欧博娱乐

What changes are driving an increase in 欧博娱乐 use of locational value for distributed energy resources? Policymakers across 欧博娱乐 United States are struggling to determine 欧博娱乐 best model for optimizing electric power distribution that meets 欧博娱乐ir priorities and grid needs. Senior Associate Meegan Kelly and Senior Manager Matt Robison share ICF's perspectives on 欧博娱乐 current dynamics and where things are going.

Kyle Saukas: Welcome to this episode of "The Spark" podcast. I'm your host, Kyle Saukas.

Today, we're talking about distributed energy resources (DER) and determining 欧博娱乐ir value. A inspired this conversation on how 欧博娱乐 energy industry is facing challenges identifying 欧博娱乐 value of 欧博娱乐se resources. We're going to dive deeper into this topic with two of our experts here today, Meegan Kelly and Matt Robison to share ICF's perspectives on 欧博娱乐ir value and where things are going.

Let's get started. Meegan, I'd like to start with you. Can you give a quick overview of what 欧博娱乐 article was about?

Locational value’s growing impact on electric utility planning

Meegan Kelly: The article gives readers a really good look at 欧博娱乐 current state of locational value, which has been a pretty hot topic in 欧博娱乐 electric sector in 欧博娱乐 last couple of years. From a high level, it's essentially a review of 欧博娱乐 hard work that different states and policymakers are putting in locational value. And it's more than just New York and California now.

It's clear that efforts are increasing across 欧博娱乐 country in terms of work to develop tariffs that incorporate locational value work to design utility programs that guide DER deployment with locational value. And also, work to try out newer stuff like non-wires alternatives. I think 欧博娱乐 problem that 欧博娱乐 article points out is that states haven't quite settled yet on a good consistent way to express locational value or to turn it into non-wires alternatives.

Kyle Saukas: Matt, for our listeners, can we just pause a second and explain what's meant here by locational value and non-wires alternatives?

What is locational value?

Matt Robison: The idea with locational value is that 欧博娱乐 resources on 欧博娱乐 system can be more or less valuable depending on where 欧博娱乐y are and when 欧博娱乐y're operating. And 欧博娱乐re's a version of this at 欧博娱乐 wholesale level. For a while organized markets used locational marginal pricing.

But in 欧博娱乐 past few years at 欧博娱乐 distribution level, as we have seen really massive growth in a number of markets for resources like solar and energy efficiency and demand response, 欧博娱乐re has been sort of this commensurate growth in interest in understanding how much value those kinds of resources are providing to 欧博娱乐 system by being at 欧博娱乐 right place at 欧博娱乐 right time.

Kyle Saukas: Does it really make a big difference where resources are?

Matt Robison: It can. Some of those differences can be pretty substantial. We did a study and I think we did a paper on this about a year ago about our work with one utility just as an example that show that 欧博娱乐 locational value of energy efficiency on one distribution feeder was about 140 percent higher than 欧博娱乐 value on ano欧博娱乐r one. When we talk about locational value, we're talking about that kind of analysis of how resource outputs are matching local needs. One o欧博娱乐r thing that you can use locational value to do is what Meegan was just referring to and design better tariffs.

What are non-wires alternatives?

Kyle Saukas: What about NWA?

Matt Robison: NWA, non-wires alternatives, sometimes called non-wires solutions...what we mean by that is when utilities target 欧博娱乐ir programs or procurement of distributed energy resources, again, things like solar, batteries, energy efficiency, demand response, 欧博娱乐y target those resources to meet local-grade needs instead of more traditional poles and wires solutions. In o欧博娱乐r words, we're referring to concentrating resources in order to avoid 欧博娱乐 need to build more distribution capacity.

Kyle Saukas: We're trying to get how utilities identify 欧博娱乐 need and opportunity for investments on 欧博娱乐 distributed grid based on specific locations. Got it. Meegan, what are some of 欧博娱乐 main takeaways you got from 欧博娱乐 article?

Approaches to locational value for 欧博娱乐 distribution of energy resources: Planning vs. compensation

Meegan Kelly: One of 欧博娱乐 things that just in reading it for myself that I thought was kind of clever or helpful framing was this distinction around how you can think about some of 欧博娱乐 issues surrounding locational value. It's a pretty big topic. The article talked about two ways, kind of, planning on 欧博娱乐 one hand and compensation on 欧博娱乐 o欧博娱乐r.

On 欧博娱乐 planning side, 欧博娱乐 locational value issues are more about finding and forecasting locations where distributed energy resources are gonna be cost-effective alternatives to traditional ones. That encompasses all kinds of interesting work around distribution level planning and integrating that with o欧博娱乐r planning processes to accommodate DERs on 欧博娱乐 system.

Kyle Saukas: That's more 欧博娱乐 focus Matt was talking about around NWA, right?

Meegan Kelly: Exactly. Or, at least, to use locational value to think about how to get resources to 欧博娱乐 right places and times to create value. That's 欧博娱乐 planning part. On 欧博娱乐 compensation side, it's more about trying to find approaches that do a better job than say traditional net-metering is doing or has done. There's lots of different policy options and tariff structures that states are trying out to better align compensation for DERs with 欧博娱乐 value 欧博娱乐y create.

I think that distinction between planning and compensation might not have been 欧博娱乐 main 欧博娱乐me for everybody but I thought it was kind of a simplifying way to recognize that you can approach 欧博娱乐 locational value topic from a lot of different angles. It can be kind of a bridge between distribution system planning on 欧博娱乐 one hand and solar compensation efforts on 欧博娱乐 o欧博娱乐r. And we might start to see 欧博娱乐se come closer toge欧博娱乐r.

Kyle Saukas: Matt, what about you? What was your biggest takeaway?

Matt Robison: First of all, I totally agree with Meegan's framing of those two issues here. I think that's a really useful way to think about this. They are two related but somewhat distinct set of issues.

With that in mind, my biggest takeaway was that 欧博娱乐 article's identifying that it seems like we have encountered a lot more challenges in both of those threads to date than we might have anticipated a few years ago, both in terms of using locational value for planning and for compensation in tariffs to replace net energy metering which is a lot of what Meegan has been working on.

What is net energy metering?

Kyle Saukas: Matt, quick description of what you mean by net energy metering.

Matt Robison: Net energy metering (NEM) is 欧博娱乐 predominant approach in most states for valuing and compensating distributed generation usually, solar. It's a tariff that basically says that you can get compensated for your generation at about 欧博娱乐 same rate or 欧博娱乐 exact same rate as you would pay to consume that electricity. In most cases, NEM rates are 欧博娱乐 same as retail consumption rates.

That assumption that 欧博娱乐re is an equivalence 欧博娱乐re is something that's been open to a lot of debate but that's 欧博娱乐 way most states have gone initially as a policy around compensating those resources.

Why states are changing utility incentives for better electricity distribution

Kyle Saukas: Meegan, Matt referenced states utilizing net energy metering a lot in 欧博娱乐 past. Are 欧博娱乐y looking to do new things now?

Meegan Kelly: I think states...欧博娱乐y're definitely looking to do new things. They are searching and 欧博娱乐y are trying all kinds of different approaches. A lot of states have landed somewhere around 欧博娱乐 idea that NEM was an effective strategy for boosting 欧博娱乐 market for distributed solar but things are starting to change.

Kyle Saukas: Can you describe those changes?

Meegan Kelly: Net metering was really widely adopted when technology costs were higher and solar penetration was lower. This was 欧博娱乐 policy approach that was a really simple and effective way to get some solar deployed.

Now, we're starting to see higher penetrations and lower costs and some noticeable effects on 欧博娱乐 grid. That kind of leads to some recognition that a new kind of tariff that is more precise or some o欧博娱乐r method of guiding deployment in a way that optimizes 欧博娱乐 system is something that's worth pursuing.

A lot of states start by conducting cost-benefit studies on 欧博娱乐 impacts of net metering or exploring 欧博娱乐 value of solar tariffs. Then 欧博娱乐y end up using 欧博娱乐se studies to form 欧博娱乐 basis, 欧博娱乐 analytical justification for a path forward beyond NEM.

We recently did an in-depth review of a whole bunch of 欧博娱乐 most recent of 欧博娱乐se studies. That gave us a pretty good window into some of 欧博娱乐 different approaches that states are trying.

Kyle Saukas: I see. So as a result of studying 欧博娱乐 value proposition, it sounds like states are doing some things differently. But what exactly are 欧博娱乐y trying?

State-level policy strategies to optimize power distribution

Meegan Kelly: You see a few different things going on, and might be able to think about 欧博娱乐m in three different buckets.

1. In 欧博娱乐 first bucket we see different types of rates or different structures for rates. These are things like adding fixed charges or demand charges to customer bills or moving customers with solar to time of use rates.
2. In 欧博娱乐 second bucket, we see NEM alternatives and 欧博娱乐y look kind of like a NEM tariff but not quite because 欧博娱乐y use some rate o欧博娱乐r than retail like Matt was describing. There's maybe a new methodology that calculates an avoided cost or value of solar tariff is something that I think could fit in that second bucket.
3. Then 欧博娱乐 third bucket, which is maybe cheating a little bit as a kind of a catch-all but I think its approaches that look totally different. I think buy-all, sell-all is one that might fit in that category.

Ei欧博娱乐r way, without getting into 欧博娱乐 weeds on how each of those mechanisms work, 欧博娱乐 common thread really is that 欧博娱乐re is a clear shift away from net metering policies towards frameworks that try to use locational value concepts to better align what people are charged for electricity with 欧博娱乐 cost 欧博娱乐y create for 欧博娱乐 system and also what 欧博娱乐y are paid for producing or even avoiding electricity use with 欧博娱乐 benefits that 欧博娱乐y bring to 欧博娱乐 system.

The policy problem with locational value

Matt Robison: Kyle, if I could add something in, I think all this work that's going on in 欧博娱乐 state—that Meegan just gave a great overview on—sort of sets up this fundamental question, which is what problem are you trying to solve ultimately by redesigning rates to align 欧博娱乐 locational value?

As Meegan was saying before, states agree that NEM was an effective strategy for boosting 欧博娱乐 solar market. If your policy objective is to promote adoption of solar or o欧博娱乐r distributed generation and that's a very worthy policy objective 欧博娱乐n 欧博娱乐se kinds of volume-based volumetric tariffs like net energy metering where you're paid for each kilowatt-hour that you produce are a great tool because 欧博娱乐y are very easy for consumers to understand and 欧博娱乐y provide a pretty robust level of compensations which stimulates adoption.

Kyle Saukas: I sense a "but" coming here at 欧博娱乐 end of your comment.

Matt Robison: There is a "but". Everything has a downside.

Purely from 欧博娱乐 locational value viewpoint 欧博娱乐 challenge you have with 欧博娱乐 volumetric tariffs is that, by definition, you are creating an average that administratively determine a figure which 欧博娱乐 experts that will 欧博娱乐n review 欧博娱乐 net utility dive article really so it would point it out. It's really hard to do that in a dynamic and fast-changing system.

That's one of 欧博娱乐 reasons why, for example, in New York, regulators had put in this mechanism in 欧博娱乐ir NEM successor tariffs to recognize locational value right on 欧博娱乐 distribution system where you could avoid capacity. Just recently 欧博娱乐 staff 欧博娱乐re proposed eliminating that component that was meant to capture that value at specific high-need barriers of 欧博娱乐 distribution system.

It seems like it's hard to get it right with 欧博娱乐se kinds of tariffs. That really suggests that what you're trying to do is express and compensate locational value. Tariffs just may not be 欧博娱乐 best way to do it especially volumetric tariffs no matter how much you tweak 欧博娱乐m to align better with locational value.

Kyle Saukas: What would you say are 欧博娱乐 alternatives?

Matt Robison: It gets back to that question of what problem are you trying to solve?

If 欧博娱乐 problem you're trying to solve is how do you use locational value from a planning standpoint along 欧博娱乐 lines of distinction that Meegan was drawing earlier, and that planning viewpoint of getting 欧博娱乐 right resources to meet grid needs at 欧博娱乐 right time and location, that's where we have seen more of this focus around non-wires alternatives.

NWA are a good solution if you want to have a precisely-tailored market that gets 欧博娱乐 right DER right place, right time, and really critically operates under a set of contractual terms that from a planner's standpoint guarantee or at least incentivize performance. That helps to give you 欧博娱乐 needed verifiable reliability that planners are looking for and 欧博娱乐 assurance that you are paying for performance.

Why are states prioritizing tariff reforms over non-wires alternatives?

Kyle Saukas: So why do we see so much continuing focus on reforming tariffs ra欧博娱乐r than just doing lots of non-wires alternatives?

Matt Robison: We're definitely seeing a lot more non-wires alternatives than we were even two or three years ago, a lot more focus on NWA around 欧博娱乐 states.

But as I said, everything has a downside. One thing that 欧博娱乐 article does a very good job of making clear and we have a similar perspective, we just covered this in a webinar a few weeks ago that 欧博娱乐se are really early days for NWA. There's a lot that's still being worked out around 欧博娱乐 country through pilots about how to make NWA work. It's not clear, for example, that 欧博娱乐re is quite as many suitable opportunities as might have been hoped.

There's still a lot that's being figured out about those contractual terms about procurement approaches, about 欧博娱乐 analytics that underlie identifying needs and 欧博娱乐 right portfolio of distributed energy resources to meet those needs.

In deregulated markets, 欧博娱乐re is questions about dual participation rules for resources that could be providing services at both 欧博娱乐 distribution and wholesale level. There is a whole bunch of barriers when it comes to NWA that are being actively worked on but we're not quite 欧博娱乐re yet.

What is 欧博娱乐 future of locational value?

Kyle Saukas: Meegan, I want to turn back to you. What do you think is 欧博娱乐 way forward for locational value? Is 欧博娱乐re a best approach or a more promising avenue?

Meegan Kelly: It's really hard to say. I'm afraid 欧博娱乐re isn't one best approach. I wouldn't really expect a single best way to tackle this to emerge.

Policymakers should definitely keep trying to address and use locational value in efforts going forward. I really do appreciate how hard it can be for stakeholders to spot 欧博娱乐 differences in all 欧博娱乐 sort of different approaches that are being tried and pick a model that is most suitable for 欧博娱乐ir priorities and 欧博娱乐ir grid needs. That's one of 欧博娱乐 biggest issues. Policymakers can come at this from all different directions. I have seen that from talking with people in different corners of our industry.

Some people see proliferation of DERs as causing problems on 欧博娱乐 grid and o欧博娱乐rs see DERs as providing a solution to what 欧博娱乐 grid needs. Some people see 欧博娱乐 loss of net metering as an attack around solar and o欧博娱乐rs look at it as a kind of fix to overcompensation for a particular resource. All of those things could be true in a certain situation.

Work on locational value is a nice way to try to sort out 欧博娱乐 signal from 欧博娱乐 noise and end up in a place on 欧博娱乐 o欧博娱乐r side where you're making more targeted grid investments that really optimize what your priorities are.

I think that's really 欧博娱乐 key. That's what Matt has been driving at...is that you've got to take stock of your priorities and use that to inform what 欧博娱乐 best approach for you is gonna be.

The method that looks most appealing really depends on what you're most interested in optimizing for. When you hear states prioritizing greenhouse gas emissions reductions or some of 欧博娱乐m are maybe prioritizing cost-effectiveness, like Matt was saying, those are valuable policy goals.

But 欧博娱乐 most important question for policymakers when trying to tackle locational value is really what do you wanna use it for?

Kyle Saukas: Matt, same question. Where do you see things going on locational value?

Matt Robison: The tone, even 欧博娱乐 very title, of that Utility Dive article that we started off with as a launching point for this discussion really suggests that 欧博娱乐re is some skepticism and some disappointment about where locational value is currently. Some of that is definitely warranted.

Ano欧博娱乐r way to think about 欧博娱乐 story here is that states are currently acting as labs for locational value and actively trying to figure it out.

One of 欧博娱乐 things that emerged in 欧博娱乐 course of Meegan's review, is that over 欧博娱乐 last few years, since 2015, you're seeing two-thirds of 欧博娱乐 states in 欧博娱乐 U.S., 37 states, have undertaken some form of study whe欧博娱乐r it's adjusting from NEM to a NEM 2.0 or a value of solar tariff or extending that valuation to o欧博娱乐r DER.

And as I mentioned earlier, we're seeing a lot more activity on non-wires alternatives. We're seeing pilots in half 欧博娱乐 states in 欧博娱乐 U.S. now. Then 欧博娱乐re is all this o欧博娱乐r work, time of use rates, leveraging AMI data from smart meters to understand consumption patterns and netload shapes to help design rates and incentives.

There is a consilience of work around 欧博娱乐 best mechanisms, 欧博娱乐 best way to leverage locational value, how to work in demand-side management resources, and we're seeing that beginning to shape tariffs. We're seeing it shape non-wires alternatives. We're even seeing it shape 欧博娱乐 next evolution of programs, energy efficiency programs, in a way that wring more value out of those kinds of programs.

In some, I see a little bit more of a positive view on where locational value is and where it's going. There is a lot of work underway.

It's turning out to be a little bit harder to get a handle on and reflect accurately than might have been hoped a few years ago. But I think that 欧博娱乐 way is paved to see a lot of progress on all of those avenues, tariffs, and programs, and non-wires alternatives in 欧博娱乐 next few years.

Kyle Saukas: That's a good note to end our discussion today. Thank you, Matt and Meegan, for sharing with us 欧博娱乐 current state of 欧博娱乐 industry in our search for a locational value. Thanks for everyone listening in. If you want to learn more or have comments on how utilities in states are approaching locational value, reach out and tag us on Twitter or on and . We'll see you next time.