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How Utilities and Customers Can Benefit from Accurate Value of DER Analysis Today

  • Smarter Investments: Utilities can plan and justify better distribution system capital expenditures, achieving required system characteristics at lower cost. Not all savings will match Con Edison’s proposed and much-heralded Brooklyn-Queens Demand Management program to save a net $750 million in new substation and transmission line costs through a reduction of 52 megawatts. However, even on a less bold scale, there are meaningful opportunities in every distribution system to optimize investments through a better understanding of hosting capacity and locational DER benefits.

  • Designing Rates: Determining net locational DER value can help utilities and regulators move beyond net energy metering to intelligent value of solar/DER tariffs that incorporate locational and temporal value—and that deliver fair and reasonable value for all customers.

  • Optimized Programs: Value of DER analysis can drive assessments of customer programs and incentives to rationalize them and reflect true costs and benefits of energy efficiency, demand response, energy storage, and renewables deployments, both in terms of locational targeting and incentives.

  • Greater Reliability: DER alternatives to traditional system investments can enhance resiliency and reliability.

  • Anticipating Customer Adoption: Customer adoption of DER is driven by both policy and technology innovation. This means that forecasting adoption becomes paramount for planning the use of the distribution grid and related investments, including integration costs. Probabilistic scenariobased planning that includes both hosting capacity and net value of DER analyses is critical for meeting customers’ needs.

Early education leaders—inside and outside of government—are looking for new ways to improve quality, accountability, and efficiency across many different programs serving young children and their families, and they see investment in data systems as a pivotal part of that effort. However, it can be challenging to develop and implement effective data systems that successfully build on existing platforms and serve multiple purposes.

If done well, a data system can provide critical information to support policy decisions, steer continuous quality improvement, create cost savings, and improve customer service. If done poorly, a data system can create new administrative burdens, incur unexpected costs, and tarnish an agency’s reputation. To ensure your data project provides the greatest benefits to all involved, download this guide to learn about key considerations across the "Assess, Plan, Do, Evaluate" cycle of data systems development.

Conclusion and Key Lessons

Our experience with DER benefit/cost analysis and with clients like our partners in the case study discussed above suggests several takeaways for utilities, regulators, and other stakeholders engaging in the question of determining the “true” value of DER.

  1. Locational net value is key. Getting the net value of DER right opens up opportunities for delivering greater value, lowering cost, ensuring reliability, and investing wisely. This is important for customers and utilities, and will be increasingly critical in a high DER-adoption future.

  2. Structured DER adoption is essential. Aligning DER rate designs for Net Energy Metering (NEM) and others as proposed in CA) and incentive mechanisms to hosting capacity and locational value analysis is essential to scale customer adoption of DER. Failure to account for locational value will likely lead to unnecessary capital expenditures to address unstructured (ad hoc) adoption and very challenging operating conditions.

  3. Analysis needs to improve. Our evaluation of locational value demonstrates that DER value within a system is variable, that methodologies applied until recently and mostly to value of solar are inadequate, and that inaccurate and inconsistent approaches have real consequences.

  4. This is hard, but achievable. Determining a value of DER—on a locational basis factoring in hosting capacity, scenario-based planning, and probabilistic methods—is hard. However, our experience shows that better approaches are rapidly being developed and can yield smarter results to inform utilities’ investments and demand-side resource programs.

  5. Scalable. The results of our case study, for example, using a consistent and rational true value of DER framework, can be applied across an entire distribution system. Over time, the aggregation of locational value can improve system-wide planning and provide the basis for new market mechanisms and utility business models. We will examine these themes in future papers.
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About the Authors

Laetitia Achille

Laetitia Achille

Vice President, Aircraft

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