POWER May 2016 - 29

DISTRIBUTED ENERGY RESOURCES
3. Mismatched distributed energy resource (DER) numbers. These results are
from a late 2015 West Monroe survey of nearly 2,000 customers, 109 utility executives and managers,
and dozens of regulatory commission staff in major U.S. markets. Source: West Monroe
Utility execs who say residential customers are adding
DERs to their systems more than commercial and
industrial users or the utility itself
Utilities that report having DERs on their systems
Utilities that have services, systems, or technologies in
place to support DERs
Residential customers considering installing DERs for
their homes in the next two years
Utility execs who say their organizations plan to make
no or minimal investments to support DERs on their
systems unless mandated to do so
ditional distribution utility service territory.
(For more on microgrid developments, see
" U.S. Microgrid Market Development " in
this issue or at powermag.com.) These and
other utilities are beginning to look at " energy
service " options to diversify and grow
their business models.
New Roles for DERs on the Grid. AES
owns a 2-MW battery facility on the campus
of grid operator PJM Interconnection and the
64-MW Laurel Mountain facility (sited with
a 98-MW wind farm) also in PJM territory
that together are estimated to save customers
in that region $20 million a year, according to
AES. PJM says the battery facility " helps PJM
quickly balance variations in load to regulate
frequency as an alternative to adjusting the
output of fossil-fuel generators; it is capable of
changing its output in less than one second. "
(For more on the amount and location of U.S.
energy storage, see " THE BIG PICTURE:
Leading the Charge " in this issue or online at
powermag.com.)
Some regions and states are already moving
forward to integrate storage and other
DERs more fully into both grids and markets
since the U.S. Supreme Court's January 25
opinion on Federal Energy Regulatory Commission
(FERC) v. Electric Power Supply
Association. It held that FERC Order 745,
which directed wholesale markets to compensate
demand response (DR) providers
at the locational marginal price-the same
price paid to generators-instead of at the locational
marginal price less the retail rate for
electricity, was not arbitrary and capricious.
ISO New England is moving forward
with full integration of DR resources into
that region's wholesale market. It plans to
implement the change by June 2018, which
may make it the first U.S. grid operator to
accomplish this. (For more on how system
operators are responding to DERs, see " How
Are Distributed Energy Resources Affecting
Transmission System Operators? " in this issue
or online at powermag.com.)
May 2016 | POWER
37%
48%
59%
0 10 20 30 40 50 60 70 80 90 100
Percentage
Then, on February 3, the California Independent
System Operator (CAISO) Board of
Governors approved several proposals that
support improved integration of storage and
DER in the wholesale electricity market.
A month earlier, California's three big
investor-owned utilities (SCE, Pacific Gas &
Electric, and San Diego Gas & Electric) announced
contracts with nine companies in
the state's first-ever auction for demand response,
known as its Demand Response Auction
Mechanism. The winners, as Greentech
Media (GTM) reported, include companies
that will provide aggregated behind-the-meter
batteries- " one of the first times batteries and
demand response have competed head to head
to provide grid services. " They also include
companies with the ability to aggregate at least
hundreds of homes with smart thermostats as
well as one that can aggregate at least 1,000
smart EV chargers. " All told, California's
three utilities have contracted for a collective
40+ megawatts of resources, according to the
advice letters filed by each utility on [January
8], " wrote GTM's Jeff St. John.
As St. John explained, starting in August,
each of the winning DR providers " will be
asked to begin responding to day-ahead
markets from state grid operator CAISO, as
well as meeting the terms of each utility's
resource adequacy (RA) requirements. That
will require them to deliver the promised
amount of reliable reduction in energy consumption
from their aggregated resources,
for up to four hours per day and up to three
days in a row, during the state's daily peaks
in grid demand. "
Power Sharing-Ready or Not
In some regions, tensions are growing between
utilities and their customers over
ownership and appropriate compensation
for customer-sited DERs. Many articles
have covered the ongoing battles over net
metering, but one thing is clear: Although,
as noted, solar power currently accounts for
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only 1% of all U.S. generation, and though
utilities own 60% of that sliver, customers
large and small increasingly expect to play
a role in deciding what sort of generation
technology gets used, and where. That genie
is out of the bottle.
In January, consultants at West Monroe
released results of a study of utility customers,
executives and managers, and regulatory
commission chairpersons and staff to assess
attitudes toward DERs (Figure 3). They
found that, although utilities and regulators
see the shift to DERs and greater customer
interest, many utilities and states are not prepared
to accommodate them: " Factors from
technology availability and cost, to public
policy drivers, to pivoting business models,
are contributing to the obstacles slowing
DER penetration across the U.S. "
Utilities and regulators responding to the
West Monroe survey agreed that solar would
have more impact on future grid operations
than EVs (Figure 4).
Though most discussions about customer-sited
DERs assume that the customer or
a third-party installer owns the generation,
some utilities, like Tucson Electric Power
and Arizona Public Service, are getting into
the business of installing and owning PV on
customers' roofs-typically in exchange for
a lower rate (though not as generous as the
retail net metering rate) for a set number of
years. This shift to giving the utility more
control is bad news for third-party installers,
and may reduce the value for consumers,
especially as many utilities are also
considering higher fixed charges and other
29
82%
80%
4. Plug and drive. Although interest in
electric vehicles (EVs) is increasing, adding
more EVs to the grid is expected to have less
of an effect than adding more distributed solar
generation. Courtesy: Gail Reitenbach

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POWER May 2016

Table of Contents for the Digital Edition of POWER May 2016