ORIGINAL REPORTING: Bringing Customer-Owned Power Into The System

Ensuring DER inclusion in capacity markets may require a rethink of resource adequacy; The growth of customer-owned resources is forcing system operators and aggregators to see their value as reliability tools and rethink the concept of resource adequacy.

Herman K. Trabish, Aug. 24, 2020 (Utility Dive)

Editor’s note: Power system operators across the country are increasingly realizing that the power of the people’s roofs is central to reliable electricity delivery.

The growth of distributed energy resources (DERs) has increased the urgency of finding solutions to new complexities introduced by rising penetrations of variable renewables. There is "growing interest in a more decentralized electric grid and new types of distributed resources," the North American Electric Reliability Corporation's (NERC) 2019 Long-Term Reliability Assessment reported. At lower penetrations, DERs "may not present a risk," but as penetrations increase, "the effect of these resources can present certain reliability challenges that require attention."

Those challenges are driving power system stakeholders to rethink resource adequacy (RA). "There is a better way to evaluate risk and reliability in a power system," said Derek Stenclik, an energy consultant focused on power grid planning and resource adequacy. Aggregated distributed solar, storage and demand response that make load and generation more flexible can offer customized solutions to reliability needs, power system authorities said. Aggregation can also avoid unnecessary resource buildouts or capacity procurement — if market participants are appropriately compensated and any barriers to entry are removed.

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But that may only be possible if the sector exchanges an outdated concept of capacity markets for a new kind of reliability. Wholesale electricity markets use capacity markets, RA measures and reserve margins in order to ensure NERC reliability standards are met, but DER aggregators have trouble qualifying.

Capacity market prices are set through forward auctions, and generators bid a price "equal to the cost of keeping their plant available," according to Resources for the Future (RFF). Sunrun became the first and so far only DER aggregator to qualify for a capacity market in ISO-NE's market in February 2019, bidding through a participation pathway available to DER aggregators and other generators who can meet certain market obligations.

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Unlike other markets' participation models, which limit behind-the-meter resources' compensation to demand response load reductions, the developer will also be compensated for exported energy, said Sunrun Policy and Storage Market Strategy Director Chris Rauscher. Several gigawatts of new DER, including 8 GW of electric storage and 35 GW of distributed solar, is expected to be added to the bulk power system by 2024, NERC found in 2019.

Because this consumer-driven growth of DERs could come without the visibility and control that system operators and planners are used to, grid operators will need to "evolve with the desires of customers and policy makers" or "become less relevant," a href="https://brattlefiles.blob.core.windows.net/files/16366_capacity_markets_and_wholesale_market_outcomes.pdf"target="_blank">2019 Brattle Group paper concluded…” click here for more

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