The Distribution System Operator (DSO) Future

Slides:



Advertisements
Similar presentations
Making Clean Local Energy Accessible Now Storage Bid Evaluation Protocols Role of CEP, Quantifiable Benefits Stephanie Wang Policy Director Clean Coalition.
Advertisements

California Energy Commission Retail Electric Rate Scenarios: Key Drivers and Structure 2015 Integrated Energy Policy Report California Energy Commission.
Connecticut’s Energy Future Removing Barriers to Promote Energy Sustainability: Public Policy and Financing December 2, 2004 Legislative Office Building.
AMERICAN PUBLIC POWER ASSOCIATION NATIONAL MEETING Salt Lake City June 15, 2009 Panel: “WHAT DOES IT TAKE TO GET TRANSMISSION BUILT?” Remarks of James.
1 Enhancing the Role of Renewable Energy in California Robert A. Laurie Commissioner California Energy Commission Geothermal Resources Council Annual Meeting.
Charles Hosken, General Manager Imperial Irrigation District
1 Reforming the Energy Vision (REV) “Utility of the Future” Tom Mimnagh Consolidated Edison Co of New York New York Energy Week April 23, 2015.
Energy Action Plan “Report Card” and the AB32 “Umbrella” CFEE ROUNDTABLE CONFERENCE ON ENERGY Julie Fitch California Public Utilities Commission Director.
Reaching the Next Level of the State’s Environmental Policy Goals Panel: Energy Procurement, Infrastructure and Policy: Climate Challenges Beyond 2020.
OSC Meeting April 27, Transmission Cost Allocation Overview.
California Takes Charge: Policies and Incentives for Energy Storage February 11, 2015 Rebecca Feuerlicht, SGIP Project Manager, Center for Sustainable.
Joint Agency Workshop on the Governor’s Energy Efficiency Goals CEC IEPR Workshop on 2030 Efficiency Goals Panel Topic Codes and Existing Buildings Monday.
By Erik Takayesu, PE Director, Electric System Planning Southern California Edison More Than Smart Webinar August 4, 2015 Distribution Resources Plan.
Southern California Edison The San Onofre Nuclear Generating Station April 14, 2011.
More Than Smart – A Distribution System Vision © 2011San Diego Gas & Electric Company. All copyright and trademark rights reserved. Dave Geier – VP Electric.
Institutional Support Vladimir Koritarov Argonne National Laboratory April 2016.
Energy Storage and Distributed Energy Storage (ESDER) Initiative California Independent System Operator CAISO – CPUC Energy Storage Workshop May 3, 2016.
California Energy Efficiency Policy and Goals Beena Morar Southern California Edison June 14, 2016.
SM SOUTHERN CALIFORNIA EDISON® RETI 2.0 Workshop 03/16/2016 IOU Panel.
Renewable Distributed Generation and Public Water Supply Utilities CWWA/CTAWWA Fall Conference Paul R. Michaud, Esq. October 20, 2015.
Making Clean Local Energy Accessible Now 11 April 2012 Craig Lewis Executive Director Clean Coalition Avoiding Transmission.
SCE Green Rate and Community Renewables Programs 2016.
Community Solar Dan McIlroy Clean Energy Collective.
Wind Project Ownership - An Investor Owned Utility Perspective John R
SEIA Perspective on Marginal/Avoided CAISO Transmission Costs
Wind Project Ownership - An Investor Owned Utility Perspective John R
Regulatory ‘Do’s’ and ‘Don’ts’ for DSOs to serve consumers’ interests Garrett Blaney co-chair, CEER Distribution Systems Working Group CEER Annual Conference.
Presented to the NARUC 2013 Winter Meeting
Transmission Access Charges (TAC)
The New Texas Wholesale/Retail Market
Regional Transmission Organizations
Transmission Access Charges (TAC) Overview
East Bay Community Energy Local Development Business Plan
East Bay Community Energy Local Development Business Plan
Lorenzo Kristov, Ph.D. Principal, Market & Infrastructure Policy
The Transition to a High DER Future
Rick Umoff, SEIA Sean Garren, Vote Solar
Implications of TAC Assessment on Distributed Generation
The Future of Demand Response in New England
Opportunities in the Changing Energy System

Distributed Solar Energy California´s Experience
Reforming the Energy Vision in New York State
Grid Modernization in Massachusetts
New England Electricity Restructuring Roundtable
Benefits of New England’s Proposed Capacity Market
New England Resource Adequacy
The Case for Why and When PCE Programs
EVP, Chief Administrative Officer
State Allocation Board Hearing Solar Energy and Energy Efficiency Project Options for California Schools Mark Johnson, Energy Solutions Manager - Schools.
Montecito Community Microgrid
City Council April 30, 2018 Item 13
The Green Communities Act: WMECO perspective
Panel II - Future of Competitive Transmission in the PJM Footprint December 1, 2016 Chip Richardson – PPL Electric Utilities.
Forging Sustainable Solar (and Storage) Incentives for New England
Metropolitan Mayors Caucus Illinois Energy Bills
Regulation for Smart Grids
New England Economic Partnership James Daly Vice President Energy Supply Energy Market Perspectives Reliable Energy, Competitive Prices and.
Anna Garcia Air Innovations Conference August 2004
Arizona Public Service Company 2012 Renewable Energy Standard Implementation Plan Arizona Corporation Commission Open Meeting August 17, 2011.
Setting transmission access charges to maximize economic and environmental benefits J.R. DeShazo.
Energy Supply Business Model enabled by the Clean Energy Package
How Small Developers and EPC Contractors Can Add PPA Financing to their Arsenals John Langhus, VP Business Development Midwest Solar Expo 2019 New Energy.
California’s Clean Energy Future
The Future Grid and Energy Storage
The Community Microgrid solution to grid restrained communities
California Transportation Electrification Activities
DC National Grid Modernization Trends NC DEQ Clean Energy Plan Workshop #3 April 22, 2019 Autumn Proudlove Senior Manager of Policy Research NC Clean.
UM 1856 PGE’s Energy Storage Proposal – Commission Workshop #1
Unparalleled resilience for communities
Presentation transcript:

The Distribution System Operator (DSO) Future Doug Karpa Policy Director Clean Coalition 415-860-6681 mobile Doug@clean-coalition.org The fastest path to the renewables-driven DER future 28 JUNE 2017

roadblocks and problems What are the roadblocks and problems to getting to a high distributed energy resource (DER) future? What is slowing us down? What are the problems we will need to solve?

Four Birds with one stone Improve reliability and simplify grid operations Eliminate market distortions Save ratepayers money Capture the value stack for DER Germany is the best example we currently have to show the efficacy of CLEAN Programs and the WDG market. If there is any confusion, Germany is in green and California—known as the leading market it the U.S.–is in red. It is astonishing that Germany is adding 11 times more solar than California even though California has a 70% better resource. Rooftop solar in Germany today is priced at the California-equivalent of 7-10 cents/kWh, which would be the most cost-effective resource deployed in California. Ground-based solar projects typically generate about 25% more kWh/W than rooftop projects, because they use tracking, which allows the panels to follow the sun throughout the day.  The net result is that ground-based projects are generally about 20% more cost-effective than rooftop projects.  The difference between the 25% and the 20% is that the O&M costs for ground-based projects are a bit higher due to their moving parts. (07_gp, 23 Sep 2013)

The Distribution System Operator (DSO): A dedicated operator of the distribution grid Centralized Generation The DSO manages Interactions with the Transmission Grid Bidding of energy services into Transmission-level Wholesale Markets Balancing within Distribution grid (power, voltage, frequency) Distribution-level Energy Services Markets *

DSO DSO DSO DSO DSO The DSO Grid Model Transmission Grid Transmission System Operator T-D Interface Distribution Grid DSO DSO DER Generation Storage Demand Response Consumer load Microgrids DSO DER Generation Storage Demand Response Consumer load Microgrids DSO DER Generation Storage Demand Response Consumer load Microgrids DSO DER Generation Storage Demand Response Consumer load Microgrids DER Generation Storage Demand Response Consumer load Microgrids 5

Creating the DSO: The Clean Coalition Plan Step 1: Separate transmission from distribution Split existing utilities from transmission assets with a bright line separation between transmission and distribution businesses. Germany is the best example we currently have to show the efficacy of CLEAN Programs and the WDG market. If there is any confusion, Germany is in green and California—known as the leading market it the U.S.–is in red. It is astonishing that Germany is adding 11 times more solar than California even though California has a 70% better resource. Rooftop solar in Germany today is priced at the California-equivalent of 7-10 cents/kWh, which would be the most cost-effective resource deployed in California. Ground-based solar projects typically generate about 25% more kWh/W than rooftop projects, because they use tracking, which allows the panels to follow the sun throughout the day.  The net result is that ground-based projects are generally about 20% more cost-effective than rooftop projects.  The difference between the 25% and the 20% is that the O&M costs for ground-based projects are a bit higher due to their moving parts. (07_gp, 23 Sep 2013) There is no (big) step 2

California’s electricity grid market structure TODAY Participating Transmission Owner (PTO) (incl. utilities) HV T-grid High Voltage (HV) Transmission Grid PG&E LV T-grid SCE LV T-grid Low Voltage (LV) Transmission Grid Above 200 kV Above 69 kV SDG&E LV T-grid Distribution Grid Other Utility LV T-grid Transmission & Distribution Facilities PG&E D-grid SCE D-grid SDG&E D-grid Other Utility D-grid OPERATED BY CAISO OPERATED BY UTILITIES UTILITIES OWN TRANSMISSION & DISTRIBUTION This graphic illustrates how high voltage (HV) and low voltage (LV) TAC currently work in California. Note that there are two categories of transmission—high (200+ kV) and low (69-200 kV). The cost of any low voltage transmission investment is restricted to the service territory in which it is located. This means that PG&E’s LV facilities are paid for by ratepayers in PG&E utility service territory. The service territory separations function as firewalls between cost allocation for each service territory. Those voltage thresholds also act as firewalls for transmission costs. For example, only HV transmission investments are eligible for statewide cost-allocation, so any facilities below 200kV are “firewalled” from having their costs allocated to other service territories. The Clean Coalition proposes using an analogous system to firewall costs under an expanded CAISO.

Transmission & Distribution Facilities Clean Coalition Proposal: Restructuring to improve competition and innovation Transmission & Distribution Facilities Only Participating Transmission Owners own transmission assets Participating Transmission Owner (PTO) HV T-grid High Voltage (HV) Transmission Grid Above 200 kV OPERATED BY CAISO LV T-grid LV T-grid LV T-grid LV T-grid Low Voltage (LV) Transmission Grid BRIGHT LINE Above 69 kV This graphic illustrates how high voltage (HV) and low voltage (LV) TAC currently work in California. Note that there are two categories of transmission—high (200+ kV) and low (69-200 kV). The cost of any low voltage transmission investment is restricted to the service territory in which it is located. This means that PG&E’s LV facilities are paid for by ratepayers in PG&E utility service territory. The service territory separations function as firewalls between cost allocation for each service territory. Those voltage thresholds also act as firewalls for transmission costs. For example, only HV transmission investments are eligible for statewide cost-allocation, so any facilities below 200kV are “firewalled” from having their costs allocated to other service territories. The Clean Coalition proposes using an analogous system to firewall costs under an expanded CAISO. Utilities own & operate distribution only PG&E D-grid SCE D-grid SDG&E D-grid Other Utility D-grid Distribution Grid OPERATED BY UTILITIES

One weird trick to reform your energy grid Only the ownership and maintenance of transmission assets changes Grid Segment Current Market Structure DSO Restructuring Owned/ Revenue Operated High Voltage (HV) Transmission Grid (above 200kV) Participating Transmission Owners, Utilities CAISO Participating Transmission Owners Low Voltage (LV) Transmission Grid (above 69 kV) Utilities Distribution Grid Transmission Markets TSO Distribution Markets (none) DSO

The reality is a bit more complex…. Transmission Grid TRANSMISSION GRID WHOLESALE MARKETS Independent System Operator T-D Interface Distribution Grid DSO bids aggregated DER energy and services into wholesale markets DSO procures power & services for distribution DSO presents power & services to T-Grid DSO facilitates DER services sales to ISO Distribution System Operator DSO delivers revenue streams to DER owners DSO “balances” Distribution Grid DSO schedules power & services from DER Owners DER Owners Generation Storage Demand Response DSO matches DER owners to customers in Distribution Grid Wholesale Market Consumer load 10

Why would anyone do this? Improve reliability and simplify grid operations Eliminate market distortions Save ratepayers money Accelerate the penetration of DER Germany is the best example we currently have to show the efficacy of CLEAN Programs and the WDG market. If there is any confusion, Germany is in green and California—known as the leading market it the U.S.–is in red. It is astonishing that Germany is adding 11 times more solar than California even though California has a 70% better resource. Rooftop solar in Germany today is priced at the California-equivalent of 7-10 cents/kWh, which would be the most cost-effective resource deployed in California. Ground-based solar projects typically generate about 25% more kWh/W than rooftop projects, because they use tracking, which allows the panels to follow the sun throughout the day.  The net result is that ground-based projects are generally about 20% more cost-effective than rooftop projects.  The difference between the 25% and the 20% is that the O&M costs for ground-based projects are a bit higher due to their moving parts. (07_gp, 23 Sep 2013)

DSOs solve four emerging problems: 1. GRID RELIABILTY DSOs can provide critical distribution grid management to ensure both transmission and distribution grids remain reliable in a high DER world. DSOs can greatly simplify grid operations

DSOs solve four emerging problems: 1. GRID RELIABILTY High renewable penetration correlates with HIGH reliability Daniel Shugar, https://www.linkedin.com/pulse/response-rick-perry-regarding-renewables-grid-stability-daniel-shugar, April 27, 2017 David Hochschild, CEC, David Owen, CAISO, Renewable energy no threat to electric grid, as Trump aides claim, S.F. Chronicle, June 16, 2017

DSOs solve four emerging problems: 1. GRID RELIABILTY The TSO’s Nightmare Transmission Grid Transmission System Operator T-D Interface Distribution Grid ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 14

DSOs solve four emerging problems: 1. GRID RELIABILTY

DSOs solve four emerging problems: 1. GRID RELIABILTY DSOs present aggregate generation and load to TSO Transmission System Operator T-D Interface DSO DSO DER Generation Storage Demand Response Consumer load Microgrids DSO DER Generation Storage Demand Response Consumer load Microgrids DSO DER Generation Storage Demand Response Consumer load Microgrids DSO DER Generation Storage Demand Response Consumer load Microgrids DER Generation Storage Demand Response Consumer load Microgrids 16

DSOs solve four emerging problems: 1. GRID RELIABILTY Transmission Grid Transmission Grid Wholesale Markets Independent System Operator T-D Interface Distribution DSO procures power & services for distribution DSO presents and schedules power & services to T-Grid Distribution System Operator DSO procures and schedules power & services from DER Owners Put in the boxes for the DER variety DSO “balances” Distribution Grid DER Owners Generation Storage Demand Response Consumer load 17

DSOs solve five emerging problems: 1. GRID RELIABILTY Key DSO functions 1 and 2 First function of DSO: Reliability Maintain distribution grid reliability Implement advanced distribution management functions DERMS T-D- Interface transactions Second function of DSO: Scheduling coordinator Scheduling coordinator for distribution grid Scheduling coordinator to the T-D interface for transmission grid. Advanced distribution functionality can make both distribution and transmission more reliable and efficient. California needs a suite of modern tools to manage DERMS for all DER, including generation, storage, DR, EV, and other emerging technologies T-D interface management

2. Eliminate market distortions & conflicts of interest DSOs solve four emerging problems: 2. Eliminate market distortions & conflicts of interest 2. Eliminate market distortions & conflicts of interest DSO market structures can ensure cost effective resources procurement. Current market structures distort procurement incentives and prices in favor of remote resources. Conflicts of interest mean distribution level services are underdeveloped.

California’s electricity grid market structure TODAY DSOs solve four emerging problems: 2. Eliminate market distortion & conflicts of interest California’s electricity grid market structure TODAY Participating Transmission Owner (PTO) HV T-grid High Voltage (HV) Transmission Grid PG&E LV T-grid SCE LV T-grid Low Voltage (LV) Transmission Grid Above 200 kV Above 69 kV SDG&E LV T-grid Distribution Grid Other Utility LV T-grid Transmission & Distribution Facilities PG&E D-grid SCE D-grid SDG&E D-grid Other Utility D-grid OPERATED BY CAISO OPERATED BY UTILITIES UTILITIES OWN TRANSMISSION & DISTRIBUTION THIS CREATES CONFLICTS OF INTEREST This graphic illustrates how high voltage (HV) and low voltage (LV) TAC currently work in California. Note that there are two categories of transmission—high (200+ kV) and low (69-200 kV). The cost of any low voltage transmission investment is restricted to the service territory in which it is located. This means that PG&E’s LV facilities are paid for by ratepayers in PG&E utility service territory. The service territory separations function as firewalls between cost allocation for each service territory. Those voltage thresholds also act as firewalls for transmission costs. For example, only HV transmission investments are eligible for statewide cost-allocation, so any facilities below 200kV are “firewalled” from having their costs allocated to other service territories. The Clean Coalition proposes using an analogous system to firewall costs under an expanded CAISO.

Distributed Energy Resources DSOs solve four emerging problems: 2. Eliminate market distortion & conflicts of interest Remote Generation Utilities get paid for: Power and services delivered. Transmission charges for profits on existing assets Guaranteed profits on new required transmission Distributed Energy Resources Utilities get paid for: Power delivered. Transmission access charges* Utilities don’t get paid for: Guaranteed profits on new required transmission *The Clean Coalition is sponsoring SB 692.

Long Range Transmission Lines Transmission Access Charges (TAC) Campaign 2. Eliminate market distortion & conflicts of interest Remote Power Long Range Transmission Lines Substation Distribution Grid Local Renewables Transmission Grid Problem: Local DER pay transmission charges, even though they don’t use transmission and don’t induce investment Solution: Meter transmission at substation downflow so that local energy is not subject to transmission fees Increases the value of local energy Makes local renewables more competitive in procurement Saves ratepayers by avoiding new transmission investment  SB 692, participation in CAISO stakeholder initiatives The core problem is that local renewable projects are being disadvantaged because CAISO hits their energy with transmission fees even that energy doesn’t use the transmission system. Transmission Access Charges (TAC) are collected to pay for the transmission grid, and CAISO assesses these based on the number of kilowatt-hours that use the transmission grid. In IOU service territory, they measure usage by adding up all the kilowatt-hours that cross the customer meter (aka, the customer energy downflow). This means that energy from local renewables is subject to TAC, even though that energy does not use the transmission system. It doesn’t have to be this way, and in many parts of California, it’s not. There is a better system already in place for municipal utilities and utilities that manage their own transmission lines. For those utilities, CAISO assesses TAC based on meters at the end of the transmission grid—based on the kilowatt hours that cross meters at the Transmission-Distribution interface. Subjecting local renewable energy to TAC makes DG projects significantly more expensive (the levelized cost of TAC is roughly 30% the cost of wholesale renewable energy) and disadvantages DG projects in energy procurement, resulting in less DG projects approved. Over the long run, this means that more transmission is built to support remote power plants at significant cost to ratepayers.

Long Range Transmission Lines Transmission Access Charges (TAC) Campaign: 2. Eliminate market distortions & conflicts of interest Remote Power Long Range Transmission Lines Substation Distribution Grid Local Renewables Transmission Grid SB 692(Allen) Eliminate the Transmission Access Charge Distortion Problem: Local DER pay transmission charges, even though they don’t use transmission and don’t induce investment. Solution: Meter transmission at substation downflow so that local energy is not subject to transmission fees Makes DER more competitive in procurement ($0.027 per kWh) Saves ratepayers by avoiding new transmission investment

Transmission & Distribution Facilities DSOs solve four emerging problems: 2. Eliminate market distortion & conflicts of interest Participating Transmission Owner (PTO) HV T-grid High Voltage (HV) Transmission Grid LV T-grid Low Voltage (LV) Transmission Grid Above 200 kV Above 69 kV Distribution Grid LV T-grid Transmission & Distribution Facilities PG&E D-grid SCE D-grid SDG&E D-grid Other Utility D-grid OPERATED BY CAISO OPERATED BY UTILITIES Utilities divest transmission assets and no longer generate revenue from additional transmission Utilities focus business on distribution grid assets This graphic illustrates how high voltage (HV) and low voltage (LV) TAC currently work in California. Note that there are two categories of transmission—high (200+ kV) and low (69-200 kV). The cost of any low voltage transmission investment is restricted to the service territory in which it is located. This means that PG&E’s LV facilities are paid for by ratepayers in PG&E utility service territory. The service territory separations function as firewalls between cost allocation for each service territory. Those voltage thresholds also act as firewalls for transmission costs. For example, only HV transmission investments are eligible for statewide cost-allocation, so any facilities below 200kV are “firewalled” from having their costs allocated to other service territories. The Clean Coalition proposes using an analogous system to firewall costs under an expanded CAISO.

Distributed Energy Resources DSOs solve four emerging problems: 2. Eliminate market distortion & conflicts of interest Remote Generation Utilities get paid on: Power and services delivered. Transmission charges for existing and new assets. Distributed Energy Resources Utilities get paid on: Power and services delivered. Distribution services Indifferent to profits on avoided transmission Avoid transmission access charges by 2018* *The Clean Coalition is sponsoring SB 692.

Key DSO functions 3 Third function of DSO: DSOs solve four emerging problems: 2. Eliminate market distortion & conflicts of interest Key DSO functions 3 Third function of DSO: Procure cost effective mix of distributed and remote resources. Act as fierce DER competitor in energy markets. Decoupling profits for transmission from procurement removes market distortion and conflict of interest. Ratepayers only pay for new and existing transmission on remote generation using transmission assets. California needs a suite of modern tools to manage DERMS for all DER, including generation, storage, DR, EV, and other emerging technologies T-D interface management

3. Plan better investment and develop distribution level services. DSOs solve four emerging problems: 3. Save ratepayers money by smarter investment 3. Plan better investment and develop distribution level services. DSOs will have a strong incentive to avoid excess transmission investment. DSOs will have strong incentives to develop distribution level service.

Large new transmission needs increase: Rate base Guaranteed profits DSOs solve four emerging problems: 3. Save ratepayers money by smarter investment Unplanned DER siting adds hundreds of millions to utility profits Southern California Edison found that planned siting of ~4 GW of local renewables would reduce SCE’s upgrade costs by over $2.2 billion Large new transmission needs increase: Rate base Guaranteed profits (Source of graphic: The Impact of Localized Energy Resources on Southern California Edison’s Transmission and Distribution System, Southern California Edison, May 2012) Source: Southern California Edison (2012) Transmission is borne by ratepayers. DER interconnection borne by developer.

Fourth function of DSO: DSOs solve four emerging problems: 3. Save ratepayers money by smarter investment Key DSO function 4 Fourth function of DSO: DSOs can run distribution grids more efficiently Avoid transmission costs with distribution planning DSOs have incentives to develop management systems for optimal visibility and scheduling. Ratepayers would save from optimized investment and services scheduling. California needs a suite of modern tools to manage DERMS for all DER, including generation, storage, DR, EV, and other emerging technologies T-D interface management

DSOs solve four emerging problems: 4. Accelerate deployment of DER DSOs can facilitate energy services markets to capture of full value stack for DER. DSOs would remove market distortions against DER. DSO have incentives to promote and develop DER supportive services.

California is failing to lead in distributed renewables DSOs solve four emerging problems: 4. Accelerate deployment of DER California is failing to lead in distributed renewables Cumulative deployed solar capacity deployed Cumulative MW Sources: CPUC, CEC, SEIA and German equivalents. Germany is the best example we currently have to show the efficacy of CLEAN Programs and the WDG market. If there is any confusion, Germany is in green and California—known as the leading market it the U.S.–is in red. It is astonishing that Germany is adding 11 times more solar than California even though California has a 70% better resource. Rooftop solar in Germany today is priced at the California-equivalent of 7-10 cents/kWh, which would be the most cost-effective resource deployed in California. Ground-based solar projects typically generate about 25% more kWh/W than rooftop projects, because they use tracking, which allows the panels to follow the sun throughout the day.  The net result is that ground-based projects are generally about 20% more cost-effective than rooftop projects.  The difference between the 25% and the 20% is that the O&M costs for ground-based projects are a bit higher due to their moving parts. (07_gp, 23 Sep 2013) As of 2017, Germany deployed more than twice as much solar as California despite California’s 70% better solar resource, mostly as DER.

DSOs solve four emerging problems: 4. Accelerate deployment of DER Why don’t we have more DER? DER provides a host of key benefits. Grid management Local Capacity Frequency response Voltage management Avoid distribution grid upgrades Avoid transmission grid upgrade Markets Saves money Greater market efficiency Diversity of energy services Environmental benefits Protect habitat Reduce GHG emissions Reduce air pollution Community benefits Provide local jobs Alleviate community health load Address environmental justice and inequity. 32

DSOs solve four emerging problems: 4. Accelerate deployment of DER Why don’t we have more DER? California needs mature markets to capture the full value of DER to incentivize deployment. DER only has limited capacity to recover its full value: Marketable Power Frequency response Capacity Markets missing Voltage management Reliability services Distribution deferral Customer services Markets in development Demand response Resiliency Avoided Transmission infrastructure Community benefits, pollution reduction 33

DSOs solve four emerging problems: 4. Accelerate deployment of DER Transmission Grid Transmission Grid Wholesale Markets Independent System Operator T-D Interface Distribution Grid DSO bids aggregated DER energy and services into wholesale markets DSO facilitates DER services sales to ISO Distribution System Operator DSO delivers revenue streams to DER owners DER Owners Generation Storage Demand Response DSO matches DER owners to customers in Distribution Grid Wholesale Market Consumer load 34

DSOs solve four emerging problems: 4. Accelerate deployment of DER Key DSO functions 5 Fifth function of DSO: DSOs sell DER services to ISO at the T-D interface DSO bids aggregate services to wholesale markets at the T-D interface. DSOs facilitate distribution level wholesale markets to match DER services to customers. DER owners capture a much broader range of values from coordination of various markets. California needs a suite of modern tools to manage DERMS for all DER, including generation, storage, DR, EV, and other emerging technologies T-D interface management

The Clean Coalition Plan Step 1: Clean Coalition Proposal: Restructuring to drive competition and innovation The Clean Coalition Plan Step 1: Separate transmission from distribution Split existing utilities from transmission assets with a bright line between transmission and distribution businesses. Germany is the best example we currently have to show the efficacy of CLEAN Programs and the WDG market. If there is any confusion, Germany is in green and California—known as the leading market it the U.S.–is in red. It is astonishing that Germany is adding 11 times more solar than California even though California has a 70% better resource. Rooftop solar in Germany today is priced at the California-equivalent of 7-10 cents/kWh, which would be the most cost-effective resource deployed in California. Ground-based solar projects typically generate about 25% more kWh/W than rooftop projects, because they use tracking, which allows the panels to follow the sun throughout the day.  The net result is that ground-based projects are generally about 20% more cost-effective than rooftop projects.  The difference between the 25% and the 20% is that the O&M costs for ground-based projects are a bit higher due to their moving parts. (07_gp, 23 Sep 2013) There is no (big) step 2

Transmission & Distribution Facilities DSOs solve five emerging problems: 5. Create new opportunities Participating Transmission Owner (PTO) HV T-grid High Voltage (HV) Transmission Grid LV T-grid Low Voltage (LV) Transmission Grid Above 200 kV Above 69 kV Distribution Grid LV T-grid Transmission & Distribution Facilities PG&E D-grid SCE D-grid SDG&E D-grid Other Utility D-grid OPERATED BY CAISO OPERATED BY UTILITIES SHAREHOLDERS CASH OUT OR MAY BECOME PARTICIPATING TRANSMISSION OWNERS SHAREHOLDERS OWN DISTRIBUTION UTILITIES / DSOs This graphic illustrates how high voltage (HV) and low voltage (LV) TAC currently work in California. Note that there are two categories of transmission—high (200+ kV) and low (69-200 kV). The cost of any low voltage transmission investment is restricted to the service territory in which it is located. This means that PG&E’s LV facilities are paid for by ratepayers in PG&E utility service territory. The service territory separations function as firewalls between cost allocation for each service territory. Those voltage thresholds also act as firewalls for transmission costs. For example, only HV transmission investments are eligible for statewide cost-allocation, so any facilities below 200kV are “firewalled” from having their costs allocated to other service territories. The Clean Coalition proposes using an analogous system to firewall costs under an expanded CAISO.

Clean Coalition Proposal: Restructuring to drive competition and innovation Restructuring drives better alignment of shareholder value with ratepayer value for cost effective energy. Shareholders hold DSO assets and transmission assets/cash. Diversified value streams come from providing a range of new distribution services. Value comes from more efficient services. Transmission business no longer cannibalizes distribution business.

The Clean Coalition Plan makes three changes: Clean Coalition Proposal: Restructuring to drive competition and innovation The Clean Coalition Plan makes three changes: Improves operation of the distribution grid Fosters creation of distribution energy services markets Adjusts ownership of transmission assets to remove conflicts of interest

Clean Coalition Proposal: Restructuring to drive competition and innovation Five Key DSO functions First Function: Maintain distribution grid reliability Second function: Scheduling coordinator Third function: Procure cost effective mix of distributed and remote resources as fierce DER competitor in energy markets. Fourth function: Run distribution grids with advanced functionality and planning. Fifth function: Facilitate distribution wholesale markets and bidding to transmission grid markets. California needs a suite of modern tools to manage DERMS for all DER, including generation, storage, DR, EV, and other emerging technologies T-D interface management

Distribution System Operator Clean Coalition Proposal: Restructuring to drive competition and innovation Transmission Grid TRANSMISSION GRID WHOLESALE MARKETS Transmission System Operator T-D Interface Distribution Grid DSO bids aggregated DER energy and services into wholesale markets DSO procures power & services for distribution DSO presents power & services to T-Grid DSO facilitates DER services sales to ISO Distribution System Operator DSO delivers revenue streams to DER owners DSO “balances” Distribution Grid DSO schedules power & services from DER Owners DER Owners Generation Storage Demand Response DSO matches DER owners to customers in Distribution Grid Wholesale Market Consumer load 41

DSOs are Good for All Stakeholders DSOs can benefit… Ratepayers: Cost effective procurement Avoided investment DER owners and developers: Capture the full stack of DER value in a much larger market. Remove market distortions favoring remote generation. Distribution utilities: DSOs can expand the range of services utility business provide. TSOs: Simplifying transmission grid operation through management T-D interface Presentation of aggregate services at T-D interface Local Communities: Local renewables reduce pollution, improve resiliency, and provide local jobs. Society: Local renewables reduces GHG emissions and habitat loss. 42

A very brief history: 1990s AB 1890 (1997) Today: DSO Restructuring Clean Coalition Proposal: Restructuring to drive competition and innovation A very brief history: 1990s AB 1890 (1997) Utilities divested generation assets Transmission System Operator (CAISO) established Today: DSO Restructuring Utilities divest TRANSMISSION assets DISTRIBUTION System Operators (DSOs) established

Participating Transmission Owner (PTO) Clean Coalition Proposal: Restructuring to improve competition and innovation Wholesale Generators Wholesale Generation High Voltage (HV) Transmission Grid Participating Transmission Owner (PTO) HV T-grid Owned by Participating Transmission Owners Above 200 kV OPERATED BY CAISO LV T-grid LV T-grid LV T-grid LV T-grid Low Voltage (LV) Transmission Grid BRIGHT LINE Above 69 kV This graphic illustrates how high voltage (HV) and low voltage (LV) TAC currently work in California. Note that there are two categories of transmission—high (200+ kV) and low (69-200 kV). The cost of any low voltage transmission investment is restricted to the service territory in which it is located. This means that PG&E’s LV facilities are paid for by ratepayers in PG&E utility service territory. The service territory separations function as firewalls between cost allocation for each service territory. Those voltage thresholds also act as firewalls for transmission costs. For example, only HV transmission investments are eligible for statewide cost-allocation, so any facilities below 200kV are “firewalled” from having their costs allocated to other service territories. The Clean Coalition proposes using an analogous system to firewall costs under an expanded CAISO. DSO owns and operates distribution grid PG&E D-grid SCE D-grid SDG&E D-grid Other Utility D-grid Distribution Grid OPERATED BY UTILITIES

The Distribution System Operator (DSO) Future The fastest path to the renewables-driven DER future Doug Karpa Policy Director Clean Coalition 415-860-6681 mobile Doug@clean-coalition.org 28 JUNE 2017