AN ADAPTIVE APPROACH TO PROMOTE SYSTEM OPTIMIZATION

The paper outlines an adaptive approach to electricity policy for a hypothetical jurisdiction, focusing on modernizing rate design and market structures to integrate distributed energy resources (DERs). It argues that traditional cost-of-service models are outdated due to technological advances in home automation and on-site generation. The author proposes four key principles for retail rates—cost causation, transparency, adaptability, and customer sophistication—and four principles for market structure—level playing fields, grid stability, innovation, and transparency. The framework is designed to be applicable to both vertically integrated utilities and market-based systems, emphasizing the use of Integrated Resource Plans (IRPs) and Integrated Distribution Plans (IDPs) to ensure long-term system optimization.

• Traditional utility regulatory models are outdated because technological advancements in distributed generation (DG), energy efficiency, and on-site storage allow consumers to become self-reliant or provide system benefits that compete with centralized generation.
• Retail rate design should shift toward cost causation, where bills vary based on the time and intensity of system use, enabled by smart-grid and home automation technologies that reduce the need for simple, flat rate structures.
• To ensure transparency and investment signals, the framework recommends adopting the U.S. Department of Energy's Green Button data disclosure protocol to allow third-party energy service companies (ESCOs) to optimize customer energy use.
• The document argues that while electricity distribution is a natural monopoly requiring centralized coordination, electricity generation is not, and should be subject to competitive procurement.
• A 'level playing field' in market structure requires defining tradable energy services—including energy, capacity, and ancillary services—so that small, aggregated DERs can compete head-to-head with conventional generation.
• To prevent market failures in long-term procurement and the integration of nascent technologies, the author proposes 'staircase capabilities markets' consisting of small-volume, long-term requests for proposals.
• System reliability and optimization should be managed through a two-step planning process: an Integrated Distribution Plan (IDP) to assess circuit capacity and an Integrated Resource Plan (IRP) for system-wide procurement.
• For vertically integrated utilities, the document suggests performance-based regulation where profits are tied to quantitative goals for reliability, affordability, and environmental performance set five to seven years in advance.

APA

O’Boyle, M. (n.d.). AN ADAPTIVE APPROACH TO PROMOTE SYSTEM OPTIMIZATION. Energy Innovation. https://energyinnovation.org/wp-content/uploads/2015/04/51st-State_APP_Energy_Innovation_Submission.pdf

Chicago

O’Boyle, Michael. AN ADAPTIVE APPROACH TO PROMOTE SYSTEM OPTIMIZATION. Energy Innovation, n.d. https://energyinnovation.org/wp-content/uploads/2015/04/51st-State_APP_Energy_Innovation_Submission.pdf.

Wikipedia

{{cite report |last1=O’Boyle |first1=Michael |title=AN ADAPTIVE APPROACH TO PROMOTE SYSTEM OPTIMIZATION |publisher=Energy Innovation |url=https://energyinnovation.org/wp-content/uploads/2015/04/51st-State_APP_Energy_Innovation_Submission.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{oboylendadaptive, author = {O’Boyle, Michael}, title = {{AN ADAPTIVE APPROACH TO PROMOTE SYSTEM OPTIMIZATION}}, institution = {Energy Innovation}, url = {https://energyinnovation.org/wp-content/uploads/2015/04/51st-State_APP_Energy_Innovation_Submission.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }