There is a growing trend among utilities and grid operators to forgo traditional transmission and distribution upgrades in favor of alternative methods to meet system needs. In mid-June, it was reported that Massachusetts lawmakers are considering a bill that would require the consideration of non-wires alternatives (NWAs) before utilities make investments in grid upgrades. In May, Bonneville Power Authority (BPA) announced that it had chosen to take “a new approach to managing congestion on our transmission grid,” according to CEO Elliot Mainzer, rather than build a new $1 billion, 80-mile transmission line along highway I-5 in Oregon. Such examples show a move from tradition toward creative innovation.
Past to Present
Traditionally, when a transmission or distribution system operator had a need to upgrade or replace infrastructure due to aging equipment or increased load demand, it would simply conduct poles and wires projects with which it could earn a regulated rate of return. No thought was given to alternatives in addressing the issue; it was simply seen as replacing a part in the electric grid machine. However, more creative solutions are being explored to address infrastructure needs at a lower cost with higher customer and environmental benefits as grid management and distributed energy resource technology has improved. Utilities now look to increase customer engagement and provide more value-added services, and policy concerns related to cost and the environment have grown.
The Massachusetts bill would require utilities to competitively seek non-wires projects for necessary grid upgrades. It would require utilities, when proposing new infrastructure, to provide a “description of the alternatives to the facility,” including other methods of transmitting or storing energy, other site locations, other sources of electrical power or gas, load management, or local energy resource alternatives.
The BPA decision “reflects a shift for BPA—from the traditional approach of primarily relying on new construction to meet changing transmission needs, to embracing a more flexible, scalable, and economically and operationally efficient approach to managing our transmission system,” according to Mainzer. The preferred solution includes resources like battery storage, flow control devices, and demand response.
No One Solution Is Yet in Play
Several utilities in different state jurisdictions have undertaken NWAs with diverse program design and procurement models. At this early stage in development, there is no standard business model and procurement process for utilities to implement NWAs. Currently, there are four models being considered and tried by utilities. The first is request for proposal, a typical utility procurement model. Auctions are another; borrowed from wholesale market models to drive the lowest cost solutions. Also being considered is procurement with current implementation contractors to keep things simple and quick. The last possibility is internal utility resource deployment if the utility has the required capabilities. There is no one right answer for all situations; each case will depend on the utility’s internal structure and capabilities along with the regulatory construct in which it operates.
NWAs are likely to become more common in US utility capital planning processes and regulatory requirements in many US state jurisdictions. It is an exciting yet anxiety inducing opportunity to change the way utilities address system and customer needs simultaneously. The sooner the industry faces this new reality, the better prepared all parties can be to ensure it succeeds. Navigant Research’s recently published report, Non-Wires Alternatives, discusses the drivers, barriers, business models, and future growth of the market.