Electricity system optimization means making the most effective use of a portfolio of electricity resources to maximize top public policy goals, delivering a system that is affordable, reliable, and clean. This presentation highlights technologies that can help optimize the grid, barriers to system optimization (an how to overcome them), and what State Energy Office can do to address and overcome these barriers.
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WHAT IS SYSTEM OPTIMIZATION?
Electricity system optimization means
making the most effective use of a
portfolio of electricity resources to
maximize top public policy goals…
…delivering a system that is:
Reliable
Affordable
Clean
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WHAT ARE OUR OPTIONS TO OPTIMIZE?
I. What technologies can help optimize the grid?
II. What are the barriers to system optimization and how can we overcome them?
III. What can State Energy Offices do to address and overcome these barriers?
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SYSTEM OPTIMIZATION IN PRACTICE
DEALING WITH VARIABILITY
Infrastructure
Demand response
Load-shaping EE
Encourage West-
facing solar
CAISO
“Flatten the head’
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SYSTEM OPTIMIZATION IN PRACTICE
DEALING WITH VARIABILITY
Infrastructure
Demand response
Load-shaping EE
Encourage West-
facing solar
Fast-ramping natural
gas
Storage technologies
Smart EV Charging
CAISO
“Shrink the belly”
…SYSTEM OPTIMIZATION
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WE CAN TEACH THE DUCK TO FLY!!
Jim Lazar, Regulatory Assistance Project, “Teaching the Duck to Fly,” 2014
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II. What are the barriers to system optimization,
and how can we overcome them?
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BARRIERS TO SYSTEM OPTIMIZATION
CURRENT
REGULATORY
MODELS
POWER
MARKET
DESIGNS
POLICIES
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BARRIERS TO SYSTEM OPTIMIZATION
Example: Cost of Service Regulation
Revenue =
Operating Costs + (Capital Spend)*(ROR)
As utility
investment
increases . . .
Revenue
increases
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FROM: “Did we pay the right amount for
what we got?”
TO: “Are we paying for what we want?”
Utility and
Regulatory Models
for the Modern Era
by Ron Lehr
Change the central question…
OVERCOMING BARRIERS
PERFORMANCE-BASED REGULATION
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Regulators
Set quantitative
performance goals
Establish reward &
penalty structure
Utilities
Meet goals
Receive rewards
and/or penalties
• Reliable service
• Customer satisfaction
• Equity
• Innovative third-party
services
• System-wide least cost
• Resource diversity
• Effective facilitation of
open access
• Environmental perf.
• Innovation
Retail Level, e.g.:
Wholesale Level, e.g.:
Outcomes
Already a
standards
driven
industry
Policymakers
Establish policy
priorities
Work with
regulators
OVERCOMING BARRIERS
PERFORMANCE-BASED REGULATION
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All resources should compete as
equals to provide:
Energy
Capacity (if traded)
Ancillary Services
Begin trading important services like:
Flexibility
Ramping
OVERCOMING BARRIERS
MARKET DESIGN FOR OPTIMIZATION
Michael S. Gordon / The Republican File
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A state could choose to create a
“distribution system optimizer”
This entity could be:
A properly incented utility
A nonprofit similar to the ISO/RTO
Either way, an Integrated
Distribution Plan can help
OVERCOMING BARRIERS
DISTRIBUTION SYSTEM OPTIMIZATION
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III. What can State Energy Offices do to promote
technology and policy solutions?
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PLANNING-BASED OPTIMIZATION POLICIES
TRANSFORMATIVE
Build system optimization into the core of state energy
plans and attendant state energy policies.
Create a roadmap for regulators and utilities to move
toward performance-based regulation tied to overall
societal goals for the power system.
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State Energy
Offices
Markets
Planning
State Energy Offices can use a handful of important tools in different market
structures to enable the resources needed to optimize the system.
POLICIES FOR SYSTEM OPTIMIZATION
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PLANNING-BASED OPTIMIZATION POLICIES
INITIAL STEPS
Encourage—or host—dialogue among utilities, commissioners,
legislators, governors’ offices, and stakeholders about how to take
advantage of new technological opportunities.
Promote adequate budget and support for the PUC to explore these
issues.
Fund pilot programs for new technologies (consider partnering with
national labs or DOE). Take advantage of state-owned buildings as
testing grounds.
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MARKET-BASED OPTIMIZATION POLICIES
INITIAL STEPS
Study the costs and benefits of improving market product definitions,
including local job creation, energy affordability, reliability, and
environmental performance.
Study the costs and benefits of expanding or linking existing markets
with neighboring markets – perhaps first through an energy imbalance
market.
Open bidding for small amounts of new grid capabilities like “flexibility,”
and see what bids in.
Engage with other State Energy Offices to increase regional
coordination and trading.
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GET INVOLVED: NGA STATE LEARNING NETWORK ON
NEW UTILITY BUSINESS MODELS
Later this month, NGA will release an RFP for interested states to apply for:
Tailored briefings and technical assistance
Funding for an in-state summit
A three-day workshop including state team time
Quarterly webinars and monthly team calls
The latest research on utility business models
Access to advisors from America’s Power Plan, LBNL, RAP, NARUC
Contact: Aliza Wasserman: awasserman@nga.org
How to Put Technology to Work for the Grid
As IT and “big data” hit an electricity system with access to many more cost-effective clean energy resources, we have an unprecedented opportunity for system optimization. An optimized system can deliver benefits to customers in the form of more affordable, resilient, and clean electricity. But reaping these benefits means taking a hard look at which existing electricity policies might be stifling innovation. This session aims to identify some new policies, regulatory models, utility business models, and power market mechanisms that can support an optimized system.
Min
Either flashdrive or Thurs or email to Stephen before
Send a couple questions ahead of time if we want
Look at:
EPRI Integrated Grid
Future of the Grid
Grid Modernization Index
This is the NREL campus.
Renewables costs are shown without subsidies.
Renewables costs are shown without subsidies.
Reducing demand, or “flattening the head” of the duck, through improved infrastructure and demand-response, will reduce the net load that needs to be met in the evening, thus reducing its different between the lowest and highest points of demand. Other solutions may involve syncing up generation from solar with other renewable energy sources, such as wind, hydroelectric, and geothermal.
Reducing demand, or “flattening the head” of the duck, through improved infrastructure and demand-response, will reduce the net load that needs to be met in the evening, thus reducing its different between the lowest and highest points of demand. Other solutions may involve syncing up generation from solar with other renewable energy sources, such as wind, hydroelectric, and geothermal.
The next solution is to ‘shrink the belly’ of the duck. This means finding options so that over-generation does not occur. Storage technologies and system optimization both tackle this issue, by helping shift the load to areas where generated electricity is better needed. Fast-ramping natural gas will still be useful to account for the remaining gap, though it is best to minimize this process as much as possible since it is an expensive activity.
The graph on the right represents an optimized system because it uses demand- and supply-side technologies to integrate low-cost renewables and keep the system reliable and environmentally clean.
Begin measuring utility performance on system optimization metrics
Provide forum for best practices to “smarten” the grid; provide for rate recovery on smart grid infrastructure
Ensure adequate budget and support @ PUC
Add transparency to system resource procurement
Fund pilot programs to demonstrate reliability and savings from new technologies
Move away from cost-of-service regulation toward performance-based regulation
Decouple utility revenue from volumetric sales
Encourage and enable more regional planning and trading
Allow revenue sharing for off-system sales
Mandate resource procurement and planning that considers supply- and demand-side options together (Integrated Distribution Planning)
Begin measuring utility performance on system optimization metrics
Provide forum for best practices to “smarten” the grid; provide for rate recovery on smart grid infrastructure
Ensure adequate budget and support @ PUC
Add transparency to system resource procurement
Fund pilot programs to demonstrate reliability and savings from new technologies
Move away from cost-of-service regulation toward performance-based regulation
Decouple utility revenue from volumetric sales
Encourage and enable more regional planning and trading
Allow revenue sharing for off-system sales
Mandate resource procurement and planning that considers supply- and demand-side options together (Integrated Distribution Planning)