POWER January 2017 - 64

COMMENTARY
Designing an Electric Power
System from Scratch
Julia Hamm
T
he Smart Electric Power Alliance (SEPA) launched its 51st
State Initiative in 2014 with a simple question: What if
there were no predefined electricity market? No rules. No
market designs. No policies. No subsidies for any type of energy
resource. Just a grid to deliver electric power from a variety of
sources. And customers. Plenty of customers. How would you design
an electricity market that optimizes the use of distributed
energy resources?
Market Design for a 51st State
SEPA posed this challenge at a time when state-level debates
over net metering and rate reform were often framed as a conflict
between utilities and the solar industry. In an effort to provide
a more collaborative framework for finding long-term, workable
solutions, the initiative's goals were twofold:
■ Creating economically sustainable business models and integrated
grid structures to ensure that electricity would continue
to be provided safely, reliably, efficiently, affordably,
and cleanly.
■ Meeting customer demand in the near and long term for solar,
storage, and other distributed energy resources.
Since that time, many state debates have become more heated,
while some recent negotiations between utilities, solar organizations,
and other industry stakeholders have resulted in
encouraging agreements.
SEPA views collaboration and cross-industry partnerships as
critical building blocks both for the growth of solar and other
distributed technologies as well as for potential changes in the
electricity utility sector. As a result, we have intensified our
focus on identifying replicable models that allow industry stakeholders
with competing interests to build the communication
and trust needed to forge compromise solutions.
As part of the 51st State, SEPA issued two separate calls for
papers. Phase I was targeted at envisioning what the 51st State's
hypothetical market structures might look like, while Phase II
asked for roadmaps of how market transformation might unfold
given specific starting and end points.
Submissions from both phases, available at SEPA51.org, resulted
in a range of options, from incremental change to the
status quo to paradigmatic shifts toward transactive energy
business models within retail residential markets. Recently,
SEPA issued a capstone document, " Blueprints for Electricity
System Transition, " bringing together the ideas in these papers
and our own work and analysis. The report also incorporates
the insights and feedback received from hundreds of industry
thought leaders and partners who have participated in the
51st State Initiative and other collaborative forums SEPA has
organized.
We believe that leveraging these ideas in a structured manner
can create a platform for fostering understanding, common pur64
pose,
and consensus building as individual regions and jurisdictions
embark upon market reform in the future.
Market Transformation Is a Journey
The core of our approach is a series of doctrines, representing
key areas of focus that can be summarized as follows:
■ Promote efficiencies.
■ Clearly define roles.
■ Identify principles of ratemaking.
■ Foster customer choice.
Our intent here is that stakeholders will use these doctrines to
establish commonly agreed-upon, " least-regrets " anchors at the
outset of conversations about market transformation.
The doctrines are also the basis for the " swimlanes " created
in Phase II of the 51st State Initiative, which encompass all
aspects of electricity market structures, roles, and responsibilities.
The six swimlanes-retail market design, wholesale market
design, utility business models, rates and regulation, asset
deployment, and information technology-create a structured
and logical breakdown of the complexities of our industry. By
examining each of these aspects of the marketplace individually,
stakeholders can foster a more well-rounded and holistic
conversation about how to incrementally revamp today's energy
markets into something new.
Lastly, the stakeholder engagement process itself will become
critical in taking the work conducted to date in the 51st State
Initiative and turning it into actionable roadmaps adapted to
the needs of specific jurisdictions. To that end, SEPA has outlined
a suggested process and four strategic guidelines that can
help stakeholders maintain focus: flexibility, incrementality, affordability,
and transparency (FIAT). If plans being laid out do
not align with FIAT concepts, they may face obstacles in implementation.
But
the 51st State Initiative has never been about the destination;
rather, the initiative has always focused on the journey.
The four foundational doctrines should be viewed as a starting
point for market reform conversations among utilities, regulators,
policy makers, customer groups, and other market participants.
Centering on points of commonality and agreement, the
doctrines provide a safe harbor for all stakeholders in the face of
major obstacles and a framework for consensus building in more
contentious areas of discussion.
With many uncertainties ahead, the need for communication,
trust, and new partnerships across our industry will be more essential
than ever. If you are interested in learning more or contributing
to this effort, please visit SEPA51.org. We welcome
input from all sectors across the energy landscape. To learn
about other SEPA priorities and activities, visit sepapower.org. ■
-Julia Hamm (jhamm@sepapower.org) is president and CEO
of SEPA.
www.powermag.com
POWER | January 2017
http://www.SEPA51.org http://www.SEPA51.org http://www.sepapower.org http://www.powermag.com
POWER January 2017

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