Locational Net Benefit Analysis Working Group November 16, 2016 Webinar drpwg.org

Agenda Time Topic 9:00-9:15 9:15-10:00 10:00-11:00 11:00-12:00 A. Introductions and Status Update 9:15-10:00 B. Review Outline of WG Short-Term Final Report 10:00-11:00 C. Data Discussion 11:00-12:00 D. Presentation of LNBA Tool Discussion on Avoided Transmission Cost Component (7.3) Wrap up and adjourn

ICA and LNBA Working Group Background ICA and LNBA WG Purpose - Pursuant to the May 2, 2016, Assigned Commissioner’s Ruling (ACR) in DRP proceeding (R.14-08-013), the Joint Utilities are required to convene the ICA WG to: Refine ICA and LNBA Methodologies and Requirements Authorize Demonstration Project A and Project B CPUC Energy Division role Oversight to ensure balance and achievement of State objective (ensure adequate stakeholder representation in consensus statements, keeping WG activities on track with Commission expectations/needs, demonstration project results review, quality control on deliverables) Coordination with both related CPUC activities and activities in other agencies (IDER CSF WG, CEC and CAISO interagency matters, interconnection/Rule 21/SIWG, other proceedings that may impact or be impacted by locational value calculation such as AB 350/IRP and LTPP/TPP/RPS) Steward WG agreements into CPUC decisions when necessary More Than Smart role Engaged by Joint Utilities to facilitate both the ICA & LBNA working groups. This leverages the previous work of MTS facilitating stakeholder discussions on ICA and LBNA topics.

October Recap October 19th: Webinar discussing long-term refinement topics October 27th: Webinar on deferability criteria November 10th: Submission of Intermediate Status Report on Long Term LNBA Refinement

Upcoming Deadlines IOUs will submit Demo B Final Report Q4 2016 (current internal deadline: Dec. 16, 2016) WG Final LNBA Report tentatively due January 2017, pending joint motion

Working Group Final Report: Proposed Process November meetings (11/16 and 11/18): Review “Super Outlines” to confirm areas of consensus, non-consensus, proposed alternatives, and recommendations for next steps December meetings: Review 1st draft of reports after Super Outline Early January: Review Final Demo A/Demo B Reports Review 2nd draft of reports after Dec meeting Mid January: WG meetings to review recommendations Review 3rd draft, incorporating recommendations after seeing Demo results Late January: Final WG meeting January 30*: Final reports due *pending joint IOU motion

LNBA “Super Outline” By “Super Outline” we mean the following: An initial written document that provides stakeholders with clear direction on what the final report will look like in terms of structure, organization, and content.  For each of the short-term topics, include the following: Identify key issues that were discussed For each issue, summarize the conversation and main discussion points, including alternatives that were considered (if applicable) Summarize areas of consensus:  things the IOUs will do for Demo A and/or recommendations for the future Summarize any next steps / areas for future study and analysis

LNBA “Super Outline” 6.1. Activity related to Demonstration Project B Recommend a format for the LNBA maps to be consistent and readable to all California stakeholders across the utilities’ service territories with similar data and visual aspects (color coding, mapping tools etc.). Consult to the IOUs on further definition of grid service, as described in requirement (1)(B)(iv-v) of Section 4.3.1 above, and in coordination with IDER proceeding.

LNBA “Super Outline”: 6.1.a Recommend a format for LNBA maps to be consistent and readable to all California stakeholders across the utilities’ service territories with similar data and visual aspects (color coding, mapping tools, etc.) Summary: The WG discussed this topic at the July and September LNBA WG meetings, in conjunction with the ICA WG. Utilities discussed inputs into the project deferral value and system-level avoided cost calculations. The proposed Demo B maps will display deferrable projects as a layer on top of ICA heat maps, with cost of deferral shown in a symbolic manner (ex: $, $$, $$$). These heat maps will include multiple layers showing separate services and functions. Clickable circuit maps lead to pop-up information about the circuit. The growth scenarios would be represented by a user-selectable map layer. Growth scenarios 1 and 3 outlined in the August 23 revision of the ACR will be used in the maps. Both ICA and LNBA results will be based on load flow modelling. All inputs to the LNBA tool, to the extent that they are non-confidential, will be provided. The utilities are aiming to use all public data for its inputs. Additional data outside of the pop-up information will be available in a downloadable data set. A draft data and mapping template was circulated for comments among the Working Group in July. Utilities have also asked for WG feedback on the high-level user flow information presented in October. Points of Consensus: Recommendations and Next Steps: The WG would like to engage in continued discussion on: how growth scenarios will be represented in heat maps what information regarding deferrable projects are included in pop-up information versus downloadable data how projects deferring a future identified need may be included in LNBA maps

LNBA “Super Outline”: 6.1.b Consult to the IOUs on further definition of grid service, as described in requirement (1)(B)(iv-v) of Section 4.3.1 above, and in coordination with the IDER proceeding. Summary: The WG discussed this topic at the July and October WG meetings. The joint IOUs presented on the distribution services, attributes, and performance and measurement requirements that were originally prepared as part of the IDER proceeding under the Competitive Solicitations Framework (CSF) Working Group meeting. These services are: 1) distribution capacity, 2) voltage support, and 3) reliability (Back-tie) and resiliency (microgrid) services. These services inform which projects are considered deferrable. Points of Consensus: The WG agreed to use the definition of grid services as defined through the CSF Final Working Group Report. Recommendations and Next Steps:

LNBA “Super Outline”: other Other: Use Cases Summary: The WG discussed this topic at the June, July, and August meetings. It was discussed that LNBA use cases could include: Information purposes (visual heat maps to inform DER providers and stakeholders of locations where DER may be most valuable/optimal locations) Distribution planning in the context of competitive solicitation bid evaluations (means of identifying and prioritizing DER deferral opportunities, through understanding how locational value informs pricing and/or procurement) Possible future use cases, such as benefitting the interconnection process, input into program design or rate setting, and identifying both optimal and suboptimal locations Points of Consensus: The WG agreed to use the above as use cases for LNBA. Recommendations and Next Steps: Long term: The WG will continue to evaluate possible future use cases as a potential long-term refinement issue

Data Discussion We received submissions from 6 separate entities on data access to the Excel template. Data has been scoped as a long-term refinement item with relevance to both ICA and LNBA WGs. Specifically in ICA, the WG has agreed to include the following specific long-term refinement items within the larger data conversation: 3.2.b: ways to make ICA information more user-friendly and easily accessible 3.2.d: market sensitive information (type and timing of the thermal, reactance, or protection limits associated with the hosting capacity on each line) For the November meetings, it is proposed that the WG review the compiled template and address the following questions: Is the request addressing a need within ICA, LNBA, both, or within another proceeding or track? Does the function support a particular grid service? Can data issues be characterized with regards to the Walk/Jog/Run framework? Are utilities currently addressing or are there plans to address?

Data Discussion MTS published a paper in October 2016 on using the Walk/Jog/Run Framework to sequentially frame the evolution of grid data needs and capabilities.

Data Discussion System planning: data used as inputs and assumptions in distribution system planning, including hosting capacity analysis, interconnection studies, annual planning, near-term operational planning, and information that lowers the overall cost of DER integration Regulatory compliance: data used by regulators to make informed decisions about performance of distribution system, utility expenditure requests, and potential location and value of Der as a non-wires alternative or other system value, including data for determining locational and system value Grid operations: real-time information about system state and availability and operation of interconnected DER, including utility data and information from grid sensing and measurement devices and operational systems, as well as data generated by DER providers’ and customers’ systems and devices Commercial transaction: data to drive efficiency into procurement and compensation activities e.g. financial data such utility avoided cost and pricing as well as the structural elements of transactions (term, performance requirements, commercial terms and conditions, etc). Market efficiency : supports market oversight and evaluation of market effectiveness to achieve desired objectives regarding customer choice, system performance, reliability, and environment

Data Discussion WALK: Planning and regulatory function related to enabling high penetration of distributed generation resources. JOG: Expanded data needs to animate operational markets for grid services and capture local benefits of DER RUN: Enhanced market coordination and management of energy transactions

Data Discussion Please refer to Excel worksheet on data

Distribution Resources Plan – LNBA Tool Discussion October 28, 2016 Larsen Plano, PG&E | Will Speer, SDG&E

LNBA Tool Overview

Demo B LNBA Tool: Project Deferral Value Calculation Project deferral benefit module will be used in Demo B to calculate indicative ranges of avoided costs realized by deferring identified capital projects User inputs: costs, discount rate, inflation, deferral duration, revenue requirement multiplier, etc. Results are used in heat maps IOUs’ inputs will be provided, to the extent possible IOUs will strive to use public inputs No confidential or market-sensitive inputs would be provided Will be made publicly available as part of LNBA Tool

Calculation Example Discrete Deferral Value for one year Deferral Value = Full Cost of Asset * RECC + DO&M RECC Calculation i = 2.5%, r = 7%, book life = 40 yrs 𝑟−𝑖 1+𝑟 1+𝑟 𝑁 1+𝑟 𝑁 − 1+𝑖 𝑁 RECC = 4.5%/1.07 *1.07^40/(1.07^40 - 1.025^40) = 5.12% Full Cost = Direct Capital * RRScaler = $8M * 150% = $12M Deferral Value = $12M * 5.12% + $0.20M = $0.81M Source: E3, http://drpwg.org/wp-content/uploads/2016/07/LNBA-Working-Group-072616_FINALVERSION.pptx

Deferral Value for Multiple Years (E3) RECC-based deferral values escalate with inflation each year. Discounting the stream of annual deferral values yields the total present value of a multi-year deferral. 𝑫𝒆𝒇𝒆𝒓𝒓𝒂𝒍 𝑻 = 𝒚=𝟏 𝑻 𝑺𝒂𝒗𝒊𝒏𝒈𝒔𝑶𝒏𝒆 𝟏+𝒊 𝟏+𝒓 𝒚−𝟏 SavingsOne = Deferral value savings in the first year = $0.815M Two year deferral = $0.815M + $0.815M *(1.025/1.07) = $1.6M Source: E3, http://drpwg.org/wp-content/uploads/2016/07/LNBA-Working-Group-072616_FINALVERSION.pptx

Demo B LNBA Tool: System-Level Avoided Cost Calculation System-level Avoided Cost Module will be used in Demo B to estimate system-level avoided costs User inputs: Hourly DER Profile, life Results don’t vary within Demo B areas, and are NOT mapped Borrows typical avoided costs from E3 2016 updated DER Avoided Cost Model Generation Capacity, Energy, etc. In addition to DERAC, includes flexible capacity and renewable integration avoided costs Will be made publicly available as part of LNBA Tool

High-Level User Flow for Demo B Deliverables DRAFT High-Level User Flow for Demo B Deliverables Access the LNBA mapping layer that identifies deferral opportunity locations Select a section with a deferral opportunity to view project description Download distribution deferral datasets for project Construct a DER profile that meets the required electric characteristics, considering deferral requirements and ICA results Upload DER profile in LNBA Tool to estimate system-level avoided costs

Appendix

Avoided Cost Theory (E3) LNBA will use the Real Economic Carrying Charge (RECC). RECC used to calculate the annual economic value or “economic depreciation” of an asset. Economic depreciation = value of deferring the asset and its future replacements by one year, in constant real dollars. Any change in O&M costs is also included. Economic value = Full Cost of Asset * RECC + DO&M Full Cost of Asset = Present Value of revenue requirements associated with capital project Source: E3, http://drpwg.org/wp-content/uploads/2016/07/LNBA-Working-Group-072616_FINALVERSION.pptx

ACR Requirements and LNBA Tool The IOUs will use the primary analysis for the LNBA methodology described in section 4.3 and 4.4.1 ACR Requirement Location in LNBA Tool Avoided T&D "Project Inputs & Avoided Costs" Lines 18-47 Avoided Generation Capacity - System and Local RA "SystemAC" Columns AL-BP Avoided Generation Capacity - Flexible RA "Flex RA" Avoided Energy "SystemAC" Columns B-AF Avoided GHG "SystemAC" Columns DF-EJ Avoided RPS "SystemAC" Columns EP-FT Avoided Ancillary Services "SystemAC" Columns BV-CZ Renewable Integration Cost "DER Dashboard" K4 Use of Real Economic Carrying Charge "Project Inputs & Avoided Costs" Line 140-185 Avoided O&M Associated with T&D Project "Project Inputs & Avoided Costs" Line 28

Relevant Sections of 5/2 ACR Section 4.1: “evaluate one near-term (0-3 year lead time) and one longer term (3 or more year lead time)… at least one voltage support/power quality- or reliability/resiliency related deferral opportunity in addition to one or more capacity-related opportunities [for possible deferral]. Section 6.1: “[LNBA working group] Activity Related to Demonstration Project B… Consult to the IOUs on further definition of grid service, as described in requirement (1)(B)(iv-v) of Section 4.1.1 above, and in coordination with the IDER proceeding.” Section 4.4.1(1)(A): “The IOUs shall identify the full range of electric services that result in avoided costs for all locations within the DPA selected for analysis.”

LNBA Avoided Transmission Cost component ACR Section 4.4.1.2: LNBA Specific Requirements (2) For avoided costs related to transmission capital and operating expenditures, the IOUs shall, to the extent possible, quantify the co-benefit value of ensuring (through targeted, distribution-level DER sourcing) that preferred resources relied upon to meet planning requirements in the California ISO’s 2015-16 transmission plan, Section 7.3, materialize as assumed in those locations. The IOUs shall provide work papers with a clear description of the methods and data used. (A) If the IOUs are unable to quantify this value, they should use the avoided transmission values in the Net Energy Metering (NEM) Public Tool developed in R. 14-07-002.43 https://www.caiso.com/Documents/Draft2015-2016TransmissionPlan.pdf. See pp 333-337 for a complete list of specific locations.

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