TODAY’S STUDY: The Cost Of Resilience
Utility Investments In Resilience Of Electricity Systems
Lisa Schwartz, et. al,, April 2019 (Organization of MISO States, National Rural Electric Cooperative Association, Edison Electric Institute, National Association of State Utility Consumer Advocates via Lawrence Berkeley National Laboratory)
While reliability is a foundational attribute for electricity systems, resilience is a related concept that has gained more recent attention. The U.S. Department of Energy included resilience among six core areas for electric infrastructure metrics, envisioning modern grids with greater resilience to hazards of all types. 1 The Grid Modernization Laboratory Consortium published a metrics reference document in 2017, including a set of forward-looking grid resilience metrics and a process for calculating them, designed to:2
• Help utilities better plan for and respond to low-probability, high-consequence disruptive events that are not currently addressed in reliability metrics and analyses
• Provide an effective, precise and consistent means for utilities and regulators to communicate about resilience issues
The reference document defined resilience as the ability to prepare for and adapt to changing conditions and withstand and recover rapidly from disruptions, including the ability to withstand and recover from deliberate attacks, accidents, or naturally occurring threats or incidents. It also recommended adoption of a seven-step process to help specify resilience objectives for utilities (see Figure ES-1).
The proposed resilience metrics are consequence-based and fall into two general areas. Following are specific categories and an example for each:
o Electrical service (cumulative customer-hours of service)
o Critical electrical service (cumulative critical customer-hours of service)
o Restoration (time to recovery) o Monetary (loss of utility revenue)
o Community function (hospitals and fire and police stations without power)
o Monetary (business interruption costs)
o Other critical assets (key military facilities without power)
Definitions and metrics for resilience are evolving. Whether and how utilities and regulators (or boards or city councils) should distinguish between resilience and reliability — in terms of approaches and decision-making criteria for planning and investments — also are developing areas. Many other entities also are involved in critical infrastructure decisionmaking related to resilience.
This report presents differing viewpoints on several key questions related to utility investments to improve the resilience of electricity systems:
1. What level and scope of resilience do we need and how much are we willing to pay?
2. Who’s responsible for resilience, and how should other entities coordinate with utilities when there are mutual benefits?
3. What types of utility investments have the most impact on improving resilience, and how can utilities and regulators tell whether utility investments in resilience are impactful?
4. Should utilities take more proactive approaches to investments in resilience?
5. How can decisionmaking about resilience investments be improved?
Authors representing diverse perspectives provide their responses:
• State regulators – Organization of MISO States, with technical support from Lauren Azar (Chapter 1)
• Utilities o Randolph Elliott, National Rural Electric Cooperative Association (Chapter 2) o Scott Aaronson, Edison Electric Institute (Chapter 3)
• Consumers – National Association of State Utility Consumer Advocates, with technical support from Sheri Givens (Chapter 4)
All the authors point out lack of a common definition, analytical framework and metrics for resilience, while acknowledging recent efforts by federal entities, including the U.S. Department of Energy; national energy laboratories; and the electric power industry. Other common themes include evolving grid threats as well as state and local responsibilities for improving resilience.
Organization of MISO States (OMS) highlights a variety of approaches state utility regulators are taking to address resilience, including specifically targeted measures, broad initiatives addressing reliability, distribution planning or grid modernization, or other activities under enabling-statute obligations. Some state regulators prefer qualitative over quantitative methods for measuring resilience; others are open to quantitative methods if they are collaboratively developed, voluntary and customizable.
The organization supports a federal role in conversations with utilities and states to respond to electric system needs and potentially planning exercises for high impact, low frequency (HILF) events. The organization also sees potential benefits from improving regional and interregional coordination, including sharing information and best practices. Still, HILF events may affect only one state (or part of a state), and each state evaluates resilience through its own unique lens. Specifically, state utility commission decisions on cost recovery for utility investments are fact-specific and case by case. “Considering the same risks and consequences, some commissions may choose to bolster resilience while others may not,” OMS says.
Similarly, the National Rural Electric Cooperative Association (NRECA) sees dispersed authority over the electric system “as a feature, not a bug,” while acknowledging a growing need for coordination as the power grid and electric industry evolve. The organization supports the Federal Energy Regulatory Commission continuing its inquiry into the resilience of the bulk power system. The coops suggested several principles to guide development of policies to address bulk power system resilience for design of centrally-organized wholesale markets, such as regional flexibility to assess needs and devise solutions, technical ability of the resource to provide resilience services, market-based compensation, and allowing self-supply by load-serving entities. In addition, NRECA sees a potential federal role with respect to developing consensus agreement on resilience definitions, analytical tools and metrics to improve “bottom-up” planning, coordination and decisionmaking at the local level. However, even if resilience was defined, measured and analyzed in a standardized way, NRECA maintains that local variations — such as resource mix, grid topology, topography of the utility’s service area, and local weather and earthquake risks — mean that appropriate resilience solutions will vary.
Rural electric coops also stress the need for long-term integrated planning to evaluate resilience risks and alternative measures to address them over the lifetime of potential utility investments, in order to minimize long-term costs and stranded investments. For the near term, the organization finds that hardening distribution systems, pursuing appropriate resource diversity on the generation system, and enhancing cybersecurity appear to offer the best approach in terms of value and minimizing regrets.
Edison Electric Institute (EEI) represents the nation’s investor-owned utilities and brings an Electricity Subsector Coordinating Council perspective. The Council is the principal liaison between senior officials of the federal government and the electric power industry for coordinating efforts to prepare for, and respond to, national-level incidents or threats to critical infrastructure. The Council also helps government and private-sector partners deepen relationships with other, interdependent critical sectors, including financial services, communications, water, natural gas and transportation.
In its essay, EEI describes the role of electric companies both in enabling resilience and providing a platform for resilient energy services that support customers and national security. As EEI points out, it is impossible to defend against all threats. So resilience planning must consider how to proactively prepare for and respond to threats. The most impactful resilience investments are those that defend against multiple hazards, according to EEI. Further, a focus on managing potential consequences, rather than prevention alone, means “electric companies avoid chasing the latest defensive measure against always evolving threats and, instead, prepare to respond to all hazards.” Given limited resources and evolving threats, prioritizing investments and focusing on consequence management are key components to improving resilience. Finally, EEI acknowledges that addressing questions about costs and benefits, especially when making investments to address high-risk, low-probability events or investments based on evolving research and new data, requires robust information-sharing and collaboration.
The National Association of State Utility Consumers Advocates (NASUCA) notes that few power outages are caused by generation issues and calls for greater attention to investment in resilience measures for distribution and transmission. NASUCA supports development of resilience frameworks that consider the probability of an event and its impacts on the grid, while requiring each utility to conduct cost-benefit analysis of major resilience investments. Specifically, for any proposed investment, potential costs should be fully delineated and just and reasonable, information provided should be transparent, investments should be made prudently and, if approved, utilities should be held accountable to staying within their proposed costs.
According to NASUCA, “The role of consumer advocates is to ensure that utilities and state commissions apply a rigorous cost-benefit analysis, prudence review, and consideration of affordability to evaluate all resilience measures.” Consumer advocates also support distinguishing resilience needs between different consumers in the same customer class (e.g., higher priority for hospitals and emergency services), prioritizing post-event recovery among them, and considering different needs when determining who pays for resilience investments.
State Regulator Perspectives on Utility Investments in Resilience…A Cooperative Perspective on Utility Investments in Resilience…Investor-Owned Electric Company Perspectives on Investments in Resilience…Consumer Advocates’ Perspectives on Utility Investments in Resilience…