1. Integrating Distributed Energy Resources 2015 Austin Electricity Conference AT&T Conference Center April 9, 2015, Page 1 Daniel Violette, Managing Director, Navigant dan.violette@navigant.com

2. Why is this a critical time for assessing DER integration? » There may be more changes in grid operations in the next 10 years than there were in the past 50 to 100 years. » Based on planning reports filed by the state’s utilities and the NYISO, approximately $30 billion will need to be spent over the next decade to maintain current capabilities, compared with $17 billion over the past ten years. » Electricity is a real-time product, produced and consumed almost simultaneously. » We have seen the impacts on grid operations, pricing and planning from in-elastic customer demands. › Load-side flexibility has real value as does diversity in the resource mix › Moving beyond traditional DR to advanced load-side technologies › Integrated DSM (EE and DR) IDSM is a common topic in many regulatory proceedings › But, now we should be focused on integrated load-side management (ILSM) – EE, DR, Renewables, DG and Storage Page 2

3. The Planning Challenge » System scenarios with at-scale penetration of DER across regions are needed. › Estimating penetration of DER is difficult – one can use regulatory goals, pending interconnections, but longer term trends will be based on economic modeling and scenario analyses to ascertain robust systems. › Location and type of DER make a huge difference in costs and benefits. › DER introduced now may not have the same telemetry as might DER in a few years as sensors, meters and communications evolve. ‒ California decision on smart or advanced invertors being required in 2016 or 12 months after UL testing). ‒ Does this lead to a mixed technology grid? › How will planning have to evolve in the near-term and longer term to make appropriate investments in infrastructure? Some of the needed technologies and systems don’t yet exist. › Need to make the right investments that don’t foreclose future economic options – pilots, DER on-ramps, and flexibility is important. › Creative approaches are being developed across the country – this is a tough issue, but we need the engineers to lead in the development of systems approaches. Page 3

4. What can we do now? » Need to model future scenarios with DER at scale – many projects of different types. › A focus on project or type-specific interconnection issues may miss the big picture. › Use feeder load data to statistically model DER impacts that can be seen on the grid. » Simulating DER scenarios to assess integration issues and costs, as well as synergies. » Developing scenarios – representative feeders for reduced form analyses of the system. California Energy Commission, “Distributed Generation Integration Cost Study: Analytical Framework,” by Navigant Consulting, CEC ‐ 200 ‐ 2013 ‐ 007 ‐ REV, September 2014. Page 4

5. Discussion Issues » Market models for distribution companies that become the “distribution services platform” (DSP) providers. › Does this make moving to an independent DSP too expensive if believe to be needed in the future. [Considerable controversy in NY REV NY on this point]. » Getting pricing right: › Dynamic retail pricing – will average pricing support appropriate DER investments? › Location influences the value of DER and the cost of integration – are we going to have locational pricing? › What are appropriate pricing schemes for grid services from DER? › Should DSPs be allowed to provided value-added services in a market? » Getting the right portfolio of DER where technologies provide self-supporting synergies – DR and roof-top solar on the same feeder. » How much telemetry and visibility into the DER eco-system is needed? › Are there size cut-offs or a feeder/substation capabilities that reduce the need for monitoring – may be costly to put telemetry in after DER installation/interconnection. Page 5