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A Pragmatic Approach to Transactive Energy and the Smart Grid

smart gridThe Interstate Renewable Energy Council (IREC) just released a white paper that should be read by every utility regulator and state legislator interested in encouraging renewable generation sources into the grid.  The Integrated Distribution Planning Concept Paper  offers practical suggestions that help accelerate the transformation to a Smart Grid.  It also helps build the foundation for the transactive energy business model.

IREC focuses on regulatory policy innovations to enable deployment of clean energy like solar, particularly at the distribution grid level.  Although this is called a concept paper, it has a realistic focus on interconnection practices and encourages a nation-wide approach to accommodate more renewables.  Interconnection from the distribution grid perspective refers to the utility processes that ensure that connection of distributed energy resources (DER) like solar occur in a timely manner with safe, reliable, and high quality electricity flow.

The paper focuses on solar interconnections into the grid, but there’s no reason why these same practices and policies shouldn’t be adopted for other distributed energy resources (DER) like small turbine wind and all forms of energy storage that can interconnect to the distribution grid.   The researchers reviewed interconnection processes in California, Hawaii, Massachusetts, and PEPCO, a utility with a footprint in New Jersey, Delaware, and Maryland.  These entities have demonstrated leadership in policies to address the explosive growth of DER interconnection requests.

Grid-connected solar photo voltaic capacity jumped 4000% from 2005 to 2012, according to IREC solar research.  Imagine how the work volume in utilities’ planning departments has similarly increased, and as the numbers of applications have grown, so have the waiting times.  That’s a problem for DER owners who want to enjoy the benefits of a solar investment as soon as possible.  However, the utilities have to make sure that anything that interconnects to the grid doesn’t blow it up.

Interconnection requests might require significant upgrades of grid equipment to ensure that the electricity delivered is safe, reliable and has good power quality (meaning no voltage sags or surges).  Utility planners have to consider the local circuit design and the type, size and location of the DER asset on that circuit, and depending on the answer, it could make a project’s ROI move back a few years.  Since distribution grids were designed for a one-way power flow from generators to consumers, not localized generation to supplement/substitute/sell, as envisioned in transactive energy models, there’s a good chance that some grid investment is required.

Some of the creative policies identified in the paper include creating new utility plans that incorporate DER  – at least generation assets – into future grid modernization initiatives.  California’s policy requires utilities to consider how generation assets in the distribution grid can “defer transformer and transmission line upgrades, extend equipment maintenance intervals, reduce electrical line, losses, and improve distribution system reliability, all with cost savings to utilities.” That’s hugely influential thought leadership because it considers that assets that are not owned by a utility can have a quantifiable value to the utility, and therefore create the foundation for a transactive energy market.

The paper’s approach, called Integrated Distribution Planning (IDP) determines the status (particularly capacity) of the existing distribution equipment and identifies potential upgrades that may be needed to accommodate anticipated DG growth in a five step process.  Most importantly, this information should be readily available to anyone interested in developing a renewable project, so realistic assumptions can be made about any grid upgrade costs and timelines.

Perhaps some day utilities will identify distribution grid points where independently-owned DER assets are welcomed to inject resiliency into the local grid or help avoid an expensive upgrade.  Potential DER asset owners  – commercial and residential – could be financially incented to take on projects with reduced risks because utilities could think about these assets in newly useful ways.  The DER assets under consideration here could include energy storage, not just generation.  That’s a significant step in the right direction to build an electricity value chain based on transactive energy concepts.

Christine Hertzog's picture

Thank Christine for the Post!

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