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3 States Lead a Power Market Revolution

July 10, 2015 By Karen Henry

urban power Energy ManageCalifornia, Hawaii and New York are radically reforming their state regulatory processes, and eventually their energy markets, to accelerate the integration of distributed energy resources (DER) into the grid. Power market reforms in these states will enable dramatically increased solar and distributed energy penetration, improved reliability, lower costs and reduced greenhouse gas emissions, according to a white paper released by ICF International.

Each state envisions the future regulated utility as one that enables customers to manage their energy costs through advanced distribution planning, modern integrated grids and market-based grid services. Realizing this vision will require integrated process reform in two fundamental areas: distribution planning and portfolio development.

While all three states have various levels of existing DER, as distribution systems experience increasing levels of DER interconnection, the three state processes all envision, if not require, an evolution in the integrated grid planning process. This integrated planning requires a wider, more complex range of engineering and economic valuation issues to be considered in a multidisciplinary fashion.

In all three states, the utility will continue to have responsibility for distribution system planning and construction. However, the new planning process for each utility must support the development of DER alternatives that meet current and future system requirements. The first step for utilities in establishing an integrated process is the development of a standardized planning framework that uses probabilistic-based engineering analysis, scenario-based distribution planning, hosting capacity analysis and locational net value of DER.

Developing a portfolio of new services enabled by DER using various pricing, programs and procurements to competitively source them requires several new processes and analytical methods . The potential types of services may include distribution capacity deferral, voltage management, power quality, reliability and distribution line loss reduction. These services would be sourced through a combination of time-varying rate designs, energy efficiency and demand response programs, and utility procurements.

The integration initiatives adopted by California, Hawaii and New York will lead to fundamental changes for utilities and will serve as models for similar transitions in other states.

Photo via Shutterstock.

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