a set of services to advance EV policies. The firm performs studies, drafts policy proposals and/or legislation, develops messaging, and coordinates efforts that guide infrastructure development and ratemaking processes to spur EV market development.
Gabel Associates is also managing ChargEVC, a not-for-profit trade and research organization comprised of a community of stakeholders to promote EV use. ChargEVC brings together various groups that are impacted by EV penetration, leading to a coalition of diverse interests that strives to help guide sustainable and balanced EV growth. As part of its work for ChargEVC, Gabel Associates is developing a strategic roadmap to help form efficient and sustainable policy options to support accelerated EV growth in New Jersey and beyond.
The participation of EVs and EV-chargers in the emerging “smart grid” provides a major opportunity to improve utility reliability and delivery, particularly as consumer interest in EVs grows. The adoption of EVs represents a case where ratepayer and utility interests, economic growth objectives, greenhouse gas policies, and clean energy goals all align.
Energy storage offers significant value to parties throughout the energy transaction chain, including customers, regulated transmission and distribution companies, renewable energy suppliers, and wholesale generators. Energy storage has the potential to dramatically improve the performance of existing grid infrastructure, while enabling higher levels of penetration and effective integration of renewable technologies. Consumers benefit from energy storage through reduced costs, improved performance, greater resiliency, and the enhanced value of sustainable sources of power such as solar and wind.
States have begun policy discussions on the market restructuring that will be needed to integrate storage technologies. Given the realities of the aging distribution system, the memory of Superstorm Sandy, and the growth of distributed solar generation, these discussions share a similar goal: to fairly align all interests in order to deliver secure, reliable, low-cost and increasingly carbon-free electricity. Storage is a key and enabling technology to achieving these objectives.
Gabel Associates has supported multiple storage and renewable projects and offers expertise in modeling their value proposition, including analysis of the value of energy shifting, regulation service, demand response, and capacity support. Renewable energy can be combined with energy storage to (1) provide the ability to utilize power when the electrical grid is down, (2) diversify back-up energy supply resources, and (3) take advantage of certain peak shaving, demand response, and regulation service opportunities to further reduce energy costs and generate additional revenue.
RTO Capacity Market Restructuring
Capacity markets help support long-term grid reliability by ensuring that adequate power supply resources exist to meet the predicted peak energy demands across the market footprint. Although capacity market designs vary across regional transmission organizations (RTOs), their primary role is constant: to ensure that the demand for electricity can be met at all times, particularly in the case of a grid emergency. Capacity markets achieve this goal by creating market prices that incentivize the development of power resources to meet future electricity demand.
In response to changing market conditions and the increased frequency of severe weather events that challenge grid reliability, some RTOs are restructuring their capacity markets. Gabel Associates has been an active contributor in the development of capacity market rules and reforms in various RTOs.
In 2015, PJM Interconnection, the largest grid operator in the country, conducted a substantial overhaul of its Reliability Pricing Model (RPM) capacity market. The revised market, called Capacity Performance (CP), meaningfully increases the risk exposure of supply resources while also providing the opportunity for increased capacity clearing prices and potential energy market upside. This change has dramatically altered the capacity construct for all resource types.
Gabel Associates has been entrusted to analyze related risk and financial issues and support the development of appropriate bid offer strategies on behalf of its clients, based upon the firm’s strong understanding of the complexities surrounding CP. To help resource owners understand CP risk, develop offer strategies, and evaluate risk management proposals, Gabel Associates developed its proprietary Analytical Likelihood of Availability and Non-Performance Risk (ALAN) model, which provides unit specific Monte Carlo analysis of risk exposure to capacity resources.
Gabel Associates is also involved in ongoing discussions at the Midcontinent Independent System Operator (MISO) toward the development of a new capacity construct. The firm has engaged in stakeholder processes at MISO to support a capacity market design that uses competition to create a rational price signal.
Clean Power Plan
On August 3, 2015, the U.S. Environmental Protection Agency (EPA) released its Clean Power Plan (CPP) Final Rule. CPP is a set of standards that will drive power plants and states to cut their carbon dioxide (CO2) emissions. The overall goal of the plan is to reduce CO2 emissions from the power sector by 32% below 2005 levels by 2030. This initiative is monumental as it is the first plan to set a national limit on carbon pollution produced from power plants.
The EPA’s guidelines give states the flexibility to devise their own approach to developing and implementing their emissions reduction plans. The EPA also allows for two main compliance pathways — a rate-based or mass-based approach.
Although the rule was stayed by the Supreme Court in February 2016, CPP has the potential to present new costs and opportunities to generating facilities and other market participants. Gabel Associates has analyzed the complex guidelines to understand and model their impact on wholesale power generators. The firm has collaborated with the New Jersey Department of Environmental Protection (NJDEP) and generation assets affected by CPP to analyze and further define the compliance options available to states.
As the plan moves through the legal challenge, Gabel Associates will remain active and diligent in evaluating generator-specific and state-level impacts and in identifying opportunities for cleaner sources including low heat rate units, energy efficiency, and renewables.
Green Power Procurement
Competitive energy procurement allows users to reduce their energy costs by taking advantage of the competitive third-party supply market. In response to a desire for heightened environmental stewardship by some clients, Gabel Associates has taken this activity one step further. Gabel has designed and implemented procurement programs that have an enhanced voluntary renewable energy component. Through a competitive request for proposal process, suppliers are asked to provide an electricity product with renewable energy content that is higher than required by the state Renewable Portfolio Standard (RPS) and, in some cases, a 100% renewable content.
Through this “green premium”, users obtain a power supply portfolio that exceeds RPS standards while still achieving significant cost savings.
Clients are able to specify the types and amounts of renewable energy they want in their portfolio. Gabel Associates evaluates current renewable energy market conditions and makes recommendations for the level of renewable energy that meets the client’s cost and environmental goals. Gabel Associates is directly involved in the development of the RPS and is active in renewable certificate purchasing, allowing it to efficiently design client programs that have added renewable content.
Gabel Associates has also worked closely with Sustainable Jersey (SJ), a statewide organization that promotes sustainable practices at municipalities, schools, and other public entities. Gabel Associates assisted SJ in the development of a point system that rewards participating users with SJ points for purchasing additional renewable energy. The firm supports entities in their effort to qualify under one or more of the SJ point system protocols, which provides additional recognition for their efforts.