SEPA and Nexant Roll Out New Methodology for Valuing DERs

Locational value of DERs will unlock new synergies to benefit customers and utilities

Washington, DC | Sept. 7, 2016

The Smart Electric Power Alliance (SEPA), in partnership with Nexant, announces the release of a new report entitled: “Addressing the Locational Valuation Challenge for Distributed Energy Resources.” It is the second report in SEPA’s Beyond the Meter series, focusing on program strategy and planning for distributed energy resources (DERs).

Locational value, the potential to defer traditional "wires" investments, is a key value proposition for DERs, such as battery storage, distributed solar, energy efficiency and demand response. With the push to incorporate DERs into distribution planning, a common metric or approach is needed for assessing potential capacity deferral value. Based on case studies with Central Hudson Gas & Electric and other utilities, the methodology in this report calculates a common locational value metric that identifies opportunities for “non-wires” alternatives and can be applied across electric utility service territories and DERs.

“The ability of DERs to defer traditional distribution investments depends on how well the operational characteristics of DERs, both individually and as part of a portfolio, align with local peak patterns and needs,” said Josh Bode, Vice President at Nexant. “This report summarizes a scalable methodology that utilities can integrate into their planning processes to optimize the mix of DERs throughout their distribution system.”

Key insights of the report include:

  • Utility managers asked to integrate DERs into distribution system planning need a way to compare DERs to more traditional distribution resources. However, approaches that seek to boil DER value down to a single benefit-cost ratio or average value per kilowatt-hour are overlooking the differences in temporal and locational characteristics inherent in DERs.
  • A metric applicable across various DER technologies allows for the capacity deferral value provided by various DERs to be stacked and combined. 
  • Four factors help identify when and where DERs have the potential to provide the most distribution deferral value: excess capacity, projected load growth, load shape attributes, and the timing, duration, and magnitude of need.
  • The proposed Load Carrying Capacity Factor (LCCF) is a measure that captures the ability of a given DER to provide effective locational capacity, when and where it is needed.
“Understanding the locational value that DERs offer to the grid is critical to their integration to distribution planning and for indicating the correct market signals to providers,” said Hal Turner, Manager of Electric Engineering Services at Central Hudson.

“Valuing DERs has been and will continue to be one of the keys to unlocking the powerful synergies they can offer for customers and utilities.” said Julia Hamm, SEPA President and CEO. “By recognizing the impact of time and locational variables, the Nexant methodology has the potential to move industry discussions beyond traditional cost-benefit analyses. As energy technologies evolves, our methods for valuing these resources have to evolve too.”

Download "Addressing the Locational Valuation Challenge for Distributed Energy Resources" here.

Josh Bode will present a summary of the report and discuss the locational valuation methodology 3:30-4 p.m., Wednesday, Sept. 14, at Solar Power International in Las Vegas. Bode and SEPA researchers will also be available for interviews during the conference.

Upcoming reports in SEPA’s Beyond the Meter series will explore issues in three key areas: evaluating DERs’ potential system benefits, integrating insights about customers, and re-assessing planning processes.

About SEPA:
The Smart Electric Power Alliance (SEPA) is an educational nonprofit working to facilitate the utility industry’s transition to a clean energy future through education, research and collaboration. SEPA offers a range of research initiatives and resources, as well as conferences, educational events and professional networking opportunities. SEPA is cofounder and cosponsor of Solar Power International and winner of the Keystone Policy Center’s 2016 Leadership in Energy Award. For more information, visit www.sepapower.org.

About Nexant:
Formed in 2000, Nexant is a global industry leader focused on every facet of the energy industry. Nexant offers best-in-class energy consulting services that transform utility business processes and improve implementation of smart grid, clean energy, distributed energy resources, and customer experience initiatives. Nexant consultants help utilities embrace a customer-centric strategic planning model that aligns markets, products, technology and customer strategies, reducing risk to achieve superior business results. Learn more at www.nexant.com.

SEPA contact: K Kaufmann, Communications Manager, kkaufmann@sepapower.org or 202.379.1637

Nexant contact: Dan Gruidel, Vice President of Global Marketing, dgruidel@nexant.com or 303.998.2467