RMI Answers Your Questions From Last Month’s eLab Hangout

Thanks to all of you who were able to join us live at our “eLab: Creating a Resilient ElectricitySystem” Google hangout, and to those of you who viewed the archived video later.

We are, again, also very appreciative to the eLab participants who joined us:

• James Newcomb, program director for RMI’s electricity practice
• Clay Luthy, global distributed energy resource manager, IBM Global Energy & Utilities
• Roger Woodworth, vice president and chief strategy officer, Avista Corp.
• Kumar Dhuvur, managing director, market development and strategy, SunEdison
• Curtis Seymour, director of government affairs, SunEdison

We received some great questions via Twitter; here are answers to a few we couldn’t get to during the hangout.

Q: How do costs, markets, value get recognized and communicated at the distribution edge?
A: We are entering a new world in terms of transparency of costs and benefits at the distribution edge. Dozens of utilities around the country are undertaking studies and developing new methodologies to analyze costs and benefits and to share and apply best practices for doing so. In some cases, this kind of analysis has a very direct connection to utility rates, as in the case of the so-called “value of solar” tariffs introduced by Austin Energy, the City of Palo Alto, and others.

Better analysis will lead to a clearer view of where distribution system costs are incurred or can be avoided as a result of distributed resource deployment. This could bring about new types of rates and incentives that provide added value for distributed resources that can supply power or other ancillary services to the grid at particular times of the day—in specific locations on the distribution system—that can be “dispatched,” or can respond automatically to system conditions.

Q: Can you talk about business models reaching renewables to the under-served and having disruptive potential?
A: This is an important area for development. We are in conversation through eLab with a number of utilities that are exploring new approaches to on-bill financing for distributed resources that could open the door to financing distributed resource development—including efficiency, distributed generation, and other options—for low income customers. Programs that lower the risk of unusually high utility bills for low-income customers have potential benefits for customers and utilities alike. Other types of pooled, utility-backed financing are also being explored.

Q: What if storage gets cheap enough so that customers with solar PV systems in Arizona or California can cut the cord to the grid?
A: This is an important design question for regulators, policymakers, and utilities to consider in restructuring rates and incentives for utilities and other parties. We see little evidence that the costs of electricity storage will become low enough to make stand-alone options viable for most customers anytime soon, when compared with the costs of efficiently delivered grid-based electricity services.But technology and services are evolving rapidly and competitive stand-alone services could be available for customers in remote areas with special power quality or reliability needs, thereby creating an early adopter market for these services.

RMI’s analysis indicates that the best outcome from a societal perspective is one where the grid remains healthy and economically viable, benefitting all customers (as it has historically) by virtue of the natural diversity of temporal patterns of supply and demand. A system where many customers build electricity generation and storage to meet just their own needs will be one which has lower rates of asset utilization and higher costs and environmental damage as a result of the overinvestment in energy assets.

It is in the interest of society for policymakers to avoid the “bypass” scenario by creating new pricing structures and utility business models that make these shared benefits available to all stakeholders in the electricity system, and to maintain the health, resilience, and efficiency of the grid model. This will happen through the transition to next generation business models and grid management architectures, about which we have written extensively in Reinventing Fire.

Q: RTO’s and ESP’s are recognizing a ‘capacity’ leak where wholesale participants are buying capacity products to meet tariff obligations and finding that there is excess capacity showing up in real time. Is DG to blame and, if so, how can it be better integrated into reliability planning and system operations?
A: RTO’s and ESP’s need better “look through” abilities to see how and where distributed resources are being deployed and what supply they are providing to the system. California ISO and PJM are both working on this issue, but there’s still a long way to go to create the kind of transparency and integration of distributed resources that can provide greatest value to the system as a whole.

It is possible to achieve a much greater degree of integration of distribution assets at the local level. In Denmark and the Netherlands, pilot projects are demonstrating how electricity distribution network companies, can create peer-based transactive energy grids that allow distributed resources to interact directly with each other through network-based local energy markets in close to real time. In both countries, electricity distribution companies are prohibited from involvement in electricity production, trading, and supply, so they operate as “pure” distribution network companies.

Enexis, an electricity and gas distribution company that serves 2.5 million households in theNetherlands, is using smart grid technologies to create a peer-based energy grid in a pilot program called PowerMatchingCity. The project encompasses 25 residential homes in the city of Groningen equipped with distributed resources including micro combined heat and power (CHP) equipment, smart appliances, smart meters, electric vehicles, and rooftop solar PV. PowerMatchingCity’s “real-time” market functions in five-minute intervals, using a market platform software system to balance supply and demand in distributed clusters with the help of intelligent “agents” that manage the energy devices owned by customers.

A similar experiment is being conducted at a larger scale on the Danish island of Bornholm, using the same platform and five-minute interval market structure, but involving 28,000 customers with an energy portfolio that is 50 percent renewables. The Scandinavian experiments are enabled in part by the restructuring of electricity distribution functions, which has removed conflicts of interest for distribution system operators in allowing distributed resources to deliver a widening range of energy and ancillary services to the grid.

Highlighted Resources

(Video) eLab is Setting the Course for a New Electricity Paradigm

Some images courtesy of Shutterstock.