Master Planning: The Key for Unlocking Distributed Generation Potential

Fewer than 10 years ago – it must seem like an eternity given today’s pace of change - master planning was a relatively straightforward exercise. Organizations would weigh demand growth projections against centralized power output capacity to determine if they needed additional centralized power output.

Today, these plans must incorporate so much more, because distributed generation touches every aspect of an organization – from billing and rates to field maintenance and operations. While there is no one-size-fits-all approach for integrating distributed generation into a local power grid, there is a process for planning, investing, and optimizing the grid in a way that economically meets evolving customer and regulatory requirements. That solution is utility resource and distribution planning, or what we call an integrated master plan – an essential exercise for utility leaders to remain financially viable; meet regulatory requirements; maintain grid reliability and enable distributed generation into the grid ecosystem.

Financial Viability and Rate Equity

Before distributed generation, utilities alone controlled where power resources came from, and resource plans identified investments in new, utility-owned generators, and/or power purchase agreements from independent power producers (IPP). Customer rate structures were relatively simple: Pay for what you use, no matter when you use it.Today, anyone can be a power producer, from a homeowner placing solar panels on the roof of their house, to sophisticated microgrids at commercial, industrial, and military complexes. This changes the economics of providing electric power services. While a simple, consumption-based rate structure worked well for nearly 100 years, it was built on the fallacy that higher kWh equaled greater cost to the utility and that less usage reduced utility costs. Today, the concept of distribution system capacity and overall system demand has evolved to understanding that provisions must be made to unbundle the cost of maintaining infrastructure, no matter who or how it was used.

Self-generators, particularly homeowners with rooftop solar, can significantly reduce their overall demand for power from the utility, but in reality create a significant cost burden due to potential infrastructure upgrades and work required simply to integrate that resource with the grid. Maintaining a consumption-based rate structure places the burden of this work and investment disproportionately on individuals who cannot implement distributed generation resources.

Today’s master plans must identify and prioritize necessary investments on the grid and corresponding customer offerings to facilitate adoption of distributed generation resources in an efficient and cost-effective manner.

Assess Requirements and Resources

Meeting evolving regulatory and stakeholder needs in as cost-effective manner as possible hinges on a thorough understanding of existing resources and assets. What is your current generation portfolio? Do you have resources that must be retired or retrofitted in the time frame to meet regulatory requirements and/or power demands? Do existing resources provide the flexibility needed to meet shifting demand outputs and requirements as a result of greater integration of distributed resources?

For service providers whose territory spans large geographies, assessing renewable energy potential across their operating ecosystem is complex, but necessary. The master plan should identify where, from a geographical perspective, the best resource areas are for distributed generation technologies, such as wind, solar and combined heat and power facilities, etc. Then assess transmission and distribution assets, to determine where the system would benefit from upgrades to handle distributed input.

Having a complete understanding of current system conditions and what is needed to meet future requirements enhances an organization’s ability to justify investments to key stakeholders, improve reliability and, for regulated utilities, gain approval for rate recovery.

Holistic View

Change is accelerating across the industry at an unprecedented rate. Adoption of distributed generation is a common challenge for virtually all utilities, but the tactical solutions will be unique for each. A holistic master plan should provide utility leaders with a 20-year view based on current market conditions. It should also account for future scenarios, such as technology changes, fuel price and more stringent environmental requirements. A completed product should be dynamic and include a scorecard of results for feasible alternatives for each scenario that enable utility leaders to evolve their plans to meet future need.