August 24, 2018
GridWise Alliance's Comments on Virginia's 2018 Energy Plan
The GridWise Alliance (GridWise) appreciates the opportunity to comment on the 2018 Virginia Energy Plan. GridWise works to advance the modernization of the electric system and has existed since 2003. GridWise uses a holistic approach to examine the electric grid and the electric system, from generation to the end user. More specifically, the electric grid serves as the enabling platform (or the “central nervous system”) for the evolution that the electric industry and states across the Nation are undertaking, including the Commonwealth of Virginia. GridWise consists of a unique cross-section of members, including electric utilities, information and communications technology equipment and service providers, national laboratories, academic institutions, Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), and more. GridWise’s members that are headquartered or have a presence in Virginia include: Rappahannock Electric Cooperative, PJM (grid operator), IBM, and Lockheed-Martin.1
GridWise commends the Commonwealth for increasing the diversity of its energy resource mix and encourages the Commonwealth to continue to set and strive to meet more aggressive clean energy, energy efficiency, and related grid modernization goals, for instance, with respect to storage and advanced transportation technologies.
GridWise’s holistic approach to the grid includes ensuring the grid can manage an increase in distributed energy resources (DERs), as well as storage, electric vehicles, microgrids, and other innovative technologies. Thus, GridWise’s comments herein focus on the role of the grid with respect to DERs, storage, and beneficial electrification, such as transportation electrification, as well as the role of Advanced Metering Infrastructure (AMI, or “smart meters”) and other grid modernization technologies and capabilities that will help the Commonwealth achieve its stated energy, climate change, sustainability, and related goals. These comments address barriers and potential solutions to overcome them, particularly for storage and transportation electrification.
GridWise encourages and supports Virginia in continuing its efforts to promote a holistic, integrative, and cross-sectoral approach to energy and other critical infrastructure development (along the lines of “Smart Cities”). Such an approach should include: relevant “smart” technologies, as well as data analytics. Digitization and communications are vital components of such an approach. The adoption not only of distributed generation but also of smart load management is important.
Many commercial and industrial (C&I) customers have their own energy objectives, such as 100 percent renewable power in a net-zero context. If this is the case, utilities should consider partnering with these customers to incorporate their sustainability objectives and targets into the overall solution. One example of this type of approach is Wal-Mart, which sets its own renewable energy targets.
Customer education will be a critical component to the success and adoption of these new focal areas and options. Metrics will help ensure progress toward achieving established goals are measured and verified.
In terms of Virginia’s planning efforts, it is worth noting that DERs will not eliminate the need for the grid or for updating our Nation’s aging grid infrastructure. In fact, aging electric infrastructure is responsible for nearly 25 percent of the power outages in the U.S., according to one report.2?The Electric Power Research Institute (EPRI) estimates that momentary power outages and “power quality events cost businesses as much as $15-$20 billion annually.”3?And, these are just a portion of the costs across our entire economy. On the other hand, EPRI has estimated the total benefit from the smart grid to be between $1.3-2 trillion from 2010-2030 and benefit-to-cost ratios are found to range from 2.8 to 6.0.4
We are witnessing trends in the electric sector, including new technological advances that are providing new capabilities, including the bi-directional or multi-directional flow of electricity, information and communications. Society’s preferences, needs, and expectations with respect to electricity are changing. New, unregulated entities are entering the market to meet consumer needs with innovative products and services. Protections are needed to prevent and respond to increasing cyber and physical security threats, natural disasters, and the awareness thereof. As a result, grid dynamics are rapidly changing and increasing in operational complexity.
Over the next 15 years and beyond, this evolution will continue to have significant implications for reliability, transmission and distribution operations, security, resilience, and consumer choice. This evolution presents technological, regulatory, market, policy, and other challenges. Yet, these challenges also provide opportunities, such as with this 2018 Virginia Energy Plan.
Overarching Recommendations:
The Commonwealth might wish to consider goals and factors that help maintain a reliable and secure grid and that can facilitate the following types of capabilities and/or meet the following needs, such as:
(1) Dynamic optimization of grid operations and resources, with full cyber-security, to facilitate system reliability, resilience, and robustness.
(2) Deployment and integration of distributed resources and generation, including renewable resources, to help improve system performance, power flow control, and reliability;
(3) Development and incorporation of demand response, demand-side resources, and energy-efficiency resources.
(4) Deployment of ‘‘smart’’ technologies (real-time, automated, interactive technologies that optimize the physical operation of appliances and consumer devices) for metering, communications concerning grid operations and status, distribution automation.
(5) Deployment and integration of advanced electricity storage and peak-shaving technologies, including plug-in electric and hybrid electric vehicles, and thermal-storage air conditioning.
(6) Provision to consumers of timely and “action-able” energy usage information and control options and greater consumer empowerment;
(7) Identification and lowering of barriers to adoption of smart grid technologies, practices, and services.
(8) Near real-time situational awareness of the electric system.
(9) Advanced monitoring and control of the modernized electric grid; and,
(10) Enhanced certainty for private investment in the electric system.
“Smart Meters”:
Utilities will need greater situational awareness of the conditions on the grid to effectively manage the increasing complex relationship between DERs and the grid, to prevent outages, and to reduce the duration of outages, when they do occur (e.g., from natural disasters). GridWise understands that Dominion Energy, which obviously has a major presence in VA, plans to install smart meters in its service territory, which is an important step in this process, and is extremely supportive of this effort. Advanced Metering Infrastructure (AMI, or “smart meters”) is critical to helping achieve updated rate designs, as well as enhanced consumer engagement, better system and load management, cost savings, and greater situational awareness and ability to manage outages. It is worthwhile for utilities to try to maximize the range of capabilities that AMI enables, such as those mentioned herein, and to realize the full benefits from these investments to the greatest extent possible. In Virginia, the rural electric cooperatives already are using AMI for a range of services and operational efficiencies, including to disconnect and reconnect customers during storms and to further empower consumers to better manage their energy usage.
In addition, foundational investments, such as distribution supervisory control and data acquisition (D-SCADA) distribution management systems (DMS), sensors, and distributed energy resource management systems (DERMS) will provide utilities with needed information on how to identify and leverage ancillary services from DERs, and also are needed to help obtain the granular data needed to transition to different rate structures and utility business models. GWA notes the need to ensure that flexibility is built into this evolutionary process.
Storage – Challenges and Opportunities:
GridWise published a White Paper on battery storage in front of the meter in 2017 that addresses some of the associated challenges and opportunities.5
Challenges Regarding Existing Laws and Regulations:
Most laws and regulations when originally drafted did not consider battery technology, so these will need to be clarified and adapted to this rapidly emerging technology.
In several states, batteries are misclassified as generation assets even when their primary application is as transmission or distribution assets, which can prohibit or hamper electric distribution companies(“EDCs”) from owning batteries and receiving regulated cost recovery for them.
Laws and regulations might restrict battery projects from participating in the energy, capacity, and ancillary services markets when they are available to do so.
Market Mechanism Challenges:
The numerous potential system-wide efficiencies and enhancements batteries can offer often are not compensated.
Market classification rules often have failed to reflect batteries’ potential multiple services and thus artificially limit their value and full participation.
If wholesale market rules focus on a specific type of resource, rather than on the service needed, this could prevent batteries from offering all of the capacity, energy and ancillary services they technically are capable of providing.
System Planning Challenges:
EDC’s long-range integrated resource and distribution planning generally have not considered the value batteries can provide, in part because they were expensive and not well proven technically and commercially.
Storage Recommendations:
Recognizing the full range of functions and services batteries can provide is vitally important, as is enacting business model, rate structure, and regulatory reforms which reflect batteries’ unique characteristics and enable EDCs and third-party competitive providers to own and operate these valuable grid assets. GridWise recommends policy makers consider the following steps:
Batteries with a primary purpose of supporting the transmission or distribution system should be allowed to be classified as transmission or distributions assets, respectively.
Subject to a streamlined project review process, EDCs should be allowed to own, and apply rate-based treatment as grid assets to, batteries and their associated control systems.
To maximize the benefits of batteries connected to the distribution system, EDCs should have visibility into and some level of input into and control of, such projects.
To help ensure a level playing field for third-party competitive providers, policy makers should encourage EDC-owned and rate-based battery projects to pass a reasonable economic benefit-to-cost screen before implementation.
Policy makers should encourage EDCs to proactively evaluate batteries side-by-side with conventional resources.
Policy makers should allow EDC-owned and rate-based battery projects to participate in the energy, capacity, and ancillary services markets.
Policy makers must ensure that batteries can offer all of the services they are technically capable of offering and be compensated fairly for those multiple services.
Policy makers should remove artificial barriers to market participation by implementing technology neutral rules and definitions, focusing not on specific resource types, but rather on a resource’s ability to provide the service needed.
To effectively assess batteries’ optimal applications, societal benefits and system impacts, policy makers should consider establishing well-designed demonstration projects and pilot programs, with clear objectives and transparent evaluation processes. Such pilots also can help identify preferred business and regulatory models and rate design structures.
Transportation Electrification Recommendations:
A holistic approach could help with the development of policy measures that facilitate beneficial electrification, such as the deployment of EVs, and avoid unintended consequences, such as disadvantaging low-income consumers. States can send a signal to automakers that they intend to support EVs by executive or legislative actions, which can include setting vehicle sales targets, for instance. Incorporating EVs and EV infrastructure in Commonwealth and community planning for transportation, environmental compliance, and grid modernization and integrated distributed energy resource planning efforts is crucial. This includes crafting regulatory and legislative processes that recognize all of the shared benefits of increased EV adoption.
GridWise supports the Virginia Department of Transporation’s (VDOT) recommendations to implement EV charging corridors and to encourage public, standardized charging infrastructure. GridWise concurs that it is important for relevant agencies to focus public investments in electrification on open access and interoperable systems that work regardless of the vehicle type, the equipment type, or the ownership/operation model. In addition, GridWise supports and encourages the Commonwealth or local governments to consider the use of high-occupancy vehicle (HOV) lanes for EVs and other efficient and alternative-fueled vehicles, as appropriate.
Additional types of incentives for EVs can occur in the form of rebates or tax credits, tax waivers, and incentives for charging infrastructure.
The Commonwealth and local government fleets should continue to prioritize electric vehicles and other alternative vehicles for fleet purchases.
To advance transportation system resilience, Commonwealth emergency and disaster recovery fleets should consider including electric and other alternative fueled vehicles, and charging and fueling corridors supporting electric and other alternative fueled vehicles, as well as on-site charging for fleets, where practicable, to ensure continuity of operations and lower operating costs, and should facilitate private sector development of such infrastructure.
In developing policies and/or regulations, decision makers are encouraged to consider a wide variety of participants to make investments that support EVs in their communities, including deploying, owning, and operating charging infrastructure, and developing strategies that allow for the management of charging.
The Commonwealth should work with new residential and commercial construction entities and property management firms to provide a portion of parking locations with the conduit and electrical system capacities to be “EV ready,” which significantly lowers the cost of adding charging stations later. Doing so will encourage EV charging in multi-unit dwellings and will thereby facilitate the growth of EV ownership.
Utilities can be authorized to provide a wide range of consumer-friendly rebates, incentives and ongoing services to promote the growth of charging infrastructure and EV purchases.
While existing policies have helped those consumers already interested in EVs make purchases, for EVs to be truly democratized, it is important to aim to reach more consumers through robust education and outreach measures.
Additional recommendations:6
1. Craft policies and regulations to allow a wide variety of participants – utilities, 3rd party providers and other private/public entities -- to deploy, own, and operate charging infrastructure and develop strategies for the management of charging to maximize its benefits.
2. Accelerate transportation electrification in a manner that provides customer value and efficient integration into the energy grid by recognizing that utilities are well-suited to expand electrification across multiple transportation modes and provide a foundational system of charging infrastructure that supports a reliable, consistent, and positive customer experience.
3. Encourage coordination between utilities, their large customers, OEMs, and third-party charging providers to increase and strategically locate charging infrastructure to ensure the siting and design of charging locations does not detract from system reliability, resilience, and security.
4. Ensure that changes to the electric system are supported by business model, rate structure, and regulatory reforms that enable utilities and third-party providers to own assets and provide services.
5. Facilitate coordination among all stakeholders to leverage the best practices of integrating and optimizing EV loads into the grid.
Utility Rate Design:
Part of the evolution described herein includes the need to consider new approaches toward rate design, that is, how electricity is priced and electric infrastructure investments are recovered, and who can provide value-added services, while also maintaining affordable, safe, reliable, resilient, and secure power and protecting consumers’ interests. The industry already is moving from a commodity-oriented approach for collecting revenues (i.e., providing volume or kilowatt-hours (kWh)) to one that is service-oriented (somewhat similar to the telecommunications industry, e.g., deploying appropriate-scale advanced technologies, building and maintaining the “Grid of the Future” as the enabling platform, and so forth), whereby revenues are differentiated based on the value to the consumer as well as the cost of providing that service. GridWise believes that highlighting the need to pay for grid infrastructure and grid-related services, and the reasons for doing so, are vital. In addition, consistent with competitive markets, ensuring utilities have the opportunity to earn a return on investment (ROI) is vital in terms of the range of investments that will be needed and the provision of services envisioned.
Broadly, in terms of the principles and related overarching recommendations for the rate design and DER compensation, GridWise encourages the Commonwealth to consider a more streamlined approach and greater flexibility in rate design and agility in rate approval, perhaps including pilots to facilitate a more expedited process.
It is important for decision makers to incorporate policy goals and objectives, including allocating and recovering costs to transform and maintain an integrated, modern grid, “responsibly, efficiently, and equitably,” and to carefully consider the implications for cost recovery and customers.7
Effective customer education and transparency will be critical to the success and adoption of any new rate structures.
Avoiding Unintended Consequences:
It is important for the Commonwealth and local governments to avoid inadvertently creating barriers that could preclude ongoing – and perhaps yet unforeseen – innovation or innovative technologies. For example, syncrophasors have been a ground-breaking technology that have enabled visibility into broad-scale grid operations at all times. Data analytics and communications that stem from their advent are among the advances that were unforeseen when syncrophasors were first developed or deployed.
For questions regarding this Submission, please contact Steve Hauser, GridWise’s CEO, at: shauser@gridwise.org and Ladeene Freimuth, GridWise’s Policy Director, at: lfreimuth@gridwise.org.