Indiana utilities are in midst of identity crisis as customers take power into own hands

Posted by Laura Arnold  /   May 20, 2019  /   Posted in Duke Energy, Indianapolis Power and Light (IPL), Net Metering, Northern Indiana Public Service Company (NIPSCO), solar, Uncategorized, wind  /   No Comments

Indiana utilities are in midst of identity crisis as customers take power into own hands

 Click link below for video accompanying this story.

As renewable energy and natural gas costs decline, it's harder to justify coal energy. Many utilities also are closing coal-generation plants in Indiana and elsewhere. Dwight Adams, dwight.adams@indystar.com

The changes came slowly, then seemingly all at once.

Next door, your neighbor installed solar panels. You started seeing more and more electric vehicles. When you drove north on I-65, you hit a patch of farmland dotted with large windmills. And what about that big field of solar panels at the airport?

You may not have thought much about it, but every time you flipped on the lights or plugged in an appliance, you were part of a revolution.

Until recently, virtually all residents in Indiana, and many states across the country, had little say in where their electricity came from or how it was produced. Bills arrived in the mail — whether from one of the big, investor-owned utilities or a smaller municipal or rural cooperative — and customers paid them.

But Indiana utilities no longer hold a monopoly on energy generation in the state.

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Today, the prospect of running your home entirely on electricity produced by you or your community is no longer a fantasy, but a real possibility. As renewable energy technologies become less expensive, ratepayers have started taking generation into their own hands. Homeowners are installing solar panels. Communities are exploring investing in their own, small-scale solar farms. Big businesses — Facebook, General Motors, Cummins — are signing contracts with wind farms.

Utilities must adapt, or risk becoming irrelevant.

For utilities it means they are becoming less of a power producer and more of a power mover. And the nation’s aging infrastructure, first built in the years after World War II, was not built to accommodate electricity generated by both utilities and their customers. So they have their work cut out for them.

“Their challenge today is to reinvent themselves as fast as things are moving,” said Beth Soholt, executive director of the Clean Grid Alliance. “They have to create the airplane as they are flying it.”

And for customers, some predict a "democratization" of the grid.

“Today we just say, 'we are the utility and this is what we have,' but that will transition to 'what do our customers have in terms of what they’ve produced, and what do they need,'” said Fred Mills, vice president of communications at Indianapolis Power & Light. “What it comes down to is that we will be a more customer-centric organization.”

Utilities respond to change

The transition could take decades, but the utility industry plans decades ahead and is making decisions about these investments now.

Thus far, major utilities still generate the vast majority of Indiana's electricity. And part of the reason is that utilities have fought customers' ability to generate their own energy.

State lawmakers voted in 2017 to drastically curtail Indiana’s net metering program, for example, under which utilities had to pay customers the retail rate for any electricity their solar panels put back on the grid. Solar experts said that 180-degree shift came way too soon, before residential solar had really gotten off the ground in the state.

The coal industry, which fuels 65% of the state's electricity, is also weighing in on those decisions. Coal interests want to keep Indiana utilities using big power plants, fueled by coal. But the utilities are increasingly turning to other fuels.

In September, NIPSCO, a northern Indiana utility, made history in the state when it announced that it would retire its coal fleet and invest in renewable energy. By 2028, they project that 65% of the electricity they generate will come from solar, wind and battery storage — and 0% from coal. According to their analysis, the change could save ratepayers over $4 billion in the long run.

Coal lobbyists are throwing their weight behind the Trump administration's promises to roll back clean air and water regulations, saying that will make the fuel cheaper in the long run. But customer demand, advancing technology and a glut of natural gas are propelling the transition to cleaner energy generation.

Even with the regulatory rollbacks, NIPSCO representatives said, renewable energy will remain cheaper than coal in the future. The catalyst for change: market forces.

Large companies are not waiting around. Cummins Inc., for example, has started purchasing some of its energy from wind turbines. General Motors is powering plants in Ohio and Indiana with wind and solar energy, and Facebook is pursuing a wind project in Indiana to power its data center.

"If people want cleaner things, then companies and technology will respond to that," said Mills from IPL. "I think that is a quicker and more effective way than rules and regulations.”

Duke Energy is still in the early stages, planning to announce its newest plans for generation later this summer. Duke recognizes that technology is advancing for both utilities and customers, said Stan Pinegar, Duke Energy’s Indiana president. Energy companies are no longer the only ones that have the capacity to produce power.

“It is naive to think customers won’t have more options in the future, we are seeing it already and will see it even more down the road,” he said. “So we just need to find our space and be really good at it.”

More customer-centric

One of those options for customers is solar, though not quite in the usual way.

Just last month, the state's first solar cooperative was launched in Indianapolis — a way of lowering the cost to install panels for residents by bringing them together and using a single installer at a group rate.

The lead organization on this effort, Solar United Neighbors, has helped hundreds of people in as many as 10 states install solar panels through such cooperatives. The Indianapolis project is still in the first stage of gathering interested residents. So far at least 25 people have signed up.

“We’re about empowering homeowners and empowering communities to see a future of an energy democracy, where electricity is in the community and not in the hands of investor-owned utilities,” said Zach Schalk, program director at Solar United Neighbors.

With electricity not in the utilities' hands, “one of the big risks is [they] become irrelevant and customers, big and small, figure out how to go around ]them],” Soholt said. “It’s hard to make the total grid be irrelevant. But people will figure out a way to get what they want and utilities can figure out how to be a part of that or either be left behind.”

A few utilities have guessed that their role might shift away from power producer and more toward that of grid operator.

“We are the wires provider,” Pinegar with Duke said. “So in the future we will be relied on as the transporter of power.”

Those wires and the grid were built to have power flow one way, according to Scott Wright, executive director of market strategy and design with MISO, which coordinates the delivery of electricity across 15 Midwest states.

But as more people produce their own electricity, and sometimes more than they need, they send that energy back onto the grid — necessitating a two-way street.

That is spreading out where power is produced. Such “distributed generation” likely will require more investment in the grid, according to Wright, including more transmission lines and more monitoring to help keep things flowing and balanced.

Batteries will also play a crucial role in that future, according to Mike Holtsclaw, director of power delivery engineering at IPL.

While renewables hold great promise, he said, they need to be paired with something — such as batteries. Wind and solar inherently will have valleys in their power generation, so batteries can help harness the excess energy produced and deploy it when it’s needed.

In 2016, IPL opened the first grid-scale, battery-based storage system in the MISO region to respond to fluctuations in energy supply and demand as well as support the ongoing integration of renewable resources.

Batteries continue to drop in price, and it’s likely the future will see many families with their own systems in the garage to supplement their power generation. Still, utilities believe customers will rely on the grid for back-up power if someone should fall short.

All those changes will leave customers’ utilities bills looking drastically different.

Customers won't be charged as much for the fuel they use — wind and solar are free. But they'll have to pay to connect to the grid and have the guarantee to move power from one place to the other, IPL said. It also would include some sort of supplemental charge if any of the utility’s electricity was used.

But could it also include a credit — the utility paying customers — for overflow electricity that was sent elsewhere? That remains unclear.

Charting Indiana's future

Even as the change takes place, few in the industry predict a 100 percent renewable future and there will be much debate about what technology will fill that gap in the near and long term.

Time will tell, as a task force to chart Indiana’s energy policy will begin soon. Many people see this as an opportunity to look at how Indiana’s energy will be produced in the future.

It’s expected that coal interests will weigh in heavily, as they did during the legislative session and during their push to enact a moratorium that could have stalled electric utilities' efforts to move away from coal. But in a surprising legislative twist, that measure was defeated.

The utilities have said this transition is pressing forward, and they need the ability to adapt and innovate to stay ready and the keep the lights on.

That task force is expected to complete its report by December 2020.

“To me,” Soholt said, “the challenge is the speed in which we can achieve these changes and how quickly can we make this transition.”

Call IndyStar reporter Sarah Bowman at 317-444-6129 or email at sarah.bowman@indystar.com. Follow her on Twitter and Facebook: @IndyStarSarah.

Emily Hopkins covers the environment for IndyStar. Contact them at 317-444-6409 or emily.hopkins@indystar.com. Follow them on Twitter: @indyemapolis.

IndyStar's environmental reporting project is made possible through the generous support of the nonprofit Nina Mason Pulliam Charitable Trust.

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