TODAY’S STUDY: How Homes And Businesses Can Strengthen The Grid
The Role Of Distributed Energy Resources In Today’s Grid Transition
August 2018 (GridLab and GridWorks)
Electricity grids across the nation are undergoing a rapid transition. The principal contributor to this transition is the increased deployment of renewable energy resources by utilities, driven in part by declining costs of these resources relative to conventional, fossil-fired resources. A second factor contributing to the current grid transition is increased adoption of distributed energy resources (DER) by customers. This trend is driven by customers who see value in DER, which provide them with choice in their energy source and the ability to proactively manage their energy use. Effective integration of renewable resources into electricity supplies and grids is the central challenge of our industry, both from a technical and from an economic point of view. This paper is about the role DER plays in addressing that challenge.
Many view the trends of increased reliance on renewable energy resources and customer DER adoption as separate and distinct. Some even perceive DER adoption by customers as a barrier to continued large-scale renewable deployment by utilities. But a handful of utilities and policy-makers are finding a better way forward, recognizing that DER can provide key grid services, including flexibility, that will complement, not frustrate, the deployment of large-scale renewables. These regulators and utilities are showing how to strategically pivot away from legacy systems to enable a more efficient, environmentally benign energy sector.
In this paper, we define and identify the capabilities of DER, with emphasis on how those capabilities facilitate the integration of large-scale renewable deployment. Next, we identify potential services DER may provide a utility and its customers. Building on existing literature, we further consider how DER provides utilities and grid operators with new flexibility in meeting grid needs. Finally, we identify three case studies wherein utilities are embracing the capabilities of DER. Based on these case studies, we conclude DER can complement large-scale renewable energy resources and provide new services to utilities and customers.
DEFINITION AND CAPABILITIES
Distributed Energy Resources is a term applied to a wide variety of technologies and consumer products, including distributed generation (DG), smart inverters, distributed battery energy storage, energy efficiency (EE), demand response (DR), and electric vehicles (EVs). These resources each have distinct strengths and capabilities. Some of the most popular DER in use today include:
Distributed Generation (DG): DG refers to small-scale power resources that generate energy. DG systems are decentralized and typically connected to the distribution grid, compared to traditional centralized large-scale infrastructure which is connected to the transmission system. DG encompasses many forms of generation including, but not limited to, solar photovoltaics (PV), small wind systems, cogeneration/ CHP systems, and fuel cells. The most prominent and growing technology in recent years, buoyed by falling technology costs and favorable policies, is distributed solar PV installed at the customer’s location.
DG’s greatest capability is the ability to generate energy locally, closer to end users compared to traditional generators. This can reduce demand for costly, large-scale utility infrastructure, such as highvoltage transmission lines. DG also reduces line losses experienced due to the transmission of power across large distances.
Finally, adoption of DG, and in particular solar PV, often catalyzes greater utility customer engagement. Utility customers who choose to install DER gain greater insight into their energy usage and often go on to install other DER technologies or utilize utility energy efficiency programs. Customers who adopt DER can be engaged on an ongoing basis in a manner that has the potential to provide additional benefits for the grid.
Battery Storage: Distributed energy storage systems can be used to both store and discharge energy. This allows batteries to act as both a generator and a source of load. Batteries can be integrated as standalone systems, used in support of other distributed resources (e.g., solar plus storage), and are becoming widely deployed in electric vehicles.
Energy storage can provide additional capabilities above and beyond distributed generation. First, batteries can provide dispatchable generation because charging behavior and battery output can be controlled. This capability allows batteries to shift energy generation by discharging at times of high demand or peak load. When energy prices vary temporally, batteries can be programmed to respond to price signals in order to both meet grid needs and reduce customer bills. For example, batteries can be programmed to charge when excess power is available and discharge at times of peak demand. Batteries can also respond instantaneously to changing load conditions, enabling battery systems to serve as a demand response resource to meet load.
Batteries can also provide important voltage regulation and frequency regulation services to improve power quality on existing grid infrastructure. In contrast to traditional utility infrastructure (e.g., transformers, regulators, etc.), storage systems can be paired with smart inverters, described in further detail below, to control the battery’s energy output autonomously in response to changing conditions on the grid. Battery storage can be programmed to ramp up or down rapidly in response to voltage and frequency conditions on the grid, which can help to stabilize and manage the grid.
Smart Inverters: Inverters are devices that convert direct current produced by a generator to alternating current used by the grid. In the past, inverters used by DG and battery systems were designed to switch off when the system experienced a grid disturbance, such as the sudden loss of a large generating resource. With more DER on the system, this can amount to a large loss of generating capacity at once, further disturbing grid conditions.
Inverters are now deployed with advanced functionalities which are capable of intelligently managing the output of the DG system, which can mitigate the impact of distributed generation on the grid. In fact, smart inverters can contribute to resolving grid constraints by providing voltage support, frequency regulation, and ramp rate control. These capabilities support the grid by allowing distributed generation to help stabilize voltage and frequency on the grid, and to “ride through” a minor voltage or frequency disturbance and remain online rather than tripping offline.1
Energy Efficiency: Energy efficiency refers to customer-sited technologies and behaviors that reduce a consumer’s end-use energy consumption. Energy efficiency can target residential, commercial, and industrial customers, and is most often focused on building efficiencies, such as lighting or insulation improvements, mechanical improvements of heating, cooling, appliance, and industrial systems, or passive measures that monitor and control energy consumption.
Energy efficiency primarily provides load and demand reductions by enabling and encouraging consumers to use less energy. Customers invest in energy efficiency measures, often supported by utility incentives or rebates, thus altering energy consumption patterns. Utilities can drive energy efficiency to achieve specific goals in two ways. First, utilities can target specific parts of the distribution network which face capacity constraints and encourage specific types of energy efficiency in response. Second, utilities can deploy energy efficiency measures broadly to reduce system peaks and avoid or defer future need for additional generating capacity.2 Energy efficiency is also being used to reduce demand at specific times, or even to shift demand. The chart above illustrates different energy profiles for various common energy end-uses. By targeting a specific energy end-use, utilities can choose to deploy efficiency technologies that will achieve demand reduction during a specific time period.3 For example, incentivizing energy efficient space heaters would reduce the evening peak illustrated above.
Demand Response (DR): DR is defined as a coordinated reduction in electric load in response to specific system conditions or market incentives.4 Demand response can be controlled by a customer, a third party or directly by the utility. Demand response capabilities allow a utility to curtail or shift load in response to a scarcity of power supplies or other various grid conditions, including changes in generating capacity, peak load scenarios, ramping requirements, transmission or distribution constraints, or voltage irregularities.
Demand response can be used to shape and shift load. DR programs can reshape customer loads over time through rate structures or energy efficiency measures that encourage better utilization of grid resources.5 Similarly, demand response programs can shift periods of high energy demand to periods of low demand. For example, DR programs can be used to encourage electric vehicle charging or heavy appliance operation during times when power supplies are abundant. DR can also be used to shed load during peak load events, for example, by incentivizing consumers to turn down air conditioning units during system peaks. Finally, demand response can be used to provide ancillary grid services, such as rapidly smoothing load or regulating voltage in response to sudden grid disturbances.
Electric Vehicles (EV): EVs primarily provide mobility, and consumers rarely (if ever) purchase them for the additional grid services they can provide. However, intelligent EV charging enables load shaping and shifting in response to grid conditions. Such “smart charging” is expected to provide significant flexibility in the near term as EV deployment grows. Grid operators can effectively utilize an aggregated network of EVs and EV chargers to respond to certain grid events, using both real-time and day-ahead pricing, and demand signals. For example, grid operators can shape demand by encouraging charging at certain hours of the day, particularly when ample solar or wind resources are available. Similarly, operators can shed load by turning off or throttling EV chargers at peak demand hours. In just one case, experts have modeled how grid integrated vehicles can mitigate the California duck curve through peak shaving, valley filling, and ramping mitigation.6
In the medium- to long-term, vehicle-to-grid services could provide capabilities similar to energy storage by not only shifting charging, but allowing EVs to generate power to the grid at key times to alleviate grid stress. EVs are a particularly effective customer engagement tool that provide an added demand response resource and aggregated energy storage technology.
BETTER TOGETHER: LEVERAGING PORTFOLIOS OF DER
In addition to the individual capabilities of each DER, distributed energy resources can be combined to maximize their value to the grid and the adopting customer. For example, a customer-sited solar and storage installation, paired with an electric vehicle and regulated by a smart inverter, can generate power when needed, store and discharge that power in response to grid conditions, energize the transportation needs of the customer, and contribute to the grid operator’s regulation of voltage at the point of interconnection. In this way, individual distributed energy resources complement one another to provide greater service to the adopting customer while also contributing to grid needs.
DER can also be deployed in portfolios where large aggregations of DER are coordinated to meet grid needs. In such cases, the DER adopted by customers — in some cases hundreds of thousands of customers — are brought together by utilities and third parties. Aggregating resources in this way provides new opportunities. First, drawing on the relative strengths of different technologies, these portfolios offer services to the grid which exceed services that each technology can offer on a standalone basis. Additionally, a portfolio approach allows for risk management strategies that are not possible for single DER resources. As is the case with an investment portfolio, risk can be managed through diversification. For example, to meet new capacity needs, a utility can combine energy efficiency, demand response, and distributed storage, engaging a range of residential, commercial and industrial customers. Aggregated, the technologies and customers can contribute to a whole which is greater than the sum of the parts.
DER are capable of providing a wide range of services to the grid whether they are used as individual resources (like DG or EE), combinations (such as solar and storage), or aggregated into portfolios of diverse technologies and customers. The following section identifies services DER can provide and describes how the capabilities of DER match both traditional and new grid needs. Building on existing literature, this paper contributes new perspectives on a growing grid need, flexibility.
AVOIDED TRANSMISSION AND DISTRIBUTION SYSTEM INVESTMENTS…AVOIDED GENERATION…FLEXIBILITY…CASE STUDIES…
As demonstrated in this paper, properly leveraged Distributed Energy Resources can provide significant benefits to the grid and utility customers. There are initial steps that utilities, regulators, and policy makers can take to capture the benefits of DER for the grid.
1 | The first step towards capturing the benefits of DER is to develop a full understanding of DER technologies, capabilities, and the various value streams they provide. This understanding is important to ensure DER continued growth in a manner that benefits the grid. There are an ever increasing number of publications about DER and non-wires solutions. Included with this document is an annotated bibliography describing relevant recent studies.
2 | Transparent Integrated Distribution Planning processes will allow utilities and regulators to evaluate the full implications of all available energy resources, including DER such as energy storage projects, demand response initiatives, and energy efficiency measures. Clear and proper evaluation of non-wires solutions, including detailed cost-benefit analyses that compare traditional utility investments with DER, are necessary to ensure customers are receiving the benefits from the full range of energy options available to them at the lowest cost. Non-wires solutions, such as adoption of solar with smart inverters or demand response programs in place of expensive transformer or transmission upgrades, often provide a multitude of grid services at lower cost. Nonwires solutions, in the context of effective Integrated Distribution Planning and avoided T&D, will often deliver a greater combination of services to the grid than a traditional infrastructure upgrade while also reducing costs for end-use consumers.
3 | Regulators can urge the adoption of smart inverters for new distributed energy sources. Smart inverters enable a host of additional services to support the grid, as highlighted above. Not only do smart inverters provide a number of ancillary grid services, such as voltage support or soft-start capabilities, but they similarly help avoid costly T&D investments. Increasing the adoption of smart inverters will inevitably lead to a more flexible, resilient electric grid.
Distributed energy resources offer a means to leverage private investment to the benefit of the grid while satisfying the desire among some customers to choose the source of their power and proactively manage their energy usage. Not all customers wish to make such a choice, but the number is growing due in large part to decreasing costs and increasing availability of DER. This trend is likely to accelerate as EVs become more mainstream, and as the cost of solar, battery storage, and smart energy management devices continues to fall.13
As shown through the case studies highlighted in this paper, utilities and their regulators are increasingly recognizing the capabilities of DER to address challenges emerging from the grid transition. DER are demonstrating their capability to provide services to reduce peak demand, avoid transmission and distribution investments, and provide voltage and frequency support. DER also provide an important new service, flexibility. In doing so, they provide enhanced value to utilities and their customers. This progress invites policymakers to think of DER as a complement to the grid transition, rather than a frustration. Once the full capabilities of DER are recognized, policymakers can value the resource accordingly, and consider approaches to incentivizing DER to unlock that value.