EET&D : Let’s jump right in. Do you really think that the integration of renewable energy into the grid is inevitable?

HvN : Yes. Obviously, we have been integrating large-scale renewables into the grid for many years now, so that is not new. However, had you asked me this question about distributed energy and renewables (DER) even five years ago, I might have answered differently. Today, it is all but certain. DER integration has taken hold in Europe already, where Germany is approaching 50 percent of grid resources. Across the Americas, the relative inertia of the past decades has given way to significant momentum.

Several factors have accelerated the progress of DER integration in recent years. Through the 2009 American Recovery and Reinvestment Act (ARRA), the U.S. Department of Energy (DOE) has “invested more than $31 billion to support a wide range of clean energy projects across the nation.” And the 2011 tsunami that led to the Fukushima Daiichi nuclear disaster has marshalled political will – dramatically in Japan and France; to a lesser degree across the globe – to deemphasize nuclear and shift to a larger reliance on renewable resources. In the United States, extreme weather events like Superstorm Sandy in October 2012 have driven national discussion questioning the status quo of the current, aging grid and demanding better ways to increase resiliency and reliability as well as to address any underlying climate impact. Regulatory mandates have played an increasingly active role in directing the use of renewable resources in the past five years. The 2014 California Public Utilities Commission’s order to integrate historic levels of energy storage is requiring utilities and grid operators to find ways to comply within aggressive deadlines. In many states, including California, the average person no longer thinks of rooftop PV Solar as an eccentric’s toy. Indeed, the culmination of multiple factors has resulted in levels of investment in generation, transmission and distribution infrastructure, which once made, cannot be lightly abandoned. Not only state and local but federal and international bodies are increasingly requiring specific proportions of renewable resources to be included in regional generation portfolios.

Perhaps even more significant than any of the factors above, economic factors in recent years have begun to swing in favor of DER – at least for consumers. It is cost savings that is driving more consumers to install rooftop solar, for example. Similarly, consumers are buying electric and hybrid vehicles because they find them reasonably affordable and viable transportation options (at least as long as federal and state subsidies persist). Hybrid and electric vehicle adoption is dramatically higher than five years ago, when adoption was nominal. According to a Vox analysis and data from the Energy Policy Information Center, as of July this year, 54,973 plug-in and battery electric EVs have been sold and 232,788 hybrids. EV sales have risen by 35 percent in just the first half of the year. As sales increase, manufacturers, businesses, governments and entrepreneurs are increasingly creating more underlying support infrastructure in the form of more available charging facilities, creating greater utility of these vehicles. As battery costs drop as manufacturing efficiencies increase, adoption will only rise further. Had financial drivers not come into play, perhaps even with all the other factors – shifting consumer attitudes, pro-renewables political clout, and various regulatory mandates – one might have argued that DER integration had not reached a tipping point. Today, that moment has passed. DER integration is happening – and the adoption rate is only strengthening.

In fact, this consumer demand for renewable energy represents a vast market poised to be shaped. It has unleashed on the energy industry a barrage of new competitors for the role of energy provider. Yet, even with the daunting challenge of adapting rapidly to an unpredictable shift of the familiar market and engineering construct that had worked effectively for nearly a century, it is creating tremendous opportunities – for utilities and other traditional grid stakeholders no less than for the newer players.

Innovation has played a vital role in shaping the changes of the last five years as well. For example, innovation in energy storage is showing promise in resolving the intermittency limits of many renewable resources. Innovation has brought down costs of solar resources as well. Most significantly, innovation is going to play a crucial role in solving the challenges of integration.

EET&D : Let’s delve more deeply into these challenges. What do you see as the main problems that must be resolved to integrate renewable energy successfully into electric systems?

HvN : The challenges are significant. And while the popular view in the Americas may be that renewable adoption is simple and held back merely by a lack of political will, the reality – as the industry itself is well aware – is much more complicated.

It’s not merely the economic challenges of replacing the traditional legacy practices – in which a small number of centralized producers sell power to relatively passive energy consumers for predictable price-per-kilowatt schemes – with more complex practices. It’s not just the engineering challenges of safely and reliably moving power across a newly decentralized grid architecture with multiple points of entry for generation and multiple smart technologies monitoring and controlling the flow of electrons. It’s not even just the resulting complexity of the intersection of these two factors, economic and engineering, and the additional challenges this creates, such as clarifying who bears the burden for costs of infrastructure ownership and maintenance. It’s all of this, plus the regulatory uncertainties that make the problem so vast and complicated. In June 2014, DNV GL published the results of our pulse survey of 200 U.S. electric energy industry executives. The challenge of integrating distributed renewable resources into the grid was their number one concern for the next five years. Regulatory uncertainty was also a top concern.

EET&D : The challenges are certainly daunting. I wonder how you see them breaking down for the different stakeholders in the utility industry.

HvN : Good point. While the same challenges may face the industry at large, the impact varies for utilities, regional grid operators, and government and regulatory bodies. Since system design, planning, and operation must take place on the local level, each of these players must forge a way to fulfill their local missions in a distributed energy future.

For utilities, the challenges are intensified by their traditional structures, which tend to separate generation, transmission and distribution functions. Continuing in this siloed approach will create serious obstacles to the integration of renewables. As we have seen, the economic, engineering, and policy challenges cannot be separated; they demand a holistic approach. For the electric industry in general, and especially for utilities, this will require change. The traditionally separated transmission plan and distribution plan will require a new approach, creating integrated resource plans (which will entail closer cooperation with regulators, as well). Utilities that can successfully align their internal business planning and the operation of their business units to support a new integrated reality will still face tremendous changes, but are ultimately more likely to succeed. Those that cannot muster the leadership to effect such sweeping change, are likely to flounder. Expertise that combines engineering, economic, and policy skillsets will play an increasing role in helping utilities define energy portfolios, manage investment risk, and scale into integration of renewable resources in affordable, effective ways. Additionally, utilities will have to manage a transition in which they have increasingly less control, but in which their regulatory obligations may not have changed, especially with respect to reliability. Stakeholders will have to tangibly address this inequity.

Independent grid operators may have an advantage in the new paradigm in that their perspective has always been holistic in terms of the entire regional grid. Across the United States, some of the most proactive and integrated planning is taking place at the ISOs. For example, in 2013, we helped develop the market for the PJM Interconnect to bring fast resources to market and reduce the costs of managing intermittency. ERCOT used our KERMIT tool to plan how much wind it would need to integrate into its market. Those are just a few I know of from our teams’ work. Other ISOs are developing EV roadmaps and tackling a variety of tricky economic and engineering challenges. One particularly thorny challenge is that ISOs will increasingly need predictable visibility to the behind-the-substation conditions – an area that has traditionally been off-limits in terms of regulatory reach

HvN : Regulatory bodies such as PSCs and PUCs face a need for knowledge. They need to establish reliable economic guidelines and performance indicators, involving deep understanding of engineering challenges at a variety of technical levels, in order to better anticipate and manage the consequences of their rulings. And it’s still early days. The majority of renewable integration work is in planning stages or not yet begun. Regulators face significant risk in finding reliable ways to extrapolate the impact of policy change. We see regulators addressing these risks and commissioning independent studies to model, simulate, and project potential impacts to a variety of proposed strategies. For example, in 2014 DNV GL developed energy storage valuation tools for the California Public Utilities Commission as it sought to place reliable boundaries around its mandates for utility compliance to California law.

And we provided the California Energy Commission analysis of the viability of five energy storage use cases they identified in the first half of 2014. In New York, this past September, we delivered a comprehensive examination of the current state of and future potential for integration of distributed energy resources across the grid. These states’ governments, regulatory bodies and ISOs are providing leadership with careful gathering of facts, with simulations and modeling, and with a generally holistic approach that is being watched by energy stakeholders around the nation.

Finally, full-scale deployment of a truly distributed model will require the consumer to become a participant in future energy markets. This is perhaps the most complex component of the upcoming transition and will need to be accompanied by lots of education, before we can move to a truly DER-driven environment

EET&D : You mentioned innovation as a potential key to successful integration. Can you elaborate on what you mean by this?

HvN : Bill Gates described his approach to innovation like this: “I believe in innovation and that the way you get innovation is you fund research and you learn the basic facts.” I think this is a relevant approach for the utility industry, which is at once one of the most innovative and one of the most skeptical industries in the world. The modern electric grid, providing near-ubiquitous reliable power in developed countries is one of the most sustaining commodities underlying modern society. As we evolve to a more sustainable and distributed future, the three factors “sustainability, reliability, and affordability” will remain an important way to assess the viability of our innovations. We see something of this approach in the research and proactive modeling being led by ISOs and regulators and by utilities themselves.

Yet innovation is not just the source of disruption; it also has a central role to play in resolving the challenges of integration for utilities, ISOs, regulators, and governments. At DNV GL, we invest five percent of annual revenue into innovation projects to address the industry’s biggest challenges. One of our innovation projects is Power Matching City, established in the Netherlands. Here, the community’s power needs are met through advanced, real-time load balancing technologies including efficiency and multiple renewable resources. Incorporating innovation means finding the latest advances in efficiency that can make an energy storage investment result in fiscal success rather than loss. Indeed, DNV GL is actively engaged with manufacturers and stakeholders to proactively test and model future energy storage options. Clearly, innovation is creating opportunities to build safer, greener and smarter future.

EET&D : Given the certainty of continued uncertainty, what can energy stakeholders do to reduce their risks and increase their ability to have successful outcomes from their renewable integration efforts?

HvN : You are correct. Uncertainty – be it economic, technological, or regulatory – is likely to continue. It’s important to consider, for example, that the very definition of what constitutes a renewable resource will continue to change. Nuclear, hydro, energy storage, and even energy efficiency and demand response/energy management tools all may be seen as renewable resources for the electric capacity they are capable of contributing.

The scope of the challenge cannot be underestimated. We are talking about restructuring the flow of electrons, the flow of information, and the flow of money that supports it. Through it all, the essential achievement of the existing grid – delivering 99.999 percent reliability, with safety and affordability – cannot be compromised.

I would summarize a prudent approach to embracing the inevitable era of integrated renewables, as follows:

• Hedge risk with flexible portfolios and new technologies that actively balance energy supply/demand
• Invest in long-term planning that considers multiple possible scenarios for generation resources
• Learn from others’ integration analysis and findings even as you shape your own portfolio suited to available resources, terrain, load size and shape, and distinct economic factors
• See innovation as solution as well as disruption
• Weigh all innovation against the vision of a reliable, affordable, cleaner grid.
• Take a holistic approach that considers the engineering, economic, and policy pieces of grid planning

EET&D : Thank you for sharing your thoughts on this compelling issue.

HvN : My pleasure. I appreciate the chance to participate in the Future Grid Forum. It’s a valuable venue for stepping back and examining the energy issues that will build the foundation for the business climate of the next century.