TODAY’S STUDY: A Roadmap To A Modern Grid
Staff Report On Grid Modernization
March 2016 (Minnesota Public Utilities Commission)
In May 2015, the Minnesota Public Utilities Commission (Commission) initiated a proceeding to consider development of policies related to grid modernization with a focus on distribution system planning. The Commission held three workshops to gather information on distribution system planning and grid modernization, and to identify specific actions, technologies, and policies that could support and enable grid modernization. The Commission also sought two rounds of comments to support this effort. This report summarizes the actions in the proceeding to date, identifies aspects of the stakeholder comments identified as important for discussion of grid modernization, and proposes a process for continuing the development of policies related to grid modernization.
Specifically, this Report:
● Develops a definition of grid modernization for Minnesota;
● Identifies principles to guide the development of grid modernization in Minnesota; and,
● Proposes a three phase approach to continue policy development of grid modernization in Minnesota.
When combined, these three components will allow the Commission to identify and consider necessary policy development and implementation in a manner that best suits the needs of Minnesota. This process will provide ample opportunity for stakeholders to provide input in the process. Specifically, this report highlights the need for the Commission to: address distribution system planning in order to enhance grid reliability and resiliency; ensure optimal utilization of grid assets to minimize total system costs; and enable integration of a variety of distributed energy resources.
The needs, use, and expectations of the distribution grid are evolving as customer preferences change and as energy technologies increasingly become available directly to customers. Furthermore, as policy directives move Minnesota, the electric utilities and consumers toward adoption of cleaner and more distributed resources, the Commission may want to plan for these changes, consistent with the public interest. This report outlines a process that would allow the Commission to develop policies that plan for and meet these expectations in a way that maintains and enhances system reliability while enabling customer choice and supporting continued innovation.
Minnesota’s electric utility distribution systems are the backbone of reliable, safe and resilient electric service for Minnesotans. These systems consist of large networks of wires, poles, transformers and control systems that provide electric services directly to customers’ homes and businesses. Today, the function of these distribution systems are improving and changing, driven by forces such as rapid technological innovation, expanding customer interests and demands, and energy and environmental public policies.
In May 2015, the Commission initiated an inquiry into grid modernization, with a focus on distribution system planning. The focus of the Commission’s inquiry is the evolution underway in Minnesota’s electric distribution grid. The Commission aims to identify steps it could take to advance grid modernization to the benefit of Minnesota’s electricity consumers. The Commission has solicited input from diverse stakeholders through a series of workshops as well as through written comments. This input will help guide the Commission as it considers future planning and operations of the distribution grid.
Definitions of grid modernization abound, and there is no single, universally recognized definition. The Energy Independence and Security Act of 2007 described it as “the modernization of the Nation’s electricity transmission and distribution system to maintain a reliable and secure electricity infrastructure that can meet future demand growth” and to meet 10 characteristics or functions.1 A modernized electric grid requires several technology types working in concert. The Department of Energy’s2 five main smart grid technology areas are: 1) integrated communications allowing for realtime information and control, 2) sensing and measuring technology supporting rapid and accurate system and human responses, 3) advanced components such as storage and superconductivity, 4) advanced control methods, such as voltage optimization, and 5) improved interfaces and decision support for distribution system managers.
Some examples of these technologies that are actively being deployed include advanced metering infrastructure, outage management with field devices, two-way communication networks, automated controls, and voltage regulation.
A concise definition of grid modernization that reflects the goals of Minnesota will provide a framework that will guide the Commission’s approach grid modernization. As discussed in further detail in Section 3 of this report, Staff proposes the following definition to guide grid modernization in Minnesota:
A modernized grid assures continued safe, reliable, and resilient utility network operations, and enables Minnesota to meet its energy policy goals, including the integration of variable renewable electricity sources and distributed energy resources. An integrated, modern grid provides for greater system efficiency and greater utilization of grid assets, enables the development of new products and services, provides customers with necessary information and tools to enable their energy choices, and supports a standards-based and interoperable utility network…
Proposed Approach to Grid Modernization Section
The next step in the Commission inquiry is to develop a strategy to address grid modernization.
Staff proposes a three-phase process for consideration of grid modernization strategies that will guide the rest of this report. A three-phase approach would allow the Commission to take an organized and thoughtful approach to development of grid modernization policies and review of specific utility actions. The three phases are:
Phase 1: adopt definition, principles, and objectives for grid modernization
Phase 2: prioritize potential action items
Phase 3: adopt long-term vision for grid modernization (no immediate action)
Adoption of a three-phase approach will put the Commission in a position to logically and thoroughly vet the many considerations related to grid modernization and organize them in a way that the Commission, Commission Staff, utilities, and stakeholders can handle efficiently.
Overview of Phase 1: Adopt Definition and Principles
In the first phase, the Commission would adopt definitions, principles, and objectives for grid modernization. In Section 3 of this report, Staff offers a definition of and guiding principles for grid modernization. The adoption of guiding principles will provide a firm foundation for future planning around grid modernization and help guide the remaining two phases.
Overview of Phase 2: Potential Action Items
In the second phase, the Commission would direct additional study on a select number of items for on-going discussion. In Section 4 of this report, Staff provides a list of possible action items identified by stakeholders in the workshops and comments. The variety of items identified in Section 4 is indicative of the far-reaching impact of grid modernization across the utility and customer landscape. A few of these items are currently the subject of open proceedings—such as data privacy and data access and time-varying rate design—and Staff recommends that where an item is already the subject of an open proceeding, that proceeding should remain open and be allowed to continue its on-going work. Finally, the action items identified in Phase 2 would not be affected by future decisions regarding the longer term role of the utility in Phase 3.
In Section 4, Staff identifies nine specific actions that parties identified as important for the Commission to consider in the near term. These items are organized to: 1) reflect specific items that warrant greater consideration, 2) identify technologies raised throughout the proceeding by parties that support grid modernization, and 3) identify several policy-related decisions that may impact grid modernization. In this phase, the Commission would not be guaranteeing cost recovery for utility investments in those items, or making any other determination other than that the Commission, utilities, and other stakeholders should continue to discuss specific items that support grid modernization. The end result of that discussion could be an application by a utility to implement one or more of the items, which would still be subject to a cost-effectiveness review. Additionally, Staff recognizes each IOU is different; therefore, any actual implementations would be guided by what is more appropriate for that utility.
Overview of Phase 3: Long-term Vision for Grid Modernization
In this phase, the Commission would consider longer-term policies associated with issues related to long-term role of the regulated electric company relative to the role of customer or third party owned resources. Potential topics in this phase could include the evolving regulatory model for Minnesota, changes to the utility business model, changes to other existing programs, and consideration of whether the utilities should transition to distribution system operators. Action on these issues could be considered after Phase 2 is underway.
As more fully discussed in Section 5, several parties argue that DER will continue to proliferate, which will eventually cause impacts on the distribution grid. As these impacts grow, ensuring a stable revenue base of the regulated electric utilities, enabling additional benefits to customers, and supporting innovation and market growth will challenge the existing utility business model and regulatory model overseeing the regulated electric companies. Since this is a complex discussion that will require careful consideration, Staff recommends it be considered separately from (and following) Phase 2, which will have a more narrow focus…
Phase 1: Adopt Definition and Principles
In both workshops and written comments, several parties encouraged the Commission to begin its consideration of grid modernization by identifying definitions, principles, and objectives. In the second round of written comments—filed between the second and third stakeholder meetings—the Commission sought additional comments on the topic of principles and objectives for grid modernization. These comments provide the foundation for Staff’s recommendations below.
Definition of Grid Modernization
In this docket, stakeholders provided the Commission with a variety of perspectives as to what “grid modernization” entails. The sheer number of options, varieties, and emphases makes it challenging to propose a single definition of grid modernization; however, staff believes developing a definition that reflects the goals and objectives of Minnesota will ensure the Commission, utilities, and stakeholders have a common understanding of how the Commission will approach grid modernization. Therefore, Staff proposes the following definition to guide further discussion on grid modernization in Minnesota:
A modernized grid assures continued safe, reliable, and resilient utility network operations, and enables Minnesota to meet its energy policy goals, including the integration of variable renewable electricity sources and distributed energy resources. An integrated, modern grid provides for greater system efficiency and greater utilization of grid assets, enables the development of new products and services, provides customers with necessary information and tools to enable their energy choices, and supports a standards-based and interoperable utility network
This definition captures the evolution of grid functions that are shifting from the one-way, radial approach of the current electricity grid into a more two-way and dynamic network. This network approach to the electricity system establishes potential new roles for the customer, the utility, the regulator, and the market. However, this definition does not preclude any role for the existing distribution utility, nor does it assume any potential restriction on the role of the utility. Rather, in keeping with the phased approach proposed by Staff, this definition recognizes the evolution occurring in the industry today and does not presuppose any broader, long-term policy preferences of the Commission.
Guiding Principles for Minnesota Grid Modernization
While there is value in developing a definition for grid modernization, perhaps the more important aspect of Phase 1 is the establishment of the principles to guide the investigation going forward. This was a nearly universal recommendation. In the second round of written comments, Staff asked parties what actions the Commission should take in the near-, mid-, and long-term. Virtually all commenters recommended the establishment of guiding principles as a near-term action item. In the second stakeholder meeting—which brought in national experts to discuss emerging best practices—each of the four presenters urged the Commission to begin by setting goals and objectives. Through the workshops and written comments, parties and stakeholders offered a multitude of possible principles and objectives. Some of these have universal support. For example, all stakeholders acknowledge the critical importance of ensuring the safety of lineworkers. Others, such as transparency and access to data, are clearly needed but do not yet have universal support.
Seemingly similar objectives can have considerably different implications depending on how they are framed. For example, many parties offered objectives that relate to DER, but in markedly different ways: the Massachusetts DPU’s objective of integrating DER may suggest a more passive role, while Cooperative Energy Futures’ objective of accelerating adoption of DER suggests a more active role. Others, like EPRI emphasized maximizing locational value of DER, and yet others—like Xcel—would provide opportunities for utility ownership of DER. These four objectives would support very different action plans; this underscores the importance of being deliberate in the identification of principles.
Based on the commission discussion at the initial planning meeting in May 2015, the written comments submitted by stakeholders in Fall 2015, and the presentations and extensive discussions with workshop participants in Fall 2015, the following principles are recommended for consideration by the Commission. As stated earlier, the purpose of establishing principles is to provide additional guidance and clarification as the Commission continues its work in grid modernization. While the principles can serve as guidance for the Commission, they are not proposed as a framework for regulatory decision-making:
Principles for Grid Modernization at the Minnesota Commission
• Maintain and enhance the safety, security, reliability, and resilience of the electricity grid, at fair and reasonable costs, consistent with the state’s energy policies;
• Enable greater customer engagement, empowerment, and options for energy services;
• Move toward the creation of efficient, cost-effective, accessible grid platforms for new products, new services, and opportunities for adoption of new distributed technologies;
• Ensure optimized utilization of electricity grid assets and resources to minimize total system costs;
• Facilitate comprehensive, coordinated, transparent, integrated distribution system planning…