Locational Value Remains at Forefront of DER Policy

Jul 17, 2017

In the first year of rebranding the “ADS National Town Meeting” as “SEPA Grid Evolution Summit,” I’ve been thinking about how much this title reflects the changes in our industry. It has been two years since I helped put together the first National Town Meeting workshop that addressed DERs. At that time, electric power industry groups were still largely siloed by technology. When Nexant spearheaded the development of a pre-conference workshop on “How to Align Distributed Energy Resources with Grid Value,” it still felt novel to consider demand response and solar under the same umbrella term of DERs and the conference itself still seemed mostly focused on smart grid and demand response. However, there was already a shift underway toward DERs being a meaningful category, relevant to utilities and to their customers around the country.This shift was evident in SEPA’s merger with ADS to become the Smart Electric Power Association. Just as SEPA was no longer just about solar, the former “town meeting on demand response” really broadened the focus of the last year’s conference to be about DERs. Last year, I remember SEPA’s Julia Hamm moderating sessions with a range of stakeholders on the 51st State Initiative, as well as “utilities looking to the future” that included DER related customer program, business model, and grid integration innovation. Since then, DERs have continued to be an increasingly  important consideration for grid planning. The dialogue between grid planners and distributed energy resource providers has only grown, hence the new title, “Grid Evolution Summit.”

From my perspective, the progress made in locational value methodology has made an important contribution toward enabling incorporation of DERs into grid planning. Last September I collaborated with SEPA to release a white paper on Addressing the Locational Valuation Challenge for Distributed Energy Resources (DERs). A key goal of the paper was to document and present a standardized approach for planning with DERs that Nexant developed in grid-edge projects over the course of several years. The approach covers both how to evaluate T&D deferral value and how to quantify the extent to which a given DER can (or can’t) provide some of that value. It seems the industry was ready to start tackling this problem, because we observed strong interest in the methodology from stakeholders around the country including regulators, utilities, and technology vendors.

The pace of rapid development in the industry is every bit as exciting today as it was when the methodology was published a year ago. While New York’s Reforming the Energy Vision initiative and California’s Integrated DER effort have received a lot of attention, similar regulatory proceedings throughout the U.S. have led to interest in the white paper from other states including Washington state, Rhode Island, Colorado, Nevada and Louisiana. There are also emerging leaders such as Illinois (see SEPA’s 51st State Perspectives research, “DERs are coming and Illinois is ready for them”). Increasingly utilities, regulators, and other stakeholders from a variety of regions are interested in better understanding how to think about DERs and locational value. At the very least, we are seeing a desire to develop a proactive plan in line with local policy goals and regulatory realities, as recommended in the NARUC DER ratemaking manual which was also developed last year. Across many of the states mentioned above, locational valuation of DERs has been specifically called out in legislative bills, policy decisions, and innovative rate pilots.

At the same time, utilities and regulatory staff in New York and California have created a test bed to push the boundaries of DER and grid innovation. In New York, Commission staff has asked utilities to develop Smart Home Rate demonstration projects to fast track the development of rates and technology needed for the prices-to-devices concept. On one end of the spectrum this can be as simple as a targeted demand management program where a critical peak pricing rate or other program incentive is deployed through geographically targeted demand response. On the other end of the spectrum, temporally and locationally granular rates are pushed out to price responsive automation technology (smart thermostats, home energy management systems, suites of connected devices, etc.), which can automatically respond to prices based on cost, comfort, or other optimization preferences. In California, the Commission has begun to approve various localized DER demonstration projects, leading to an RFO that PG&E recently issued “to pilot the integration of DERs into utility distribution planning and operations at its Huron substation.”

Another impressive trend over this past year is the rapid growth of battery storage related technologies. In the context of locational valuation I have seen the conversation shift from wanting to understand implications for solar PV (just one of many DERs) to wanting to understand locational value for other DERs too (with heightened interest in battery storage) as well as for DER portfolio optimization. I’m happy to have contributed to the conversation and to help its evolution toward a common locational valuation metric, as opposed to technology specific estimates and assumptions.

In this context of ever-evolving locational valuation and DER-related conversations, SEPA’s Grid Evolution Summit takes place on July 25-27. I invite you to join me and other DER practitioners at the pre-conference DER Fundamentals Workshop. The workshop will cover DER capabilities, planning, valuation, and policy. As part of that larger discussion, I will be presenting on the locational value of DERs and touching on some of the future challenges laid out in last year’s white paper, including:

●How can locational value be included in integrated benefit cost analysis?

●How can integrated distribution planning capability gaps be addressed?

●How to reflect need for contractual obligation / guarantees in competitive mechanisms?

●How can distribution planning reflect uncertainty and risk planning?

I’ll also offer ways to think about integrated DER valuation, incentive / procurement options in the context of time horizon and DER goals, DER forecasting, and how to use probabilistic forecasting as a tool for thinking of distribution planning (including DERs) in terms of risk management. I look forward to a lively discussion about these and the other DER related topics we’ll be covering.


Further resources:

Register for SEPA’s Grid Evolution Summit

Register for the DER Fundamentals Workshop