Valuation of NEM Solar:Transmission & DistributionGrid Perspective

January 9, 2020

Maria Veloso Koenig, Director,Grid Planning & James Frasher,Senior Strategic Business Planner, Research & Development

Agenda

January 9, 2020 2

• Transmission & Distribution (T&D) Value Study Recommendations

• Words to know

• What is the grid

• Overview of T&D Grid and Planning Process

• Power Flow on Grid – Yesterday vs Today

• Battery Storage & Energy Control Examples

• T&D Grid Impacts

• Illustrative Distribution Substation Transformer Loading & NEM PV Production

• Illustrative Service Transformer Loading & NEM PV Production

• Transmission & Distribution (T&D) Value Study Recommendations

NEM solar valuation -Transmission & Distribution perspective

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System Demand

Benefit: Reduces daytime demand and may delay traditional system upgrades

Cost: Capacity is still required to serve intermittency, evening load ramping, and immediately upon utility restoration

System Losses

Benefit: Local generation reduces losses on distribution and transmission grid

Cost: Excess generation increases losses at local level

Reliability & Resiliency

Benefit: Customers can run critical loads using their PV/Storage system if isolated from the utility grid

Neutral: Inverters will trip off line during system disturbance

Voltage/Power Quality

Benefit: Local power quality support can be maintained with appropriate Smart Inverter settings

Cost: Distribution system equipment wear & tear (voltage regulators, capacitors)

Words to know

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• American National Standards Institute (ANSI) – Organization that oversees development of standards for products, services, processes and systems

• ANSI C84.1 – American National Standard for Electric Power Systems and Equipment – Voltage Ratings (60 Hertz)

• California Public Utility Commission – A government entity that regulates privately owned utility companies in California

• Distribution Capacity – The maximum loading an electrical equipment on the distribution grid can support during normal and emergency conditions measured in megavoltamperes (MVA) or kilovoltamperes (kVA)

• Energy – The amount of electricity produced by a generator, consumed by a customer, or stored by a battery over a specific period of time and measured in megawatt-hours (MWh) and kilowatt-hours (kWh)

• Federal Energy Regulatory Commission (FERC) – An agency that regulates the energy industry

• Grid – A network of transmission and distribution facilities that provide path for power to be transmitted from a generation source all the way to end users.

• Native load – The end-use customer connected loads (Air conditioner, appliances, electric vehicle charger, etc.)

• North American Electric Reliability Corporation (NERC) - A regulatory body that assures grid reliability and security

• Power – The output an electricity generator, demand resources or batteries deliver to a grid, measured in megawatts (MW) or kilowatts (kW)

• System Demand – The amount of power provided by SMUD to meet customer electricity use, including electricity travel losses, at a specific time measured in megawatts or kilowatts

• System Losses - Electricity has to be transmitted to consumers via extensive networks. The transmission over long distances creates power losses. The major part of the energy losses comes from Joule effect in transformers and power lines. The energy is lost as heat in the conductors.

• Western Electricity Coordinating Council (WECC) – An organization that has been delegated to assure grid reliability and security of the Western Interconnection’s Bulk Power System

January 9, 2020

What is the grid?

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Transmission

Distribution

SMUD’s T&D System Summary

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• Miles of Line Transmission – 484 miles

Sub-transmission – 646 miles

Distribution – 9,692 miles

Secondary – 5,710 miles

• 20 Transmission Substations

• 187 Distribution Substations• Total Photovoltaic (Installed PV

Capacity)- NEM

o Residential - 113 MWo Commercial – 97 MW

- Utility Scale – 110 MW

Overview of Transmission & Distribution (T&D) Grid Planning Process

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• Purpose

- Ensure transmission and distribution system adequacy to meet load serving needs

- Ensure compliance with North American Electric Reliability Corporation (NERC) reliability standards and other applicable industry standards

• Drivers

- Safety

- Reliability

- Power Quality

- Regulatory Compliance

- Cost Effectiveness

Overview of Transmission & Distribution (T&D) Grid Planning Process (cont)

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• Transmission Planning horizon covers 10 years (updated annually)

• Distribution Planning horizon covers 5 years (updated annually)

• Criteria- Serve load during peak conditions without exceeding equipment thermal ratings

and voltage operating limits

o Transformerso Wires

- Locate substation facilities as close to the load center and in commercial/industrial parcels if possible

- Coordinate capital investments with aging infrastructure replacements and other capital maintenance programs and initiatives

In depth analysis performed annually to ensure transmission and distribution grid comply with reliability standards and serve load safely, reliably and cost effectively

Power Flow on Grid - Yesterday vs Today

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Transmission Lines

Transmission Substations

Sub-transmission Lines

Distribution Substations

Distribution Lines

Service Transformer &

Secondary

NEM customers1-Way Power Flow

2-Way Power Flow

Before NEM After NEM

• Since we last talked on November 7th SMUD has…

- Launched Residential Smart Energy Optimizer Pilot Program (Residential Customer Pilot)o Enables customer owned systems to dispatch when resources are neededo Pilot will evaluate device response reliability and grid impacto Pilot Payment Structure: $500 upfront and $10/month

- First customer enrollment into the SMUD Energy StorageShares Pilot Program (Commercial Customer Pilot)o Aligns customer investment in technology with grid needso Avoids increased GHG emissions from demand charge reductiono Considers locational impact of technology adoption

- Released an RFP for a 4MW energy storage systemo Will provide infrastructure support for the Hedge Substationo Planned market participation (CAISO / Energy Imbalance Market)o Evaluation of stacked value streams

- Completed Installation of our 60kW Second Life Battery Projecto Located at SMUD’s PV canopy parking loto Supporting 175kW DC fast charger, Level 1&2 Electric Vehicle Storage Equipment

(EVSE’s) and ~65kW of PVo Coordinated operation of all technologies reducing the burden on service infrastructure

Battery Energy Storage Update

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Importance of Energy Storage Control

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This graph shows an individual commercial customer load profile for 1 day. The curve contains 96 data points taken at 15-minute intervals. Recording data at 15-minute intervals is standard for commercial customers.

Importance of Energy Storage Control

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This graph is an overlay of data from 9 similar commercial customer loads for a 24 hour day. Each line shows the utility meter readings for an individual customer.

Importance of Energy Storage Control(Illustrative Example of Cumulative Load of all 9 Customers)

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Adding the 9 individual customer loads together shows the load that SMUD serves for these customers. Lowest consumption occurs overnight with increased consumption during the daytime.

Comparative Examples

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Scenario 1: Individual Optimization

9 Individual Systems Installed: Each sized at 60kW // 120kWhTotal Batteries installed: 540kW // 1080kWh

Estimated Total Battery Cost: $600,000 to $1,000,000

Scenario 2: Aggregated Optimization

1 System Installed: 200kW // 400kWh

Estimated Total Battery Cost: $200,000 to $400,000

The impact of battery control was evaluated under 2 scenarios. Scenario 1 assumes installation of batteries by individual customers and operation based on individual demand charge reduction. Scenario 2 considers the installation of a smaller battery system to reduce peak demand of the aggregated load.

Individual Optimization Example

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Scenario 1: Individual OptimizationTotal Storage: 540 kW // 1080 kWh

Under scenario 1, individual operation of each of the 9 battery systems decreases the peak of the aggregated load. Peak reduction varies over the 24 hour period because individual customer loads do not always peak at the same time.

Aggregate Optimization Example

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Scenario 2: Aggregated OptimizationTotal Storage: 200 kW // 400 kWh

Under scenario 2, aggregated operation of the battery systems also decreases the peak of the aggregated load. Peak reduction is more stable over the 24 hour period because the battery is not responding to changes at the individual customer level, but rather changes in the aggregated load.

Utility Model vs Investor Owned Model

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In this example less then half the battery capacity could provide as good or better benefits than the larger

alternative because of the control strategy.

This example shows the power of the utility model and how working together brings the best outcomes (financially & environmentally) for all parties and maximizes every dollar we spend to benefit all our customers.

Location Matters For Distributed Energy Resources

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Customer Battery Benefit

Utility Battery Benefit

Value Spread Across Territory

Highly Locational Value

*Representative Example. Not based on actual location needs.

January 9, 2020

A few guiding questions for integration with distributed energy resources:• How do we make the best use of the

assets we have?• How can we increase the useful life of

the assets we invest in?• How do we provide the right solution to

the right place at the right time?

NEM / Grid Operating Environments

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Optimal Sunny Conditions Cloudy / Smoky Conditions

Grid Disturbances / Outages Evening Peak Load Conditions

Grid Impacts From PV on System Demand

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Rooftop solar reduces system net demand during normal daytime operating condition.

Neighborhood Transformer

Grid Impacts From PV on System Demand

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Load must be served under ALL conditions (cloudy or smoky day, evening). System must be designed to meet demand also when rooftop solar is not producing.

Grid Impacts from PV on System Demand

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System Demand Solar Solar + Storage

NEM Customer Benefit Benefit

Utility Distribution Grid

Benefit – Reduces System Demand during normal day time operating conditions

Neutral - Does not contribute during non-solar producing periods

Benefit – Reduces System Demand during peak periods

Cost – Uncontrolled battery storage charging could increase System Demand

Grid Impacts From PV on System Losses

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Rooftop solar reduces system losses but as excess generation flows upstream, then losses occur at local level

T&D Line Loss

Less Neighborhood Line Loss

Excess Generation = Distribution Line Loss

Grid Impacts from PV on System Losses

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System Losses Solar Solar + Storage

NEM Customer Benefit Benefit

Utility Distribution Grid

Benefit – Reduces System / Line Losses

Cost – Excess generation causes System Losses at local level

Benefit – Reduces System Line Losses

Added Benefit –Shared control of the inverter can avoid load pockets

Grid Impacts From PV on Voltage Regulation

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Rooftop solar with Smart Inverter technology is capable to support voltage regulation at local level

Voltage Regulation

Smart Inverter can assist in Voltage Regulation

Capacitor Banks & Voltage Regulators

126V

114V

120V

Smart Inverter can assist in Voltage Regulation

Grid Impacts from PV on Voltage Regulation

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Voltage Regulation Solar Solar + Storage

NEM Customer Benefit Benefit

Utility Distribution Grid Benefit – If applicable Smart Inverter technology functions are enabled it will provide voltage regulation support at local level.

Cost – If not enabled, additional voltage support is required from SMUD to support all customers (i.e., capacitor banks, voltage regulators).

Benefit – If applicable Smart Inverter technology functions are enabled it will provide voltage regulation support at local level. Storage can provide additional benefit by absorbing excess PV generation.

Grid Impacts From PV – Reliability & Resiliency

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Rooftop solar will go off line in the event of a utility service outage.

Grid Impacts from PV on Reliability & Resiliency

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Reliability & Resiliency Solar Solar + Storage

NEM Customer Neutral – Adds no additional benefits or costs

Benefit – Customers can run critical loads using their PV/Storage system if isolated from the utility grid

Utility Distribution Grid

Neutral – Adds no additional benefits or costs

Neutral – Adds no additional benefits or costs

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Substation Transformer Net Load NEM PV Gen Substation Capacity Native Load

Illustrative Distribution Substation Transformer Loading & NEM PV Production (8/14/19)

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Key Takeaway:Transformer capacity still required to address native load

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Substation Transformer Net Load NEM PV Gen Substation Capacity Native Load

Illustrative Distribution Substation Transformer Loading & NEM PV Production (5/16/19)

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Key Takeaway:PV generation can become intermittent due to clouds or smoke

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Distribution Service 75kVA Transformer Loading and NEM Generation

Service Transformer Net Load NEM PV Gen Native Load

Illustrative Service Transformer Loading & NEM PV Production (5/11/19, 5/16/19, 8/14/19)

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5/11/19 – Clear day 5/16/19 – Cloudy day

8/14/19 – Clear summer dayKey Takeaway:Capacity still required to address native load

NEM solar valuation -Transmission & Distribution perspective

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System Demand

Benefit: Reduces daytime demand and may delay traditional system upgrades

Cost: Capacity is still required to serve intermittency, evening load ramping, and immediately upon utility restoration

System Losses

Benefit: Local generation reduces losses on distribution and transmission grid

Cost: Excess generation increases losses at local level

Reliability & Resiliency

Benefit: Customers can run critical loads using their PV/Storage system if isolated from the utility grid

Neutral: Inverters will trip off line during system disturbance

Voltage/Power Quality

Benefit: Local power quality support can be maintained with appropriate Smart Inverter settings

Cost: Distribution system equipment wear & tear (voltage regulators and capacitors)

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Distribution Service 75kVA Transformer Loading and NEM Generation

Service Transformer Net Load NEM PV Gen Native Load

Illustrative Service Transformer Loading & NEM PV Production (5/11/19, 5/16/19, 1/7/20)

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1/7/20 – Foggy day5/11/19 – Clear day 5/16/19 – Cloudy day