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Grid Modernization: Distributed Energy Resources and the Electric Grid

Industry Insights
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The current infrastructure is in need of innovation, as the system in place has more in common with the original electric grids established in the late 1800’s by electricity pioneers Thomas Edison and William Stanley, Jr.

While the United States has yet to establish a consistent, nation-wide policy on grid modernization, state-level initiatives are underway that may provide a foundational example for growth and investment on a larger scale. The SEIA looks at these efforts and more in their set of policy briefs, offering a glimpse at a potential paradigm shift that would elevate consumer choice, energy stability, and alternative energy generation and distribution options.

State-Level Initiatives Lead the Way

Last spring, the SEIA kicked off its white paper series with a look at How California and New York are Building Grids that Encourage the Growth of Distributed Energy Resources. These two states are leading the country in grid modernization efforts, yet are still in the early stages of the kind of comprehensive, long-term planning and implementation that will truly result in a modern infrastructure. The paper notes that “public utility commission discussions about modernizing the electric grid are unfolding in different ways,” but arrives at the conclusion that there are five main concepts that underscore grid modernization efforts, which include:

Updated Utility System Planning

The foundation of future innovation can be built by planning a system that will meet consumer’s evolving needs and desires. “This planning,” the SEIA argues, “should view all DER (distributed energy resources) as an asset to the grid instead of a problem to be avoided.” This requires a major shift in the way utility companies think - instead of updating old equipment (and passing the costs along to ratepayers) to preserve the original system, they must create a more open grid that prioritizes connectivity and adaptability to DER’s like solar and wind power. The SEIA calls for more transparency from utility companies in order to collaboratively develop this new framework with alternative energy experts.

Identifying Alternatives to Traditional Utility Investments

Recent natural disasters such as hurricanes and wildfires have revealed the instability of the current electric grid, and distributed energy resources have emerged as valuable ways to avoid these gaps in coverage. With this in mind, “utilities, regulators and solar firms can identify strategic locations on the grid itself where traditional capital investments can be offset by DER alternatives.” These may include Non-Wires Alternatives (NWAs), which are distributed energy resources that can reduce demand on substations and eliminate the need for costly investments in outdated technology.

Modifying Value/Compensation Frameworks

Grid modernization efforts will only gain steam if it becomes economically viable for distributed energy resources to be developed and built in strategic areas that will benefit from greater power availability and stability. In order to achieve this, the SEIA calls for “making valuation more locationally dependent, developing solicitations, rates, and tariffs to meet needs in areas of the distribution system” that will most benefit from DER implementation. They also note that net metering policies could be part of this solution in areas with a large amount of solar deployment.

Updating the Functionality of the Grid Itself

Finally, the existing grid must be updated in order to allow for seamless integration of distributed energy resources. This would include monitoring technologies that could better diagnose weaknesses in the system, as well as distributed energy resource management technologies that include “smart inverters,” which “provide much more data than utility equipment and have the capability to help manage power quality on the distribution system.”

A Clear Path Towards a Stable, Sustainable Energy Future

The initiatives underway in California and New York may be in the early stages, but they provide the example needed to define the process of grid modernization and help build consensus on what steps are needed to secure our energy future. The SEIA notes that in these states, “public utility commissions have required the execution of significant pilot programs and have begun requiring utilities to provide new analysis and redesign rates to accomplish their objectives.” Clearly, and regulatory pressure is needed to encourage utility companies to abandon wasteful spending on the status quo and begin investing in a more open grid system.

One way that consumers can encourage meaningful action from utility companies is to vote with their dollars. Investments in residential or commercial solar systems demonstrate that sustainable, clean energy technologies are vital to meeting our energy needs and deserve a central place in discussions about infrastructure development.

Author- Mr. Bob Solger, Specialist in the Innovative Design and Application of Solar Energy Technology

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