Locational Valuation Challenge Quantified for DERs

The Smart Electric Power Alliance (SEPA), in partnership with Nexant, announces the release of a new report entitled: "Addressing the Locational Valuation Challenge for Distributed Energy Resources." It is the second report in SEPA's Beyond the Meter series, focusing on program strategy and planning for distributed energy resources (DERs).

Locational value, the potential to defer traditional "wires" investments, is a key value proposition for DERs, such as battery storage, distributed solar, energy efficiency and demand response. With the push to incorporate DERs into distribution planning, a common metric or approach is needed for assessing potential capacity deferral value. Based on case studies with Central Hudson Gas & Electric and other utilities, the methodology in this report calculates a common locational value metric that identifies opportunities for “non-wires” alternatives and can be applied across electric utility service territories and DERs.

“The ability of DERs to defer traditional distribution investments depends on how well the operational characteristics of DERs, both individually and as part of a portfolio, align with local peak patterns and needs,” said Josh Bode, Vice President at Nexant. “This report summarizes a scalable methodology that utilities can integrate into their planning processes to optimize the mix of DERs throughout their distribution system.”

Key insights of the report include: Utility managers asked to integrate DERs into distribution system planning need a way to compare DERs to more traditional distribution resources. However, approaches that seek to boil DER value down to a single benefit-cost ratio or average value per kilowatt-hour are overlooking the differences in temporal and locational characteristics inherent in DERs. A metric applicable across various DER technologies allows for the capacity deferral value provided by various DERs to be stacked and combined. Four factors help identify when and where DERs have the potential to provide the most distribution deferral value: excess capacity, projected load growth, load shape attributes, and the timing, duration, and magnitude of need. And the proposed Load Carrying Capacity Factor (LCCF) is a measure that captures the ability of a given DER to provide effective locational capacity, when and where it is needed.

“Understanding the locational value that DERs offer to the grid is critical to their integration to distribution planning and for indicating the correct market signals to providers,” said Hal Turner, Manager of Electric Engineering Services at Central Hudson.

“Valuing DERs has been and will continue to be one of the keys to unlocking the powerful synergies they can offer for customers and utilities.” said Julia Hamm, SEPA President and CEO. “By recognizing the impact of time and locational variables, the Nexant methodology has the potential to move industry discussions beyond traditional cost-benefit analyses. As energy technologies evolves, our methods for valuing these resources have to evolve too.”

Download "Addressing the Locational Valuation Challenge for Distributed Energy Resources" here. Josh Bode will present a summary of the report and discuss the locational valuation methodology 3:30-4:00 p.m., Wednesday, Sept. 14, at Solar Power International in Las Vegas. Bode and SEPA researchers will also be available for interviews during the conference.