RMI Playbook Provides Roadmap to a Cleaner, More Cost-Effective Grid
Utilities Embracing Emerging Technologies Can Reduce Customer Costs and Support a Cleaner, More Flexible Grid, New Report Says
US utilities continue to spend tens of billions of dollars annually on infrastructure, even as electricity sales growth flattens. Paying for these investments will fall to customers for years to come. However, non-wires solutions (NWS)—targeted applications of distributed energy resources (DERs) like solar photovoltaics and efficiency technologies—increasingly are a cost-effective way to provide grid services that can defer or even obviate the need for traditional “wires and poles” investments. Increasing DER deployment can also help reduce carbon emissions by avoiding carbon-intensive electricity generation on the power system, and can enable indirect carbon savings through increased flexibility.
Despite these benefits, a number of market barriers have inhibited the growth of NWS. These include regulatory frameworks that don’t effectively encourage NWS, limited utility expertise incorporating NWS into standard operating procedures, and a lack of experience procuring NWS. To overcome these hurdles, Rocky Mountain Institute created The Non-Wires Solutions Implementation Playbook, which offers policymakers, regulators, utilities, and developers practical tools to scale the NWS market.
Based on interviews with more than 65 experts across 15 states—including over 20 utilities, as well as developers, regulators, and trade associations—we developed a set of best-practice recommendations that are critical to creating and sustaining successful NWS programs. We also developed practical NWS implementation guidelines for utilities that address four core aspects of NWS implementation: screening criteria, competitive solicitation processes, evaluation frameworks, and contracting considerations.
Regulatory Environments Lay the Groundwork for NWS
Regulatory environments are key enablers of successful NWS markets. Legislatures and regulatory bodies can establish a vision that sends a clear signal to utilities and developers that NWS are desirable, cost-effective alternatives to traditional infrastructure investment. Legislators and regulators have a number of tools to lower market barriers to cost-effective NWS deployment, including creating mandates and incentives that require or encourage utilities to consider NWS systematically. They can also develop NWS screening criteria and encourage DER forecasting that can be integrated into utility planning processes. Grid-data transparency and access is another way that regulators and legislators can ease market barriers: they can ensure that planning processes capture system data to support NWS development, and make that data available so developers can propose solutions that meet grid needs. Finally, regulators can support collaborative stakeholder proceedings that inform the development of durable NWS rules, incentives, and processes.
Evolved Utility Processes Can Unlock NWS Applications
Even with a supportive regulatory framework, there’s a meaningful role for utilities to play in ensuring they fully capture the benefits of NWS opportunities. Specifically, utilities can streamline NWS planning and execution to make it easier to compare NWS and traditional infrastructure approaches. As a first step, utilities should consider consolidating accountability for NWS within a single interdisciplinary team that is fully integrated into the utility’s business-as-usual operations, rather than keeping NWS teams focused on one-off projects. These NWS teams should be cross-functional, drawing on employee expertise across domains, including electric supply, distribution planning, permitting and interconnection, energy efficiency, and customer programs, policy, and procurement. Still, it’s important for utilities to strike the right balance between integrating NWS groups into the core business of the utility and keeping the team’s reporting lines sufficiently distinct to head off any internal bias toward wires and poles infrastructure.
Given that most utilities are just beginning to operationally integrate NWS, it’s likely that they will rely on pilots to gain comfort with NWS as effective alternatives to traditional grid infrastructure. While there are important lessons to be learned from scoping, soliciting, and operating NWS demonstration projects, utilities should also lay the groundwork to scale NWS pilots to full deployment and not spend too much time launching NWS pilot projects.
At this early stage of NWS adoption, utilities should be cognizant that they may not have all the solutions in-house, and that engaging with technology providers is likely to lead to optimal outcomes. Designing an NWS project to resolve a grid issue may involve assembling a portfolio of technologies that collectively address the need. Both utilities and third parties can aggregate individual NWS components into a comprehensive solution. While many utilities may want to aggregate NWS portfolios themselves, they may not be familiar with newer technologies and how they can be integrated to create effective NWS. In some cases, technology developers may be better positioned to determine how their approaches work in concert and can therefore present the utility with an optimal solution.
Leading-Edge Procurement Practices can Scale NWS Deployment
A utility that is both operating in a supportive regulatory market and internally aligned to pursue NWS at scale may still not be able to source the most optimal outcomes. The practical procurement of NWS is complex, and utilities should reexamine and refine their procurement practices to ensure that they effectively support NWS sourcing.
The three most common procurement strategies for NWS are customer programs (e.g., demand-side management), pricing mechanisms (e.g., time-of-use rates, demand charges), and competitive solicitations (i.e., requests for proposals). Several factors inform which option(s) a utility will ultimately use to source NWS, including scope of the procurement, time available before need must be addressed, project complexity, certainty of need, and risk tolerance. The Non-Wires Solutions Implementation Playbook focuses primarily on competitive solicitation procurement practices, because the traditional utility request for proposals (RFP) process has many rules, processes, and standards that create institutional barriers to innovation and adaptation in the NWS context.
The Playbook outlines recommended changes to RFPs that will enable NWS providers to participate more effectively and maximize the probability for technically feasible and cost-competitive results. NWS RFPs should provide bidders with ample data that accurately describe the identified need (e.g., load relief, hosting capacity, reliability, voltage support) as well as forecasting how that need may change over time. This probabilistic analysis encourages developers to design more flexible, modular solutions.
At the same time, the utility’s needs description should not prejudge a particular solution. Solicitations should articulate how the solution is expected to meet the described need without pointing to a particular technology or outcome. In particular, developers will want to understand if and how utilities intend to dispatch resources to meet the described need. For example, are the DER solutions active resources that require signals for dispatch, or passive resources that constantly reduce load or operate independent of utility instruction? The level of control required by the utility—for both dispatch and data visibility—should also be made clear to developers.
To encourage a large number of meaningful responses, a utility’s RFP should state clearly how bids will be evaluated so developers can craft solutions that reflect the utility’s priorities. Clear methodologies for how solution costs and benefits will be quantified are critical for transparency and bid optimization. Providing transparent evaluation criteria can help build developer trust in the solicitation process and encourage continued participation in the utility’s NWS solicitations.
Arming Market Participants with the Tools They Need
NWS represent a compelling update to traditional utility investment practices, helping keep customer electricity bills stable while enabling a lower-carbon electricity grid. With the rate of spending on distribution infrastructure increasing, there’s a need for utilities to systematically evaluate whether NWS might obviate the need for costly investment. At the same time, NWS can unlock additional value from DERs, promoting the cost-effective deployment of resources that are important for reducing carbon emissions.
RMI’s Playbook arms regulators, utilities, and technology or service providers with a roadmap for deploying NWS at scale and elevating DERs as core components of cost-effective grid infrastructure.
