Navigant Research Blog

Integrated DER Maturity Assessment, Part II of III

— July 18, 2016

Energy CloudAs introduced in the first post in this series, Navigant has created the integrated distributed energy resource (iDER) Maturity Model for electric utilities in an effort to help utilities understand and appropriately adopt DER. DER adoption is one of the most disruptive factors affecting the grid today and into the future. Many North American utilities are unprepared for the dynamic impact these resources will have on current grid operations. For utilities to take control of their future, an iDER strategy and approach is critical. The iDER Maturity Model provides the benchmark for a utility to measure their current state, a guideline for what a mature utility looks like, and a starting point for what the next steps should be.

Navigant’s multifaceted iDER Maturity Model benchmarks a utility against five maturity levels across the following major dimensions:

  • Leadership
  • Regulation and Policy
  • Business Models
  • Customer
  • Operations
  • Technology

For each category, Navigant also defined a one to five “maturity level” scale, as shown in the table below, ranging from Level 1: Inactive DER, to Level 5: Fully Mature iDER Business. By ranking a utility’s maturity across each dimension, Navigant has created a matrix that utilities can leverage to understand and map out a profitable path to the future. To illustrate the maturity levels, two utility profiles describe how organizational initiatives can be benchmarked against our iDER Maturity Model and how the matrix can be used to identify next steps.

iDER Maturity Level Descriptions

iDER Descriptions

(Source: Navigant) 

iDER Maturity Model Benchmarking Categories

iDER Benchmarking

(Source: Navigant)

Example Utility A: Business as Usual Market (Maturity Level 1 to 2)

A utility in a state representative of business as usual (BAU) stayed the course on investing in traditional generation assets and was reluctant to even pursue advanced metering infrastructure (AMI) investments. However, disappointing load growth and increased federal regulations targeting fossil generation of late are undermining long-standing assumptions, causing management to reevaluate priorities. This includes surveying DER opportunities and contemplating shifting investments toward assets and services that would support DER. The question remains of whether these efforts will be too little too late as the utility’s customers increasingly become targets for third-party providers of energy services.

This utility is behind the curve and should use the iDER Maturity Model to identify the starting points for piloting DER initiatives. In addition to planning investments in AMI, the utility needs to begin redesigning and overbuilding targeted portions of its distribution grid, as well as installing control and safety schemes to allow for the two-way power flows seen with high DER penetration. For customers, the utility also needs to begin development of a streamlined process for integrating rooftop solar and electric vehicle (EV) charging stations, and to pilot mutually beneficial customer DER programs. On the operations side, the utility leadership needs to develop IT/OT tools and processes for its operators to manage DER and to help bring DER from the fringe into the mainstream within its organization.

Example Utility B: Grid Reform Market (Maturity Level 3 to 4)

A utility that operates in what could be characterized as a grid reform state (i.e., under aggressive renewable and distributed policies) has taken a decidedly Energy Cloud mindset. Anticipating a more networked grid, this utility has begun developing new services—integrating EV charging with demand response (DR), offering bring your own device programs to customers, etc.—to serve an integrated, plug-and-play electricity system that it believes will enhance the value of individual assets across the network. With the goal of shifting away from the traditional ratepayer model, this utility is taking steps to provide customers maximum flexibility and choice in how they use energy in order to maximize value across the network. To accomplish this, this utility is proactively building collaborative partnerships with technology providers.

This utility has a leg up on many utilities, but can still leverage the iDER Maturity Model to clarify its vision of the future and identify next steps. The utility should focus on expanding the membership to its DER programs through improved customer outreach, possibly implementing a new customer portal, and offering new DER programs in transactive energy, rapid DR response, and targeted residential programs.  On the operations and technology sides, it will be very important to integrate all DER management systems with other IT/OT systems, such as customer information systems (CIS), advanced distribution management systems (ADMS), and meter data management systems (MDMS), to remove organizational and operations silos. As DER penetration grows, operators need to see DER as just one more lever they can pull in managing the grid, just like dispatching additional generation. Finally, as IT/OT systems become more interconnected and complex, the communications network limitations can often become a hindrance—the utility should utilize grid edge intelligence as possible and ensure network security and latency issues are resolved.

 

Integrated DER Maturity Assessment, Part I of III

— July 11, 2016

AnalyticsWhy Prepare for Distributed Energy Resources?

Navigant’s forecasts show that distributed energy resources (DER) capacity is expected to grow almost 3 times faster than new central station generation over the next 5 years. Total DER capacity is expected to more than double by 2023. Meanwhile, North American utilities are at various stages of integrating distributed generation, demand response, energy efficiency, electric vehicles, microgrids, and energy storage. Many are unprepared for the dynamic impact these resources will have on current grid operations and their overall operations.

For utilities to take control of their future, an integrated DER (iDER) strategy and approach is critical to manage their transition to the Energy Cloud, a platform of highly networked distributed energy, two-way power flows, and intelligent grid architecture. To help our clients navigate this changing landscape, Navigant has developed the Energy Cloud Playbook. The first part of the playbook is the iDER Maturity Model, which helps utilities assess their own iDER preparedness.

Navigant’s iDER Maturity Model

Navigant’s multifaceted iDER Maturity Model allows utilities to assess their progress toward DER integration. In this first in our series of posts on the Maturity Model, we provide a blueprint for what a fully integrated DER system looks like. The blueprint presented here would score the highest ranking of 5 in our Maturity Model, and then we define five levels of iDER maturity based on that blueprint. Future posts will establish the criteria for evaluating the remaining four maturity levels in more detail.

What Does a Fully Integrated DER System Look Like?

Utilities at advanced iDER maturity levels will have addressed issues arising from high DER penetration such as intermittency, reverse energy flows, and power quality issues. They are using information and operations technology (IT/OT) in coordination and have aligned their business processes, operations, and organization appropriately. DER management systems (DERMSs) and advanced distribution management systems (ADMSs) are managing DER output at the feeder and substation level. At this advanced DER maturity level, utilities have augmented their role as a supplier of electricity and have assumed the role of a platform provider enabling prosumers to market their DER assets in an open market. This role is not only critical to fully maximize the benefits of DER, but will be key to providing future value to the utilities’ customers and shareholders.

The graphic below summarizes Navigant’s blueprint for a fully integrated DER system. It shows utilities, customers, third parties, market operators, and regulators working in conjunction with iDER processes for full integration across operations, energy markets, and IRP. These processes are supported by critical information, operations, and communications technology (IOCT) systems to ensure active, real-time, and large-scale iDER management. In such a system, evolving energy economics and increasing customer choice, supported by strong policies and mandates, drive DER penetration. Third-party aggregators and customers are incentivized to participate in the local energy markers, supported by transactive energy platforms and systems.

Blueprint of a Fully Integrated DER System

iDER Figure 1

(Source: Navigant)

iDER Maturity Levels

This blueprint for an advanced and fully functioning iDER system would score a 5 in Navigant’s iDER Maturity Model. Working backwards from there, Navigant has a multifaceted criteria model that benchmarks a utility at one of the five maturity levels, as laid out in the table below. What are the criteria for defining these levels of iDER maturity? What are some examples of utilities at each of these maturity levels? We will answer these questions in the next post in this blog series.

Proposed iDER Maturity Levels

iDER Table 1

(Source: Navigant)

 

Tesla and SolarCity: Is Financing a Bundled Clean Energy and Transportation Service on the Horizon?

— July 8, 2016

Electric Vehicle 2Tesla’s recent announcement that it intends to acquire SolarCity was an unprecedented Energy Cloud trifecta. It’s not easy for a single release by one company to stir the interests of three separate sets of passionate stakeholders tracking transformative clean energy and transportation technologies and business models. And rightly so, as the potential for Tesla to pair vehicle electrification with solar and advanced battery energy storage as integrated distributed energy resources (DER) is an eye-opener to say the least.

Tesla’s vehicle and battery manufacturing businesses are very different than SolarCity’s solar business, both technically and revenue model-wise. It will likely be a challenge for the company to explain these separate businesses to its investors and manage expectations. One could argue that Tesla might be better off focusing 100% of its efforts on building out the Model 3 and Nevada Gigafactory battery manufacturing capacities in the short term.

The DER Standpoint

But from a DER technical standpoint, it’s intriguing to consider the possibility of what the new Tesla could do. For example, the new Tesla could couple the energy capacity of plug-in electric vehicle (PEV) batteries with solar, PEV charging infrastructure, and virtual power plant (VPP) software all at the home of a single customer. It’s not hard to envision how this type of arrangement could serve both as DER and an overnight revenue source to utilities. The new Tesla indicated that it plans to continue to partner with utilities, which are increasingly interested in aggregated behind-the-meter demand response capacity. And SolarCity’s recent efforts to partner with utilities in New York on a new program to eliminate net metering along with the company’s recent hiring of former Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff as Chief Policy Officer demonstrates a willingness to pursue such new and innovative business models.

Going to Market

But how might the new Tesla take this sort of concept to market? A key aspect of technology innovation in renewable energy has been financing innovation. The development of power purchase agreement financing has been instrumental in the growth of solar PV. Navigant Research believes that financing innovation will also drive energy storage markets over time, as well.

But the new Tesla could be uniquely positioned to apply financing innovation to an integrated solar battery PEV-based VPP while also providing consumers with the use of the vehicle. Imagine a homeowner entering into a 15-year financing agreement for solar, energy storage, and use of a Tesla Model 3 under a single contract. In this scenario, the new Tesla/utility partner manages the VPP asset while the customer gets access to, but not ownership of, a Tesla Model 3. If the new Tesla/utility partner decides to extensively use a Model 3 battery as part of the VPP, then the homeowners get a new Tesla battery. In this scenario, the long-term assumptions on VPP revenue, replacement batteries, or even new vehicles and solar storage benefits are bundled under one customer-facing agreement.

This type of integrated financing innovation might sound challenging. But I can guarantee that a trifecta (or more) of interested Navigant Research teams will be closely tracking if and how the new Tesla comes together.

 

Are We Approaching the Energy Singularity? Counter Point

— June 27, 2016

Cloud ComputingThe energy singularity sounds awesome, but bring your doubts. Who doesn’t appreciate the thought and effort it takes to make scientific breakthroughs? Exploring possibilities, creating new scenarios, and imagining the unimaginable. Ray Kurzweil’s singularity idea is one such notion, proposing “an era in which our intelligence will become increasingly non-biological and trillions of times more powerful than it is today—the dawning of a new civilization that will enable us to transcend our biological limitations and amplify our creativity.” Artificial intelligence (AI) taking over at an explosive rate—it sounds amazing. My colleague Mackinnon Lawrence suggests this breakthrough is possible for the energy sector within the next couple decades. Maybe.

A Different Grid of Tomorrow

To be sure, the future grid will differ from today’s grid. It might not even be a grid as we know it in 2045, the estimated year of Kurzweil’s singularity vision. Furthermore, changes are already taking place quickly, with the decline of coal-powered plants, the rise of solar power, and the promise of affordable storage technologies, to name a few. Navigant’s Energy Cloud vision already foresees an energy world full of profound changes and decentralized structures, a system more dynamic and responsive than today’s.

It is tantalizing to imagine the future power grid (or ecosystem) with blazing efficiency, unparalleled reliability, and widespread availability. My colleague cites the rapid advancements around self-driving cars and Google processing billions of search queries a day to enable deeper understanding of human thought as examples of the pace of change from machine learning. Machines are getting smarter, but there are also setbacks, particularly where grid assets, old and new, have failed, including:

  • The Fukushima Daiichi nuclear disaster in 2011
  • The San Bruno pipeline explosion in 2010
  • The Ivanpah solar power facility fire in May of this year

Even Google’s vaunted driverless car has collided with a bus. These negative events do not mean the problems can’t be overcome with powerful machines. Perhaps future super-intelligent systems will prevent or reduce the chances of such calamities. But these events do illustrate the downside of technology and the limits of machines.

In the energy sector, there is also the human constraint of regulation and business models. Even if technology breakthroughs take place, will regulators and politicians hold to the past and not allow transformations to emerge? Some are open to change. In California and New York, regulators and politicians have shown a willingness to embrace new ways of thinking about energy and new models. But others are likely to be more stubborn. Nevada regulators approved a price hike for solar customers, and SolarCity and Sunrun promptly pulled their operations from the state. In Montana and Wyoming, coal is still a powerful force for economic and political reasons.

Skepticism Abound

Among leading technology thinkers, respected names have trouble accepting Kurzweil’s future vision. Gordon Moore, cofounder of Intel and namesake of Moore’s Law, says the singularity is not likely to happen, at least not for a long time. Jeff Hawkins, cofounder of Numenta, a company developing a computer memory system based on the human neocortex and founder of Palm and Handspring, expects we will build machines that are more intelligent than humans, but there will be no singularity or runaway growth in intelligence. And Microsoft cofounder Paul Allen, who has devoted resources to his Allen Institute of Brain Science, has expressed serious doubts about the singularity occurring.

Count me among these skeptics. Predictions about breakthroughs often don’t pan out, or take way longer than expected. We were supposed to be commuting in flying cars, living in underwater cities, and colonizing other planets by now. We can imagine such things, but the future is difficult to see clearly. Some of what is imagined for the grid and energy is quite possible—I’m all for the wonderful magic, positive advancements, and geeky possibilities. Kurzweil is someone I respect. But the future also holds potential darkness, shadows, and unintended consequences. Man has a propensity to screw things up (wars), and his machines break down (think Space Shuttle Challenger or Chernobyl). Perhaps I’m stuck in a 2016 mindset, but my bet is the singularity moment is a long way off, if even possible. Moreover, the Kurzweil idea is too Panglossian. Machines will definitely grow smarter and the energy sector will benefit. But the process will be bumpy, unpredictable, and we will see a singular failure, or two, or three.

 

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