Distributed Energy Resource Optimization: Page 3 of 5

LOCATIONAL NET BENEFIT ANALYSIS

Per the final LNBA working group report filed on March 15, 2017 (see Resources), the LNBA “evaluates DERs’ benefits at specific locations” with the ultimate goal of ensuring that “DERs are deployed at optimal locations, times and quantities so that their benefits to the grid are maximized and utility customer costs are reduced.” The starting point in this effort is the CPUC-approved “Cost-Effectiveness Calculator” developed by Energy + Environmental Economics, which the LNBA methodology enhances to include location-specific values and avoided-cost considerations. The LNBA utilizes much of the same data as the ICA, but its intended use is different.

Intent. At times it can appear that IOUs view DERs as a hindrance rather than an asset. Since the LNBA seeks to quantify the benefits of DERs at specific locations, it may change the way IOUs view DERs. The basic idea is that optimally sited DERs can serve a load more directly than a remote power plant and provide other grid-stabilizing services that will in turn negate the need for costly transmission and subtransmission upgrades. The final LNBA report clarifies that the working group’s primary focus “has been on creating a methodology for identifying opportunities to defer investments that are already in utility upgrade plans within a certain time horizon.” In the long term, the LNBA could also provide a compensation framework for DERs deployed in certain areas.

Sahm White, the director of policy and economic analysis at the Clean Coalition, a nonprofit working to accelerate the adoption of a more efficient energy system, notes that the 2017–18 Transmission Plan recently released by the California Independent System Operator canceled $2.6 billion in planned transmission project upgrades. He explains, “The forecasted need for transmission projects was lowered mostly because of higher than forecasted impacts of distributed solar and energy efficiency. Since the $2.6 billion in savings reflects only the initial capital costs of the planned upgrades, the actual savings to ratepayers are much higher after accounting for the high return on equity payments to transmission owners as well as avoided O&M costs.”

The fate of the proposed Gates-Gregg 230 kV transmission line in Fresno, California, is a good example of how distributed solar power can provide avoided-cost benefits. The California Independent System Operator identified the Gates-Gregg 230 kV line as a necessary reliability-driven project in its 2012–13 Transmission Plan and opened the project for competitive solicitations. In October 2014, the Federal Energy Regulatory Commission approved transmission rate incentives for the project. Barely 2 years later, in November 2016, the regional transmission manager for Northern California noted, “There do not appear to be sufficient economic benefits to support the Gates-Greg 230 kV transmission line project.” The cause of this dramatic reversal was the rapid growth of distributed solar capacity in the central San Joaquin Valley. The California Energy Commission has forecast that interconnected solar capacity in the region will grow to more than 260 MW by 2021 (it was just 60 MW in 2016).

Demo B. The Distribution Resource Plan working group mandated the development of a unified locational net benefit methodology consistent across all three IOUs. Per the LNBA working group’s final report, the LNBA framework needs to evaluate “the full range of electric services that result in avoided costs,” including “any and all services associated with distribution grid upgrades,” whether these are identified during the utility distribution planning process, the circuit reliability improvement process or the maintenance process. In other words, the LNBA must consider any positive impacts associated with incremental DER interconnections.

A May 2016 ruling approved the framework for the LNBA and authorized the utilities to use this methodology in Demonstration Project B, which serves as the beta test for the LNBA methodology prior to a wider rollout. The LNBA working group monitored and consulted with the utilities on Demo B, which uses the approved LNBA methodology to evaluate one distribution planning area in each IOU’s service area. The approved LNBA methodology relies on planned utility upgrades to assess the value of DERs to the IOUs in certain areas. While transmission and distribution avoided costs are most sensitive to location, DERs also provide other system-level avoided costs, such as avoided generation capacity, avoided energy and avoided ancillary services. Demo B leverages an existing CPUC-approved DER avoided-cost calculator to estimate the value of these system-level benefits.

As executed in Demo B, the LNBA results appear in a heat map, with distribution circuits highlighted in an easy-to-read color-coded scheme, shown in Figure 3. The colors correspond with avoided-cost metrics that the LNBA working group has defined, shown in Figure 4. When users select individual circuits, an informational pop-up box identifies the specific avoided cost that DER interconnection in that area would offset, and indicates the date on which transmission upgrade projects are scheduled to go into service. The pop-up box also provides a generalized visualization of avoided-cost and upgrade-deferral values that allows IOU planners to quickly compare and prioritize interconnections at different locations.

While the LNBA’s visual approach is similar to the ICA’s, the data serve a different purpose. LNBA results aim to help IOU planning engineers understand the benefits in terms of avoided costs that result from hosting DERs at specific locations in the system. Installers can also utilize these data to prioritize interconnections in areas where utilities see DERs as a benefit to the overall electric grid. On the policy side, policymakers may be able to use LNBA data to develop programs or incentives targeting specific locations through distributed resource planning processes, such as the Community Choice Aggregation program or the Integrated Distributed Energy Resources proceeding for IOUs.

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