Grid Edge, Smart Grids, Flexible Grids: Projected Growth of U.S. Distributed Energy Resources
Wood Mackenzie just came out with a new forecast for grid edge technologies for the 2020’s. This post is basically a review of that report.
First looking back to the 2010’s they note that low-cost fuels and stagnant electric load growth defined the decade. This set the stage for some distributed energy technologies to be poised for growth in the current decade. Although distributed energy resources (DERs) and technologies like electric vehicles have only just begun in the last couple years to appear, both combined at about 0.2% of projected load growth in 2020, it is clear that both are growing. With the rollout of 5G there will be a rollout of self-driving vehicles, electric vehicles, that are expected to reduce traffic accidents to the eventual point of lowering auto insurance rates. EV fleets and distributed resources like grid-tied rooftop solar and storage beyond the distribution substation, at the grid edge, will become more dispatchable, says the report. In order for this to happen at a large scale, continued grid modernization and regulatory support are necessary. Commercial and industrial customers who want green energy will be able to buy it easier or build their own like many of the tech companies have.
DERs are a double-edged sword for utilities. They can help prevent some expensive upgrades by helping with local demand response issues, but they can also potentially destabilize the grid and utilities need to make some investments to prevent that from happening. They also require a smarter grid so those investments are a prerequisite, but one that has had significant success so far. With DERs some consumers of energy also produce energy. These are called prosumers. Grid flow becomes bidirectional with DERs sometimes feeding the grid. Wood Mac says there will be a shift this decade from mitigating DERs to monetizing them. Right now, many market-design demonstration projects are ongoing.
They say the grid is evolving in three stages: 1) the utility-centric phase of build-out of smart grid technologies including smart meters and bidirectional metering and communications. 2) the ecosystem-centric phase of DER integration including customer access to wholesale markets (currently a debate among system operators, DER providers, and the FERC), improving sensors and switching on the networks, changing regulatory models, and offering some infrastructure deferments. In this phase the utilities are still responsible for grid balancing 3) the market-centric phase which offers more systemwide benefits and decentralized grid balancing responsibilities.
Intermittent renewable energy sources like wind and solar, which continue to increase on the grid, create grid balancing challenges for utilities and power markets. Currently in the U.S., there are 50 gigawatts of behind-the-meter flexible DERs enrolled in demand response programs. A large rollout of EVs would increase this quite a bit. Those sources already enrolled in demand response are considered the easiest to integrate and monetize. Regulatory reform in terms of improved market access will help DERs integrate and monetize. From the report:
“In the U.S., the Energy Regulatory Commission is pushing regional market operators to formalize market designs that are inclusive of DERs. FERC has mandated operators under its jurisdiction to survey interconnection practices within their footprints and assess the economic benefits of incorporating individual resources and aggregations onto an equal footing with traditional system-balancing resources. The FERC order will shape DER participation in markets in the 2020s and will join Orders 745 and 841 as the most significant DER regulations of the last decade.”
The use of DERs for demand response is really about optimizing grid flexibility in a grid with inevitable growth of intermittent resources. This will require new or altered business models. Demand response providers are increasingly being incorporated into larger utilities and service providers trying to enhance their energy management capabilities. The need is to integrate DERs into participating in power markets and to assess the value of that participation. Increased electrification, particularly of heating and transport, are expected to grow quite a bit in the 2020’s. Decarbonization is one of the main reasons this is happening. That will increase electricity demand and make utilities consider the costs of new infrastructure upgrades. Dispatchable DERs and microgrids will help to provide grid resiliency. If DER pricing becomes well-defined in power markets and the IOT abilities of appliances and thermostats are incorporated, then these can also help to stabilize grids. Orchestrating these changes will be a juggling act and will not be cheap to implement but optimization will help stabilize the grid and eventually help profitability. They note that North American available EV storage capacity will be at 97.5 gigawatt-hours in 2020 and possibly to 647.3 gigawatt-hours by 2030. This storage capacity can and likely will be incorporated into wholesale and local power markets in the so-called EV2G revolution predicted long ago.
One problem noted in the report is the lack of standardization and alignment of policies and requirements among utilities, commissions, and government. Such standardization will help the scaling of optimal DERs. The currently fragmented system is not optimal and better alignment will help de-risk grid edge investment.
One of the authors of the report, Elta Kolo, summarizes in the GreenTech Media article that in order for DERs to be optimized for grid balancing four key areas need to be addressed: regulatory reform, the evolution of market models, the scale of grid edge investment around electrification, and de-risking grid edge investment. Along with electrification of heat and transport there will be residential solar-plus-storage. Another requirement will be the ability to dynamically determine the value at any given time of energy, capacity, and ancillary services.
References:
Foresight 20/20: The Making of a Flexible Grid – by Elta Kolo and Ben Kellison, in Wood Mackenzie – Power and Renewables, March 2020
A New Era is Beginning For the Grid Edge. Is the Utility Industry Ready? – by Elta Kolo, in GreenTech Media, March 19, 2020
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