Navigant Research Blog

The iDER Playbook for Utilities: A Firsthand Report from the EEI Strategic Issues Roundtable

— November 14, 2016

SmartCityMichael Rutkowski and Jay Paidipati coauthored this post.

Navigant’s new integrated distributed energy resources (iDER) maturity model provides a valuable tool for immediate application to address today’s emerging industry needs. Using the tool, utility planners can evaluate their current state of readiness for DER integration and value capture, as well as provide guidance for future investments. We recently had the opportunity to apply the iDER maturity model during a highly interactive session with a senior utility audience at the Edison Electric Institute (EEI) Strategic Issues Roundtable, and the findings tell a compelling story.

After sharing some of Navigant’s latest insights on DER and our industry tipping points, we opened the dialogue to focus on the five dimensions of the iDER maturity model—Customers & Programs, Regulation & Policy, Business Models, Technology, and Operations. After outlining the context of each dimension, we described the characteristics of a utility at the highest maturity rating—Level 5—and described what such a utility would look like in terms of strategic focus, operational capability, and market structure.

Scoring DER Readiness and Importance

We prepared the audience, a group of about 80 utility executives, for deeper discussion by asking an initial strategic question for each dimension: How important is it for your utility to be mature today and 5 years from now? Respondents gave low and high scores for each dimension, and after a brief discussion, we recorded an average score across the group. The scores varied for good reasons and were dependent on the role of each utility executive, the current adoption rate for DER in their jurisdictions, and whether or not their companies were already offering DER programs and solutions in regulated or non-regulated business units.

We then asked a second question, again for each dimension: How mature is your utility today, and how mature should it be in 5 years? This resulted in a rich dialogue for each score, and afterwards we tallied average results accordingly. For example, some utilities have an active DER business unit already focused on customer product and service offerings. Naturally, their scores suggested greater importance regarding readiness and importance for Customers & Programs.

The results often reflected wide variations across different utilities, as well as divergence from different stakeholders within the same utility. Summary results are outlined in the two tables that follow.

Readiness

Readiness

 Importance

Importance

 Source: Navigant analysis

Operations (e.g., organization and processes) scored the highest in terms of importance to utilities today and 5 years from now for a fully mature iDER company. However, this dimension had one of the lowest readiness scores from the group, setting it up as an area with considerable gaps to fill over the next 5 years. Some of the reasons cited for this lag include the lack of a robust telecommunications network for high-speed connectivity to DER devices on the far edges of the grid, as well as limited ability to handle high volumes of data and provide sufficient analytics in the middle and back office. There was also mention of softer elements, such as the right cultural mindset and ability to hire talent that fully understands and embraces new digital applications and advanced customer analytics.

Furthermore, the utilities generally felt that their Business Models were not ready today but would be the most important area for readiness 5 years from now, suggesting that considerable work needs to be done along this dimension. On another level, the utilities felt that Regulation & Policy was highly important for iDER maturity and that they were further along today in this dimension. Some of the representatives in the room were from states where these regulatory constructs are well underway, including New York (i.e., REV proceedings). Others were in areas of the Midwest, where traditional, vertically integrated market structures are not expected to change in the near future.

Finally, we noticed variations in scores from representatives within the same utility. This implies that maturity model scoring needs to take place across multiple functions within a utility in order to inform an overall strategic approach. Navigant is applying this model with a number of initial utilities and will be publishing a white paper showing where the industry currently is and benchmarking against Navigant’s vision of a fully DER-integrated utility. Through this effort, we will present an industrywide view on the state of utility readiness for DER integration, as well as the top priority areas for utilities in readying their organizations to serve as a useful basis for utility strategy, planning, and resource allocation efforts as this industry transformation takes place.

 

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 Resources (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)

 

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