E2Is Collaborative Approach for WinWin DER Opportunities

1
E2Is Collaborative Approach for Win-Win DER
Opportunities

• Ellen Petrill
• Program Director, E2I
• E2I DER Public/Private Partnership
• December 10, 2004

2
E2I DER Public/Private Partnership Vision

• Improving the quality of life by enabling DER to
  provide reliable and clean power to meet customer
  needs and support the power delivery system

3
DER Partnership Market Integration

• Objective
• Provide decision makers with input on policy and
  market development opportunities to encourage DER
  integration where it brings value
• Approach
• Facilitate stakeholder development and
  implementation of win-win approaches for DER
  integration

4
Stakeholders Who are they? Why does it matter?
5
Numerous partners and stakeholders participate

• Government Entities
• California Energy Commission
• NYSERDA DOE
• Massachusetts Renewable Energy Trust NASEO
• Colorado Office of Energy
• Regulatory Entities
• NJ BPU PUC Ohio
• TX PUC NY PSC
• CA PUC FERC
• CARB BAAQMD
• NRRI NARUC
• OR PUC
• Manufacturers
• Solar Turbines UTC Fuels Cell
• Cummins Fuel Cell Energy
• Siemens Westinghouse STM Power
• ASCO

• Electricity Entities
• TVA Ameren
• NY ISO NYPA
• CPS San Antonio Exelon
• SCE First Energy
• OPG Southern Co.
• PEPCO
• Developers
• RealEnergy
• DTE Energy Technologies
• Northern Power Systems
• Consumers
• Silicon Valley Manufacturers Group
• Verizon
• NGOs
• Energy Foundation
• USCHPA NRDC

6
What is a Win-Win? How to Achieve?

• Multiple stakeholders benefit no stakeholder
  harmed
• Customers
• Regulators--Society
• Utility
• shareholders
• and other rate payers

• Developed collaboratively, since a benefit to one
  is a cost to another
• Legitimate
• Accepted
• Mutually beneficial

7
What is Win-Win?
Utility Shareholders Other Ratepayers
DG Customer
Rate Design Custom Contract
Win
Win
Cost Savings
Bill Savings
Public Incentive
Society
Win
Cleaner Environment Lower Costs
8
DER Market Integration Status

• 2003 Developed tools to enable
  stakeholder-driven DER integration programs
• Assessed stakeholder perspectives on DER
• Assembled catalog of existing approaches
• Developed cost-benefit allocation model
• Created framework for collaborative win-win DER
  program development
• 2004 Implement tools in stakeholder
  collaboratively-developed DER pilot program
• California

9
Framework Use Stakeholder Collaboration to
Integrate DER More Widely

• Focus on stakeholder interests
• Utility, DER customer, DER provider, regulatory
  and societal interests (including
  non-participating customers)
• Identify
• Needs of each stakeholder
• Barriers to meeting those needs
• Approaches tried or proposed
• Define collaborative strategies
• Leverage DER value
• Design efficient incentives
• Eliminate barriers
• Match strategies to stakeholder needs, tailor to
  local conditions

10
California DER Pilot Project Seeks Win-Wins

• Help DER providers understand SCE planning area
  needs
• Help SCE develop an RFP that yields successful
  proposals
• Objectives
• Test the E2I stakeholder collaboration process
• Identify win-win solutions
• Scale to other regions
• Approach
• Share analysis of SCE distribution system needs
  and potential win-wins with stakeholders in
  workshop
• Develop innovative win-wins with stakeholder
  working groups
• Provide input to SCEs RFP development
• Monitor results and report
• Outcomes
• Scalable process
• Cost-benefit analyses of win-win examples

11
E2I DER Pilot Project Timeline

• Workshop preparation May - July 2004
• Initial Stakeholder Workshop July 15 16, 2004
• Issue Group Analysis and Discussions via
  telephone conference July 30 October 1, 2004
• Final Stakeholder Workshop October 7, 2004
• Draft Report of Process mid-November
• Final Report mid-December
• SCE RFP Spring 2005
• SCE Soft start demonstrations Early 2005

12
Key Achievements of the E2I Collaborative
Approach for Developing a Successful DG
Solicitation
13
A process for developing win-win approaches
Use modeling tool to estimate DER costs and
benefits for each stakeholder
Identify key stakeholders
No
Implement win-win DER solution
Yes
Identify ways to leverage DER values
Yes
Eliminate barriers
No
Design efficient incentives to share benefits
among stakeholders
14
Looking for Win-Win-WinPGE Peaking Plant in
Constrained Area
15
Achieving Win-Win-WinAdjusting incentives
16
Framework Initiatives Addressed by CA DER Pilot
Project
17
Framework Initiatives Addressed by CA DER Pilot
Project, continued
18
Major Findings 1

• Focus on sources of value
• Capture all value streams to stakeholders
• Simplify the process
• Longer term planning horizon
• Target greater areasdistribution planning areas
  rather than circuits or substations
• Targets tariffs or credits for areas where demand
  is growing in ways that DER can address
• Proactively plan for and integrate DER
• Design total resource planning approachsave/buy/b
  uild
• Identify appropriate mix of centralized and
  distributed energy sources DG, renewables,
  energy efficiency, and demand response
• Design programs to coordinate and optimize
  interactions of distributed components

19
Major Findings 2

• Adjust the regulated business model to encourage
  utilities to support, integrate, and adopt
  distributed energy solutions
• Reward utilities for creating and managing
  least-cost approach to overall delivery of energy
• Remove disincentives for utilities to incorporate
  customer demand reduction initiatives as a
  resource to manage system
• Work with state regulators, utilities, other
  stakeholders to adopt new approaches

20
Major Findings 3

• Expand facilitated stakeholder collaboration
• Bring together interested stakeholders, and more
  actively engage regulators and their staffs and
  energy customers
• Pursue other elements of E2Is Framework
  methodology not addressed in CA pilot
• Facilitate informal working groups of experienced
  professionals representing key stakeholders, to
  design pilot programs to implement and evaluate
  the high priority activities

21
Opportunities for Focus

• Stakeholder collaboration to develop the win for
  utilities
• Find ways to reward proactive integration of
  distributed generation, renewables, demand
  response, and energy efficiency
• DER value assessment use stakeholder approach
  to reach agreement on values and quantification
  methods
• Develop an approach for targeting system benefits
  charges and other incentives to locations with
  the highest grid value.

22
Appendix

• E2I CA DER Pilot Project Materials
• SCE DG Solicitation Information
• Working Group participants
• Sample value calculation

23
Intent of SCEs DG RFP

• Solicit others to provide Distributed Generation
  installations coupled with controls to provide
  Physical Load Reduction Assurance as a
  potential short-term alternative to SCE
  expanding or upgrading its Distribution System
  through the use of traditional distribution
  wires projects
• Potentially reduce short-term TD costs by
  entering into operating agreements with customers
  operating or planning to operate DG that will
  allow the deferral of identified requirements for
  the upgrade or expansion of SCEs distribution
  systems

24
Paramount Requirements

• Located in the right place The distributed
  generation must be located where the utilitys
  planning studies identify substations and feeder
  circuits where capacity needs will not be met by
  existing facilities, given the forecasted load
  growth
• Installed and operational The DG unit must
  be installed and operational in time for the
  utility to avoid or delay expansion or
  modification.
• Provide sufficient capacity Distributed
  generation must provide sufficient capacity to
  accommodate the utilitys planning needs.
• Provide physical assurance Customers offering
  to operate Distributed generation must provide
  appropriate physical assurance to ensure a real
  load reduction on the facilities where expansion
  is deferred.

25
Prospective 2004 RFP Timeline
06 deferment projects operational
Identify candidate distribution projects
06 deferment projects physical assurance systems
operational
Responses due
Issue RFP
07 deferment projects operational
Execute agreements
07 projects phys. assur. systems operational
10/04
05/05
11/05
11/06
05/06
05/07
11/04
08/05
26
Working Group Participants

• Advisors
• Valerie Beck, CPUC
• Mark Rawson, CEC
• Nag Patibandla, NYSERDA
• Valerie Harris, CPS San Antonio
• Fran Cummings, Mass Tech Collaborative
  (Substitute Gerry Bingham)
• Tony Prietto, SDGE
• Sephir Hamilton, CHGE
• Eileen Buzzelli, First Energy
• Pat Hoffman, DOE. (Designee Joe Ianucci)
• Jim Armstrong, NStar Electric and Gas Corp
  (Invited by Mass Tech Collaborative)
• E2I Pilot Project Team
• John Nimmons, Nimmons Associates
• James Torpey, Madison Energy Consultants
• Snuller Price, E3
• Dan Rastler, EPRI
• Ellen Petrill, E2I

• Developers
• Kevin Best, Real Energy (Sub Robin Luke)
• Tom Drolet, DTE Tech
• Chach Curtis, Northern Power Systems
• Jeff Lyons, US Power
• Gordon Savage, Simmax Energy
• Suppliers
• Tod OConnor, STM Power
• George Wiltsee, Ingersoll-Rand
• Eric Wong, Cummins
• Kevin Duggan, Capstone
• Bob Bjorge, Solar Turbines
• Customers/Customer Representatives
• Justin Bradley, SVMG (Sub Jeff Byron)
• Howard Choy, LA County ISD (Substitute Steve
  Crouch)
• Southern California Edison
• Stephanie Hamilton, Tom Dossey,
• Ishtiaq Chisti, Dan Tunnicliff, Lynn Ferry

27
Operational Requirements of an Example DG to Meet
Needs in Area A

• DG is required to reduce peak loads

DG operates during highest load hours Usually
the hottest summer days About 100 hours in this
area
Local Area Demand (Amps)
Percent of Hours (Sorted High to Low)
28
Calculating the Value of Deferring a Specific
Distribution Upgrade for Area A for Three Years
PRESENT VALUE OF THREE-YEAR SAVINGS STREAM Year
one 39,000 / 290 kVA 135/ kVA Year two
38,000 / 580 kVA 65/ kVA Year three
36,000 / 880 kVA 41/ kVA Present
Value 107,000 / 880 kVA 122/kVA
Ratepayers better off as long as DG payments are
less than 107,000 (122/kVA for 880kVA)
Basic Assumption WACC 6
29
What does this all mean?

• Area A DG is worth roughly 135/kVA-yr in year
  1
• Value falls off quickly to 41/kVA-yr within 3
  years
• 3-year contract for 880kVA is worth about
  122/kVA over 3 years, or 107,000
• Keys to capturing this value are
• location
• dispatch
• coordination with distribution planning