TODAY’S STUDY: How To Get More Distributed Energy On The Grid Faster

Optimizing the Grid: A Regulator's Guide to Hosting Capacity Analyses for Distributed Energy Resources

Sky Stanfield and Stephanie Safdi, December 2017 (Interstate Renewable Energy Council)

Executive Summary

From coast to coast, states are experiencing unprecedented growth in distributed energy resources (DERs) – resources located on the electric distribution system, such as renewable energy, energy efficiency and energy storage. With much of this activity being driven by consumers, changes to the nation’s outdated electric system are underway. To ensure that the benefits of these DERs are fully optimized, there is a need to proactively integrate them into grid planning, operations and long-term investment decisions. Rather than simply “tolerating” DERs, there is an opportunity to utilize a new tool known as Hosting Capacity Analysis (HCA), which can help more Americans enjoy the benefits and full potential of these resources on the grid.

The term “hosting capacity” refers to the amount of DERs that can be accommodated on the distribution system at a given time and at a given location under existing grid conditions and operations, without adversely impacting safety, power quality, reliability or other operational criteria, and without requiring significant infrastructure upgrades.

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HCAs allow utilities, regulators and electric customers to make more efficient and cost-effective choices about deploying DERs on the grid. If adopted with intention, HCA may also function as a bridge to span information gaps between developers, customers and utilities, thus enabling more productive grid interactions and more economical grid solutions.

Utility regulators play a key role in ensuring HCAs are deployed strategically, prudently and for the benefit of all energy customers. Optimizing the Grid: A Regulator’s Guide to Hosting Capacity Analyses for Distributed Energy Resources will assist state regulators in guiding and overseeing utilities as they conduct hosting capacity analyses on their distribution circuits, as part of a broader grid modernization or distribution planning efforts and/or in support of their state’s near- and long-term energy policy goals.

Based on lessons from the handful of states and utilities that have begun to prepare HCAs, this guide focuses on the process that will help regulators realize HCAs’ full promise in their respective states. The experiences and key takeaways from the states and utilities undertaking these analyses, including California, New York, Minnesota, Hawaii and Pepco Holdings, Inc., provide important insights for other states and utilities to take into consideration as they pursue similar efforts. Details on each can be found in Appendix A of the full guide.

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Hosting Capacity Analysis Use Cases

There are two principal applications, or use cases, for an HCA: 1) assist with and support the streamlined interconnection of DERs on the distribution grid; and 2) enable more robust distribution system planning efforts that ensure DERs are incorporated and reflected in future grid plans and investments. A third, complementary function of an HCA could be to inform pricing mechanisms for DERs based on separate analyses to assess the benefits of DERs based on their physical location on the grid and their performance characteristics (see Figure ES-1). To achieve an effective HCA, regulators and utilities should carefully consider and articulate their goals and use cases at the outset of an HCA effort.

Use cases can be selected to reflect the unique characteristics and identified goals of states and utilities. These use cases should inform and guide the development of an HCA methodology and its implementation. A process should also be in place to refine the selected use cases as new regulatory, social, and technological conditions emerge. The two major HCA use cases—interconnection and planning—as well as the complementary function of optimizing the locational benefits of DERs are discussed in detail in Section III of the full guide.

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Hosting Capacity Analysis Methodologies

A well-considered methodology for determining hosting capacity is necessary given the variety of factors that affect the grid’s ability to host a wide range of DERs. IREC has identified three principle categories of methodologies that are currently being tested and employed by utilities to analyze hosting capacity, generally known as the stochastic, iterative, and streamlined methods. This paper describes these methodologies, including the tradeoffs between them that may make them more or less suited to the various use cases that regulators may select. Briefly, the three methodologies are characterized as follows:

The streamlined method applies a set of simplified algorithms for each power system limitation (typically: thermal, safety/reliability, power quality/voltage, and protection) to approximate the DER capacity limit at nodes across the distribution circuit.

The iterative method directly models DERs on the distribution grid to identify hosting capacity limitations. A power flow simulation is run iteratively at each node on the distribution system until a violation of one of the four power system limitations is identified. The iterative method is also sometimes referred to as the detailed method.

The stochastic method starts with a model of the existing distribution system, then new solar PV (or other DERs) of varying sizes are added to a feeder at randomly selected locations and the feeder is evaluated for any adverse effects that arise from this random allocation. This essentially results in a hosting capacity range.

Different methodologies can result in different hosting capacity values due to different technical assumptions built into the models, and the methodological choices in an HCA can significantly impact whether the results are sufficiently reliable and informative for grid-related planning and decision-making. Section IV of the full guide outlines several key considerations when evaluating and selecting HCA methodologies.

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Regulatory Process Underpinning Hosting Capacity Analyses

The process underpinning HCA efforts is key to ensuring that the HCA tool is deployed to support relevant state policy goals and sufficiently reflects the input from stakeholders, ultimately enhancing the benefits for all ratepayers. Still an emerging grid modernization tool, the benefits and drawbacks of different HCA methodologies are being revealed, and likely will become even more apparent with time. However, rather than wait for the perfect HCA methodology to emerge, regulators can take initial steps to gain familiarity and understanding of the different HCA methodologies, their function, their capabilities, and their limitations. Given the substantial investment in time, energy and resources that HCA efforts require, there is value in taking the time early in the process to ensure that the tool being developed is capable of meeting identified objectives. Questions or concerns about what an HCA can do should be addressed before widespread implementation, lest substantial resources be invested in something that proves invaluable or ambiguously useful. This paper identifies the key process steps and considerations therein, summarized as follows:

Establish a stakeholder process to work with utilities and other interested stakeholders to select, refine and implement the HCA. Ideally, this process should involve one or more working groups consisting of utility and nonutility participants with oversight from regulators to guide the HCA development. Regulators should also retain a process to improve on the selected HCA methodology over time and establish clear timelines for utilities to meet near and long-term HCA goals. Figure ES-2 outlines best practices for stakeholder engagement, drawing from lessons learned in states such as California, Minnesota and New York.

Select and define the use cases for the HCA with input from diverse stakeholders, ensuring they are clearly designed to address and achieve identified goals, including state energy policy goals. These use cases should inform and guide the development of an HCA methodology and its implementation. As regulators and utilities consider undertaking an HCA, it is critical that all stakeholders carefully consider and select desired use cases for HCA together at the beginning of the process. Defining use cases ensures that the cart is not put before the horse and will also prevent potentially costly and inefficient undertakings that do not produce useable results.

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Identify criteria to guide implementation of the HCA at the outset. Working through the established stakeholder process to identify and answer key questions regarding the scope, duration and other key elements of the HCA can help ensure a more efficient process throughout (and greater buy-in from all involved). The frequency of updating the HCA results, the extent of the grid covered by HCA, and criteria for ensuring transparency in the selected HCA methodology and its results are all important to discuss and define. In addition, regulators may consider whether to create a phased roadmap for implementation of HCA, depending on the level of sophistication of the utilities and the timeline for achieving state energy goals. However, care should be taken not to create an endless implementation timeline that quickly becomes obsolete or fails to miss near term opportunities for deployment and use.

Develop an HCA methodology (or methodologies) most appropriate to the use cases. Regulators will need to provide sufficient guidance for utilities to clarify what HCA should be capable of doing and how it can be used to support identified goals, such that the final tool is designed appropriately to meet such goals. This can be accomplished by providing clear and specific guidance and ensuring that the methodologies and assumptions are transparent and informative to all involved stakeholders and end-users. Regulators should ensure that the HCA methodology is scalable so that, even under an incremental approach, the full grid and range of DERs can eventually be analyzed. Different methodologies can result in different hosting capacity values due to different technical assumptions built into the models. Given the variety of factors that affect the grid’s ability to host a wide range of DERs, it is necessary to select a well-considered methodology for determining hosting capacity based upon its intended use.

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Validate the results of the HCA over time. As with any model or analysis, real-world validation can help improve accuracy and functionality over time. Transparency in the methodology and assumptions and ready access to HCA results will ensure that they can be easily validated and any problems with the methodology identified and resolved. Ideally, sufficient information about the methodology should exist so that a third party could perform an independent analysis to validate the results reached by utilities. Regulators will need to consider the most useful manner for utilities to publish and display hosting capacity data, and set milestones over time to evaluate the performance of the HCA, relative to identified goals.

As regulators oversee the implementation of HCAs, there are other key considerations to keep in mind, noted throughout the guide. For example, requiring consistency in approaches and methodologies among utilities (where there are multiple utility services territories within a state) will help simplify the implementation and oversight process, while also ensuring a more consistent and efficient utilization of this tool among DER project developers and customers. Data sharing is another key factor shaping the evolution of the electricity grid, and the data collected and generated as part of an HCA will help utilities, regulators, and DER customers better capture the diverse value streams of DERs. Concerns surrounding data sharing can and should be managed proactively and should not be a reason to not pursue HCAs or related efforts.

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In addition, given swift changes to technologies, performance and markets, HCAs should be agnostic to the type of DER analyzed to ensure that it remains useful over time. Technology agnosticism can also help utilities identify opportunities to expand hosting capacity with other DERs and deploy non-wires alternatives as part of utility grid upgrades and investment plans.

Perhaps most importantly, HCAs should not be developed or implemented in a vacuum, and should be considered in the context of other policy choices and how they may impact how DERs are deployed. As consumers and the market responds to new programs, policies and price signals, so too should the HCAs reflect the anticipated and planned changes to DER adoption. More robust DER forecasting methodologies will need to be developed in order to provide greater accuracy of the HCA.

Ultimately, as utilities plan for and pursue (or solicit from third parties) grid infrastructure improvements over time, HCAs can help ensure that DERs are optimized, not discouraged, on the system as an integrated and functional feature of affordable, quality and reliable electricity service provided to all ratepayers.

With this guide in hand, regulators can provide the leadership and direction needed to ensure the process, function, and implementation of HCA supports and enables the critical grid transformations underway across the country.

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