Utility companies should evolve with technology and consumer demand, says Richard Kauffman, Chairman of Energy & Finance for New York and the Chair of the New York State Energy Research and Development Authority (NYSERDA) Board.

As an innovative step toward the future, Kauffman designed New York State’s Reforming the Energy Vision (REV) program, which may be a template for other states to follow. Instead of being paid for infrastructure and sending electrons to customers, REV proposes to compensate utilities for energy efficiencies and delivering value to customers. An essential part of this program is the ability of utilities to accommodate technologies such as solar panels and electric cars.

REV also aims to create financial and physical infrastructure to support bi-directional movement of electrons through the power grid along with pairing intermittent renewables with battery storage and demand-side resources.

Recently, Kauffman was interviewed by Forbes and shared the principles he believes will be part of future power grid development:

Implement location-based pricing
Because a distributed resource will be valued differently based on where it’s located, a location-based pricing framework needs to be developed. This type of pricing will increase economic efficiency for customers and the power grid.

Phase out traditional utility rate structure
Traditionally, utilities add infrastructure investments into the rate base. Adhering to this rate structure discourages investments in new technology, contributes to an inefficient, peak-driven power grid, and deters investments in some locations.

Focus competitive markets on customers
A platform that is responsive to market needs would ultimately serve the customers and utility companies better. And such a consumer-based focus will stimulate innovation. Kauffman likened such a platform to smartphones, where companies such as iPhone and Android provide the platform for numerous app developers. In the energy field, vendors would similar develop ways to support assets such as solar panels and batteries that both consume and provide energy to the grid.

Think open source
Kauffman believe that changing the process to further power grid development may provide long-term benefits. A more open source approach would allow the regulatory process to become a more market monitoring function. Regulators would evaluate alterative solutions, looking for those with most value. And utilities would seek new, innovative answers instead seeking RFPs for every project.

Some places in New York are already implementing such creative solutions. For example, in the Brooklyn Queens Neighborhood Program, Con Ed avoiding having to build a $1.2 billion substation by opting for $200 million in alternatives such as battery storage and efficiency and demand response program.

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