How to Build a Regulator-Approved Beneficial Electrification Program

Utilities across the U.S. are aware of beneficial electrification (BE) programs, but wide adoption has been held up by uncertainty about their potential and broader role in the evolving regulated utility business model.

Fundamentally, BE programs promote the use of electric vehicles (EVs) and other transportation applications traditionally dominated by fossil fuels. In areas with significant distributed energy resources (DER) capacity, BE is a way to introduce new loads to consume some excess DER generation, and can be a key part of a regional diversification solution.

Developing a Program

Utilities should identify practical electrification solutions that strategically align with customer-driven DER growth, such as solar photovoltaic (PV), energy storage, and EVs, and allow adoption of long-term strategic electrification approaches that go beyond piecemeal solutions. Here’s how.

Conduct Market Assessment. The assessment should identify the electric technologies that make sense in the service territory and quantify the addressable market. The focus of the market assessment is to determine which market segments and technologies offer immediate returns and how much value can be gained from long-term utility involvement in electrification. This includes an assessment of technical and economic potential as well as available funding streams (such as Volkswagen mitigation trust funds, smart city initiatives, and Environmental Protection Agency settlements) that can leverage utility investments. Utilities should identify additional benefit streams that will emerge in a 1- to 10-year timeframe: integration of intermittent renewables resources, grid management and locational values, carbon and air quality values, alignment with grid modernization plans, and others. This assessment can form the basis of a plan for enhanced electrification and dovetails with a utility’s overall strategic vision.

Assess Regulatory Climate and Develop Strategy.Evaluate the regulatory climate and create a strategy for funding a BE program using shareholder or ratepayer dollars. Utilities should examine rules regarding promotional marketing and fuel-switching so they know what they are allowed to do with regard to promoting increased electricity consumption. Regulatory filings may be required for authorization to provide incentives or rebates to customers who purchase electric technologies. Utilities also need to know the regulators’ current position on electrification. Utilities should demonstrate that a BE program will benefit ratepayers by tending to lower rates over time, an important criteria when making a submission for a BE program.

Choose an Enactment Process.Select an electrification implementation method that works for your business model. Utilities should consider the full range of BE implementation methods and make a decision based on what works from a logistical, financial, and workforce bandwidth standpoint. Options include day-to-day management in-house; a hybrid option, with some in-house resources supported by a third party with technical expertise in electrification technologies and program implementation; and third party, in which the utility provides oversight while implementation is outsourced.

Determine Infrastructure Requirements.Utilities should take stock of their in-house infrastructure resources and budget money appropriately before implementing an electrification program. Some technologies may require line extensions that will need engineering design work by the utility. While commercial and industrial customers are typically responsible for purchasing and installing equipment charging stations, utilities may share the cost when the equipment is proven to drive revenue.

Get Buy-In.Secure agreement from staff tasked with implementation and build a dedicated, informed electrification account team. A utility’s key account team is vital to manage the rollout, customer education process, and ongoing success of a new electrification program. It’s critical to engage and train the key account managers from day one. Even if a third party helps run a program, account teams will continue to play a key role in getting out the message about the program and engaging with customers.

Understanding Business Benefits of Beneficial Electrification

Electrification programs provide substantial financial benefits to utilities, with incremental annual sales and a favorable return on investment. Utilities in vertically integrated markets benefit from the increase in kWh and demand charges billed to customers that add electric end-use equipment to their homes and businesses. Utilities serving air quality nonattainment or maintenance areas, and utilities in states with greenhouse gas emissions targets, will find additional value in the potential environmental benefits of transportation electrification. Electrification also can be used to build a utility’s base of controllable load to improve operational efficiency while accommodating increased renewables and DER.

Customer satisfaction among existing electrification programs has been high due to the tangible benefits, which may include reduced maintenance requirements, lower fuel consumption, cleaner work environment, less noise, and increased safety—along with the impact these technologies have on the customer’s bottom line. Regulators have mostly embraced BE due to its customer-focused, resource-conscious outcomes, and overall downward impact on utility rates. Utilities should consider BE programs that promote adoption of environmentally beneficial electric technologies as a replacement for fossil-fueled systems and equipment. ■

Philip Mihlmester is an executive vice president at ICF, a global consulting provider, and Bob DiBella is a principal at ICF.

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