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An Idea Whose Time Has Come

January 28, 2015

By Paul Alvarez, GEM Lecturer

Fortnightly Magazine – November 2014
For decades now, most states have required Investor-Owned Utilities (IOUs) to file periodic plans describing least-cost, least-risk approaches for meeting anticipated future loads. Though many restructured states have replaced “Integrated Resource Planning” with “Procurement Planning,” the goal is essentially the same: complete a public process to help assure regulators (and other stakeholders) that low-cost electricity will be reliably available to customers when needed. More recently, integrated resource planning (IRP) has also been used to accomplish other ostensibly worthwhile goals, such as renewable portfolio standards, with as little cost and risk to customers as possible. To date, however, integrated resource plans have focused almost exclusively on electric generation options, including consideration of related issues such as transmission and demand-side management potential, capabilities, and costs.

This article proposes to apply integrated resource planning principles to distribution grid modernization. Using IRP goals, processes, and characteristics as a guide, readers will recognize the potentially significant value of Integrated distribution planning (IDP) in reaching future customer, community, and societal goals in the most cost-effective and low-risk manner possible. We’ll begin by looking at the changing role of distribution grids and modern distribution grid investment characteristics. We’ll also consider a potential framework for an IDP process and its likely value to community planning and development stakeholders.

As the roles evolve that distribution grids (and utilities) will be asked to play in the future, the characteristics of required investments (and planning) will (should) change too. Before the recent grid modernization gold rush, the capital a utility might request for its distribution grid in a rate case might have amounted to $100 per customer. Today, a utility’s comprehensive grid modernization proposal might amount to $2,000 per customer or more . Historically, customers demanded that distribution grids reliably accommodate 1-2% load growth annually; today, stakeholders are demanding that distribution grids meet a variety of customer, community, and societal goals, each presenting its own challenges and many in conflict with others:

Figure 1 – Distribution Investment Characteristics, Historical vs. ModernChoice. Accommodate ever-greater customer choice, including self-generation, electric transportation, microgrid, payment, and pricing options

Reliability. Maintain or enhance reliability, including reduced vulnerability to cyberattacks and severe weather

Efficiency. Increase the energy efficiency of the distribution grid

Cost. Remain economically viable/maintain low capital costs while holding rates down during times of falling sales volumes.

If the dramatic changes in distribution grid and utility roles aren’t enough to prompt a new approach to distribution planning, perhaps the uncertainty associated with future customer technologies is. How might convenient, cost-effective energy storage change the distribution grid and utilities? What about the connected home and the internet of things relative to demand response and real-time pricing? The timing and extent of customer generation and electric vehicle adoption? These ‘known unknowns,’ not to mention the ‘unknown unknowns,’ threaten to make IRP modeling look simple by comparison.

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