While there is evidence that resilience is a consideration in regulatory proceedings and non-regulatory analyses, there are no standardized approaches for determining a specific value of resilience when making investment decisions, according to a report prepared by Converge Strategies, LLC, that was released by Converge and the National Association of Regulatory Utility Commissioners (NARUC) on April 24.
As noted in the filing, the report was developed based upon funding from the Alliance for Sustainable Energy, LLC, managing and operating contractor for the National Renewable Energy Laboratory (NREL) for the U.S. Department of Energy (DOE); funding provided by the DOE Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office.
The filing also noted that the report was written as an input to a broader project by NARUC under the Solar Energy Innovation Network (SEIN); NARUC’s SEIN project focuses on the value of resilience and its use in state policymaking.
Recent extreme weather events, natural disasters, and cyber incursions have brought the vulnerability of the electric system into sharp focus, the report said, adding that those events have demonstrated that planning for long-duration power interruptions caused by high-impact, low-probability events will require new approaches to power system resilience above and beyond previous hardening efforts.
The rapid growth and declining costs of such distributed energy resources (DERs) as microgrids, solar photovoltaics, and batteries have introduced new technology options for energy resilience, the report noted, adding that as a result, state policymakers have established electricity resilience policies and programs, with several states focusing specifically on resilient DERs as part of clean energy programs, as well as grid modernization efforts.
Identifying appropriate methodologies to calculate the value of resilience will be an important step toward ensuring that resilient DERs are considered alongside alternatives and integrated into future energy infrastructure, as well as investment planning efforts, the report said.
Presently, there are no standardized approaches for policy makers or energy project developers to identify and value energy resilience investments at the state, local, or individual facility levels, the report said. That lack of standard practice is further complicated by the existence of numerous and ongoing grid resilience discussions focused at different levels of governance, the report noted, adding that at the federal level, for instance, there continues to be significant debate regarding how best to target resilience investments as a matter of national policy.
The utility industry is engaged in resilience investment planning as well, the report said, noting that several utility companies have partnered with DOE specifically on resilience strategies that address the impacts of climate change.
Noting that resilience is closely related to reliability, the report said that those concepts are not identical, and that NARUC has developed the definition of resilience as “robustness and recovery characteristics of utility infrastructure and operations, which avoid or minimize interruptions of service during an extraordinary and hazardous event.”
Electric reliability refers to the ability of the power system to “maintain the delivery of electric services to customers in the face of routine uncertainty in operating conditions,” the report said.
A major distinction between resilience and reliability is the scale and duration of the power interruptions contemplated, the report said, adding that while reliability focuses on preventing disruptions that are “more common, local, and smaller in scale and scope,” resilience “addresses high-impact events, the consequences of which can be geographically and temporally widespread.”
The report noted that a second distinction between resilience and reliability is that reliability focuses primarily on power interruption prevention, whereas resilience focuses on preserving system function during the period post-event as well.
Noting that state policymakers are moving ahead with electricity resilience policies and programs, the report said that the Reforming the Energy Vision (REV) proceeding in New York, for instance, explicitly links the issue of resilience with considerations of DER expansion. Also, the California Public Utilities Commission recently mandated that IOUs in the state pursue at least one pilot for DERs to demonstrate distribution grid services – including “resiliency (microgrid) services)” under the integrated distributed energy resources (IDER) proceeding, the report said. The use of DERs for resilience is also a prominent focus of power system reconstruction efforts in Puerto Rico, the report noted.
Discussing recent experience with microgrids in regulatory proceedings, the report noted, for instance, that Exelon’s (NYSE:EXC) Potomac Electric Power Company (Pepco) in September 2017 filed a proposal for two community microgrids in Largo, Md., and Rockville, Md. The company filed an updated proposal in February 2018, proposing 6.78 MW of generating capacity and 1.6 MW of storage for Largo, as well as 7.46 MW of generating capacity with 0.25 MW of storage for Rockville, the report said, adding that both proposals were filed as a condition of Pepco’s 2016 merger with Exelon.
The Maryland Public Service Commission in September 2018 denied the company’s proposal, citing, among other things, concerns over the impact on residential rates and Pepco’s inability to quantify the community and distribution system resilience benefits of the program, the report said.
While Pepco did not calculate a value of community resilience in its proposal, citing the lack of a standardized industry methodology for determining community benefits, the company did use the interruption cost estimated (ICE) calculator to estimate two benefits for customers connected to the microgrid – “outage avoidance benefits to microgrid participants” ($7.6m) and “resiliency savings” ($8.3m), the report said. Pepco suggested that microgrids “represent a public good,” the value of which is difficult to calculate and “nearly impossible to assign in terms of cost allocation,” according to the report.
The ICE calculator tool was developed by the Lawrence Berkeley National Laboratory (LBNL) and estimates the avoided cost of power interruptions for specific customer types in different parts of the country and for different durations, the report noted.
The report noted that the Maryland commission reiterated its position that “public purpose microgrids have the potential to serve the community by providing electricity for public purposes during periods of extended grid outages,” but clarified that the costs of microgrids should not be borne solely by the ratepayers, but instead should be financed, at least in part, “through a combination of participant contributions, government grant programs, and funding arrangements with the counties or private market participants.”
Such state proceedings reveal several trends in regulatory decision making related to ratepayer-funded microgrids, the report said, including that resilience is consistently identified as an important but intangible benefit of microgrid development, and that resilience is unquantified in the formal regulatory proceedings surveyed.
Discussing case studies of how power interruption valuation methods have been used to calculate a value of resilience for DERs in the United States, the report said, for instance, that following Superstorm Sandy in 2012, the City University of New York (CUNY) launched the Smart Distributed Generation Hub “to develop a strategic pathway to a more resilient distributed energy system.”
CUNY partnered with NREL to analyze the technical and economic viability of PV and battery systems on three critical infrastructure sites in New York City, with NREL using the ICE calculator tool, the report said. A “value of resiliency” was calculated for each of the three cases on a $/hour/year basis using the ICE calculator, the report said.
The ICE calculator outputs are based on surveys of the willingness-to-pay to avoid power interruptions of up to 16 hours in length, and that duration is too short for resilience analysis, the report said, adding that the ICE calculator – and the results from contingent valuation surveys more generally – can be used to support analysis for an individual facility or for larger geographic areas.
Regulators attempting to analyze investments in resilient DER have several options, including actively engaging in research efforts focusing on new approaches to resilience valuation, the report said. Ongoing efforts to advance the “frontiers” of energy resilience valuation include new survey designs to elicit willingness-to-pay values for power interruptions with longer-durations than those used in existing models, the report said.