IREC Releases Regulatory Guide For Optimizing Distributed Energy

The “grid of the future” is no longer a distant goal; it is upon us today with the adoption of innovative tools, technologies and resources that facilitate the transition to a cleaner, consumer-driven electric grid, according to the Interstate Renewable Energy Council (IREC).

The organization has released a new in-depth guide meant to help states manage the grid redesign with new analytical tools and the benefit of lessons learned from states leading the way.

According to IREC, more Americans are choosing increasingly economical and available distributed energy resources (DERs) – such as rooftop or community solar, energy storage, and electric vehicles – and these DERs create new opportunities and challenges as they are integrated into the traditional electric system.

IREC says its new report, “Optimizing the Grid: A Regulator’s Guide to Hosting Capacity Analyses for Distributed Energy Resources,” helps guide state regulators as they oversee utilities developing hosting capacity analyses to integrate DERs on their distribution systems. Hosting capacity analyses are a new analytical tool – as part of broader grid modernization or distribution planning efforts – that can help states and utilities plan for and build a modern grid that allows for the benefits of DERs to be fully realized by more individuals, businesses and institutions.

“With consumers motivated by economic, environmental and resilience objectives, distributed energy resources are no longer small asterisks at the edge of the electricity grid (or the economy),” says IREC’s Sara Baldwin Auck. “Rather than simply ‘tolerating’ DERs, there is an opportunity to utilize this new tool – hosting capacity analysis – to proactively integrate them into grid planning, operations and long-term investment decisions.”

According to IREC, the term “hosting capacity” refers to the amount of DERs that can be accommodated on the distribution system at a given time and at a given location, under existing grid conditions and operations, without adversely impacting grid safety or reliability and without requiring significant infrastructure upgrades.

“Hosting capacity analyses allow utilities, regulators and electricity customers to make more efficient and cost-effective choices about where, when and how to deploy distributed energy resources on the grid,” explains Sky Stanfield, lead author and regulatory attorney representing IREC. “If adopted with intention, this analytical tool may also function as a bridge to span information gaps between developers, customers and utilities, enabling more productive grid interactions and more economical grid solutions.”

Process is key
IREC says the process underpinning hosting capacity analyses is key to ensuring that the tool is deployed to support relevant state policy goals, has clearly defined use cases, and sufficiently reflects the input from all involved stakeholders. The desired result is enhanced benefits for all ratepayers. IREC’s “Optimizing the Grid” guide outlines several key considerations when evaluating and selecting methodologies, as well as provides detail on identification of key process steps.

Perspective
Historically, utilities have maintained sole control and oversight over the distribution system. They have prioritized large centralized investments and traditional grid infrastructure to meet expected increases in consumer demand for electricity. Because DERs fundamentally change consumer electricity demand, they impact the assumptions for growth, the investment needs, grid planning and operations. These energy resources also change how consumers and third-party service providers engage both with technologies and their utilities.

“Rather than merely reacting to consumer adoption of distributed energy resources, a tool such as hosting capacity analysis allows for improved transparency and insight into the electric distribution system, a key step toward realizing a modern, clean and resilient grid,” says report co-author Stephanie Safdi. “Based on lessons from the handful of states and utilities that have begun to prepare hosting capacity analyses, this new guide focuses on the process that will help other regulators as they oversee their own state’s development and implementation.”

According to IREC, there are two principal applications, or use cases, for a hosting capacity analysis: 1) assist with and support the streamlined interconnection of DERs on the distribution grid, and 2) enable more robust distribution system planning that ensures transparent information is available to all involved parties and that DERs are incorporated and reflected in future grid plans and investments. A third, complementary function could be to inform pricing mechanisms for DERs, to assess their benefits based on their physical location on the grid and performance characteristics.

In addition, the guide for utility regulators offers detailed insight on the different methodologies that can be used for hosting capacity analyses. IREC says this is critically important, as the methodology can result in different hosting capacity values (due to different technical assumptions built into the models) and can significantly impact whether the results are sufficiently reliable and informative for grid-related planning and decision-making. The guide also highlights factors relevant to evaluate the performance of the hosting capacity analysis, as they relate to identified goals, including how to validate results to improve accuracy and functionality over time.

“Still an emerging grid modernization tool, the benefits and drawbacks of different hosting capacity methodologies are just now being revealed and likely will become even more apparent with time,” says Stanfield. “Regulators will find value in taking initial steps now to gain familiarity and ensure that the tool being developed is capable of meeting identified objectives.”

According to IREC, insights and recommendations included in its “Optimizing the Grid” guide include the following:

  • Key process considerations for hosting capacity analyses efforts overseen by utility regulators, including effective regulatory stakeholder engagement strategies.
  • Lessons learned from hosting capacity analyses efforts in California, New York, Hawaii and Minnesota.
  • Principal use cases for hosting capacity analyses and considerations to ensure they are designed to address and achieve identified goals, including state energy policy goals.
  • Principal categories of analytical methodologies, with an overview of the differences and tradeoffs between methodologies.
  • Key considerations for regulators when guiding and overseeing the implementation of hosting capacity analyses, including evaluation and selection of a well-considered methodology based upon its intended use.
  • Factors relevant to evaluate the performance of hosting capacity analyses, relative to identified goals, including how to validate results to improve accuracy and functionality over time.
  • Strategies for implementing an effective stakeholder engagement process to help guide the development of a hosting capacity analysis that is useful to a wide range of customers.

The full report is available for download here.

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