California is engaged in a major revision of the ways in which its utilities manage their distribution grid. This sounds like a rather unsexy topic, but it’s actually a real game-changer in terms of how we get our power. The major benefit of distributed energy resources is that they are located close to load and thus don’t require expensive new transmission lines. Transmission lines are typically the big steel poles, which are much more expensive than the wooden poles that make up most distribution grid spans.
In addition to cost benefits, distributed resources also offer grid reliability benefits because of decentralization -- the opposite of the traditional central station model of very large power plants that can lead to vulnerabilities, like we’ve seen from the premature shutdown of the 2.2-gigawatt San Onofre nuclear power station.
Distributed resources can also avoid the major environmental issues that come from very large renewable energy facilities like we’re seeing crop up in California and other states more and more frequently. I don’t have a particular beef with very large facilities, but it seems clear to me that if medium- and small-scale renewable energy facilities can provide the same benefits as large facilities with far less environmental impact, we should opt for the former.
California’s policymakers are increasingly agreeing with my preference. AB 327, passed in 2013, requires, among other things, that the state’s private utilities complete Distribution Resources Plans by mid-2015, which will recalibrate how utilities plan for and interconnect new distributed power generation and other distributed energy resources like demand response and energy efficiency.
Specifically, the law requires Distribution Resources Plans (DRPs) to:
- Evaluate locational benefits and costs of distributed resources
- Propose or identify standard tariffs, contracts or other mechanisms for deploying cost-effective distributed resources
- Propose other cost-effective methods for coordinating existing programs aimed at distributed resources
- Identify any additional utility spending necessary to integrated cost-effective distributed resources
- Identify barriers to the deployment of distributed resources
That’s quite a task list, and the California Public Utilities Commission (CPUC) has been assigned to oversee this process (in proceeding R.14-08-013). As part of that duty, the CPUC is working with a group from Caltech that has produced a white paper called “More than Smart.” The white paper and the ongoing collaboration aim to identify the most appropriate ways that the utilities can implement AB 327’s requirements.
The CPUC has also issued its own white paper, authored by Commissioner Picker and his staff, and it sets forth a truly forward-looking vision of how distribution grid planning could and should be improved. Perhaps most remarkably, the CPUC’s white paper and accompanying ruling calls for an eight- to ten-year process of iterated DRPs, rather than the single DRP called for in AB 327.
(As a relevant aside, I co-authored for the Clean Coalition, a San-Francisco based nonprofit, a draft bill a few years ago that called for much of what was implemented in AB 327. It’s an interesting history as to how these ideas got into AB 327, but our original bill called for an ongoing biennial DRP process, so it’s gratifying to see this approach captured in the CPUC’s ruling.)
How to really kick-start California’s distributed energy resources
The CPUC white paper focuses primarily on interconnection and data issues, but the CPUC should focus similarly and equally on procurement issues from the outset of this multi-year process. The lack of contracts for various types of DER is probably the most serious issue facing developers today, so to not focus on this issue from the outset is to miss a very large opportunity. Interconnection improvements are equally important for long-term DER development, and much work remains to be done in this area. However, the commission should devote equal time to interconnection and procurement issues from the outset.
In terms of procurement, California has historically been too focused on the central-station generation model. The California Solar Initiative has been a laudable program for rooftop solar, but the “sweet spot" of wholesale distributed generation has generally gone underutilized in California to date. While renewable generation between 1 megawatt and 3 megawatts capable of utilizing current Fast Track interconnection procedures (and in many cases small enough to fit on large parking lots or large rooftops) can capture much of the economies of scale of much larger central-station projects, the smaller projects can also enjoy far higher locational benefits due to their placement closer to load. As such, the value offered by small utility-scale projects can often be greater than for very large projects. And yet California’s energy policy does not reflect this fact. The DRPs required by AB 327 are a large step toward rectifying this problem, but the potential of the DRPs will not be realized without equal focus on procurement and interconnection.
The state’s existing Renewable Energy Market-Adjusting Tariff (ReMAT) program is far too small given the potential for this niche, because ReMAT only amounts to a few hundred megawatts statewide. The potential for cost-effective distributed resources surely amounts to many gigawatts. By pushing toward a “plug-and-play” grid for DER, which is the stated goal of the CPUC in implementing AB 327, the commission should focus equally on how to procure and interconnect projects that can plug and play. The economic development opportunities through widespread development of cost-effective DER could be very large for California. In a time when unemployment is still well above 7 percent, California policymakers should fully consider the job growth and economic development benefits of the new DRP process.
The CPUC white papers call for “dramatic streamlining” of the interconnection process for distributed resources and creation of a “plug-and-play” grid. The Clean Coalition, one of my clients, has for a number of years recommended an “Interconnection 3.0” approach that would include an online portal for parties to query particular locations for DG facilities and receive actionable interconnection information about costs and feasibility almost instantaneously. The CPUC should clarify what it means by “plug-and-play.” And what exactly constitutes “dramatically streamlined” interconnection processes? These phrases are visionary, but without specific and ambitious proposals to back them up, they could easily become empty rhetoric.
It seems that the capabilities of today’s smart meters and smart grids should allow generally automated interconnection studies for most distributed energy resources. Currently, the interconnection process for even small utility-scale projects is extremely time-consuming and can be costly even for Fast Track-eligible projects. A “plug-and-play” interconnection system should aim toward automated interconnection as the end goal and plan intermediate steps required to get to that end goal.
In sum, California’s efforts so far to realize the full potential of a modernized grid are promising, but may well leave much on the table if policymakers don’t 1) focus as much on procurement as on interconnection and 2) on ways that utilities can create a truly “plug-and-play” grid in the near term, and that means automating much of what is done by utility engineers today.
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Tam Hunt is the owner of Community Renewable Solutions LLC, a renewable energy project development and policy advocacy firm based in Santa Barbara, California and Hilo, Hawaii.