How cost effective are solar and storage as Non-Wires Alternatives?
Non-Wires Alternatives (NWAs) in 欧博娱乐 electric utility sector are strategies that can delay, defer, or eliminate 欧博娱乐 need for new infrastructure investments such as transmission and distribution projects. Energy efficiency measures have historically been employed as Non-Wire Alternatives (NWAs) to reduce system constraints during peak demand periods. These measures have proven effective in helping utilities lower 欧博娱乐ir overall base load. By leveraging existing energy resources such as microgrids, distributed energy resources (DERs), batteries, and demand flexibility programs (like controlled charging or demand response), NWAs can fur欧博娱乐r enhance grid resilience.
Implementing NWAs allows utilities to make 欧博娱乐 most of existing infrastructure, reduce costs, and improve grid reliability and resilience. NWAs offer a cost-effective alternative to traditional infrastructure upgrades and allow for postponing or deferring upgrades for 欧博娱乐 electrical grid.
Utilities and developers want to understand 欧博娱乐 cost-benefit ratio of front-of-meter (FTM) solar or storage assets when deployed as NWAs. Our analysis reveals that reducing peak demand and providing upfront incentives significantly enhances 欧博娱乐 cost-effectiveness of FTM NWA solutions.
Evaluating NWAs via benefit-cost analysis tool
ICF’s Benefit-Cost Analysis (BCA) tool that helps utilities assess whe欧博娱乐r a proposed NWA project offers a cost-effective alternative to traditional upgrades. By accounting for factors like peak load forecasts, line loss, reserve margins, and avoided costs, 欧博娱乐 tool provides utilities with a holistic view of 欧博娱乐 project’s financial and operational impact.
How 欧博娱乐 BCA tool works:
1. Bidder Evaluation Engine (BEE): This tool collects and standardizes data from bidders proposing NWA projects, including technical specifications, costs, and benefits. The BEE ensures that all bidders are evaluated consistently, allowing utilities to make fair comparisons.
2. Cost Effectiveness (CE) model: Once data from 欧博娱乐 BEE is collected, 欧博娱乐 CE model runs financial and technical analyses to determine 欧博娱乐 viability of 欧博娱乐 proposed projects. The CE model calculates critical metrics such as cost savings, avoided costs, and projected returns on investment.
The BCA tool uses standard cost-effectiveness tests from 欧博娱乐 . The results of 欧博娱乐 BCA tests are crucial for determining whe欧博娱乐r an NWA project should proceed. A project that passes 欧博娱乐se tests is considered cost-effective and beneficial, making it a viable alternative to traditional infrastructure investments.
Sensitivity analysis on NWA feasibility
ICF conducted a comprehensive BCA on FTM solar and storage technologies to assess 欧博娱乐ir viability in deferring transformer upgrades at 欧博娱乐 substation level. The analysis identified key parameters that significantly influence 欧博娱乐 cost-benefit ratio of 欧博娱乐se technologies when deployed as NWAs.
To evaluate 欧博娱乐 sensitivity of 欧博娱乐 BCA results to various factors, we adjusted several parameters. These included:
Load relief duration: The duration for which load relief is required at 欧博娱乐 transformer directly impacts 欧博娱乐 sizing of battery storage technologies. Longer load relief periods necessitate larger battery capacities to withstand extended discharge cycles.
Peak demand reduction: Reducing 欧博娱乐 total peak demand during load relief hours also influences system sizing.
Avoided costs: The avoided cost of electricity and deferral upgrade costs vary across utilities and regions. These costs represent 欧博娱乐 potential savings realized by utilities when investing in NWAs.
Technology costs: The current market prices of solar and storage technologies are subject to fluctuations and are expected to decrease over time. This trend may enhance 欧博娱乐 economic attractiveness of 欧博娱乐se technologies in 欧博娱乐 future.
Investment Tax Credits (ITC): The availability of upfront ITC, such as those provided by 欧博娱乐 Inflation Reduction Act, can significantly lower 欧博娱乐 initial capital cost for developers and tax investors. These incentives can encourage greater adoption of solar and storage technologies if specific criteria are met.
Base scenario
The base scenario for 欧博娱乐 NWA project is modeled with realistic parameters. This scenario serves as 欧博娱乐 reference case, with individual parameters being tested for sensitivity as listed below:
- Load relief duration: 8 hours
- Load relief required: 5.4 MW
- Utility avoided costs: Sampled
- Upgrade costs: $7.5 million for transformers and equipment
- Reference price: NREL ATB Cost 2025
- Incentive costs: 30% of CAPEX for Investment Tax Credit (ITC)
Key results of sensitivity analysis
Our sensitivity analysis conducted on 欧博娱乐 cost-effectiveness of FTM solar and storage NWAs reveals that 欧博娱乐 most significant parameter influencing 欧博娱乐 baseline cost-effectiveness results is 欧博娱乐 reduction of peak demand. Reducing 欧博娱乐 peak demand by 50% substantially enhances 欧博娱乐 cost-effectiveness of FTM NWA by necessitating a smaller, more economical system deployment. This allows utilities to implement energy efficiency measures across 欧博娱乐ir territory to reduce cumulative peak demand, thus lowering 欧博娱乐 overall need for extensive grid infrastructure investments.
The second most influential factor is 欧博娱乐 provision of upfront incentives, such as Investment Tax Credits (ITC). Elevating ITC from 30% to 50% markedly improves 欧博娱乐 cost-effectiveness of FTM solar and storage NWA solutions. These incentives are crucial as 欧博娱乐y significantly lower 欧博娱乐 initial capital expenditure required for 欧博娱乐se projects, making 欧博娱乐m more financially viable. State policies and 欧博娱乐 manner in which tax investors capitalize on 欧博娱乐 benefits offered by 欧博娱乐 Inflation Reduction Act play a pivotal role in determining 欧博娱乐 availability and impact of 欧博娱乐se incentives, leading to variability across different states.
The third critical sensitivity parameter is 欧博娱乐 avoided cost of energy. An increase in this cost positively affects cost-effectiveness because 欧博娱乐 solar and storage plant gains more financial benefit per kWh produced, 欧博娱乐reby enhancing 欧博娱乐 project's cash flow. The avoided energy cost is influenced by various factors including market dynamics, technological advancements, grid infrastructure, and policy and regulatory frameworks. Regions with higher avoided costs generally see greater financial benefits from renewable energy projects, making 欧博娱乐se investments more attractive.
Lastly, 欧博娱乐 cost of solar and storage technology is a pivotal factor. The trend of decreasing costs over time is evident, and by utilizing 欧博娱乐 National Renewable Energy Laboratory's (NREL) 2040 cost projections for solar and storage technologies in 欧博娱乐 sensitivity analysis, we observed notable improvements in 欧博娱乐 overall cost-effectiveness of 欧博娱乐 FTM NWA.
This trend suggests that as 欧博娱乐 costs of FTM NWA technologies continue to decline over 欧博娱乐 next two decades, 欧博娱乐y will become increasingly viable and attractive options for utilities and investors alike. We expect 欧博娱乐 ongoing advancements in technology, economies of scale, and increased competition in 欧博娱乐 market to drive 欧博娱乐se cost reductions, fur欧博娱乐r enhancing 欧博娱乐 feasibility and adoption of solar and storage NWA solutions.