TODAY’S STUDY: A Utility Puts Out Its Vision Of New Energy On A New Grid
The Emerging Clean Energy Economy: Customer-Driven. Modernized. Reliable.
September 2016 (Southern California Edison)
The Power Grid of the Future: Choice, Innovation, Opportunity, and Challenge
Amidst the profound shift underway in the electric power industry, today’s customers are increasingly seeking choice in how they manage their energy. They are adopting distributed energy resources (DERs)—rooftop solar, onsite energy storage, electric vehicles, and energy management systems—to achieve cost savings, cleaner energy, conservation, and enhanced reliability. In response, the industry has begun an era of reinvention to enable these choices and create a clean, reliable energy future.
California is at the forefront of the power system transformation toward a cleaner, more diverse future with reduced carbon emissions. The state is home to 50 percent of the nation’s private solar systems—more than half a million businesses and homes.i It boasts more than 200,000 plug-in electric vehicles (PEV)—40 percent of the nation’s PEV sales—with a goal of 1.5 million by 2025.ii With proper support, DERs will not only benefit individual customers, but also could contribute significantly to local economies, clean energy, and grid resiliency.
The path suggested in this report leads to a modern electricity distribution grid and enhanced utility capabilities that will be vital to facilitating these choices and helping customers maximize their investments—while improving the reliability and affordability of the grid for everyone. Decisions made now on how to embrace this change will have profound implications for how the energy grid adapts to meet consumer needs and reduce carbon emissions for the rest of the twenty-first century.
Harnessing the potential of distributed energy resources
To facilitate the transformation, the local power grid must become a plug-and-play platform that integrates an ever-growing set of DER technologies.iii By connecting to this platform, DER owners access a grid that supports their needs as customers and markets that increase the value of their investment. Maximizing this potential for all customers requires a thoughtful approach that:
• Modernizes and reinforces the grid and its operations to improve reliability and integrate distributed resources and other carbon reducing technologies;
• Connects DERs to markets that provide new revenue opportunities; and
• Transitions to customer rate designs and DER programs that better reflect the benefits and costs of distributed resources.
Modernizing and reinforcing the grid will be critical for customers seeking to adopt DERs and connect to the grid— quickly and with minimal hassle. Utilities must anticipate future DER growth and reinforce local grids to accommodate these new resources. Once connected, clusters or concentrations of distributed resources can quickly complicate grid operations. Grid operators need advanced sensors, communications, and automation so they can see what is happening in real time, minimize disruptions, and maintain reliability. To meet these challenges, utilities will expand their capabilities as Distribution System Operators (DSOs) that plan and manage a modernized plug-and-play grid, ensuring that all customers receive safe, reliable, clean energy, while seamlessly integrating rapid growth in distributed resources.
Connecting DERs to markets and new revenue opportunities can encourage innovative new markets and creative solutions that expand customer choice and benefit the grid.
Three potential areas include:
• Wholesale: DSOs will ensure that DERs can connect to wholesale markets to sell services that reduce the need for new large-scale generation, while still maintaining local reliability.
• Distribution: DERs could receive compensation for providing location-specific services to the distribution grid, including the deferral of traditional grid upgrades.
• Third party markets: the distribution grid platform could enable markets for energy transactions between customers or marketplaces for new products and services.
Coupled with declining prices of DERs, these markets could eventually eliminate the need for subsidies and administratively-determined tariffs. DSOs will need to work with resource providers and other stakeholders to shape markets and distributed solutions that support the grid.
Finally, to maintain affordability for all customers, rate designs and programs must transition to share the benefits and costs among customers who deploy DERs to meet a portion of their energy needs and those who do not. Rates should account for the fixed costs of the grid so all customers, including DER owners, pay for access to the modernized and reliable distribution grid and the critical service it provides.v DER owners should receive compensation based on the value at the time and location of the services they deliver.
These massive changes to the grid and markets will take time—possibly more than a decade—to accomplish. But, if utilities, regulators, and distributed energy providers come together now with a sense of urgency, the foundation developing now will be established by the turn of the decade: with functioning markets for DERs, a modernized grid in priority locations, informed customers, proven resource providers, and reduced carbon emissions. Underpinning this, utilities will evolve to become facilitators of customer choice and the clean energy economy by unlocking the benefits of DERs while enhancing the reliability critical to everyone.
1. A modernized grid— essential to improving reliability and enabling distributed energy resources
Customer adoption of DERs can quickly alter the makeup of the electric grid. New devices impact system operations, requiring planners to adjust their forecasts and upgrade plans accordingly. Although independent system operators often run transmission systems and dispatch thousands of resources, the distribution system is more dynamic, fluid, and complex. DSOs will interact with hundreds of thousands—even millions—of distributed resources, and coordinate between control rooms and field crews in real-time to manage new markets and grid operations simultaneously. Utilities already perform many of these functions and have the scale and capability to integrate DERs into the planning, development, and operations of a modernized distribution grid…
2. Access to new markets— essential to expanding distributed energy choices for customers
Distributed energy resources, when connected to a modernized electric grid, may provide valuable services that extend their worth beyond their owners’ specific uses. By monetizing these additional services, DER providers can create innovative new applications that expand the breadth of choices available to customers. Distribution System Operators will become more important in balancing the needs of customers, the grid, and other markets to realize the full potential of DERs. The DSO will offer greater visibility and performance certainty for these resources…
3. Balanced program and rate design—essential to ensuring fair energy access for all
Benefits to the grid can vary significantly from location to location, but current policy tools, such as net energy metering and feed-in tariffs, do not capture these time- and location-related contributions. Regulators need to evaluate rate structures and program to incentivize DER adoption and performance consistent with carbon reduction and other policy goals. This includes assessing the potential for substantial cost shifting among customers…
4. The path forward
Today’s electric power industry is in the midst of profound transformation. One of the biggest challenges is unlocking the tremendous potential that technologies such as rooftop solar, on-site energy storage, electric vehicles, and energy management systems can provide to the local power grid while reducing carbon emissions. Enabling and encouraging DERs will facilitate greater customer choice—while also helping achieve clean energy policies and facilitating the growth of new markets for energy products and services. This transition will likely take more than a decade, which is why it must start now (Figure 7).
The early stages of this evolution will involve three key efforts, all of which will require a partnership among electric power companies, customers, technology providers, and regulators:
Grid modernization and reinforcement. Foundational capabilities like advanced distribution automation should move forward quickly to support increased connection of distributed resources. These technologies, along with proactive upgrades, will support rapid DER expansion so that the pace of adoption does not outgrow the capabilities of the grid…
DER performance validation…DER market design and development…