wg-1: dspp markets committee

NYSDPS

WG-1: DSPP MARKETS COMMITTEENew York State Department of Public Service

July 10, 2014

https://www.google.com/url?q=http://www.dps.ny.gov/&sa=U&ei=5MN0U5nZCIidqAaJvILICg&ved=0CEgQ9QEwDQ&usg=AFQjCNFyLtQvTYWlMU5rOp47W1dqDH8cuA

07-10-2014 WG-1: DSPP Markets Committee

About this Presentation

This presentation includes input from all sectors and parties

This presentation does not nor was it intended to represent a consensus view

For this committee, policies and facts are intertwined, and development of the issues requires consideration of both


Agenda

Committee Overview

Products & Services

Challenges & Pathways to Increased DER Penetration

Initial Model

Interaction with Wholesale Markets

Summary


Committee Overview: Participation & Structure

Steering Committe

eGovernmental

Agencies

Consumers

ESCOsOther

Utilities

DER Providers

Environmental Groups

Each sector represented on a Steering Committee

Steering Committee members coordinated with parties within sector/sub-sector

Weekly working meetings of the Steering Committee

Weekly reports to and requests for information from the full Committee

Interaction with Wholesale Markets subgroup


Committee Overview: Scope

The scope and objectives of the Markets Committee was to:

• Identify potential products, services and transactions between various parties under the new REV construct

• Develop information on the value of the products and services• Focus on the near term or initial stage of REV rather than end state market

structure• Define challenges and pathways to further proliferation of DER provision of

products and services• Recommend a potential initial model or procurement structure to facilitate DER• Describe interaction of DSPP and other parties with NYISO wholesale markets


Committee Overview: Key Takeaways

There are numerous potential products and services that DER can provide• Some exist today; it is expected that new and innovative products will develop in the future

Precise definitions of DSPP products and services will be of great importance; the varying legal, industry, and customer context leads to ambiguity in such basic terms such as energy, capacity, demand response, and distributed energy resources

Distributed energy resources exist today • Programs and initiatives by PSC, NYSERDA, utilities, ESCOs, NYISO etc.• Resources may be under utilized• More resources are needed to optimize efficiency and achieve the goals of REV

There are a number of challenges to further proliferation of DER

In the initial stage: • The utilities will play a key role in further developing and utilizing DER• Utilities and DER providers need to be engaged and share information • There are regulatory actions that can help facilitate DER development• NYISO market rules may also need to be aligned


Agenda

Committee Overview

Products & Services


Initial Model


Summary


Products & Services: Overview

The Committee broadly defined DER to include:• Distributed generation (e.g., fuel cells, PV, CHP, etc.)• Energy storage• Demand response• Energy efficiency• Microgrids• Other distributed resources

New innovative resources are expected to be developed in the future

For this effort, products and services viewed from two perspectives:• Procured by the DSPP for the benefit of the electric distribution system or to

meet public policy requirements • Procured by and among customers, ESCOs, DER providers and other third

parties


Products & Services: Bought by the DSPPPotential Benefits

Multiple benefits can be expected from some products:

Product or Service Examples of anticipated benefits

Base load modifications (e.g., local energy production/supply side increases; permanent load shift/reduction)

Avoided or deferred T&D investmentsReduced line lossesIncreased system flexibilityReduced operating costsFuel diversityEmission reductions

Peak load modifications (e.g., capacity – DER output offsetting generation; demand response/peak management; flexible capacity/ramp rate)

Improved asset utilization/load factorImproved local reliabilityImproved system stabilityImproved capacity utilizationClimate change mitigationLower energy/capacity costs



Product or Service Anticipated benefits

Non-bulk ancillary services (e.g., frequency response and regulation; spinning and non-spinning reserves; power factor correction; voltage support)

Local optimization of servicesImproved power qualityImproved efficiencyImprove reactive supportAdditional revenue to offset operating expensesReduced fuel consumption

Contingency/Planning (e.g., resource adequacy; black start; emergency power islands)

Improved resiliencyImproved emergency responseImproved system restorationIncreased proliferation of DER, particularly cleanPublic health and safety benefits

* NOTE: The Committee disagreed as to whether energy and capacity are products that the DSPP would buy/make a market for and whether they provide value to the distribution system.



The value of benefits of DER products are dependent on specifics of DER and system conditions.

Potential benefits will be influenced by:

• Location• Resource• Time of day• Resource variability• Predictability and visibility• Price• Other factors


Products & Services: Bought by Others

Product or Service ExamplesDelivery Services • Value added service

• DG/DER Interconnection service• Non-bulk ancillary services• Smart technology and load management services

End Use Customer Services • Enhanced power quality• Energy efficiency programs

Pricing and Billing Services • Time differentiated pricing• Billing for third parties• Management of transactions between customers/ESCOs and the DSPP or the DSPP and the NYISO

Metering and Information Services

• Customer usage data• Load research data• Market potential or saturation studies• Data analytics


Products & Services: Provision of DER

DER products and services may provided though various markets or funding mechanisms

• Bilateral agreements• DSPP tariffs (e.g., tiered)• Fee based aggregation• DER funding based on future savings• Wholesale markets • On-bill financing• Property Assessed Clean Energy (PACE)• DSPP, DER, ESCO and/or Third-Party provision of services


Agenda

Committee Overview

Products & Services


Initial Model


Summary


Challenges and Pathways: DER Penetration & Utilization

DER penetration is not currently at a level where an “end-state” market would function

Need to identify and remove challenges to entry, expansion and integration of DER

Need to provide appropriate market structures and incentives

DE

R P

enet

ratio

n

Build Asset Base

Establish Day 1 Market

Adapt and Improve Market

Time


Challenges & Pathways: How to Facilitate DER Penetration

Pricing• Monetize DER benefits

• Varying compensation based on distribution level benefits (location, level and timing of system needs, and resource performance)

• Monetize public policy and customer benefits • Develop appropriate pricing for services based on values and costs (e.g.,

incentives for performance of DER)

Information availability• Distribution system needs and capabilities• DER performance and commitment• Customer account/usage information

Billing and Metering• Standardization of metering, verification and reporting requirements


Challenges & Pathways: How to Facilitate DER Penetration

Technical• Interconnection rules

• Streamline• Coordinate electric, gas and steam operations

• Establish monitoring, control and verification of DER installations• Deployment of communication infrastructure

Other• Address cost and financing of DER• Incentivize utilities to consider DER alternatives to T&D investments• Continue RPS, EEPs, SBC through transition• Revisit standby rates (cost allocation)• Clarify future of net metering• Improve LSE/customer data submitted to the NYISO for capacity and energy settlements• Revise benefit/cost analysis framework to include societal benefits and costs (e.g.,

environmental)• Ensure use of DER maintains reliability of the T&D system


Agenda

Committee Overview

Products & Services


Initial Model


Summary


Initial Model: Utility Roles

DSPP CustomersBought by customers

Bought by DSPP

Third-Parties

Integrated Resource PlanningCustomer engagementServices (e.g. metering and financing options)AggregationProduct valuation and pricing (i.e. Tariff )


Initial Model: Utility Roles

An entirely market-based system in the near term is probably unrealistic

Utilities will likely play an integral role in facilitating and integrating DER

Utilities should do the following in the near term:

• Identify areas where DER would have near term value• Provide information and develop sufficient price signals to reflect distribution system needs

for planning and real-time operations • May require DSPP explore DER opportunities as alternatives to T&D investment through a

targeted RFP or rates• Partner with customers in identifying, designing and developing DER projects

• Integrate DER in system planning• First establish visibility into new and existing DER• Develop standard methods for predicting, measuring, observing, and verifying performance• Where feasible, utilities should standardize (e.g., information to be exchanged between

utilities and DER providers; contracts; etc.)


Initial Model: Potential Regulatory Actions

Regulatory actions may be needed to help facilitate utility procurement of DER and incorporation into its planning and operation functions

Some potential actions include:

• Provide guidance on “values” to be monetized and develop appropriate metrics (e.g., environmental benefits, resiliency, etc.)

• Adopt a cost/benefit valuation methodology for DERs as alternatives to T&D investment

• Multiple types of market and procurement models will able to be developed using the same valuation methodology but applied to different compensation mechanisms

• Leverage and expand existing programs as a bridge to sufficient DER penetration to animate markets

• Create a platform for communication, monitoring and dispatch of distribution level DER

• Address tariff, pricing and billing issues and policies (e.g., standby rates, net metering, capacity tags, access to customer information, utility rate design)


Initial Model: Potential Regulatory Actions

Potential actions include (continued):

• Address technical challenges (e.g., interconnection requirements, equipment limitations associated with two way flow; DER measurement/verification)

• Provide incentives, through performance-based ratemaking, for the utilities to pursue DER deployment opportunities

• Create or modify rate structure to more appropriately reward customer load responsiveness

• Begin transitioning toward advanced metering technology and direct load control where economic

• Ensure proper market rules are in place to create a level playing field and give all competitors equal opportunities to sell their products

• Develop a common portal to exchange information and solicit interest in products between Utilities, Customers, DER Providers, ESCO’s and other third parties

• Continue to address barriers or conflicts as they arise


Agenda

Committee Overview

Products & Services


Initial Model


Summary


DSPP Interaction with Existing Markets and Programs

NYISO MarketsEnergy MarketsCapacity MarketsAncillary Services

Demand Response Opportunities in NYISO ProgramsDay Ahead Demand Response Program – EnergyDemand Side Ancillary Service Program – Ancillary ServicesSpecial Case Resources - CapacityEmergency Demand Response - Reliability

Existing Utility DER ProgramsCon Ed Demand Response Programs/NYPA and LIPA programs


DSPP Interaction with Existing NYISO Markets

• DSPP use of DER to interact with the wholesale market:• Offsetting energy purchases by flattening load • Aggregating customer demand response capability

• DER visibility and control:• Enhances market efficiency and operational control• Provides distribution and bulk power system reliability

benefits• Aligned market rules:

• Ensure efficient and appropriately valued DER participation in both arenas.

• Avoid double payment for the same product purchased in both markets

• NYISO rule changes subject to NYISO governance


Maximizing the Benefits of DSPP Interaction with the NYISO

• Assess short-term impacts of increasing DER integration on the wholesale markets.

• Avoid unanticipated adverse impacts on bulk power system:• Market commitments• Real time operations • Reliability rules and requirements

• Plan DSPP market/program design to avoid unanticipated impacts requiring redesigns


Understanding the Impacts of Increased DER for Program Design and System Planning

• Is an evaluation of the impact of DER penetration on the New York bulk electric system valuable?• Reliability, including installed reserves• Increased regulation and other ancillary services• Impacts on production costs

• Planners must:• Recognize increased penetration of DERs• Account for its value• Understand reliability impacts

• Design DER programs to ensure load forecasting and system planning can rely on results• Align measurement and verification requirements


Maintaining Demand Response Capability

• Uncertainty as a result of the recent D.C. Circuit ruling on the FERC’s authority

• Ongoing DER value to the wholesale market through DSPP rates / programs that:• Shape the peak energy use/price• Satisfy the installed capacity obligation and • Reduce energy purchases

• Reliability can be facilitated by providing load reduction at NYISO request• Provide timely, transparent compensation to the DSPP for

any bulk power reliability benefit and DSPP administrative services


Agenda

Committee Overview

Products & Services


Initial Model


Summary


Summary

There are numerous potential products and services; some exist today; it is expected that new and innovative products will develop in the future

Distributed energy resources exist today and they provide products and services today

In order to fully achieve the goals of the REV initiative, including more efficient distribution and bulk power systems, additional resources and better utilization of existing resources is needed

There are a number of challenges to further proliferation of DER

In the initial stage, the utilities will play a key role in further developing and utilizing DER

More information sharing and engagement from both utilities and DER providers is needed


Summary (continued)

• There are regulatory actions that can help facilitate DER development (e.g., performance based regulatory design, address tariffs and pricing)

• NYISO market rules also need to be aligned to ensure efficient use of DER participants

• Approaches to increasing the penetration of DERs should occur systematically, reliably and safely.

wg-1: dspp markets committee

Documents

dspp markets committeepage

committee interaction

wholesale markets subgroup

innovative products

overviewthe committee

provision of products

numerous potential products

platform technology