Monday Study – A Framework To Bring Distributed Energy Resources Into The Power System
The Transition to a High-DER Electricity System’; Creating A National Initiative On Der Integration For The United States
August 2022 (Energy Systems Integration Group)
Distributed energy resources (DERs)—generation, storage, electric vehicles, and responsive load connected to the distribution system—have the potential to bring a range of benefits to the U.S. electricity system and the customers it serves: demand flexibility, lower greenhouse gas and criteria pollutant emissions, customer choice, competition, rapid innovation, cybersecurity, and enhanced reliability and resilience.1 Enabling DERs to provide these benefits will require ongoing and significant changes in multiple areas—DER interconnection, distribution and transmission planning, data access and communication, distribution system operations, utility regulation, tariffs, electricity markets— that better integrate DERs into electricity systems (referred to as “DER integration”).
Several initiatives, from the Federal Energy Regulatory Commission’s (FERC) Order 2222 (FR, 2020) to California’s Rulemaking on a High Distributed Energy Resources Future (CPUC, 2021), are underway to address DER integration issues. However, these initiatives are limited in jurisdictional and geographical scope and have different areas of focus. They reflect a provincial and piecemeal approach to addressing DER integration issues that will lead to limited national progress toward realizing the benefits that DERs can provide. FERC Order 2222, for example, provides limited guidance on how distribution operators should carry out nondiscriminatory overrides of market dispatch instructions; state regulators and utilities will need to develop solutions.
Currently, individual states, such as California and New York, are developing their own distribution-level solutions to DER integration. While these efforts are reflective of the actions of individual, forward-looking states, this approach is inefficient, as each state has to essentially reinvent the wheel. This situation will lead to a proliferation of disparate standards, terminology, and approaches around DER integration across the United States, which in turn will generate confusion and increase costs among manufacturers, developers, and other DER service providers. It will ultimately result in less access to distribution systems for DER providers, higher DER costs, and lower DER benefits to customers.
Need for a National Initiative on DER Integration
A U.S. national initiative around DER integration issues could help to accelerate national progress on DER integration. This initiative could address three fundamental gaps around DER integration in the United States:
• The lack of a common vocabulary, framework, and vision for thinking about DER integration across different jurisdictions
• The lack of a common understanding around shorter-term, least-regrets strategies for DER integration that are consistent across distribution utilities, including strategies for enhancing distribution and transmission planning, data sharing and communication, distribution operations, and DER interconnection and aggregation review
• The lack of a structured dialogue on solutions to longer-term issues around DER integration, such as the design of distribution system operator (DSO) operations, markets, and regulation; federal-state jurisdictional overlap; independent system operator (ISO) market design; and incentive frameworks for regulated utilities2
A national initiative around DER integration could build on recent, related cross-state initiatives in the United States, such as the National Association of Regulatory Utility Commissioners (NARUC) and National Association of State Energy Officials (NASEO) Task Force on Comprehensive Electricity Planning,3 and could draw from the recent experiences of Australia’s OpEN Energy Networks Project and the United Kingdom’s Open Networks Project. A U.S. national initiative could also build on related Order 2222 efforts, including the Energy Systems Integration Group’s (ESIG’s) report DER Integration into Wholesale Markets and Operations (ESIG, 2022a) (hereafter referred to as the ESIG DER integration report), and related efforts by the Electric Power Research Institute (EPRI, 2022), and Advanced Energy Economy and GridLab (AEE and GridLab, 2022). These efforts describe key challenges that must be solved to facilitate FERC Order 2222 in the short term and expand opportunities for integrating DERs into power systems over the longer term. All highlight the need for, and call for, broader venues that facilitate cross-state knowledge sharing.
This report proposes a national initiative to develop greater consistency and consensus around DER integration in the United States. The report outlines a possible design, process, and governance for a structured work effort that would address the three gaps described above. The report is intended to be useful for multiple audiences, including national-level organizations that may wish to integrate these elements into their ongoing efforts and stakeholders who may be participants in the national initiative.
This report proposes a national initiative to develop greater consistency and consensus around DER integration in the United States. It is intended to be useful for multiple audiences, including national-level organizations that may wish to integrate these elements into their ongoing efforts and stakeholders who may be participants in the national initiative.
The proposed design of this national initiative, in terms of objectives, scope, and execution, draws on the insights from the ESIG DER integration report and the second report in the ESIG series, Lessons Learned for the U.S. Context: An Assessment of UK and Australian Open Networks Initiatives (ESIG, 2022a; 2022b). The initiative would also build on existing efforts, such as the NARUCNASEO Task Force and work by the Electric Power Research Institute on coordination between transmission system operators and distribution system operators. While many of these efforts are focused on specific topics, the national initiative described here is intended to be more comprehensive and provide common reference points that enable broader consensus among stakeholders. The initiative would be broadly inclusive, enabling participation by different kinds of utilities (investor-owned, municipal, cooperative) and their associations (the American Public Power Association, Edison Electric Institute, and National Rural Electric Cooperative Association), regulators, NARUC, and NASEO, as well as participation by jurisdictions that are within and outside of RTOs and ISOs.
We envision a staged approach to a national initiative, with an initial focus on technical foundations and developing a common vocabulary, framework, and vision (Track 1), a subsequent focus on least-regrets strategies (Track 2), and a final focus on initiating structured dialogue to address issues that will require more time to resolve (Track 3). The first two tracks map to five workstreams, each addressing a different category of DER integration issues (see Table ES-1). Some of these workstreams, or elements thereof, may be part of ongoing efforts, and as such would not need to be duplicated in this initiative.4
Creating Common Concepts and Vocabulary, Potential Solutions That Can Be Tailored, and More Alignment Across the Industry
The most important value of a U.S. national initiative around DER integration, relative to each jurisdiction developing solutions independently, is the potential to create common concepts and vocabulary, more standardized solutions to nearer-term DER integration challenges, and more alignment across the industry on how to resolve longer-term challenges. Greater national consensus around DER integration would help to provide distribution utilities and their regulators with more visibility on possible paths forward for DER integration, grid technology manufacturers with more clarity on where to focus innovation, DER developers with more consistency in rules across states, and ISOs with a more discrete set of models for nearer-term and future distribution system planning and operations that they would need to accommodate.
This national initiative would not seek to produce one-size-fits-all solutions to DER integration issues across the United States. The U.S. electricity sector is too diverse and complex, in terms of both industry structure and its federalist regulatory system, for blanket solutions to be effective. Instead, the national initiative would seek to develop a limited number of potential solutions that different jurisdictions and utilities can choose from and tailor to their own conditions. For instance, in some jurisdictions, distribution system operations might be more passive, with the distribution utility having a minimal role in DER operations, whereas in other jurisdictions the distribution system operator may actively dispatch, control, and run markets for DERs. The concepts and strategies developed in a national initiative would need to be broad enough to accommodate different approaches, while at the same time recognizing that different approaches share a common technical foundation in physics, engineering, and economics.
Stakeholder engagement will be a critical and challenging component of a U.S. national initiative around DER integration. The Australian and United Kingdom open networks projects illustrated the importance of stakeholder buy-in for generating meaningful results. The U.S. electricity system is much larger, and its stakeholders are more numerous and diverse. Obtaining stakeholder buy-in will require transparency, broad representation, and opportunities for meaningful input. At the same time, however, the organizers of a national DER integration initiative will need to ensure that it is focused enough to produce actionable results. This report proposes a potential governance structure and stakeholder engagement model that would balance these two imperatives.
Design of a National Initiative
The Time Is Right
Designing and implementing an impactful national initiative around DER integration will be challenging. It will require careful attention to both design and process as well as skilled organizers that can effectively balance trade-offs and bridge gaps among stakeholders. To be successful, the initiative would need to provide regulators, utilities, and other stakeholders with common concepts, frameworks, and strategies they can use, while still providing flexibility to tailor them to local needs. Despite the challenges of developing consensus and standardization across such a complex and diverse industry, the potential benefits are significant.
The timing is right for a national initiative. Many jurisdictions are currently struggling with FERC Order 2222 implementation and are beginning to consider how the distribution system should evolve with higher levels of DERs—and they are doing so without the benefit of common technical foundations on nearer-term strategies, a longer-term vision, and transition strategies. A national dialogue could create these common reference points, accelerating progress toward finding solutions to DER integration challenges, and ultimately toward realizing the benefits of DERs…