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Leveraging Customer-Side DERs to Benefit All Utility Customers

By Erika Myers and Obadiah Bartholomy

Editor’s note: Figure 1 in this blog has been updated to reflect more accurately study findings on the potential impact of distributed energy resources on SMUD’s resource planning processes. 

Like a growing number of utilities, the Sacramento Municipal Utility District (SMUD) has recently seen a dramatic rise in customer- and third party-owned distributed energy resources (DERs). Near-term forecasts suggest that SMUD customer investments in energy efficiency and behind-the-meter distributed technologies — such as rooftop solar — could soon eclipse the utility’s own investments in new energy resources and grid infrastructure.

Solar neighborhood (Photo courtesy of SMUD).

However, instead of simply viewing these trends as a business risk, SMUD saw a strategic opportunity to leverage and optimize future customer investments in behind-the-meter DERs to provide grid benefits to all its customers. As a first step, earlier this year, the public power utility serving 1.3 million customers in central California undertook a comprehensive forecast of DER penetration in its service territory through 2030.

SMUD plans to use the data and insights gained from the initiative to target program development and marketing to influence customer DER adoption rates — both the number and scale of technology deployments and their specific grid locations.

“The rapid change in customer behavior — both how customers are generating power as well as how they are using power — is definitely something that utilities throughout California are thinking very much about when it comes to how to integrate (these changes) into future planning processes,” said Scott Olson, a project manager for Black & Veatch, an industry consulting firm that worked on the SMUD analysis.

Related reading: The SEPA and Black & Veatch report, Planning the Distributed Energy Future, here.

SMUD has already been working on these issues, Olson said, talking about the study during a recent webinar hosted by the Smart Electric Power Alliance (SEPA). But its efforts had been somewhat “siloed,” rather than approached holistically — a point of departure for the DER forecast.

The six-month project was, he said, “a much more integrated approach, thinking about how to incorporate all the customer-side potential response and behavior, and what that means for (SMUD’s) long-term planning.”

The analysis pointed to a number of benefits linked to higher levels of DER penetration, including reduction in peak demands, flattening of overall loads, carbon reduction, and potentially lower overall energy supply costs. In addition – and of primary importance — the study identified the data still needed to better capitalize on customer investments and deliver greater value to all SMUD customers.

Leveraging customer data
The SMUD analysis combined granular data on customer electricity usage with detailed information on customer demographics and program participation to create more accurate projections of customers’ “propensity to adopt” specific technologies.

The goal, Olson said, was not to spread things out equally in SMUD’s service territory, but to “estimate where within the service territory will we likely see DERs being implemented.”

For example, an analysis of the potential for photovoltaic (PV) solar installations on residential rooftops and commercial parking lots identified locations that, if developed, could put about 700-800 megawatts online by 2030, much more than SMUD had previously projected, he said.

The study also developed customers’ “individual operational profiles” to be integrated into the planning process, Olson said.

Related reading: SEPA blog on smart thermostats and demand response as another part of the DER picture, here.

“It’s not just who’s going to adopt, but how is their behavior going to change,” he said. “When are they going to start charging their EV? When is the PV going to be peaking, depending on how they configured their system?”

SMUD plans to eventually use these deep adoption forecasts for more targeted customer marketing, particularly for its demand response and energy efficiency programs. In addition, the forecasts will be used to project changes in peak loads as part of distribution planning, a process which historically has not accounted explicitly for future DER adoption.

SMUD is also using the analysis data to develop potential plans for deferral of distribution projects, based on forecasts of natural customer adoption of DERs, combined with targeted incentives to enhance adoption of technologies with specific desired attributes. If successful, this approach could lead to a more standardized process for defining and providing location-based incentives that link project evaluation for distribution planning with utility investments in customer programs.

Distribution impacts
Based on the Black & Veatch analysis, SMUD identified two major potential impacts at the distribution system level, one from electric vehicles (EVs) and a second from PV systems.

1. In a high-penetration scenario, the analysis forecasted a clustering of EVs — that is, EVs concentrated in specific neighborhoods or on specific feeders — which could require more than 12,000 transformer upgrades (17 percent of the total in SMUD’s service territory). The scenario was based on an EV penetration of about 25 percent of on-road vehicles by 2030, coupled with a time-of-use rate, but a “coincident” charging situation in which many EVs would be charging at the same time. The findings here underline the potential value of avoiding localized impacts of concentrated, coincident EV charging by staggering charging timeframes or the rate of charge for multiple EVs located on the same residential transformer.

2. The second largest impact was the concentration of customer-side PV. At current growth rates, increased PV penetration could cause violations of standard voltage minimums and maximums at 51 substations (26 percent of total). The forecast also looked at the mitigation costs of various technology solutions, including smart inverters, storage, and voltage-regulating transformers.

Related material: Check out SEPA’s June 23 microwebinar on EVs and solar here.

A program to manage EV charging could spread out and reduce stress on the distribution system — and defer upgrades. Looking at customer-side PV, costs for distribution system upgrades to address voltage issues were estimated at a very modest 1-3 percent of customers’ forecasted PV investments. This projection can be used to design future rate tariffs, interconnection processes, and research and demonstration efforts.

Bulk system impacts
SMUD used three criteria to identify the future value of DERs for the bulk system: (1) how dispatch might change, based on DER forecasts, (2) how much such new dispatch changes will cost to implement, and (3) how changes in retail sales might affect net revenue forecasts.

Figure 1: SMUD projection of how high-penetration DERs could affect peak demand: The utility is now studying the impact of high levels of DERs on other resources and, as a result, utility planning.

(Source: SMUD, 2016)

Based on the future energy and capacity value scenarios examined in the analysis, the resource value of DERs for the utility was generally positive. But the net value — using an assumed time-of-use rate design being planned for 2018 — was generally negative, meaning rate increases might be needed to raise additional revenue to address the impacts of higher levels of DER adoption.

Still, while the study found that higher penetrations of DERs increased pressure on rates, they also reduced SMUD’s overall costs to supply energy. Influencing DER adoption in a way that minimizes rate impacts will allow SMUD to develop new revenue targets for DER programs and save money via deferrals of distribution investments.

Next steps
SMUD will continue to investigate opportunities to capitalize on deployment of DERs by demonstrating their locational value through several pilot projects with energy efficiency, demand response, and solar and storage. If the pilots are successful, SMUD expects that targeted customer incentives could help influence consumer adoption of DERs in ways that reduce risk and lead to more effective spending on utility infrastructure.

Further, SMUD wants to identify the appropriate timing of the various planning processes to ensure comprehensive DER valuation. Improving coordination and timing will better link rate development, customer programs, and bulk and distribution planning to enhance the overall value DERs provide. SMUD sees this as critical as customer and third-party investments in DERs begin to exceed utility investment in the overall energy supply and delivery landscape.

The bulk of the analysis done for the Black & Veatch forecasts was completed in about six months, a relatively long timeframe in today’s fast-moving markets. SMUD is now working to identify gaps in software tools to allow for speedier DER portfolio optimization.

Developing such tools will be a critical step toward making the process of integrated DER planning as effective and cost-efficient as possible. By achieving this goal, SMUD can help steer the significant DER investments its customers are making toward technology combinations that deliver the greatest value to the community.

A taped recording and slides from the SEPA webinar, Examining Future Grid Impacts through Integrated DER Analysis, are available here.

Erika Myers is the Senior Manager of Research for the Smart Electric Power Alliance. She can be reached at [email protected].

Obadiah Bartholomy is the Manager of Distributed Energy Resource Strategy at SMUD. He can be reached at [email protected].