Market Expansion PDF

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GRID+ United States Market Expansion

GRID+ United States Market Expansion 1
Background 2
Electric Industry Deregulation 2
Power Markets and the Price of Electricity 5
Energy Fundamentals 11
Grid+ 12
Overview 13
Deregulated States 31
Texas 32
Illinois 36
Ohio 40
New York 44
Pennsylvania 48
Massachusetts 52
New Jersey 56
Maryland 60
Connecticut 64
Maine 68
New Hampshire 72
Rhode Island 76
Washington D.C. 79
Delaware 83
Michigan 87
Conclusions 90
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Background
The electric power industry is as amorphous as it is complex. Overlapping interests and jurisdictions
create a mosaic of rules, regulations, and market signals that dictate who gets to participate in the market,
where they may participate, and how they may generate revenue. Recent advances in technology and shifts
in legislative and consumer priorities have tasked the electric power industry with integrating a growing
abundance of distributed energy resources (DERs) into the electricity ecosystem. These technologies found
on the “grid edge” have already, and will continue to, profoundly alter how electricity is managed and
consumed by the end user as well as which business models will prevail in the competitive landscape.
As Grid+ navigates the process of launching a retail electricity provider in Texas, this report examines
the current market conditions in states that allow for electricity retail choice by consumers. The long-term
roadmap of Grid+, as outlined in the whitepaper, calls for expansion to other deregulated electricity markets
after successfully establishing operations in Texas. Eighteen states and Washington D.C. offer retail choice in
some form and a variety of factors determine their attractiveness for Grid+ market expansion. This report will
compare states across factors that will influence the success of the Grid+ business model and likelihood of
customers choosing Grid+.
Electric Industry Deregulation
Early versions of the electric grid allowed competing energy suppliers to extend their own
distribution lines to customers, creating a hodgepodge of wires and resulting in an inefficient allocation of
resources. Power generation, transmission, and distribution are characterized by large, fixed capital
expenditures and low marginal costs of serving an additional customer. Seeing the opportunity to solidify a
natural monopoly and capitalize on the cost advantages of economies of scale, power companies began
consolidating and the public became wary of the new, powerful conglomerates that could unilaterally control
the price and access to a resource necessary for modern life. In response, municipalities started to create
their own power companies to protect their citizens from electric monopolies. Private utilities, worried about
their bottom line, searched for a solution that could protect their business interests while alleviating the
concerns of local governments. The winning solution, known as the “regulatory compact”, would guarantee
private utilities a monopoly over a service territory in exchange for granting a local or state governing body
the right to regulate prices and services offered.
For decades, almost all customers were served by regulated utilities that controlled generation,
transmission, distribution, and billing. These utilities are referred to as being “vertically integrated” and are
heavily regulated by state governing bodies known as Public Utility Commissions (PUCs). Several legislative
and regulatory landmarks altered this status quo and allowed for the restructuring of the electric power
industry. In 1978, the Public Utility Regulatory Policies Act (PURPA) was passed in response to the 1973
energy crisis. PURPA opened the door to competition in generation by allowing non-utility power producers
to sell electricity in the wholesale market. The Energy Policy Act of 1992 (EPACT92) further propelled many
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energy markets toward restructuring by creating the exempt wholesale generator class of power producer
which removed many barriers to entering the wholesale market. Federal Energy Regulatory Commission
(FERC) orders 888, 889, and 2000 in the 1990s provided open access to transmission and distribution services
and allowed for the creation of Independent System Operators (ISOs) and Regional Transmission
Organizations (RTOs) to operate electric grids, administer power markets, and ensure long-term reliability of
the electricity system.
In tandem to the restructuring of the electricity generation market, some states began planning for
deregulation at the other terminus of the power process. Retail choice allowed for customers to select their
own retail electricity provider (REP) to procure wholesale electricity on their behalf and bill them for their
usage. This system separates electricity markets into distinct generation, transmission and distribution, and
retail segments. The transmission and distribution segment of the market, often referred to as Transmission
and Distribution Service Providers (TDSPs) or Transmission and Distribution Utilities (TDUs), is regulated by
the state PUC and usually consists of a flat charge and set price per kWh established in rate cases.
The graphic below illustrates the primary structures of electricity markets in the United States. Two
missing structures are the municipally-owned utility, which operates similarly to a traditional vertically
integrated utility but with city oversight, and the electric cooperative, which is primarily found in rural areas.
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Source: The University of Texas at Austin Energy Institute1
States have adopted or piloted retail choice at different rates and through different processes. While
no state is 100% open to retail competition, many now have utility service territories with millions of end
users that can select a retailer in a competitive marketplace. For the purposes of this report, the only states
that will be examined are states that allow residential customers to purchase electricity from competitive
retailers.2 While not discussed in this report, other states may restructure their electricity sector in the future
and Grid+ may license its technology to utilities in regulated markets.
1
Tuttle, David P., et al. "The history and evolution of the US electricity industry." White Paper UTEI/2016-05-2
(2016).
2
There is a ballot measure in Nevada up for vote in November 2018 that would establish retail choice. Nevada is
not included in this report but the analysis could be extended to include the state.
https://ballotpedia.org/Nevada_Question_3,_Legislature_to_Minimize_Regulations_on_the_Energy_Market_and_
Eliminate_Legal_Energy_Monopolies_Amendment_(2018)
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Power Markets and the Price of Electricity
The retail price of electricity in a deregulated market can be broken down into four cost
components: the generation charge (represented by the wholesale price), the delivery charge, taxes and
government fees, and the retail markup. The delivery charge, taxes, and government fees are all set by
legislative mandate or the state PUC and all retail electricity providers operating in a region pay these same
costs at the same rate. The retail markup is unique to each retail electricity provider and can represent a
surprisingly high proportion of your total electricity bill. Retail markups are set to cover marketing and
customer acquisition costs, administrative overhead, billing, and the financial risk associated with bad
customer debts. Reference the Grid+ Whitepaper to see how Grid+ is developing a novel approach to lower
retail markups.
The generation charge in most wholesale power markets is comprised of separate energy and
capacity market prices.3 Energy markets represent the cost of producing electricity in the present day, while
capacity markets are designed to ensure adequate investment in generation to meet future demand. In a
forward capacity market, utilities and electricity retailers are required to purchase enough capacity from
generators to meet their customers peak demand at a time in the future, plus an additional amount of
capacity known as a “reserve margin” to ensure that demand will be met even if it exceeds forecasts. This
process is intended to ensure a revenue stream to cover the high fixed costs of developing an electricity
generation project. Energy-only markets do not facilitate a capacity market and instead rely on other
mechanisms, such as scarcity pricing, to incentivize generation development necessary to meet future
demand and fulfill a mandated reserve margin. Proponents of capacity markets claim that it is the best
system to ensure long-term electricity supply and critics of of capacity markets point towards high or volatile
capacity prices and see other alternatives as sufficient alternative.
While most customers are priced at a flat rate, wholesale power markets are highly variable and the
wholesale price of electricity changes through the day and year reflecting variables such as fuel price,
electricity demand, power plant costs, and location. Wholesale pricing is usually represented as the
Locational Marginal Price (LMP) which is algorithmically determined to reflect the value of electricity at
different locations by accounting for factors such as transmission losses and congestion. LMPs are usually
settled at a load zone, which represents a weighted average of LMPs in a region. The LMP is calculated
differently based on the policies of each ISO or RTO with some excluding transmission losses in their
calculations.
Wholesale power can be priced in three ways: in the day-ahead market, in the real-time market, or
through bilateral contracts between a supplier and purchaser of electricity. In the day-ahead market, the ISO
or RTO forecasts electricity demand at particular time intervals and generators bid their capacity at a specific
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ISO New England, PJM Interconnection, New York ISO, and Midcontinent ISO all operate a form of forward
capacity market. ERCOT operates an energy-only market where the wholesale price represents all variable and
embedded fixed costs of electricity generation.
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price. The ISO or RTO then dispatches electricity from cheapest to most expensive until demand is met. The
price of the next megawatt hour of electricity to be dispatched after demand is met is the clearing price
represented in the wholesale market. In the real-time market, participants can buy and sell electricity over
the course of the day in near real time. The actual pricing interval changes from ISO to ISO; the Electric
Reliability Council of Texas (ERCOT), for example, operates the real-time market at a 15 minute interval.
Bilateral contracts are private pricing and supply agreements between buyers and sellers. A common form of
bilateral contract is a power purchase agreement for renewable energy which is usually a prerequisite for
renewable energy project financing.
Some distinct patterns emerge when prices are averaged over periods of time. For example, at the
Houston Load Zone in ERCOT average prices are higher during the hottest parts of each day and during the
hottest months of the year. This makes intuitive sense as large amounts of air conditioning is required to
make buildings inhabitable during hot Texas summers. Indeed, most states encounter a peak in demand and
pricing during the summer when temperatures are high and AC units are active. Some states in the northern
United States have a dual peak when extreme temperatures in both the summer and winter result in high
prices compared to more mild conditions prevalent in the spring and autumn.
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Day-ahead and real-time prices typically track each other on average. In fact, using the Houston Load
Zone in ERCOT as an example, the mean price of electricity purchased on the day-ahead and real-time
markets in 2017 was within 1/100th of one cent per kWh of eachother. This is to be expected as the
day-ahead market offers a prediction of what the following day’s market conditions will be. While the prices
on average are very close, the distributions of prices on the day-ahead and real-time market are noticeably
different. The real-time market is much more volatile and is subject to intense price spikes and dips that are
smoothed over in the day-ahead market. For this reason, many retailers choose to primarily participate in the
day-ahead market to eliminate risk. There are, however, some considerable advantages to operating in the
real-time market.
The graphic below shows the 2017 calendar year pricing data for the Houston Load Zone in ERCOT.
The volatility of the real-time market is immediately apparent and skews the scale of the y-axis entirely. At
the peak real-time price in 2017, wholesale electricity prices were more than 100 times greater than average.
Another representation of the distribution of prices in the day-ahead and real-time markets for the
Houston Load Zone in ERCOT indicates that the distribution is heavily skewed right by extreme observations,
especially in the real-time market.
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Violin plot of price distributions in the real-time and day-ahead markets with boxplot and mean plotted within
the distribution. Median, interquartile range, 1.5x IQR whiskers, and mean shown.
Despite having nearly identical means, the real-time market has a smaller median indicating that
most of the time the real-time price ends up being cheaper than the day-ahead price. The abnormally high
pricing events at the high end of the price distributions, although a small percentage of the total pricing
events, have an outsized effect on the price that is passed on to consumers. This signals that there is an
opportunity for consumers to save on their electricity bill if they can lower usage when prices are high and
compensate by increasing usage when prices are low, assuming their retail electricity provider offers a
dynamic pricing plan.
Increases in smart meters and Internet of Things (IoT) connected devices have allowed consumers to
take advantage of this arbitrage opportunity. In a process known as “demand response” consumers can save
on their electric bill while also contributing to grid reliability and promoting renewable energy. Renewable
generation sources have no fuel costs and can bid into the wholesale market at near zero (or sometimes
sub-zero) prices. When prices are low, that usually indicates that more renewable generation is occuring;
when prices are high, the costliest generation sources are being called into action. These costly generation
sources are typically highly-polluting peaker plants.
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Avoiding even a small percentage of the highest priced peak moments in the wholesale market can
have large effects on the average price of electricity and the customer’s monthly bill. The figure below shows
the effect of removing a certain percentage of the highest priced moments on the mean wholesale price of
electricity.
Prices for the calendar year 2017 were arranged in descending order and filtered by market type. The x axis
represents removing a certain percentage of the highest priced intervals and the y axis is the corresponding
mean price after removing price peaks.
It is immediately apparent that curtailing even a small amount of electricity consumption can have a
large effect on the mean price of electricity. For many customers, it is not possible to completely shut off
their load. It is, however, possible for almost all customers to drastically reduce consumption of high energy
use devices such as air conditioners for short periods of time, for example, a 15 minute interval in ERCOT
pricing terms. By strategically managing electricity consumption, consumers can save significantly over the
course of a year. In many places there are even demand response markets that can directly compensate end
users for reducing their load.
The Grid+ agent device is designed to assist users in managing their electricity consumption. By
connecting to smart meters and in-home smart devices, the agent can learn consumption patterns and make
intelligent consumption decisions on behalf of a consumer based on market information. The agent serves
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the valuable purpose of connecting other smart devices to a shared financial infrastructure and can serve as
the central decision making hub for smart home management.
There is already strong evidence that consumers are willing to adjust their electricity consumption
based on the price of electricity. The graphic below shows the relationship between the retail price of
electricity and household electricity consumption for each US state and Washington D.C.
Hawaii is a clear outlier at approximately 27.5 cents per kWh . High import fuel costs, the proliferation of
behind the meter renewables, and pleasant weather all contribute to Hawaii’s unique position on the graph.
Customers in states that have a higher price for electricity tend to be more cognizant of this cost, and
thus consciously decrease their consumption to save on their electric bills. Likewise, states with low
electricity prices do not pass along strong economic incentives for end users to conserve power. This
observation suggests that at some level electricity can be considered an elastic good, wherein customers will
react to increases in price by decreasing consumption. Not all consumption can be removed, but luxury
consumption is more likely to be curtailed in regions with higher prices. Allowing consumer access to more
granular pricing structures may more frequently align incentives between market participants and end users
by rewarding customers for conserving energy when it is most beneficial to the stability of the grid (i.e. in
times of peak demand).
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Energy Fundamentals
This report will make frequent use of different units of energy and power common to the electricity
sector and it is important to understand how these units scale and what they mean. A good analogy for the
difference between power and energy is the difference between speed of a car and distance traveled. Power
is the instantaneous “speed” of a device and energy is the “distance” traveled over time. Just like a car can go
different speeds, different devices consume or produce electricity at different rates. Measuring the amount
of time these appliances are in use and multiplying that by the rate they consume/produce energy gives the
energy consumed/produced by that device over a period of time.
In this document, power is represented in quantities of watts and energy is represented in quantities
of watt hours. A watt hour is defined as one watt of power being expended over one hour of unit time. A 10
watt led light bulb left on for 10 hours would equal 100 watt hours of energy consumed. Watt hours is often
misused as watts per hour. Since a watt is already a rate, watts per hour would be a measure of the
acceleration of power consumption or production and is typically used to measure how quickly power plants
can ramp up generation. In practical terms, a watt is not very much power so we often measure power in
kilowatts (one thousand watts), megawatts (one million watts), or gigawatts (one trillion watts.) Similarly we
usually use kilowatt hours, megawatt hours, and gigawatt hours for energy as they are more useful. For
reference, the average household electricity consumption in the United States is around 900 kWh per month.
Transmission and distribution companies are primarily concerned with power since there are
structural limitations that determine how much power the grid can accommodate at one instant. Generators
sell energy on the wholesale market and end users are charged for their energy usage over a billing cycle,
therefore retail electricity providers are primarily concerned with energy rather than power. Consumers with
solar panels are concerned with both the power of their system as well as the energy produced.
Solar panels are rated at power capacities in watts at standard test conditions (STC). Standard test
conditions represent excellent conditions for solar production, and power output will rarely exceed the
power rating of a panel.4 Just like devices in your home, you can measure the energy output of a solar panel
by multiplying the power output by the amount of time the panel is producing at that power. For example, a
two kilowatt solar system operating at STC for three hours will produce six kilowatt hours of electricity over
that time frame.
Since sunlight is highly variable, power output is highly variable. Therefore, solar potential is often
represented in a metric called peak sun hours to compensate for this variability. Peak sun hours is defined as
the number of hours that a panel could operate at peak efficiency if the total sunlight over the course of a
day was added together. A panel will not operate at peak efficiency for most of the day, or sometimes at all,
but peak sun hours allow users to multiply by their installed capacity to predict production. Peak sun hours is
4
Some solar panels are rated at PVUSA Test Conditions (PTC) rather than STC. PTC was developed under the
direction of the National Renewable Energy Laboratory (NREL) to represent more realistic field conditions than
STC. The main difference between STC and PTC is the ambient and solar cell temperature at which the testing
occurs.
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typically 5-7 hours in the summer and 2-4 hours in the winter depending on your location within the United
States.5
Grid+
A variety of factors could serve as indicators for a state being a good candidate for business
expansion. The novel approach to energy retailing that Grid+ will employ creates a unique criteria set that
can influence the ultimate success of the project. Important factors to consider include market size,
competitors and their market share, smart meter penetration, adoption rate of other “grid edge” resources,
and regulatory friendliness, among others. While not exhaustive, this report serves as an important starting
point for understanding important market dynamics within deregulated states. Further work is required to
fully understand the pros and cons of entering each market, particularly with respect to the regulatory
environment and services offered by competitor retailers with established operations.
5
NREL has a tool called PVWatts to measure expected solar output anywhere in the United States.
https://pvwatts.nrel.gov/index.php
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Overview
Note that rounding errors may cause some values to not add to correct amount.
Electricity sales in deregulated service territories grouped by state and customer type. Both Texas and
Michigan have proportionately large sales to industrial customers reflecting the large manufacturing and
petroleum-related industries in the states respectively. The District of Columbia has a proportionately large
share of sales to commercial customers reflecting the relatively small amount of housing within the District.
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Table of above graph.
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Percentage of electricity sales (measured in kWh) in deregulated service territories grouped by state. High
values indicate a larger customer base switching to electricity retailers and lower values indicate more
customers staying with incumbent, bundled services. Texas is not shown because there are no bundled
services in deregulated service territories. When deregulation occurred in Texas, the retail components of
utilities were required to seperate form the transmission and distribution components.
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REP market share over time graphic from Brattle Group. REP market share has increased across all
deregulated states since market liberalization. Analysis covers the addressable market including commercial
and industrial customers. Increases in Ohio, Illinois, and Massachusetts are credited to the establishment of
Community Choice Aggregation (CCA) programs. CCA is a process where a community has a designated board
that aggregates individual buying power to make an electricity choice on behalf of all users. CCAs can
negotiate with generators or develop their own power supply. Many CCA programs opt for renewable
electricity portfolios or can negotiate a favorable deal with a REP. Decreases from 2014-2016 are partially
attributed to the 2014 Polar Vortex that had adverse effects on electricity prices. Texas is not shown because
there are no bundled services in deregulated service territories. Michigan is excluded as well because they are
operating under a pilot program.
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Average retail price of electricity in deregulated states during the month of March, 2018 (most recent data at
time of analysis.) Note that these are statewide values and include non-deregulated service territories in
deregulated states. Higher prices may indicate a greater likelihood of customers being willing to switch
energy suppliers.
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Electricity bill as percentage of median household income by deregulated state. Calculated by multiplying
average household consumption in each state by the average price of electricity in that state before dividing
by the median household income. Customers paying a higher percentage of their income on electricity are
likely more willing to switch providers if a cheaper service enters the market. Figure includes non-deregulated
service territories in deregulated states.
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Relationship between the retail price of electricity and per household consumption in deregulated states. The
pattern indicates that there is a negative relationship between the retail price of electricity and household
consumption. Other factors besides price can serve as determinants for household consumption, but it makes
intuitive sense that customers that pay more per kWh are more incentivised to conserve energy.
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Total number of electricity retailers operating in deregulated states, subdivided into retailers with greater
than 1% market share and retailers with less than 1% market share. Market share is measured as percentage
of total sector revenue from residential customers. Note that this figure only includes electricity retailers and
not bundled services. Comparatively large blue bars to red bars indicate greater parity among electricity
retailers.
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Total electricity sales (MWh) to residential customers in deregulated service territories grouped by state and
service type. Comparatively large blue bars to red bars indicate more customers opting for electricity retailers
over incumbent, bundled services.
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Table of above graph.
23
Quantity of Advanced Metering Infrastructure (AMI) Smart Meters by deregulated state. AMI smart meters
allow digital two way communication between utilities and customers. The Grid+ agent device will be able to
connect to AMI smart meters to intelligently manage consumption. Note that this data is from 2016 and
smart meters are becoming increasingly common. For example, ConEdison, a large utility in New York, began
installing smart meters in 2017 and plans to install 5 million by 2022. This figure is likely to change
significantly over the next several years.
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Residential meters in deregulated states by meter type. Advanced Meter Reading (AMR) meters enable one
way communication from meter to energy supplier but does not natively give consumers that information.
“Dumb” meters lack an automated interface. Missing numbers indicate missing data.
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Installed capacity of grid-connected rooftop installations and ground-mounted installations under 5 MW in
deregulated states. A large number of installations can indicate a willingness for customers to adopt “grid
edge” technologies, a regulatory friendliness to “grid edge” technologies, and a potential increased value of
Grid+ technology to consumers. Pennsylvania and Maine had incomplete datasets and are underrepresented
in the graph. Note that Michigan and Rhode Island data were not contained in this dataset.
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Installed solar capacity over time in deregulated states. Decreasing solar prices have led to increased
adoption of solar technologies at the consumer level. States with green incentive programs like mandated net
metering or low interest solar financing see a greater increase in solar adoption. Pennsylvania and Maine had
incomplete datasets and are underrepresented in the graph. Note that Michigan and Rhode Island data were
not contained in this dataset.
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Installed solar capacity over time in deregulated states log-transformed to more clearly see state by state
trend. Each y-axis tick mark represents an order of magnitude change in installed solar capacity. In the graph
on the previous page, the large solar adoption in New Jersey, Massachusetts, and New York obscure the trend
that solar adoption is increasingly rapidly in every state. Sharp changes in the graph usually indicate the
passage of legislation that incentivizes renewable procurement (i.e. Pennsylvania’s Alternative Energy
Investment Act in 2008 or New Hampshire’s Renewable Portfolio Standard law in 2007). Note that Michigan
and Rhode Island data were not contained in this dataset.
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Annual value of a 4 kW solar panel in deregulated states. Annual solar output from each deregulated state
was calculated by using the National Renewable Energy Laboratory PVWatts Calculator default settings and
selecting a point in the interior of the state. Expected annual output was multiplied by the average residential
retail price of electricity to determine annual value. The cost of installing the solar panel or the availability of
incentive programs like net metering is not factored into this calculation.
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Combined revenue from residential electricity sales by deregulated state. Values exclude revenue from utilities
that offer bundled service. Texas has much higher revenue due to its large population and rulemaking that
does not allow for incumbent, bundled utilities to maintain retail operations.
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Removing Texas from the graph shows an easier-to-digest comparison between states in which Grid+ is not
currently operating. Values only include electricity retailers and exclude utilities offering bundled services.
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Deregulated States
In this section, market information is presented for each state in which Grid+ could operate as a
retail energy provider. Some states offer limited choice to commercial or industrial customers, but only states
that allow residential retail choice are included in this report. More state by state information on electricity
and natural gas deregulation can be found on the American Coalition of Competitive Energy Suppliers’
website.
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Texas
Electricity choice is available in the AEP Central, AEP North, CenterPoint, Oncor, Sharyland, and Texas
New Mexico Power utility territories. Centerpoint and Oncor cover the population centers of Houston and
Dallas/Fort Worth respectively. Sharyland is a small utility covering several small towns in Texas.6
The Texas deregulated market does not allow for bundled, incumbent services. When retail deregulation
occurred in Texas, the retail operations of each utility split from the transmission and distribution service to
form a new company. These new retail companies were called “Affiliate REPs” (AREPs) and had their retail
rates regulated by the Texas PUC for the first five years following deregulation (2002-2007.) The retail rate set
for AREPs was called the “price to beat” and was calibrated to allow competitive REPs to enter the market
without being priced out by a dominant incumbent. Competitive REP market share has increased steadily over
time but former AREPs, namely TXU Energy Retail and Reliant Energy Retail Services, are still dominant forces
in the market.
6
https://www.puc.texas.gov/industry/maps/maps/tdumap.pdf
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Market share of electricity retailers measured as percentage of revenue from residential customers.
34
Installed capacity of grid-connected rooftop installations and ground-mounted installations under 5 MW over
time.
35
Average daily peak sun hours by month. Peak sun hours is a common measure of solar potential.
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Illinois
Electricity choice is available in the Commonwealth Edison and Ameren utility territories.7
Homefield Energy has a large market share in both the Midcontinent ISO and PJM Interconnection sections of
Illinois, hence the two percentages. PJM covers most of Chicago and its suburbs.
7
http://www.ilenergyassn.org/electric-utilities-illinois-map/
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Market share of residential sales divided by bundled service providers and retail electricity providers.
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time.
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Ohio
Electricity choice is available in the AEP Ohio, Dayton Power & Light, Duke Energy Ohio, and
FirstEnergy (Ohio Edison, The Illuminating Company, and Toledo Edison) utility territories.8
8
https://www.puco.ohio.gov/emplibrary/files/Util/GIS/Electric_Maps/Ohio_Electric_Service_Areas_Size_A.pdf
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time.
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New York
Electricity choice is available in the Central Hudson, Con Edison, New York State Electric and Gas
(NYSEG), National Grid, Orange & Rockland, and Rochester Gas and Electric (RG&E) utility territories.9
9
https://power2switch.com/NY/utility_territory_map/
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time.
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Pennsylvania
Electricity choice is available in the Citizens’ Electric, Duquesne Light, Met-Ed, PECO Energy, Penelec,
Penn Power, Pike County Light & Power, PPL Electric Utilities, UGI, Wellsboro Electric, and West Penn Power
utility territories.10
10
https://avalonenergyconsultants.com/wp-content/uploads/2017/05/pa-utility-map.pdf
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time.
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Massachusetts
Electricity choice is available in the Eversource, Fitchburg Gas and Electric, and National Grid utility
territories.11
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https://www.mass.gov/files/documents/2017/09/11/map-of-electric-company-service-territories-by-municipality.
pdf
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time.
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New Jersey
Electricity choice is available in the Atlantic City Electric, Jersey Central Power & Light, Public Service
Enterprises Group (PSEG), and Rockland Electric utility territories.12
12
http://www.njcleanenergy.com/main/public-reports-and-library/links/electric-utilities-territory-map
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time.
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Maryland
Electricity choice is available in the Baltimore Gas and Electric (BGE), Choptank Electric Cooperative,
Delmarva Power and Light, Potomac Edison, Potomac Electric Power Company (Pepco), and Southern
Maryland Electric Cooperative (SMECO) utility territories.13
13
http://www.opc.state.md.us/Portals/0/OPC%20Images/MDfull.jpg
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time.
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Connecticut
Electricity choice is available in the Eversource and United Illuminating utility territories.14
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https://mintenergy.net/wp-content/uploads/2016/11/Utilty_Map_CT.jpg
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time.
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Maine
Electricity choice is available in the Emera and Central Maine Power utility territories.15
15
https://www.maine.gov/mpuc/electricity/map/index.shtml
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time. Stair-step pattern occurs from data being entered once monthly for most of dataset. Data only available
in Maine from 2011-2013.
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New Hampshire
Electricity choice is available in the Public Service Company of New Hampshire (PSNH), Liberty, Unitil
Energy Systems, Inc. (UES), and the New Hampshire Electric Cooperative, Inc. (NHEC) utility territories.16
16
https://www.nhsaves.com/wp-content/uploads/2014/02/state.pdf
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time.
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Rhode Island
Electricity choice is available in the National Grid utility territory which covers all but the northwest
corner of the state.17
17
https://mintenergy.net/wp-content/uploads/2016/11/Utilty_Map_RI.jpg
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Washington D.C.
Electricity choice is available in the Potomac Electric Power Company (Pepco) utility territory, which
encompasses the entire District.
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time.
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Delaware
Electricity choice is available in the Delmarva and Delaware Electric Cooperative utility territories.18
18
Utility service territory map unavailable for Delaware.
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time.
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Michigan
Electricity choice is available in the Alpena Power Company, Consumers Energy and DTE Energy
utility territories. Consumer participation is capped at 10% of each utility’s sales from the previous year.19
19
https://www.michigan.gov/mpsc/0,4639,7-159-16377-41337--,00.html
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Conclusions
Texas is by far the most robust deregulated market constructed within the United States. With a
large population and legislation in place requiring retail choice, Texas is the logical starting point for
establishing a first retail electricity provider to prove out Grid+’s business model and technology.
Additionally, significant smart meter penetration allows Grid+ agent functionality that other metering
technology currently does not support. The elimination of incumbent utilities with bundled service allows for
open competition and a consumer base that is accustomed to making energy provider selections. It is worth
reiterating that while there are no incumbent utilities with bundled service, the two largest retailers by
market share (TXU Energy Retail and Reliant Energy Retail) were the former affiliates of Oncor and
CenterPoint, the two largest TDUs in Texas.
Texas is also the sunniest deregulated market and has seen rapid growth in solar installations in
recent years, although many of those installations are utility-scale or on residences in non-deregulated
service territories such as Austin and San Antonio. Despite weak state-wide green incentive programs, Texas
is often a testing ground for distributed technologies due to its natural sun and wind, combined with its
openness to free market competition. This trend is likely to continue into the future as renewable and
battery prices continue to decline, making them more economical for customers, so long as the Texas
legislature and the PUC promotes a philosophical alignment to free markets and welcomes new technology
rather than stifling innovation.
Some deregulated states considered in this analysis offer a small market that is dominated by
incumbent utilities or a select few REPs. The business case for expansion to these states over others is weak
and the startup costs may completely overshadow the potential reward. These states include Maine, New
Hampshire, Rhode Island, and Delaware, as well as Washington DC. Additionally, Massachusetts and New
Jersey have halted smart meter rollouts and could abandon the process altogether affecting the outlook for
expansion.20,21 Michigan retail choice is currently under a pilot program capped at 10% of the market in
certain service territories. Should the pilot program prove successful, Michigan could be a good candidate for
market expansion.
Several states warrant further examination as options for a first round of business expansion. Each
offers unique advantages and disadvantages based on the factors examined in this report but there are other
significant factors that could influence business success, namely regulations in place and competitors’
business models. Additional trends to watch include how smart meter programs are adopted in states such as
New York and how stakeholders adapt their policies to accommodate growing distributed energy resources.
20
Walton, Robert. “Massachusetts Rejects Smart Meter Rollout for 'Weaknesses in the Business Case'.” Utility Dive,
14 May 2018,
www.utilitydive.com/news/massachusetts-rejects-smart-meter-rollout-for-weaknesses-in-the-business-c/523383/.
21
“State Still Not Sold on Smart Metering for Utility Customers.” NJ Spotlight,
www.njspotlight.com/stories/18/03/06/state-still-not-sold-on-smart-metering-for-utility-customers/.
91
Illinois is one of the larger deregulated markets outside of Texas and offers several advantages that
other deregulated markets lack. High smart meter penetration and openness from regulatory bodies to
provide access to usage data position Illinois near the front of the pack. The Open Data Access Framework
was developed by the Environmental Defense Fund, Citizens Utility Board, and Illinois Commerce Commision
22
to clarify which sets of usage data Illinois customers and authorized third-parties can access and how that
data should be provided.23 While a separate framework applies to REPs, the willingness of the state to
embrace progressive, data-driven approaches to energy management is a promising indicator of regulatory
friendliness to new technology in the electricity sector. Additionally, Illinois finalized their Long-Term
Renewable Resources Procurement Plan in 2018 providing a clear roadmap towards more distributed
electricity generation and a target of 25% renewable generation by 2025.24 The Illinois REP market is
competitive compared to other states and most competition is centered in the Chicago metropolitan area
which houses approximately 75% of the state’s population. Commonwealth Edison remains the dominant
incumbent in the Chicago area but REPs have chipped away market share over time. One unique factor in
Illinois is the presence of two independent system operators, PJM Interconnection covering the northeast
portion of the state and Midcontinent ISO covering the rest of the state. Further research is required to
understand how REPs navigate working with different ISOs in different parts of the state.
The Ohio energy market is currently in flux and worth monitoring over the next few years. Despite
being one of the larger markets, uncertainty in the future of the market poses more risk than other
deregulated states. Ohio operates under a hybrid deregulated model where utilities that manage
transmission and distribution can also own generation assets. Some of these legacy generation assets,
particularly coal and nuclear power plants, have been largely priced out of the market by the influx of cheap
natural gas and require subsidies to remain operational. This has caused some utilities to argue for increased
subsidies or a re-regulation of the electricity sector.25 Additionally, FirstEnergy Solutions, which holds the
largest market share in Ohio, recently sold off its competitive retail business after filing for Chapter 11
bankruptcy reorganization in March of 2018.26 The November 2018 elections and changing industry dynamics
will provide additional insight on Ohio’s energy future.
New York’s retail market is characterized by parity among REPs overshadowed by the outsized
market share of incumbent utilities. Despite incumbent powers, there is ample evidence to suggest that the
New York electricity sector will undergo significant changes over the coming years that could present a
favorable scenario for market expansion. New York has positioned itself as one of the more progressive
22
The Illinois Commerce Commision is the Public Utility Council for the state of Illinois.
23
E nvironmental Defense Fund. “Open Data Access Framework.”
blogs.edf.org/energyexchange/files/2014/08/CUB-EDF-Open-Data-Access-Framework.pdf.
24
Merchant, Emma Foehringer. “Illinois Approves Path to 25% Renewable Energy by 2025.” Gtm, Greentech
Media, 5 Apr. 2018,
www.greentechmedia.com/articles/read/illinois-approves-path-to-a-quarter-renewable-resources-by-2025.
25
Munson, Dick. “Ohio Electricity Battles Abound.” Climate 411, 26 July 2017,
blogs.edf.org/energyexchange/2017/07/25/ohio-electricity-battles-abound/.
26
“FirstEnergy Solutions Selling Competitive Energy Biz to Constellation for $140M.” Power Engineering, 11 July
2018,
www.power-eng.com/articles/2018/07/firstenergy-solutions-selling-competitive-energy-biz-to-constellation-for-1
40m.html.
92
states in reshaping the electricity sector with comprehensive policy objectives outlined in Reforming the
Energy Vision, Governor Cuomo’s strategy for shaping the future of energy in New York.27 Additionally, there
is strong institutional support for distributed energy resources from the New York State Energy Research and
Development Authority (NYSERDA) and the New York Green Bank, a state-sponsored entity with the goal of
leveraging public dollars to stimulate private investment in clean energy technology. Furthermore, Reforming
the Energy Vision calls for increased advanced metering infrastructure, and utilities are in the process of
rolling out smart meter installations across New York.28
Similar to New York, Pennsylvania’s retail market is also characterized by parity among REPs and a
large market share of incumbent utilities. Pennsylvania already has a smart meter initiative in place with the
goal of installing smart meters for all customers by 2023.29 As the second largest natural gas producer and
third largest coal producer in the United States, Pennsylvania has lagged on renewable deployment despite a
goal of 18% of the generation coming from renewables by 2021.30 Pennsylvania has the most REPs competing
for market share of all the deregulated states outside of Texas which could prove to be an obstacle for a new
entrant or an opportunity to capitalize on a consumer base that is likely more aware of multiple retailer
options.
Maryland and Connecticut offer less opportunity than some of the larger markets but relatively
favorable conditions compared to other mid-sized markets. Both states have retail markets dominated by
incumbent utilities, parity amongst REPs, and solar growth in recent years. Maryland has had a smart grid
program in operation for years31 and Connecticut recently reaffirmed their commitment to implementing
advanced metering infrastructure in their 2018 Comprehensive Energy Strategy report.32 While neither state
is a likely first option for expansion, following developments in the retail market would be worthwhile.
As the electricity sector undergoes unprecedented change, it remains more important than ever to
take a calculated approach to developing a business within the industry. Understanding which states offer
favorable conditions for business expansion is imperative to achieving the goals set by Grid+ at its inception.
The proliferation of renewable energy and other grid edge resources have propelled the industry to require
novel solutions to newly created questions. Grid+ hopes to provide solutions to some of these questions in
markets where it is able to operate. While the future of the electricity sector remains uncertain, it is trending
in a direction that will strengthen Grid+’s business model, benefit consumers, and protect the environment.
27
More information on New York’s Reforming the Energy Vision program can be found at https://rev.ny.gov/.
28
Tweed, Katherine. “New York Prepares for Millions of Smart Meters Under REV.” Gtm, Greentech Media, 29 Oct.
2015, www.greentechmedia.com/articles/read/new-york-prepares-for-millions-of-smart-meters-under-rev.
29
Smart Meter Q&A. Pennsylvania PUC, www.puc.state.pa.us/general/consumer_ed/pdf/13_smart%20meters.pdf.
30
Pennsylvania State Profile and Energy Estimates. U.S. Energy Information Administration - EIA,
www.eia.gov/state/?sid=PA.
31
Maryland Smart Grid - Electricity. Maryland Public Service Commission,
www.psc.state.md.us/electricity/maryland-smart-grid/.
32
Comprehensive Energy Strategy. Connecticut Department of Energy and Environmental Protection, 8 Feb. 2018,
www.ct.gov/deep/lib/deep/energy/ces/2018_comprehensive_energy_strategy.pdf.
93

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