Distributed energy resources (DER) as non-wires alternatives, regardless of owner, have the potential to reduce system operating costs and delay system upgrades, a new report finds.
The report, Valuing distributed energy resources for non-wires alternatives, said it is difficult to determine the appropriate economic signal to incentivize DER investors to install capacity that will benefit both the DER investors and the system operator. To determine this co-optimal price signal, the report presents a bilevel optimization framework that determines the least cost solution to distribution system over-loads. A key output of the framework is a price signal to DER owners that simultaneously guarantees the DER owners’ required rate of return and minimizes the system operation costs.
The framework is demonstrated with a case by which the system operator considers utility owned battery energy storage systems, traditional system upgrades, and energy purchased from DER owners. The results show that utility owned storage combined with DER for non-wires alternatives can result in lower operating costs with similar upfront costs to traditional system upgrades by avoiding or delaying upgrades. In a use-case example the authors show that when valuing DER the operating costs over 20 years can be reduced by over 40% resulting in a $3M net present value.
As population and electrification grow, there is pressure on local electric distribution utilities to increase overall capacity and upgrade equipment to maintain high reliability. However, traditional actions related to the wires and poles of the distribution system might not keep pace with load growth that will accommodate rapid electric vehicle adoption or widespread installation of electric heat pumps as a way to reduce on-site fuel use for space and water heating. As a consequence, the report says, there is an acute need for non-wires alternatives that can be used to improve overall system performance. Some of those alternatives include demand response and distributed energy resources, such as local power generation and/or storage.
Though distributed energy resources avoid additional loading on the distribution lines, traditional utility funding models do not always support their installation. Furthermore, market signals can be confusing and do not encourage DER installation even though novel business models are emerging that would reduce total system cost.
The research seeks to explain how DER might be appropriately valued in light of increasing electrification and EV adoption in an era when traditional grid enhancements are hobbled by cost and policy hurdles.
Early evaluations of DER for non-wires alternatives compared costs and benefits of known DER capacities and locations against capacity upgrade costs. A common theme in the literature for valuing DER as non-wires alternatives accounted for the single perspective of the distribution system operator (DSO). For example, Contreras-Ocana et al. developed a model that puts DER costs and benefits in competition with upgrade deferrals from a single perspective, at a single location with forecasted overloads. By neglecting power flow constraints they were able to account for many types of DER including energy efficiency investments. However, without a network model the DER are presumably installed at the single, overloaded location.
The framework proposed in the report accounts for both the system planner’s perspective and the DER investor perspectives. The bilevel optimization framework is meant to guarantee that solutions minimize the planner’s costs over the chosen horizon as well that the DER investors achieve their required rate of returns, thereby addressing the need for techno-economic methods that appropriately value DER for power system planning and operations.
Using a use-case example, the report’s authors showed how the framework can be leveraged to value DER for non-wires alternatives. Comparing life cycle costs over 20 years for the system planner, the results show that by valuing DER for non-wires alternatives the DSO can avoid upgrading most of the overloaded components as well as achieve a net present value of nearly $3M relative to the cost of the traditional upgrades. The authors also compared the solution with DER valued to a scenario with utility owned batteries and no third-party DER value. The results show that the DSO can achieve an additional $1M in net present value when valuing DER relative to the scenario with utility owned batteries.
In future work, the authors intend to leverage the bilevel framework in a transactive control context. Transactive control methods that account for the DSO perspective and the DER owner objectives are necessary to appropriately motivate DER to provide services that benefit the entire system, the authors said.
