Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

The Rise of Distributed Energy Resources: Calling on the Lilliputians

Is DER competitive with traditional utility investments, and if so, what are the costs and benefits?

Fortnightly Magazine - February 2007

that only 1 percent actually will install DG each year.

Factors that limit DG penetration include load mismatch, over- or under-sized technology, low thermal demand, and unfavorable economics. For example, small PV may be the only DG technology that is viable and economically attractive to residential customers (see Table 2).

The Role of Demand Response

The notion that DR provides value to utilities and their customers is supported by several ISOs/RTOs. Unlike DG, DR may provide value to utilities, but only for a limited number of hours. Traditionally, DR is called when a system emergency exists or when marginal prices are high. Restructuring DR programs for capacity deferral would lead to increases in participation targets and hours of interruption. Increased incentive payments also may be needed to achieve participation targets.

Customer interest in DR can be fickle. Additional customer incentives may be needed to sustain customer participation and acceptance. Complete shutdown over an extended number of hours usually should be avoided. Rather, cycling of all participating customers during the peak intervals hours may be needed to avoid customer opt-out ( e.g., 20 minutes on; 40 minutes off each hour).

Successful DR programs share certain attributes.

Residential. Typically, DR consists of air-conditioning (AC) and hot water control (HW), either by direct shutoff via timers or electronic signal ( e.g., radio). Figure 6 illustrates typical residential DR reduction levels achieved in the United States. To increase penetration, additional incentives are necessary. Restructuring existing programs is straightforward; timers or interruption signals are reset to correspond to T&D peaks. The hours of interruption likely will increase to ensure a sufficient amount of AC or HW is interrupted during feeder or system peak hours.

Commercial. Commercial DR applications range from small offices to large shopping complexes, often for cooling or heating systems (HVAC). Limited tolerance for extended interruptions suggests DR should be cycled as owners will bristle at the prospect of customer inconvenience.

Industrial. Given the criticality of industrial processes—primarily the economic impact of lost production—DR incentives should be structured to limit the maximum hours of interruption to 100 to 150 hours annually. For commercial and industrial DR, firm DR estimates should reflect customer non-participation or lower than expected load reductions caused by idled plant or facilities.

Utilities need absolute assurance that DR can be relied upon in lieu of new T&D capacity. For direct-controlled HW or AC, minimum firm capacity is assured if devices are utility controlled. C&I incentives and penalties must be set to provide greater assurance that customers will reduce load when requested by utilities. Further, once outage exposure exceeds 100 to 200 hours, additional DR cannot be relied upon to provide firm capacity. From operating hour limits, the maximum level of firm DR equals about 5 to 10 percent of the feeder or substation peak.

The article has described methods to evaluate DER comparably with traditional T&D planning solutions. An economic methodology that consistently predicts and analyzes benefits and costs over time and DER ensures that all valuation metrics are fully considered. A rigorous and unbiased approach is essential if DER