IEEE Power & Energy Magazine - March/April 2022 - 49

While NWAs are nascent in the power and utility industry,
there are many pilots underway, and some jurisdictions,
such as New York, have begun larger-scale implementation.
Figure 1(b), new load growth drives the need for supplementary
infrastructure, which has been addressed through the
traditional solution of adding centralized generating capacity
and network equipment. In Figure 1(c), however, a DER
is used as an alternative. DERs can serve as substitutes for
centralized resources and T&D infrastructure, and when
employed in this integrated manner, they may constitute a
more cost-effective solution.
There are several drivers behind the economics of using
DERs as NWAs. First, DERs can be employed in numerous
ways, meaning that only a portion of their cost needs
to be compensated for when they provide services for NWA
purposes. For example, another major source of revenue
for DER participants comes from providing services to the
wholesale market at the transmission level. Second, DERs
have a smaller, targeted, and continuous installation in comparison
to the large and " lumpy " nature of T&D infrastructure
investment, which is an economic driver for using
them as NWAs. Typically, new T&D infrastructure is lightly
loaded in the years directly following its construction, which
means that the cost for a mostly unused asset is recovered
from the end consumer. On the other hand, DERs, being
modular, can be paid for through time as needed and in step
with when load growth materializes and more installations
need to be built. Third, while hard to quantify, when DERs
are used as NWAs, they provide " option value " associated
with the uncertainty in planning assumptions and the flexibility
of making decisions in the future. The ability of a
DSO to make smaller, staggered, and shorter-term payments
to DERs (relative to traditional network infrastructure) provides
value by keeping options open, permitting planners to
observe whether expected load growth materializes before
150-MW
GS
150-MW
GS
150-MW
TS Limit
TD
150-MW
Load
(a)
10-MW
GS
TD
(b)
160-MW
Load
(c)
figure 1. DERs can be used as alternatives to traditional infrastructure. (a) An existing load, with the GS and transformer
station (TS) at their limits. (b) Growth met with new TS and GS capacity. (c) Growth met with new DER capacity.
TD: transmission-distribution.
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ieee power & energy magazine
49
making a significant long-term investment. This approach
also enables the DSO to monitor how technology cost trends
unfold, such as the price of battery storage during the next
several years. Finally, DERs contribute to the reduction of
system losses, which can be material at the lower voltage
levels of the distribution network and especially during
peak demand. As a result, energy costs decline, as does the
resource capacity that is needed through time. In short, traditional
centralized solutions to meet electricity needs enjoy
economies of scale that are not available to DERs. However,
DERs have added locational value and an advantage in their
smaller and modular installation, which may outweigh their
lack of economies of scale, especially as their cost and capability
continue to improve.
The Demonstration Project
Using DERs as NWAs remains an emerging concept and
practice in the power and utility industry. There is limited
real-life experience with relying on DERs to balance
demand and supply in a very localized area as part of an
NWA project. The demonstration was developed to test auctions
as a means for a DSO to manage DERs as NWAs, with
a particular focus on reliability considerations and coordination
with wholesale markets. When initiating the demonstration,
in 2019, white papers were developed as groundwork.
Subsequently, the rules and contracts for participating
were drafted. These documents spell out the requirements
and processes for participants, including how auctions are
cleared, prices are established, and payments are calculated
and settled. The design concepts and rules and contract documents
were presented in draft form to potential participants
and broader Ontario industry stakeholders to solicit feedback.
150-MW
GS
150-MW
TS Limit
TD
160-MW
Load
10-MW
DER

IEEE Power & Energy Magazine - March/April 2022

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