The modern electricity grid is a complex system of systems, operating in a highly politicized monopolistic environment, that is bounded by the technical potential and economic realities of ‘steel-in-the-ground,’ and balanced through a combination of regulated market operations and unilateral dispatch towards planning constraints.
Sound complicated?!? Like many in the Utility world, I’ve struggled at times to explain “what I do” to industry outsiders, or even to colleagues working in a different utility arena. A simple analogy, that explains without trivializing, can help establish a common framework to discuss the challenges (and opportunities!) currently facing an industry in transition.
There have been a number of fantastic posts[1] on Energy Central discussing the evaluation of alternative resources (i.e. non-central plant) within the traditional utility resource planning process. As fitting for an evolving multi-stakeholder process, these conversations reflect a wide range of perspectives, from policy, to planning, sustainability, and system operations.
I’ve shared my perspective on one potential impact of DERs on the grid, but feel it would be helpful now to take a step back, and share a framework that I’ve used to facilitate multi-discipline discussions of the challenges presented by the modern grid.
With apologies for my limited artistic capabilities:
Imagine the electric grid as a bucket of water. Water is constantly leaking from this bucket, and the role of a utility is to balance the outflow using a combination of supply side (i.e. generation, or water flowing in) and demand side (i.e. demand response and DERs) assets. Generation is water flowing into the bucket, while consumption is water flowing out. Water can flow into the bucket from a variety of sources, and flows out through an assortment of differently sized holes (representing the variances in customer consumption).
Philosophically, the right of a utility to exist as a natural monopoly is based upon the ability to reliably and cost effectively maintain the level of water within the bucket. This challenge is complicated by the physical limitations of the existing system. To visualize, imagine a line drawn around the circumference of this bucket.
- If the water level is not maintained within a few millimeters of this line (i.e. operational range), customers will be impacted. As the water level falls below the range, customers begin to lose power; if the water level exceeds the range, then customer (and utility) devices may be damaged.
- While the rate of leakage can be forecasted, outflow at any given moment in time is highly variable, due to variances in customer behavior in response to economic and environmental conditions; the size of each hole contracts and expands over the course of each day.
Within this analogy:
- Central generation plants are hoses feeding into the bucket. Central generation is the easiest way for utilities to maintain the overall water level (e.g. base load), with large, predictable, and easily controllable flows. However, just as it takes time for water to flow through a hose, each type of central generation is limited by a ramp rate; and not all technologies can respond to instantaneous changes in demand. Additionally, just as a faucet is not always accessible, central plants tend to be located some distance away from demand.
- Utility Scale Renewables are funnels that catch and direct naturally occurring water into the bucket, and are illustrated with dotted lines to represent the intermittency of renewable resources. Different renewable asset types present different patterns of intermittency; the flow through these funnels is weather dependent and, without energy storage, the funnel is scalable, but uncontrollable beyond a binary on/off.
The lighter blue of the renewable energy flow indicates that each individual renewable asset is smaller than the typical central plant; while significant in aggregate, renewable assets are dispersed throughout the grid and are variable based upon the microclimate of the asset location. Balancing the flow from these assets can require granular weather modeling. - Bulk Operations. In a traditional vertically integrated utility, a single entity is responsible for maintaining the balance of the grid; the bucket, hoses, and everything depicted in the image is owned and operated by a single company. However, balancing at the bulk power level in the American grid, after PURPA, EPACT92, and FERC Orders 888 and 2000, is often a multi-stakeholder process.
Imagine that the bucket, hoses, funnels, and (potentially) the ultimate retail customer relationship are all owned and operated by separate entities that are uniquely driven to optimize their own business. Water from each hose or funnel can potentially serve multiple buckets, and each hose or funnel supplies water at a different price point. In this world, there needs to be signals to coordinate the dispatch of each asset that serves the bucket. Without getting too deep into the weeds of RTO/ISO, LBA, and Transmission operations, these signals can be can be market (e.g. auction or exchange) or technical in nature; in their totality, these Bulk Power signals maintain the overall level of water, while juggling Regional, State, and corporate governance rules. - Distribution Operations. Frankly, the bucket analogy begins to fray at the Distribution level. However, for the sake of maintaining the visualization, imagine that the bucket is actually composed of thousands of smaller interconnected buckets (i.e. distribution feeders). Bulk Power Operations maintains the overall level of the larger bucket, while the holes that represent customer consumption are connected to one or more of these smaller buckets.
Just as Bulk Power Operations balance the supply side, Distribution Operations transform and deliver power to the end customer. The function of a transformer can be visualized by the difference between the thick lines feeding the supply side and the smaller arrows that represent water flowing to Retail customers; just as it would be dangerous to drink from a fire hose, voltage needs to be “stepped-down” for safe consumption.
Historically, power has flowed in one direction, and Distribution Operations was primarily an exercise in planning, maintenance, and workforce management; in other words, Distribution designs the system and works to ensure that the holes in the bucket are never clogged.
As customers continue to install Distributed Energy Resources (DERs)[2], represented here with bidirectional arrows, Distribution is increasingly challenged to not only manage, but operate resources on the “grid edge.”
DERs can be visualized as straws where water can flow both to the customer or back into the bucket; Demand Response (which I consider a subcategory within DER[3]) is the ability to temporarily plug a hole. Just as there is an optimal range for the overall level of water in the bucket, each “distribution bucket” also has limitations based upon utility and customer equipment that has been installed on that line. The implication here is that a DER asset can present either a net cost or a net benefit to the system based upon the characteristics and capabilities of the local grid (e.g. distribution bucket). This is particularly challenging given that most DER installations to date have occurred outside of the traditional utility planning process.
In many ways, DERs represent a grassroots evolution of the Bulk Power system. However, whereas the dance between utilities, IPPs, transmission owners, and system operators has been refined over the last few decades, we are just now beginning to grapple with the unique challenges of “balancing the ‘D’ side.” The standards, systems, and markets necessary to “co-optimize” customer, utility, and bulk values have yet to be defined, much less tested and refined.
How might the grid continue to evolve? (Stay Tuned!)
This analogy has served me well over the last few years, but my attempt to simply describe the ‘largest and most complex manmade machine in history’ has already rambled on for far longer than intended.
Regarding the shape of the future grid, the aggregation and operation of DERs remains a nascent space that I believe is likely to become increasingly significant in coming years. I intend to share my thoughts in future posts, but Reader what do you think?
[1] The commentary in Doug Houseman’s “When is Capacity not Capacity?” is particularly insightful.
[2] Recognizing that DERs represent a broad range of assets with distinct characteristics, for the purposes of this simplified analogy, DERs are broadly defined as a single asset category.
[3] Building upon SEPA and PLMA’s “DER 2.0” framework, I’ve spoken previously about the evolution of DSM into DER….a topic to be addressed in future posts!