What Everyone Keeps Getting Wrong About NWAs: And Why Utilities Should Pay Attention

Over the past five years, distribution Non-Wires Alternatives (NWAs) have seemingly transformed from a grid panacea poised to change the utility business model to simply another tool in the utility’s toolbox. How did this happen?

In 2014, there was a lot of heady talk: distributed energy resources (DER) would change everything. Utilities would plan and invest in their systems completely differently and $billions in cost would be squeezed out of the system. Then-Chair of the New York Public Service Commission, Audrey Zibelman wrote: “Rooftop solar, energy storage, smart energy management technology, and the aggregation of demand are all areas where demand, rather than generation, can become the state’s primary energy resource…” Zibelman promised that utilities would develop plans to “integrate potential DER solutions into their traditional capital planning,” mostly through NWAs.

Predictions were made – predicated on Con Edison’s $1 billion BQDM project – that NWA-led dollar savings were going to be widespread, and that annual system savings from DER would total in the $billions. On the West Coast, NWAs were viewed in no less bullish terms. California utilities filed their first round of Distribution Resources Plans in 2015, filled with planned demonstrations for DER to replace traditional grid investments.

Yet by early 2019, the story sounded totally different. Greentech Media headlined “Few Opportunities, No Contracts: Slow Progress for Non-Wires Alternatives in California.” Utility Dive similarly led with “Hawaii regulators question lack of non-wires alternatives in HECO’s integrated grid plan.” New York’s REV Connect website listed 47 NWA opportunities, but only 6 as successful and in operation.

NWAs are incredibly important to the future of utilities, but not because there is DER-led value on every street corner. The value is not in taking NWAs to scale, but rather in using them to forge a new approach to utility planning and investment that better integrates demand management and improves the utility’s ability to optimize grid operations. In other words, NWAs shouldn’t be seen as an end in themselves, but as an important bridge to active load management that can be used to plan and operate the grid.

More Progress Than You Think…
First, NWAs are steadily gaining ground.

• Almost half the states are exploring distribution NWAs in some form (see map).
• A recent report from E4theFuture, PLMA, and SEPA highlighted 10 successful NWA case studies:

• ICF is working with multiple clients on NWA pilot projects that are showing high benefit-cost ratios and successful DER-led solutions for meeting grid needs. We are supporting Canada’s Independent Electricity System Operator in the design of a demonstration project to launch the first ever local electricity market in the York Region of Ontario. We are also working with the Joint Utilities of New York to steadily refine and increase the speed of the NWA development process.
• NWA use cases are expanding beyond typical mitigation of load growth, such as Eversource’s reliability-driven NWA in New Hampshire.

…But Also More Hurdles
Several factors have slowed the predicted explosion of NWAs.

• The process for identifying worthwhile NWA opportunities has taken time to develop via intensive utility-stakeholder discussion.
• The value of mitigating distribution-level infrastructure is a smaller part of the total energy resource “value stack” than originally assumed. The value of deferring or avoiding the need for infrastructure is quite small on average. The key, of course, is that there are hotspots on the distribution grid where the locational value can be much greater (in fact, ICF has shown that funneling such value into program cost-effectiveness can significantly increase benefit-cost ratios).
• The procurement-led NWA model has turned out to be valuable, but hardly nimble. Emerging best practices can improve the process, but it is proving difficult to implement at speed and at scale. ICF’s experience with clients, as well as a number of study results, shows that program-led solutions tend to be the most cost-effective.

The Value in NWA: Not a Dollar Figure Today, an Approach for Tomorrow
Today, utilities plan and invest in the electric distribution system (and in vertically integrated utilities, generation and transmission) to provide safe and reliable service at the lowest cost. Many also have separate functions to design and manage programs. However, in the next five to ten years, planning, programs, and behavior modifying pricing will be increasingly integrated. As tools emerge to better forecast, disaggregate, and modify load, utilities will be as much in the business of managing load as in building wires.

This shift will benefit and customers through more stable rates, a more efficient and resilient electric grid, and trusted utility partners providing more choices. It also benefits utilities by enabling better opportunities to efficiently manage their systems, diversify their business, and offer more value to their customers. This shift will also encourage innovation from third-party providers to help manage load and maintain system reliability.

This evolution will take a great deal of work: piloting, testing, and learning. ICF has learned in the past 5 years that NWAs are not an end unto themselves. Rather, they are a means for utilities to explore how to effectively identify DER and demand management opportunities within their core planning process, how to implement those solutions hand-in-hand with more traditional infrastructure, and how to work collaboratively with regulators and stakeholders to incentivize this practice so that all parties can benefit.

From this standpoint, NWAs are right on track. Not as a widespread solution in today’s grid, but as a means of delivering a more integrated, high-value future.