IEEE Power & Energy Magazine - March/April 2022 - 42

By investigating the Illinois example in detail and describing a
consistent theory-driven approach, this analysis elaborates on
key considerations for DER valuation across the industry.
" node " in the system (i.e., at each location where the
load or DER can be connected).
✔ Capture the value of DERs in avoiding the potential
cost of future grid investments to meet forecasted capacity
needs.
✔ Express the LMV as a set of geospatial and temporal
values.
✔ Account for distribution losses, including transformer
and line losses.
✔ Provide valuations of generic DERs, which could be
either a single technology or multiple technologies
combined, for example, solar and storage.
We need to know more than the grid location to understand
how a given injection of real or reactive power from a
DER will affect a circuit constraint. Often, more than one
branch of a circuit will be overloaded to varying degrees
and at different times. When nodal voltages are high or low,
multiple nearby nodes are likely to exhibit related voltage
deviations to differing degrees. Depending upon its location,
a DER may impact all overloaded branches equally
or only one, or it might affect multiple branches differently.
Similarly, it may have a greater or lesser impact on different
nodes with voltage issues.
The comparison with a conventional grid investment
adds more complexity to the framework. Typically, a conventional
investment is a single project intended to address
all forecasted problems on a circuit, station, or network
component. Such an investment may involve upgrades,
multiple pieces of distribution equipment, and the cost of
installing them. There is a substantial challenge in attributing
the aggregate characteristics of such an upgrade to the
specific nodes where DERs can provide services to avoid
upgrade costs.
The complexities associated with this level of analysis
only increase as realistic networks and circuits are considered.
Voltage problems and the effect of reactive power add
still more complexity.
Key Concepts in the Value
of DERs Framework
The value of DERs (VDER) framework has two key concepts:
1) Allocate the costs of traditional investments to locations
on the system according to whether they exhibit
forecast limit (current and voltage) violations triggering
the investment.
2) Assign a value to DER real and reactive power according
to the sensitivity of the forecasted violations
42
ieee power & energy magazine
to nodal DER kilowatt and kilovar injections and proportional
to the allocated costs of those violations.
The first concept is implemented by allocating the project
cost to each overloaded piece of equipment according
to the extent of that equipment's loading and voltage violation,
calculated on an hourly basis. No costs are allocated
to equipment with no forecasted violations, even if some
project costs are spent on them. Costs are allocated only in
those hours when violations are forecast for a specific piece
of equipment. This process results in an " allocated cost of
capacity " that varies by system component and time (e.g.,
the hour of the year).
The second concept is implemented by calculating the
" treatment effectiveness " for each violation, given a DER
injecting real or reactive power at a specific location and
time. The treatment effectiveness is applied as a discount
against the allocated cost of capacity to determine the local
grid benefit that the DER provides.
In this way, we define the LMV as the incremental value
of the DER on a kilowatt and kilovar basis at a given location
(node) given that specific DER's ability to reduce overloads,
over- or undervoltages, and so on. This is very similar
to the " locational marginal price " concept in markets and
can be derived in a similar way as the shadow cost of a
constraint. The key difference is that, instead of being an
energy-clearing price, it is the marginal effect of the cost
of capacity.
An ideal methodology would be technology agnostic.
In other words, it would treat all forms of DERs equally
depending strictly on their contributions to the grid. We can
extend the VDER methodology to determine the values of
different DER technologies by running LMV calculations
specific to them.
The LMV calculated for a generic DER is the maximum
value that a DER can realize, assuming there are no temporal
or operational restrictions for the DER to inject or draw real
and reactive power. However, this is not the case for some
DER technologies for which the real power output is limited
by their energy source, such as wind and solar resources,
or battery storage, where there are constraints due to the
size of the energy storage system. Therefore, to accurately
capture the value of these resources, we need to understand
how grid needs are aligned with the injection/draw capability
of a specific resource both temporally and spatially. For
example, a solar resource on a feeder that requires thermal
overload relief in the evening has minimal to no value for
the grid, and this should be reflected in its LMV. However,
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