MTS Working GroupWebinar Mtg

April 9, 2015

22

Agenda

• Introduction - Paul De Martini

• DRP Methodology - Mark Esguerra

• Q2 2015 Plan - Paul De Martini

Optimal Location Values & Methodology

44

Distribution Planning Process

Annual Distribution Plan For Each DPA &

Substations/Feeders

Bi-Annual DRP & Integration Capacity

Analyses

DRP Locational Value Methodology

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000 Net Locational Value

by Location

Identification of Optimal Locations

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

Locational Value: Avoided Costs and Benefits

Geographical Areas

Not Required for “Walk” Phase

55

Value Analysis: Avoided Costs and Benefits

Value Integration Cost Net Locational Value $-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

Integration Costs

Net Avoided Cost

Total Benefits

Locational Value: Avoided Costs and Benefits

Local Emissions Power Quality Resiliency Reliability Local EmissionsPower QualityResiliencyReliability

Illustrative

Note: Analysis excludes some avoided costs/benefits that do not have a locational dimension. Therefore, analysis is not intended to estimate full stack of avoided costs and benefits associated with DER “Integration Costs”. These include investments to realize locational benefits such as grid modernization, procurement, and other related costs.

Benefits

Avoided Costs

66

Final CPUC Guidance on Optimal Location Benefit AnalysisRequirements:• IOU Unified Locational Net Benefits methodology

• Based on E3 Cost-Effectiveness Calculator, but enhanced to include following location-specific values (minimum):

# Minimum Value Components to include in Locational Net Benefit Methodology1 Avoided Sub-Transmission, Substation and Feeder Capital and Operating Expenditures2 Avoided Distribution Voltage and Power Quality Capital and Operating Expenditures3 Avoided Distribution Reliability and Resiliency Capital and Operating Expenditures4 Avoided Transmission Capital and Operating Expenditures5 Avoided Flexible Resource Adequacy (RA) Procurement6 Avoided Renewables Integration Costs7 Any societal avoided costs which can be clearly linked to the deployment of DERs8 Any avoided public safety costs which can be clearly linked to the deployment of DERs

77

MTS Identified DER Value Components (1/2)

Value Component Definition

Wholesal

e

WECC Bulk Power System Benefits Regional BPS benefits not reflected in System Energy Price or LMP

CA System Energy Price Estimate of CA marginal wholesale system-wide value of energy

Wholesale Energy Reduced quantity of energy produced based on net load

Resource Adequacy Reduction in capacity required to meet Local RA and/or System RA reflecting changes in net load and/or local generation

Flexible Capacity Reduced need for resources for system balancing

Wholesale Ancillary Services Reduced system operational requirements for electricity grid reliability including all existing and future CAISO ancillary services

RPS Generation & Interconnection Costs Reduced RPS energy prices, integration costs, quantities of energy & capacity

Transmission Capacity Reduced need for system & local area transmission capacity

Generation/DER Deliverability Increased ability for generation and DER to deliver energy and other services into the wholesale market

Transmission Congestion + Losses Avoided locational transmission losses and congestion as determined by the difference between system marginal price and LMP nodal prices

Wholesale Market Charges LSE specific reduced wholesale market & transmission access charges

For reference, yellow highlighted value components relate MTS defined values to CPUC Final Guidance for initial DRPs

Societal & Environmental value components left to IOUs to identify locational linkage

88

MTS Identified DER Value Components (2/2)

Value Component Definition

Distribution

Subtransmission, Substation & Feeder Capacity Reduced need for local distribution system upgrades

Distribution Losses Value of energy due to losses between wholesale transaction and distribution points of delivery

Distribution Steady-state Voltage Improved steady-state (generally >60 sec) voltage, voltage limit violation relief, reduced voltage variability, compensating reactive power

Distribution Power Quality Improved transient voltage and power quality, including momentary outages, voltage sags, surges, and harmonic compensation

Distribution Reliability + Resiliency+ Security Reduced frequency and duration of outages & ability to withstand and recover from external natural, physical and cyber threats

Distribution Safety Improved public safety and reduced potential for property damage

Custome

r, Environmental &

Societal

Customer Choice Customer & societal value from robust market for customer alternatives

CO2 Emissions Reductions in federal and/or state carbon dioxide emissions (CO2) based on cap-and-trade allowance revenue or cost savings or compliance costs

Criteria Pollutants Reduction in local emissions in specific census tracts utilizing tools like CalEnviroScreen. Reduction in health costs associated with GHG emissions

Energy Security Reduced risks derived from greater supply diversity

Water Use Synergies between DER and water management (electric-water nexus)

Land Use Environmental benefits & avoided property value decreases from DER deployment instead of large generation projects

Economic Impact State and/ or local net economic impact (e.g., jobs, investment, GDP, tax income)

99

E3 Cost Effectiveness Methodology

E3 Value Components System/Local E3 DERACT Method

Generation Energy System Forward market prices based on fixed and variable operating costs of CCGT.

Losses System System loss factors

Generation Capacity System Residual capacity value for a new simple-cycle combustion turbine

Ancillary Services System Percentage of generation energy value

T&D Capacity System Marginal system-wide sub-transmission and distribution costs from utility ratemaking filings

Environment System Synapse Mid-level carbon forecast developed for use in electricity sector IRPs

Avoided RPS System Cost of marginal renewable resource less the energy market and capacity value associated with that resource

• Utilize E3’s Distributed Energy Resources Avoided Cost Model (DERAC)• But, Current DERAC model has “system level” values that need to be

modified/replaced with relevant locational specific values.

1010

Proposed Adaptation of E3 DERACT for Locational Benefits Analysis

Value Components E3 DERACT CPUC Guidance

Recommendation

DERACT

Values

Generation Energy System N/A

Losses System N/A

Generation Capacity System Flexible RAUse MTS Method in DERACT based on Local Capacity Requirement

Ancillary Services System N/A

T&D Capacity System Yes, Local Use MTS Method in DERACT

Environment System Yes, Local Use MTS Method in DERACT

Avoided RPS System N/A

Additional Value

s

Transmission Capacity None Yes, Local Use MTS Method in DERACT

Dist. Voltage & Power Quality None Yes, Local Use MTS Method in DERACT

Dist. Reliability, Resiliency & Security None Yes, Local Use MTS Method in DERACT

Safety None Yes, Local Use MTS Method in DERACT

Renewable Integration Costs None Yes, System Use MTS Method in DERACT

1111

MTS Recommendations

• Utilize E3’s DERACT model as starting point, but leverage MTS locational methods in lieu of system values as applicable • For example, Local RA will be used for Generation Capacity value

• Generation related integration costs incorporated using interim integration adder adopted by CPUC – System value

• Societal & Public Safety will be included as qualitative factors until quantitative data is available.

• Review and compare T&D deferral benefit calculations among the IOUs

• For all categories, DERs may increase cost (e.g., integration systems cost). Net Benefit for specific technologies will account for any increased costs.

1212

Final Commission Guidance and MTS WG Recommendations

Q2 2015 MTS WG Scope

1414

MTS WG 2015

• Advisory Board (Quarterly, or as needed)

• MTS Working Group (Monthly – webinar)

• Technical sub-groups (as needed virtual & in person)

• Complete discussion on alignment of DPP with CA planning and CPUC ratemaking

• Define initial services (incl. functional requirements) for deferred capital, voltage/reactive power management and reliability/resilience. Plus identify sourcing structures related to these services (e.g., procurement, tariffs, programs, other)

• Define incremental operational functions to integrate and optimize DER related to the values identified in the CPUC final guidance. This includes identifying technology and new processes leveraging industry practices and CA developments (incl. measurement, ISO/IOU coordination processes, information protocols, etc.)

Structure Q2 2015 Activity

DRP Methods Background

1616

Avoided Sub-transmission, Substation and Feeder Capital & Operating Expenses • Definition

• Avoidable costs incurred to increase capacity on sub-transmission, substation and/or distribution feeders to ensure system can accommodate forecast load growth

• Value Calculation Approach• Use utility capacity 10-year plans by substation and/or future

plans that result from the DRP that include enhanced ICA analysis and locational benefits methodologies.

• Benefit/Avoided Cost is the deferred cost of capital value of deferring capacity work

• Examples• Substation upgrades• Transformer upgrades• Distribution feeder reconductoring/reconfiguration

1717

Avoided Distribution Voltage and Power Quality Capital and Operating Expenses • Definition

• Avoidable costs incurred to ensure power delivered is within required operating specifications (i.e. voltage, flicker, etc.)

• Value Calculation Approach• Use existing information in conjunction with DRP scenarios

analysis to identify projected avoided overloads of distribution transformers and services, and any reactive requirements that cannot be met by smart inverters alone.

• Examples• Breakdown maintenance investments that result from historical

and projected customer complaints, or information from smart meters.

• Best achievable avoided cost in this category are unnecessary transformer and service replacements due to overloading.

1818

Avoided Distribution Reliability and Resiliency Capital & Operating Expenses • Definition

• Avoidable costs incurred to proactively prevent/mitigate routine outages (reliability) and major outages (resiliency)

• Avoidable costs incurred in responding to routine outages (reliability) and major outages (resiliency)

• Distribution Resiliency costs defined as spending needed to meet reliability expectations that are above/beyond distribution planning criteria to address major outage events.

• Value Calculation Approach• Avoided costs to improve reliability/resiliency based on statistics (i.e. SAIDI, CAIDI, SAIFI)

by substation/local area• Examples:

• Reduction of O&M expenses due to reduced duration of outages and labor required for restoration

• Forecasted future capital reductions based on longer equipment replacement life cycles (better system efficiency)

• Reduced outages due to the use of microgrids

Note: In order to achieve improved reliability, more investments are needed in areas for microgrid development, control and communications with DER technologies for a portfolio solution, DMS, DERMS, advanced protection, etc.

1919

Avoided Transmission Capital and Operating Expenses

• Definition• Avoidable costs incurred to increase capacity on transmission line

and/or substations to ensure system can accommodate forecast load growth

• Value Calculation Approach• Use existing CAISO TPP plan by substation and/or• Perform load forecasting vs. capacity analysis to forecast needed

capacity upgrades before exceeding NERC reliability criteria• Benefit/Avoided Cost is value of deferring transmission capacity

work

• Examples• Substation upgrades• Transformer upgrades• Transmission line reconductoring/reconfiguration• Voltage regulation investments

2020

Avoided Flexible Resource Adequacy Procurement• Flexible RA determined at system level.

• Instead of Flexible RA, recommend using Local RA.

• Alternate Definition (Avoided Local RA Procurement)• Avoidable incremental costs incurred to procure Resource Adequacy (RA)

in CAISO-identified local areas (e.g. LCR)

• Value Calculation Approach• Use latest CAISO local capacity requirements to identify incremental

capacity needs beyond current generation and identify deficient sub-areas.

• Benefit/Avoided Cost is value of deferred Local Capacity or transmission

• Examples• Local RA Procurement

• PG&E: Needs to purchase Bay Area Local RA at a premium in area to fulfill Local RA requirements

2121

Avoided Renewable Integration Costs

• Renewable Integration determined at system level. • Not location specific

• Definition • Avoidable incremental costs to integrate renewables onto electric

system.

• Value Calculation Approach• Current cost calculation is an interim method for calculating

renewable integration costs at a system level, which is to be replaced in 2015.

• Utilities to coordinate efforts with development of the updated RPS Calculator and Renewables Integration Charge to factor in locational specific values

2222

Societal Avoided Costs

• Definition • Avoidable incremental costs that are borne by the public, as well

as environmental benefits (improvements in air and water quality and land impacts) that can be clearly linked to deployment of DERs.

• Value Calculation Approach• Until more data is available in this area, qualitatively identify

societal value of a location • Use CalEnviro Screening tool as a qualitative method• In some cases, DERs impose costs on society, such as increased

taxes for those not participating with DERsExamples

• Criteria Pollutant Emissions/Local Air Assessments/ Health Impacts

2323

Avoided Public Safety Costs

• Definition • Avoidable incremental public safety related costs that can be clearly

linked to deployment of DERs.

• Cost Calculation Approach• Until more data is available in this area, qualitatively describe the Public

Safety Benefits• In some cases DER could potentially increase costs and hazards for safety

related items

• Note: • Safety is a fundamental consideration in distribution planning related to

ageing infrastructure replacement, capacity additions and reliability/resiliency. Not clear at this time if there is a discrete locational avoided cost element. Also, due to the ongoing replacement of ageing infrastructure the inherent safety aspects of the distribution system are improving.