DPV-plus-Storage Regulatory Considerations...Feb 01, 2020 · § Net Energy Metering serves as a “financial storage” for DPV customers, so there are no additional incentives for

DPV-plus-Storage Regulatory ConsiderationsCarishma Gokhale-Welch and Thomas Bowen, National Renewable LaboratoryNaim Darghouth, Lawrence Berkeley National Laboratory

Gujarat – February 27, 2020

Purpose and Focus of Talk

Resource Planning - States

§ Global context and forecasts

§ Designing programs to achieve deployment objectives for storage

§ Compensation mechanisms

§ Implications of metering & billing arrangements and tariff design

§ Technical configuration and metering requirements

§ Interconnection requirements

Key Takeaways


§ Well designed policy frameworks ensure distributed storage

benefits all stakeholders

§ Policy objectives have downstream consequences

§ Incremental effort to incorporate storage into existing DPV

programs

Why behind-the-meter storage?

§ Behind-the-meter storage can offer the most value to stakeholders

§ But this may require additional steps§ Identified?§ Enabled with infrastructure?§ Incentivized?

Fitzgerald, Garrett, James Mandel, Jesse Morris, and Touati Hervé. 2015. “The Economics of Battery Energy Storage.”Rocky Mountain Institute.

Global and Indian Context for DPV-plus-Storage

5

DPV-plus-Storage: United States

Source: GTM, and Energy Storage Association. “U.S. Energy Storage Monitor: Q2 2019 Full Report,” June 2019.

0

20

40

60

80

100

120

140

160

180

200

2013 2014 2015 2016 2017 2018 2019

Inst

alle

d C

apac

ity (

GW

)U.S. Cumulative Residential BTM Storage Deployment

All Others

New York

Massachusetts

Hawaii

California

DPV-plus-Storage: Australia

“2019 Australia Behind-the-Meter Forecast.”. Bloomberg New Energy Finance.

0

10

20

30

40

50

60

2010 2020 2030 2040 2050

GW

PV with storage

PV only

Australia Cumulative Forecasted Behind-the-Meter PV Capacity

DPV-plus-Storage Aggregation: Australia

§ Emergence of Storage-plus-DPV

Aggregation

§ South Australia’s AGL Virtual Power

Plant

§ 1000 residential BTM storage-plus-

DPV customers (5MW, 12 MWh)

§ Intended Use:

§ Voltage support for distribution

feeders with high solar penetration

§ Avoiding infrastructure for peak

demand

§ Capacity and frequency regulation at

wholesale market levelhttps://arena.gov.au/projects/agl-virtual-power-plant/https://www.agl.com.au/solar-renewables/solar-battery-storage

Image credit: twitter.com/aglenergy

§ Customer compensation:

§ Direct purchase: 11.6 kWh system for

$3,849 (all inclusive)

§ BYOD: 1-year contract: $100 signing

bonus, $45/quarter (bill credit)

Indian Context


India poised to become leading market for ‘grid-interactive’ storage. This can maximize value from DPV and help DISCOMS cost effectively manage the grid.

• LonghistoryofdeployingBTMgenerationandstorage• Storagesystemsprimarily‘passive’inthepast

Reliabilityconcerns

• Strongcross-subsidizationschemeassocialpolicyinIndia• DERadoptionforlargecustomersreducesutility‘cross-subsidy’revenue

FinanciallydistressedDISCOMs

• NEMdominantcompensationmechanisminIndia• NetBillinghasbeenproposedinsomestatesandbyCEA

NetEnergyMetering

• AggressiveREgoalsincludespecifictargetsforrooftopsolarPV• Initiativesforreal-timemarketandadvancedmeteringdeploymentGov’tinitiatives

Challenges that distributed storage could address in India


Customers

Lossofserviceduringpoweroutages

NotbeingabletouseDPVsystemduringoutages

Desiretoreduceelectricitybills

DISCOMs

Highinfrastructurecoststomeetpeakloadlevels

ChallengesofDPVintegration

Highoperatingcosts

The Emergence of Behind-the-Meter Storage


Comprehensiveframeworkforstoragecanensuresystemsworkforcustomersandutilities

CompensationMechanisms

TechnicalConfigurationandMetering Interconnection

Ascostsdrop,storagespreadsandcapabilitiesimprove

Storagewillofferincreasedrangeofservicesforcustomersandutilities

Manyjurisdictionsalreadyfamiliarwithstorage

Primarilyasbackupresourcewithlimitedgridinteraction

Policy Objectives for DPV-plus-Storage

12

Potential Distributed Storage Objectives


Enabling back up power for customers

Preserving the ‘integrity’ of

DPV compensation mechanisms

Peak shaving

Reducing utility

operating costs

Achieving regulatory objectives

Providing power to

emergency/ resiliency

areas

Managing evening ramps

Balancing utility cost

recovery and customer

compensation

Encouraging self-

consumption from DPV systems

And many more…

Potential Distributed Storage Objectives


Peak shaving

Reducing utilityoperating costs

Though we can focus on just two…

How do objectives influence downstream decisions?


ObjectivesCustomervs.utilitiesneedsPolicyGoals

CompensationMechanismDesignWhichenergyflowscompensated?Time- orlocation-dependentcompensation

TechnicalConfigurations,MeteringMeterrequirement?Anysystemlimitations?

InterconnectionRequirementsSystemmonitoringandcommunicationSystemcapabilities

Designing Compensation Mechanisms

16

Why do Compensation Mechanisms Matter?


§ Customers respond to compensation mechanisms to minimize bills

§ Compensation mechanisms impact customer economics and drives

deployment

§ Well-designed compensation mechanisms align customer bill

reductions with utility cost reductions

DPV Compensation Mechanisms and DPV-plus-Storage


§ Net Energy Metering serves as a “financial

storage” for DPV customers, so there are

no additional incentives for customers to

adopt storage

§ Net billing encourages self-consumption

of onsite generation to minimize exports,

and hence incentivizes storageSource:Zinaman,etal(2017).“Grid-ConnectedDistributedGeneration:CompensationMechanismBasics.”

Retail Tariff Design


§ Powerful too to align customer

behavior

§ Must consider ability of customer to

respond

§ Should take into account equity

concerns

§ Are some customers

disproportionately impacted by the

change in tariff design?

Average Change in Customer Load in Critical Peak Price Pilot Project

DTEEnergy.2014.“SmartCurrents:DynamicPeakPricingPilot.” FinalEvaluationReport.

Price signals, especially with enabling technology can align customer behavior with grid needs

Alternative Retail Tariff Structures for Gujarat


§ More granular rates give customers signals to adjust behavior and offer opportunities to reduce bills,

while also helping DISCOMS more cost efficiently operate their power systems

VolumetricRate(perkWh)

MinimumBill(permonth)

Totalconsumption

Regardlessofconsumption

Time-variantVolumetricRate

(perkWh)

Time-variantDemandCharges

(perkVA)

FixedCharges(permonthorbill)

Highestrateof

consumption

Regardlessofconsumption

Totalconsumptionandtimeofconsumption

Currentrate

cost-reflectiverate

Technical Configuration & Metering Requirements

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What are ‘technical configuration requirements’?


§ Rules for allowed flows of energy between load panel, generation

system (if present), storage system, and utility network

§ Incremental effort to integrate storage into existing DPV programs

§ DISCOMS and customer have different concerns about metering

and restricting power flows

§ Metering requirements and restricting/allowing certain flows to have

important implications on use cases and costs of systems

Power Flows: Standalone-DPV

Resource Planning - StatesImage Source: Zinaman et al. (forthcoming)

Power Flows: Storage-plus-DPV

Resource Planning - StatesImage Source: Zinaman et al. (forthcoming)

Balancing Needs


§ Additional meters

§ Offer insight into underlying load

§ Help better track flows for policy goals

But…

§ Increase costs for customers

§ More restrictive technical configurations

§ Makes it easier to track flows and ensure certain policy goals

§ Can reduce potential negative impacts from connecting systems

But…

§ Can drastically impact customer economics

§ Permanently limit ability of system to interact with power system now and in the future

Interconnection Requirements

26

Why are interconnection requirements important?


§ Governs requirements associated with interconnecting systems

§ How applications are handled, what standards must be used, how

should systems be evaluated

§ Requirements have implications for costs and capabilities of

interconnecting systems

§ Systems must be sophisticated enough to meet policy objectives

DER as ‘good grid citizen’


§ Standards for inverters can address many potential technical issues for DER (harmonics, voltage rice, etc.)

§ Applies to both DPV and DPV-plus-storage (only incremental changes necessary)

§ Standards already exist!

Source:Nagarajan2018,“BestPracticesforGridCodesforRenewableEnergyGenerators”

Safety Considerations


§ DPV issues§ Islanding§ Equipment

§ Storage Issues§ Fires

§ Solutions§ IEEE 1547 – Interconnection,

Inverters§ NFPA 70 – Wiring, all equipment§ NFPA 111 – Stored Energy,

Storage§ NFPA 855 – Installation, Storage

Differences between DPV and DPV-plus-Storage


§ Additional flows possible

§ Concerns about the ‘source’ of storage energy

§ Considerations of ‘total capacity’ of the systems

§ DPV capacity + storage capacity?

§ NEM and NB affect DPV-plus-storage systems differently

§ Safety issues surrounding lithium-ion

§ More capabilities

§ Dispatchable

§ Can both charge and discharge

§ Automated responses possible

Business Models

31

Business Models for DISCOMs and DPV-plus-Storage


§ Storage offers DISCOMs access to new value streams

§ DISCOMs well suited to act as intermediary between customer and developers

§ Providing services as subscription (‘___ -as-a-service’)

§ Aggregation of DPV-plus-storage

§ South Australia’s AGL Virtual Power Plant

§ Voltage support for distribution feeders with high solar penetrations

§ Avoiding infrastructure for peak demand

§ Self services at wholesale market level

New opportunities for utilities?


Zinaman, Owen. 2019. “Bottlenecks in Renewable Energy: Distributed Generation and Storage.” Clean Energy Transition Partners. Porto Digital, July.

There are many permutations of potential storage business models available for consideration

• Who reaches out to customer to garner interest?Customer Acquisition

• Who brings the project to financial close, including pricing the storage system for the customer?Transaction Facilitation

• Who installs the system?Project Design / Construction (EPC)

• Who is responsible for certifying the system and registering with the distribution?

Interconnection Certification and Registration

• Who manufactures and/or procures the storage system components?Battery Supply Chain

• Who invests the capital to build the system?Project Financing

• Who ensures that financing payments are delivered?Facilitation of Financing

• Who is the legal owner of the storage system?Battery System Ownership

• Who owns the location where the storage is sited?Battery Site Ownership

• Who is responsible for investing and operating the distribution grid under increased storage penetration?Distribution Grid Management

Utility “Facilitation” Business Model


§ Residential customers are at a significant disadvantage during procurement, leading to higher system pricing

§ Utility plays role of:§ Periodic aggregation of

customer interest§ Competitive procurement (and

financing) facilitator on behalf of customers

§ Can offer both individual and community DPV and storage systems

Zinaman, Owen. 2019. “Bottlenecks in Renewable Energy: Distributed Generation and Storage.” Clean Energy Transition Partners. Porto Digital, July.

Microgrid-as-a-service


PV developers

Storage developers

EV developers

Utility as ‘facilitator’

Customer, e.g. a municipality

Variable or fixed payments for

serviceExclusive access,

O&M, software

Variable or fixed payments for use

of equipment

Guaranteed reliable power, easy interface

Payback Time for DPV-plus-storage systems in Gujarat: A case study analysis

36

Analysis Questions

1. What is the current payback period for DPV-plus-Storage systems for an HTP-I customer served by UGVCL in Gujarat?

2. How do the economics of DPV-plus-Storage systems change as storage costs continue to decline?

3. What elements of tariff design may need to be re-visited to better incentivize behind-the-meter DPV-plus-storage systems under current market conditions?

37

Analysis Approach

• Customer economics of DPV-plus-Storage in Gujarat

– Optimal sizing of storage

– Dispatch of storage to minimize electricity bills

– Bills computed with and without DPV-plus-storage

• For storage sizing and dispatch: NREL’s System Advisor Model (SAM) and REOpt Lite

• For bill calculations: System Advisor Model (SAM)

• Case study

– HTP-I tariff for UGVCL

– Typical non-seasonal industrial customer load profile

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Current payback time

• For a HTP-I customer at current PV and storage costs

– Model does not build out a battery system; only DPV system included

– Payback period: 7.2 years

Storage Cost Sensitivity

• Impact of reducing lithium-ion battery costs on the economics of DPV-plus-Storage systems for an HTP-I customer in Gujarat

• Ran ReOPT optimization with different storage costs until model deployed a battery

• For current HTP-Base customers, model does not deploy a battery until low storage costs (5700 INR/kWh)

– Storage costs would need to halve from current value

Battery Pack Cost (INR/kW)

Battery Power (INR/kWh)

Battery pack size

(kW)

Battery power size

(kWh)

Payback (yrs)

Rs. 9980 Rs. 4990 0 0 7.2Rs. 8560 Rs. 4280 0 0 7.2Rs. 7130 Rs. 3570 0 0 7.2Rs. 5700 Rs. 2850 48 222 6.8

Tariff sensitivity: Demand Charge Minimum Bill

• Currently, storage cannot reduce demand charge to less than 85% of contract demand

• Sensitivity scenario:

– Remove 85% constraint so storage could further reduce monthly demand charge

– At what costs does installing storage reduce payback?

• 25% reduction in costs from current levels

Battery Pack Cost (INR/kW)

Battery Power (INR/kWh)

Battery pack size

(kW)

Battery power size

(kWh)

Payback (yrs)

Rs. 9980 Rs. 4990 0 0 7.2Rs. 8560 Rs. 4280 20 60 7.0Rs. 7130 Rs. 3570 77 275 6.3Rs. 5700 Rs. 2850 125 528 5.7

Key Outcomes

• For current tariff structures, battery costs need to drop by 50% to result in deployment of economic DPV+storage systems

• HTP-I customer bill savings are constrained by minimum billing demand ratchet– Removing minimum billing demand from tariff makes storage systems profitable at costs only 25%

lower than todays

• Other tariff design changes could be modeled to understand potential impact on DPV-plus-storage payback

Conclusions and Next Steps

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Key Messages


§ Policy objectives drive downstream decisions

§ Largely an incremental effort to update existing solar programs to accommodate DPV-plus-storage

§ New use cases for ‘grid interactive’ storage more expansive than current ‘passive’ systems

§ These use cases can benefit much broader set of stakeholders compared to passive storage or DPV alone

Discussion and Next Steps (1)


§ Regulatory objectives

§ Creating favorable and well-designed regulations for storage could provide significant value to utilities and customers in Gujarat

First stepsDecide what role DPV-plus-storage is to have in Gujarat



§ Tariffs and compensation mechanisms

§ Designing more cost-reflective, time-varying tariffs provides incentives can align customer behavior with system needs

First steps: Adopt time-of-day demand charges and time-of-day energy charges that better reflect grid costs



§ Metering and configuration requirements

§ Ensure visibility into system behavior and alignment of use cases with policy objectives

§ Consider the impact of requirements on additional costs and payback time of systems for consumers

First steps: Decide which power flows are allowable, developing metering requirements for grid-interactive

distributed resources



§ Interconnection processes

§ Ensure new systems can achieve objectives and do not negatively impact the power system

First steps: Decide on which standards to adopt, consider making interconnection process more transparent for

developers and customers

Questions?

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Documents

DPV-plus-Storage Regulatory Considerations...Feb 01, 2020 · § Net Energy Metering serves as a “financial storage” for DPV customers, so there are no additional incentives for