Monday, July 23, 2018

Stakeholders Hash out Future of DER at OMS Workshop

By Amanda Durish Cook

MADISON, Wisc. — MISO state regulators and industry officials gathered this week to discuss how the region’s electricity sector will accommodate the budding growth of distributed energy resources within the RTO’s footprint.

While the outlook of participants at the Organization of MISO States’ Aug. 1 DER workshop ranged from cautious to optimistic, nearly all agreed that the industry could be confronting a profound transformation as energy resources become increasingly decentralized.

MISO distributed energy resources DER

OMS DER Workshop Audience | © RTO Insider

“DER, this is really just a fad, right? We don’t need to concern ourselves with this,” joked Wisconsin Public Service Commissioner Mike Huebsch. “In all seriousness, that’s what some were saying a few years ago, but it’s clearly not a fad.”

Missouri Public Service Commission Chairman Daniel Hall said DER is fast becoming a national policy issue.

“We are witnessing technological advances to accommodate the growing demand for DER,” he told a crowd of utility executives, regulators, renewable energy advocates and RTO officials at the workshop, sponsored by the Wisconsin Public Utility Institute and the Wisconsin Energy Institute.

MISO distributed energy resources DER

Kelly | © RTO Insider

“I think of this as potentially the creation of a new industry,” said Suedeen Kelly, a partner at the law firm Jenner & Block. DERs and microgrids are introducing electricity to far-flung regions of developing countries, she said.

“Is it going to be as dramatic a change in the U.S.? I don’t know yet. Are we going to move to a country of microgrids? Personally, I doubt it — but maybe,” Kelly said. “I think most of the decisions that state regulators have to make can fall into three categories: Who’s going to be allowed to own them? Who’s going to be allowed to dispatch them? How are they going to be compensated?”

Kelly said each state would likely tackle these questions on its own.

“We have a lot of time to figure out the dispatch question — who and how and all that,” said Mike Bull, director of policy at the Center for Energy and Environment.

Bull said he expects DER owners, rather than regulators, to come forward with policy ideas, noting that regulators are often reactive rather than proactive.

DER: Enemy — or BFF?

MISO distributed energy resources DER

Azar | © RTO Insider

“DERs are advancing at a pace that I’m not sure any of us grasp,” said Lauren Azar, a former Wisconsin PSC commissioner, and current energy consultant and attorney.

Azar said states must work together to take the lead on policy issues and set aside regional differences. “It’s not surprising that whenever a huge new region comes into MISO, that it’s going to take some time to build some trust,” she said, referring to the integration of MISO South.

MISO Vice President of System Operations Todd Ramey said DERs could reach 20 GW in the RTO by 2030. MISO underestimated the adoption of customer DERs in its past modeling, he noted, and the RTO’s main concern remains forecasting substation-level requirements as early as possible, anywhere from two or three days to five minutes ahead ― a schedule MISO intends to maintain even with the increased penetration of DERs.

When Azar asked if anyone in the audience was surprised at the rate of electric vehicle adoption, she was met with a scattered raising of hands.

“OK, well you guys are more prescient than I am,” she said to laughter.

Azar said the grid is remarkable in its dynamism and ever-changing flows. “This year’s enemies are next year’s BFFs,” she said. “As state regulators, you have the luxury of taking the economic long view. You should not be driven by what your utility’s dividends are right now.”

MISO distributed energy resources DER

Mele (left) and Ramey | © RTO Insider

Azar expressed regret about her 2011 vote against allowing aggregated demand response in Wisconsin and said she now realizes DR strengthens the nation’s grid and economy. She advised states against becoming too wrapped up in their own needs to notice what is good for the nation as a whole.

She noted that last year’s Notice of Proposed Rulemaking requiring RTOs to remove market barriers for storage and DERs indicates that FERC is inclined to allow for state regulation of aggregated DERs and energy storage above 100 kW. The NOPR is reminiscent of FERC Order 719, she said.

She advised states to encourage a regulatory structure in which new technologies are allowed to “bubble up” in non-discriminatory fashion and are properly monetized.

The Elvis Paradox

Tim Noeldner, WPPI Energy vice president of rates and special projects, said his company expects “slow and steady growth” in DERs and will leave a small planning gap for the resources to fill. “We go into the future a little bit short,” he explained.

MISO distributed energy resources DER

Owens | © RTO Insider

Entergy Director of Regulatory Research Andrew Owens said 4% of New Orleans households with rooftop solar are spread throughout all socioeconomic corners of the city, a result of falling costs and generous tax credits.

“Is that an opportunity or a threat? Right now, we have no grid visibility of it other than locations and zip codes. We can do desktop modeling of it, but it’s not real,” Owens said. He said a mix of policy, pilot projects and partnerships are needed for a steadier transition, and can help scale New Orleans Mayor Mitch Landrieu’s lofty climate action goal of 255 MW of solar capacity within the city in the next decade, up 215 MW from today.

Owens also cautioned against the simple extrapolation of present DER trends, referring to the “Elvis Presley Paradox,” which he said holds that the number of Elvis impersonators increased from about 30 at the singer’s death in 1977 to around 50,000 by the mid-1990s — a growth rate that would translate into every third person in the world being an Elvis impersonator by now.

At some point, Owens said, there won’t be usable space for solar, and a willing tide of customers will abate.

Former FERC Commissioner Tony Clark, now a senior adviser with law firm Wilkinson Barker Knauer, said DERs could affect the future in one of three ways.

“You can make a case that things will look not much different than today ― I don’t think that’s the case,” he said. On the other hand, one could assume the “Elon-Musk-on-steroids version of the world takes over,” and electric vehicles are in every garage and residential heaters are able to store energy, making houses self-contained units.

Future reality is likely to be found somewhere in the middle, according to Clark.

Thomas (left) and Clark | © RTO Insider

“I personally think the most likely scenario is, moving forward, you literally have more power at the edges of the grid and figuratively more power in the hands of the consumers. … It’s still a network grid, but a more nimble grid,” Clark said. “I’d think that’s the most likely scenario. … Distribution services will still play an extraordinarily important role.”

University of Wisconsin engineering professor Bob Lasseter, who studies the penetration of DERs, said that microgrids provide the most promising means of integrating substantial amounts of distributed sources. However, a decentralized grid works best autonomously — not micromanaged by grid operators — and spared from extensive communications and controls.

“I believe that this bottom-up model is really going to work,” Lasseter said. “Microgrids are getting killed because there’s too much managing of loads.”

Supersized Battery

Residential DERs can help grid planners avoid costly transmission projects by lowering demand, said Amy Heart, director of public policy at solar advocacy group SunRun. “Imagine having customers excited about rate cases because they’re helping to generate savings,” she said.

MISO distributed energy resources DER

Talberg | © RTO Insider

Kelly said that the electric industry has traditionally rewarded investment because expansion has long been necessary. “Now? Not so much,” she said, adding that the industry needs to find methods to reward avoiding costly investments.

Grid investment is still paramount, Michigan Public Service Chairman Sally Talberg said, and new technologies to accommodate DERs could be incorporated into the upgrade of Michigan’s aging infrastructure.

“We’ve got breakers that are 70 years old. … It’s like driving a car without a steering wheel ― and this is not an autonomous car,” Talberg said. She envisioned grid upgrades that accommodate two-way energy flows and the grid itself upgraded to become “a large storage battery.”

More Visibility, Please

RTO executives, meanwhile, are seeking historical and operating data to plan for DERs.

Resource visibility is the key to modeling grid planning, MISO’s Ramey said. “I need to know where it’s at, what size and dynamic impacts,” he said. “Today, MISO has no role in integration [of DERs], but we need that data to ensure reliability.”

Billinton | © RTO Insider

CAISO Manager of Transmission Planning Jeff Billinton said DER information needs to be incorporated into transmission planning and NERC reliability models years in advance. ERCOT Chief Operating Officer Cheryl Mele said RTOs need to know whether it will be the resources or the distribution companies that will provide production data.

Utility executives are also calling for more DER visibility.

Joe McGovern, Alliant Energy’s director of electrical engineering, said DER use is no longer a simple issue of interconnection. “It went from an engineering problem to a broader market issue very quickly,” he said. Stakeholders, generation owners, customers and developers must be educated on the potential impacts. He said he’d like to see a distribution system that runs like a software platform and is easily accessible.

Commonwealth Edison Director of Energy Policy Chris Foley said his company is giving “a lot of thought to the utility of the future” but is not yet moving to a distribution system operator model in which the utility co-optimizes distributed resources.

Baked-in Distribution Costs?

Clark said he said he would attempt to make attendees “uncomfortable,” reminding them that FERC could intervene and issue regulations for DERs if their growth went unchecked and had an adverse impact on rates.

“Consider me the Scaramucci of the workshop,” he joked, referring to the foul-mouthed former White House communications director.

“I thought he was going to cuss like Scaramucci did,” Arkansas Public Service Commission Chair Ted Thomas teased.

“That was the Midwestern version,” Clark replied.

Noeldner said WPPI supports a retail rate in which distribution costs are built in.

MISO distributed energy resources DER

Left to right: McGovern, Foley and Noeldner | © RTO Insider

EnerNOC Director of Regulatory Affairs Greg Geller added that DER-owning customers need to reap the financial benefit of the value they are helping to create and suggested attaching a value to “peak shaving,” when customers help reduce demand at peak times.

State regulators must recognize the “push and pull” of customers influencing policy, said Tyler Huebner, executive director of Renew Wisconsin. “What we see is, the worse the net metering policies are [in a state], the bigger rush there is to install storage,” Huebner said.

OMS Executive Director Tanya Paslawski said the DER workshop served as a “good starting point” for future discussions within her organization. RTO officials last month asked OMS for policy ideas on a common DER definition and market rules. (See “MISO Asks OMS for DER Ideas,” OMS Issues EE Market Participation Opinion.)

“We’re not in any emergency situation in MISO ― or any RTO for that matter ― but this is something that is picking up steam … and there are a lot of moving parts to consider,” Paslawski said.

MISO participants will resume their DER conversation again in September at a full board meeting in which stakeholders will debate DER treatment as a “hot topic” discussion item. The RTO also continues to develop a common definition and market rules for the participation of energy storage in its markets. (See MISO Rules Must Bend for Storage, Stakeholders Say.) MISO’s Steering Committee last month voted to approve the creation of an energy storage task force, which will report its findings and discussions back to the committee.