IEEE Power & Energy Magazine - March/April 2022 - 82

exposed to dangerous temperatures.
Although many cities designate cooling
centers for those without air conditioning,
such centers often have
the capacity to serve less than 2% of
a city's population and may not be required
to have backup power supplies.
Community resilience should start by
deploying DERs and microgrids to
maintain power at critical facilities.
In some regions, climate change
will require more fundamental changes
in the structure and operation of
power systems. With the knowledge
that extreme weather will periodically
degrade the system, the grid will need
to evolve into a layered system with
defined relationships between bulk
power, distribution, and circuit-level
segments; fractal zones that can balance
supply and demand in an islanded
mode and participate in the larger grid;
and autonomous operations that combine
distributed control and locational
pricing to balance demand and resource
availability. Developing the capabilities
needed for this smarter, more resilient
system will require the participation of
multiple engineering disciplines, innovation,
and field experiments.
Aligning Utility Regulatory
and Business Models With
Environmental Goals
More than 270 electric companies serving
more than 70% of U.S. consumers
have objectives to rely on 100% clean
energy or to become carbon neutral
by 2050. Reconciling these objectives
with affordable and reliable service
will require a combination of efficient
investment and optimized use of existing
capabilities. Greater flexibility,
including flexible demand that will
reduce peak requirements, is needed
to balance VERs, match demand
and supply in constrained areas, and
improve asset utilization. The efficient
use of smart grid technologies, including
volt-var optimization, power flow
controls, dynamic line ratings, and
topology management, can reduce investment
requirements and help utilities
manage costs. Additionally, the
efficient development and operation of
82
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nonutility DERs can provide important
community-resilience benefits.
Unfortunately, utility regulation seldom
provides incentives for optimizing
existing assets or reducing the need for
future utility investment. Utility profits
are based on earning a return on capital
investment. Regulation should also
encourage actions that advance clean
energy transition and require little or
no utility capital investment.
A few jurisdictions have sought to
align regulation with the transition
to a clean energy future. In 2014, the
U.K.'s Office of Gas and Electric Markets
implemented an innovative form
of incentive regulation that included a
multiyear revenue cap on total expenditures.
At the start of the rate plan,
the regulator fixed the percentages of
revenue recovered in each rate year
(fast
revenue) and capitalized to be
recovered over time (slow revenue).
Thereafter, recovery did not depend
on the nature of the utility's expenditures.
Earnings were no longer tied
to capital investments. The plan also
included funding for innovation projects
and significant outcome-based
incentives. The Office of Gas and
Electric Markets is currently developing
the second round of distribution
rates for 2023-2028.
New York followed some elements of
the U.K. model, including performance
incentives that " both encourage achievement
of new policy objectives and counter
the implicit negative incentives that
the current ratemaking model provides. "
The New York Commission concluded
that outcome-based incentives " will
tend to be the most effective approach "
and should not be confined " to items
under direct control or strong influence
of the utility. " It has approved incentives
for reductions in greenhouse gas
emissions from customer adoption of
electric vehicles and heat pumps; distributed
PVs, wind, and storage; reducing
peak demand below forecast levels; and
improving load factors in constrained areas.
Both the U.K. and New York regulators
gathered extensive input, including
from the engineering community and
other independent experts.
Concluding Thoughts
The transition to a clean energy future
provides opportunities for DERs to
create significant value by
✔ increasing system flexibility,
primarily by shaping and adjusting
net load in response to anticipated
prices
✔ enhancing resilience, initially
for critical facilities, and over
time in an increasingly fractal,
autonomous system that maintains
basic services in islanded
circuits.
Realizing these benefits will require
changes in the regulation, structure,
and operation of the power system.
Creating the systems needed to achieve
an affordable, reliable, resilient, and
environmentally sustainable future
will be one of this century's major engineering
challenges.
For Further Reading
S. Burger, J. Jenkins, S. Huntington,
and I. Pérez-Arriaga, " Why distributed?
A critical review of the tradeoffs
between centralized and decentralized
resources, " IEEE Power Energy Mag.,
vol. 17, no. 2, pp. 16-24, Mar./Apr. 2019,
doi: 10.1109/MPE.2018.2885203. "
Exploring the impacts of extreme
events, natural gas fuel, and other
contingencies on resource adequacy, "
EPRI, Palo Alto, CA, USA, Rep.
3002019300, 2021.
R. Hledik, A. Faruqui, T. Lee, and
J. Higham, The national potential for
load flexibility: Value and market potential
through 2030. The Brattle Group,
New York, NY, USA, 2019. [Online].
Available: https://brattlefiles.blob.core
.windows.net/files/16639_national
_potential_for_load_flexibility_-_final.pdf
R. Tabors, G. Parker, P. Centollela,
and M. Caramanis, " White paper on
developing competitive electricity markets
and pricing structures, " NYSERDA,
Albany, NY, USA, Apr. 20, 2016.
[Online]. Available: https://hepg.
hks.harvard.edu/publications/white
-paper-developing-competitive-electricity
-markets-and-pricing-structures-1
p&e
march/april 2022

https://brattlefiles.blob.core.windows.net/files/16639_national _potential_for_load_flexibility_-_final.pdf https://brattlefiles.blob.core.windows.net/files/16639_national _potential_for_load_flexibility_-_final.pdf https://brattlefiles.blob.core.windows.net/files/16639_national _potential_for_load_flexibility_-_final.pdf http://hepg.hks.harvard.edu/publications/white-paper-developing-competitive-electricity-markets-and-pricing-structures-1 http://hepg.hks.harvard.edu/publications/white-paper-developing-competitive-electricity-markets-and-pricing-structures-1 http://hepg.hks.harvard.edu/publications/white-paper-developing-competitive-electricity-markets-and-pricing-structures-1

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