What regulatory actions could help establish a path to higher renewables integration?
Regulators, legislators and other stakeholders highlighted the importance of flexibility, business model changes and enabling non-wires alternatives, during the Interstate Renewable Energy Council (IREC) Vision Summit on Wednesday.
But restructured utilities are finding it difficult to encourage non-wires alternatives, such as distributed energy resources (DERs).
"There's no incentive for the wires utility part of Exelon to go acquire that commodity," under the current business model, Steve Steffel, DER planning and analytics manager for Pepco Holdings, an Exelon subsidiary, told Utility Dive.
The creation of a Distribution System Operator (DSO) that can transact energy at the distribution level could advance Exelon's utilities to expand access to renewables and DERs, he said. Exelon views transactive energy as a possible activity "down the road," and separating the ownership and the operation of electric distribution.
"The [DSO] concept is definitely out there and people are looking at different ways of approaching how to manage distributed resources on the grid."
Sara Baldwin
Regulatory VP, IREC
DSO considerations are not new, but a lot of unanswered questions remain about the benefits of distributed resources aggregation and the creation of a formal distribution operator, according to Sara Baldwin, regulatory VP at IREC.
"The concept is definitely out there and people are looking at different ways of approaching how to manage distributed resources on the grid,” she told Utility Dive.
Many energy policy experts have highlighted the need for distributed resources, including storage and demand response, on the grid. Encouraging DER, non-wires deployment and continued growth is key to avoiding costly upgrades for transformers or substations, former Hawaii regulator Lorraine Akiba said at the IREC Vision Summit.
The Hawaii Public Utilities Commission announced its intent in 2014 to modernize the state's utility business models, which "gave regulatory certainty that we're going to treat DERs, ... energy efficiency, demand response, electric vehicles and electric storage as generation resources,” to encourage growth, said Akiba, who currently works as a regulatory and public policy consultant.
However, while regulators can direct Hawaiian Electric, the biggest investor-owned utility in Hawaii, to issue power purchase agreements (PPAs) for non-wires alternatives, DERs and demand response, a restructured utility would need other mechanisms to impact the growth of those resources.
"For us, what are we going to do with these PPAs, you know? That's kind of the challenge" that a DSO market would address, Steffel said.
However, electric distribution is vertically integrated, largely, with utilities like Exelon owning and operating the distribution grid. Establishing a DSO that includes behind-the-meter solutions would separate the operations aspect, to enable DER and non-wires solutions to plug in, according to Ric O'Connell, GridLab executive director.
"The idea I like is the distribution grid as a platform that you know, electric vehicles, [energy] efficiency, all that stuff can come and plug into," O'Connell told Utility Dive.
"What it would do is allow everybody to operate economically, but [the DSO would] step in if there was, you know, going to be grid problems to manage and operate," Steffel said.
While the grid has distribution automation today to reconfigure circuits in the event of a fault, it does not know how to switch a negative load, creating the need for monitoring that would come with a DSO, he said.
California and other states with a lot of solar energy have experienced zones with so much solar output so as to create negative load or negative electricity pricing caused by an oversupply of generation.
Without DSO capabilities, the increase of DER resources "will affect reliability and other issues down the road," he said. "I know there's a lot of things you can do semi-autonomously, but there's also things that you have to do with control if you're going to continue on the higher [renewables, DER] penetration path," like controlling different combinations of resources and changing the power factor.
"If we could do the [distribution-level] transactions and manage that between one customer to another, that would be a whole ‘nother paradigm. We're looking at that, whether we use blockchain or whatever to do the back-office transaction," Steffel added.
One challenge to build out DSO markets, he said, would be to carry out transactions while adding values to stakeholders, so that "nobody's losing money or it's not lowering the value of what we're delivering."
Exelon could be ahead of the curve on evaluating DSO possibilities, but it could also be among the "most interested in the DSO model” due to its restructured businesses, GridLab's O'Connell said.
DSO markets: Not tomorrow's solution
DSO discussions are "definitely floating around," Steffel said, but transmission system operators largely control distribution-level energy supplies by having them work through the transmission marketplace.
"There'd have to be a distribution system operation marketplace... a different paradigm" within the existing market structures.
PJM Interconnection and other transmission operators, "they probably would have to do a lot of negotiating to figure out how the two entities could operate," Steffel said.
"[I]f we’re going to continue to put more and more DERs, and that’s basically distribution-level generation, you’re probably going to have to have [a DSO]."
Steve Steffel
DER planning and analytics manager, Pepco Holdings
"A DSO would allow for a lot more of this idea of transactive energy," he said, of neighbors supplying neighbors from their DERs through the distribution system.
"The people operating this would probably have a wall of separation so they're totally neutral and not biased ... But I think down the road of that, if we're going to continue to put more and more DERs, and that's basically distribution-level generation, you're probably going to have to have that," he said.
However, any substantive movement on this is a long way off, according to many stakeholders.
"I do think that before we get to the DSO, we really need to focus on data" related to DERs, Mike O'Boyle, electricity policy director at Energy Innovation, told Utility Dive.
"What data do DER providers need and what data does the utility need to provide to regulators and stakeholders in order for this whole model to work?"
Beyond those questions, utilities must understand hosting capacity and provide a data platform for the distribution grid, he said. California and, to some extent, Illinois are the farthest along in sharing anonymous system data, according to O'Boyle, which is necessary for an operator to gain visibility within DERs.
