What is DG?

Distributed GenerationBenefits and PlanningChallengesCREPC/SPSC Resource Planners’ ForumOctober 3, 2012Arne Olson

Agenda1. What is DG, and whatdoes it do for us?2. Is DG more costeffectivethan centralstation generation?(Hint: it depends onyour perspective.)3. Challenges inharvesting DG values:how current planningpractices account forDG (or not).4. Concluding Thoughts3

What is DG, and what doesit do for us?

What is DG?DG has beendefined in manydifferent waysdepending on thecontextdistributedadjectivespread out or scattered about or dividedup [ant: concentrated]WordNet® 3.0, © 2006 by Princeton University.DG dimensions:• Size: 1 kW up to … 50 MW?• Location: customer side vs. utility side of meter• Interconnection point: distribution, sub-transmission, bulktransmission• Proximity to load: behind-the-meter, same distribution feeder, in aload pocket, remote from load• Technology type: PV, CHP, micro wind, fuel cells, microturbines,reciprocating engines5

Which of These are DG?Remote 20 MW sites identified byCalifornia’s RETIIllustrative Example of Distributed Solar PV20 MW near substationsLarge commercial rooftopsResidential rooftops6

Why DG?DG has a number of potentialbenefits relative to centralstation generationRatepayer benefits:• High locational energy value inload pocket• Reduced losses (~7% average,up to 15% on peak)• Reduced need for newtransmission• Reduced need for newdistributionNon-ratepayer benefits:• Reduced electricity bills forcustomer-side DG• Reduced land-use footprint insensitive ecological regions• Local jobs in economicallydepressedareas?• Increased consumer choice &autonomy?• More tangible/real thanremote RE?7

Spectrum of DG InterconnectionPointsSince DG can have many definitions, it is better tofocus on the benefits that generation can provideat different interconnection points4kV to21kVDG Interconnection PointsNeighborhood3 4DistributionSubstation$C69kV to138kVCommunitySub-Trans.Substation$DNetworkTransmission230kV+ReferencePoint forCostingExisting HighVoltageSystem-$FNon-existingTransmission230kV+Remote, newtransmission6Renewable energyzone$A$B2Gen Step-upSubstationMeterHome 1-$ERemote,5existingtransmission8

Is DG More Cost-EffectiveThan Central StationGeneration?

Solar PV Costs Can VaryDramatically by LocationInstalled cost varies due to resource quality, size,installation type (shown as levelized $/MWh)Residentialrooftop (4 kW)$121Large, ground-mount(150 MW)Small, ground-mount(5-20 MW)$231$154$167$105Small, ground-mount(1-5 MW)Source: CPUC 33% RPSCalculator, April 201211

Example Values byInterconnection PointValues using CPUC “net cost” approach ($/MWh)Interconnection PointDG BenefitHome(5 kW)Neighborhood(1-5 MW)Community(5-20 MW)Remote,existing Tx(150 MW)Remote,new Tx(150 MW)Levelized Cost $231 $167 $154 $121 $105Locational energy value -$39 -$39 -$39 -$34 -$34Reduced Losses -$3 -$3 -$1 - -Capacity Value -$35 -$35 -$35 -$38 -$38Reduced need fordistributionReduced need fortransmission-$26 -$26 - - --$7 -$7 -$7 - +$20Net Ratepayer Cost $121 $57 $72 $49 $53Environmental/other benefits? ? ? ? ?Values based largely on CPUC RPS Calculator12

$/kWhDGPV Can Be Cost-Effective for NetMetered CustomersTypical California residential rates$0.40$0.35$0.30$0.25$0.20South CoastRooftop PVLCOESCEPG&ESDG&E$0.15$0.10SMUDLADWPSolar Rooftop PV LCOE$0.05$0.000 200 400 600 800 1000 1200Monthly Consumption (kWh)13

Challenges in HarvestingDG Values

Accounting for DG in ResourcePlanningDG is typically considered as aload modifier• Base load forecast developed viaeconometric estimation• Load modifiers to reflect demand-sidepolicies and programsRemaining net load served withleast-cost portfolio of supply-sideresources• Wires savings and other locationalvalues of demand-side resourcesfrequently not consideredUtility-side DG has not historicallybeen cost-competitive enough tomerit full consideration in IRP15

Accounting for DG in TransmissionPlanningTransmission planning isdone for multiple purposes,not all of which referencelocal value of DG• Interconnection: respond toservice requests (DG does nothelp)• Economic: relieve congestion(DG can help)• Reliability: serve load in localarea (DG can help)DG not considered astransmission option, but maybe reflected in load forecastLocal area studies aretypically based onmeeting NERC criteria(N-1, G-1)16

Concluding ThoughtsDramatic reduction in cost of PV has made DG a“live” option for the first time• We can now plausibly ask the question “Is it cost-effectiveto develop distributed resources close to load that do notrequire new transmission infrastructure?”• However, PV module cost reductions also affect cost ofcentral station solar resourcesDG can have significant additional value relative tocentral station resources in specific situations• Highest locational value occurs where resources are servingload downstream in a fast-growing areaThere are challenges in harvesting these valuesdue to utility planning and procurement practices19

Thank You!Energy and Environmental Economics, Inc. (E3)101 Montgomery Street, Suite 1600San Francisco, CA 94104Tel 415-391-5100Web http://www.ethree.comArne Olson (arne@ethree.com)