Navigant Research Blog

Community Choice Aggregation at the Forefront in California

— February 11, 2016

??????????????????The city of San Diego is making waves in the energy world with its new and unprecedented commitment to renewable energy. Unanimously approved in December of last year, the city’s Climate Action Plan sets a legally binding mandate to transition to 100% renewable energy by 2035. One of the possible ways to achieve this is through community choice aggregation (CCA), a model that is quickly gaining popularity throughout California. While largely lauded by the environmental community, utility advocates have expressed concerns regarding this industry restructuring, setting the stage for what could be an industry-altering debate in the coming years.

Traditionally, utilities have been able to define their own resource mix with regards to electricity. The concept of CCA shakes up this model and allows communities to form their own local non-profits for electricity purchases and/or generation. Under this system, utilities will still own and manage the electrical infrastructure while local communities will now be allowed to determine their own electricity mix. This model is quickly gaining popularity among California communities, with CleanPowerSF, Sonoma Clean Power, and Marin Clean Energy all representing California CCA systems formed since 2008.

Utility Perspectives

It is easy to see why utilities may not be too keen on CCA given that it could lead to reductions in revenue, monopoly status, and elements of control. Utilities have typically opposed these efforts through lobbying, ballot measures, marketing campaigns, and legislation. However, the California State Legislature responded in 2011 with the passage of a law prohibiting utilities from using ratepayer funds for such activities.

San Diego Gas & Electric (SDG&E) has not come out as actively attacking or suppressing the idea of a CCA system. In an immediate response to the city council vote, SDG&E reaffirmed its support for the Mayor’s Climate Action Plan. Naturally, this has raised a few eyebrows among environmental advocates, with the local nonprofit Climate Action Campaign moving quickly to highlight SDG&E’s newly formed marketing division as a potential source of opposition. This investor-funded venture sidesteps the aforementioned 2011 law by setting shareholders as the source of funding rather than ratepayers. While SDG&E is quick to mention that this is purely to facilitate a robust discussion, the Climate Action Campaign still has strong doubts about this proclamation.

Future Implications

Given the recent trend toward renewable energy adoption, one would expect more CCA proposals to continue in the future, particularly in areas like California. Reaching a balance between community and utility interests will be vital to a cooperative future. One key to a harmonious relationship will be to derive a fair and accurate exit fee for utilities. These surcharges are attached to customers who opt into these CCA systems. This additional revenue will help utilities hedge against long-term power purchase agreements, and forces customers to pay their representative costs for energy that were acquired to serve them prior to their departure. CCA promotes an array of benefits, including customer autonomy, community involvement, and alternative energy adoption. States should look to foster healthy relationships among utilities and local communities looking toward CCA.

 

Value of Flexible Grid Resources Coming into Focus

— February 1, 2016

Server room.Earlier this month, California’s big three utilities announced awards for a new initiative to bring clarity to the value that flexible distributed energy resources (DER) can provide to the grid. The Demand Response Auction Mechanism (DRAM) program is one of the first attempts to incorporate a wide variety of DER into statewide grid operations. While this program is focused only on one service—helping reduce peak load on the grid—it is an important development in recognizing the full value that DER can provide.

The recently announced awards include load reduction through four primary technologies: behind-the-meter energy storage, residential DR, commercial & industrial (C&I) DR, and electric vehicle (EV) charging. Although the majority of this capacity was awarded to traditional C&I DR, the inclusion of more innovative technologies validate claims made by vendors that their solutions can provide value to multiple stakeholders throughout the grid system. Residential energy management providers such as EnergyHub, Ohmconnect, and Chai Energy won bids totaling over 11 MW to reduce load primarily using smart thermostats. Distributed energy storage vendors Stem and Green Charge Networks won a combined 880 kW of load reduction utilizing batteries they have located in C&I buildings. Finally, startup eMotorWerks will be shaving over 1.2 MW of load by aggregating the operations of more than 1,000 smart EV chargers.

DER Value and Growth

The diverse technologies included in this program demonstrate the ability of multiple technologies to provide valuable services to the grid. While the value these technologies provide for their host users differs significantly, they can be viewed as a single, flexible resource by grid operators. Navigant Research’s recent Distributed Energy Resources Global Forecast report provides a detailed breakdown of the rapidly growing DER market in countries around the world. As shown in the report and with the DRAM program, traditional DR is currently the most cost-effective form of load reduction for utilities. However, other technologies are expected to see much faster growth in the coming years. Distributed energy storage is expected to be the fastest growing DER resource in the United States, with a compound annual growth rate of 45% over the next decade.

Once again, California is leading the way in identifying and valuing the diverse services that new technologies can offer the power grid. All bids have been kept strictly confidential through the DRAM program, an important point to note as the various technologies have widely differing costs to install and operate. These bids will help inform future efforts to integrate DER both in California and around the world.

 

In California, IOU Filings Spell Out DER Forecasts

— July 28, 2015

On July 1, California’s investor-owned utilities (IOUs) submitted the first iterations of their Distribution Resource Plans (DRPs), a new regulatory filing detailing how each will integrate distributed energy resources (DER) into their conventional planning process. Among a wealth of other information, these DRPs include a 10-year adoption forecast of different resource types, which will be used to analyze the range of potential impacts of DER on the electric grid. The California Public Utility Commission guidance provided a framework for three different DER growth scenarios, allowing each utility to use consistent underlying assumptions. The utility filings presented the forecasts with a variety of different metrics for different resources types, from annual energy impact to installed capacity to territory peak impact.

DER Coincident Peak Impact by Type, Trajectory Scenario: 2025

Trajectory Scenario(Source: Navigant Consulting)
Note: Figures display the Navigant estimate of territory peak impact based on the data provided in the resource plans.

DER Growth Scenarios

These scenarios include a low Trajectory case, a moderate High Growth case, and an aggressive Policy Impact case. The Trajectory case portrays business-as-usual based on the existing economic and regulatory drivers. The High Growth case incorporates improved cost-effectiveness for many of the technologies and results in higher adoption. Finally, the Policy Impact scenario assumes California pursues aspirational greenhouse gas reduction, zero net energy, and electric vehicle goals.

The utilities were also required to allocate their system-level resource projections down to individual distribution circuits in order to consider potential location-specific effects from increased DER concentrations. In this iteration, the method and level of detail for this allocation varies both by IOU and resource type, as many categories were not actively tracked in the conventional distribution planning process. However, future filings will likely place additional emphasis on this difficult but impactful component.

Peak Impact Forecast Scenarios

PG&E Peak Impact

SCE Peak Impact

SDG&E Peak Impact

(Source: Navigant Consulting)

Potential Grid Impacts

Each of these planning forecasts is used to determine potential impacts to the future distribution grid. The major categories are changes to the load growth forecast, consequences for grid operations and reliability, potential for capital investment deferral, and impacts to the planning process. While it is clear that these DRPs are the first step in an iterative process, it is also increasingly evident that these issues will have significant influence on the future of California’s electric power system. The variances and magnitudes of DER impacts estimated in the DRPs demonstrate the importance of incorporating location-specific DER adoption trends into California’s already complex load forecasting, procurement, and transmission planning processes. They also indicate the value of upcoming filings in the DRP proceeding that will seek to understand location-specific costs and benefits associated with DER.

 

CA Utilities Unveil Distribution Resource Plans

— July 9, 2015

On July 1, 2015, California’s investor-owned utilities (IOUs) submitted the first iterations of their Distribution Resource Plans (DRPs), detailing how to integrate distributed energy resources (DER) into their distribution systems. For reference, DER includes energy efficiency, demand response, rooftop solar, combined heat and power, electric vehicles, and energy storage.

The IOUs organized their filings around the California Public Utilities Commission (CPUC) guidance released in February under Rulemaking 14-08-013, taking approaches specific to their territories. The DRPs come at the intersection of increased DER deployments and the pending replacement of significant amounts of the state’s conventional electric grid. This confluence of changes in generation on the supply and demand sides of customers’ electric meters highlights the growing need to develop accurate and widely accepted valuations for all types of energy resources. Satisfying this need will enable wider DER integration into IOU resource adequacy and long-term procurement planning proceedings; a critical path to realizing the emerging opportunities materializing in the Energy Cloud and a more dynamic, responsive, and decentralized California electric grid.

Integrated Capacity Analysis

One of the most important questions that the DRPs address is the extent to which the grid is able to integrate DER without significant changes. The IOUs developed a common methodology to quantify this capacity, calculating the number of DER that can be installed on a circuit without violating voltage requirements, equipment thermal ratings, protection scheme limits, or safety standards. The results of the analyses have been provided as online maps by Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E).

SCE DER Interconnection Map

SEC DER Interconnection Map

(Source: Southern California Edison)

The CPUC expects these interconnection maps will help direct third-party DER investments toward more beneficial locations. The commission guidance requires the analysis to be performed down to individual circuit segments, and the variable nature of distributed resources necessitates an intraday time scale. This modeling approach represents a significant increase in locational and temporal granularity as compared to existing distribution planning approaches.

Optimal Location Benefit Analysis

In addition to the engineering analysis establishing integration capacity, the DRPs include a study of the financial impacts of all distributed resources. The framework was created jointly by the IOUs and includes guidance from the More Than Smart working group. The framework enhances previous tools to include the locational detail and dynamic timing required to accurately value DER contributions. The value components from the SCE filing are shown in the following table.

SCE Value Components

SCE Value Components

(Source: Southern California Edison)

The DRP locational benefit analysis considers many of the same questions as the CPUC’s Net Energy Metering Successor Tariff proceeding, though it remains to be seen how closely the two proceedings will be coordinated. The DRPs are a critical first step toward integrating DER into electric system planning, and hopefully the beginning of fruitful convergence of utilities, consumers, and third-party provider interests.

 

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