Creating Win-Win DER
Opportunities through
Stakeholder Collaboration
Ellen Petrill
Director, Public/Private Partnerships
Electric Power Research Institute
650-855-8939 [email protected]
http://www.epri.com/der-ppp/index.html
Restructuring Roundtable
Boston, Massachusetts
June 17, 2005
What is Win-Win and How to Achieve?
DER Customer
Rate Design
Custom Contract
Utility Shareholder
& Other Customers
Win
Win
Public Incentive
DG Costs
and Benefits
Society
© 2005 Electric Power Research Institute, Inc. All rights reserved.
•Cleaner Environment
•Lower Total Costs
•Cost Savings
•Return on
Investment
Win
2
EPRI DER Public/Private Partnership Cuts
Across All Stakeholder Groups
Government
*California Energy Commission
* NYSERDA
DOE
* Massachusetts Tech Collaborative
NASEO Colorado Office of Energy
Regulatory Agencies
NJ BPU
PUC Ohio
TX PUC
NY PSC
CA PUC
FERC
CARB
BAAQMD
NRRI
NARUC
OR PUC
Manufacturers
Solar Turbines
UTC Fuels Cell
Cummins West
Fuel Cell Energy
Siemens
Westinghouse
STM Power
ASCO
© 2005 Electric Power Research Institute, Inc. All rights reserved.
Utilities
* TVA
* Ameren
* NY ISO
* NYPA
* CPS San Antonio Exelon
SCE
First Energy
OPG
Southern Co.
PEPCO
Developers
RealEnergy
DTE Energy Technologies
Northern Power Systems
Consumers
Silicon Valley Manufacturers Group
Verizon
Los Angeles County
NGOs
Energy Foundation
USCHPA
NRDC
3
A Cost-Benefit Model Enables Transparent
Analysis and Allocation
CHP Cost / Benefit Chart
Scenarios
Base Case
SCE
Recip 300kW Rich Burn - 2005
No Incentives
Aggressive Market Access
Industrial
Moderate Market Access
Increased Incentives
1 Description
Wholesale gas price + SGIP
Retail gas price + No SGIP
Export + T&D + CO2 credit
Export
SGIP Increase + Production Tax
Recip 300kW Rich Burn - 2005
Sensitivities
2.11 Years Simple Payback
CHP Owner
Utility / Non-Participants
($0.05)
$0.05
$
$
$
$
Society
$0.01
$0.20
Utility Avoidable Rate
Levelized Cost and Benefit $/kWh
$0.18
Backup Value
$
$
$
$
Value of Waste Heat
$0.16
SGIP Incentive
$0.14
Gen Capacity Payment
T&D Capacity Payment
$0.12
Financing and Capital
$
Fuel Cost
$0.10
Maintenance Cost
$0.08
Wholesale Energy
$0.06
$0.04
Wholesale Capacity
CHP Rate Sensitivity
T&D Capacity
Rate 2: Demand and Energy Charge
Other Service Payments
$
$
$
$
Reduced CO2 Emissions
$0.02
Production Tax Credit
t
os
C
Be
ne
fit
t
os
C
Be
ne
fit
t
os
C
Be
ne
fit
$0.00
© 2005 Electric Power Research Institute, Inc. All rights reserved.
1,350
6.51
0.065
0.013
5,593
8
50%
600
0%
TRUE
Avoided Rate
2
0.14
0.08
17.87
83%
$0.110
CHP Capital Cost $/kW
CHP Fuel Cost $/MMBtu
Wholesale Electricity Price
Maintenance Cost $/kWh
Recovered Heat Btu/kWh
Backup Value $/kW-year
Generation Capacity
T&D Capacity
CO2 Reduction Value $/ton
Capacity Payment (% of Value)
SGIP Incentive
Energy Export
Vary Electric Prices with Gas
Utility Rate Type
Total Average Rate for Class
Energy Charge
Demand Charge
Reservation Charge
Demand Charge Avoided
$/kWh Generated
4
Decision Process for Win-Win: Identify and
Allocate DER Costs and Benefits
Identify key stakeholders
Use modeling tool to estimate
DER costs and benefits
for each stakeholder
No
Identify ways to leverage
DER values
Does DER provide
a net societal
benefit?
Yes
Implement win-win
DER solution
Does DER provide
a net benefit for
each stakeholder?
Yes
Eliminate barriers
No
Design efficient incentives
to share benefits
among stakeholders
© 2005 Electric Power Research Institute, Inc. All rights reserved.
5
California DER Pilot Project
• Goal: Help Southern California Edison develop an RFP that yields
successful proposals
• Objectives
– Test the EPRI stakeholder collaboration process
– Identify win-win solutions
– Develop a successful, scalable process
• Approach
– Share stakeholder needs and potential win-wins
– Stakeholders address issues
– Monitor results and report
• Outcomes
– DG community learned about distribution planning needs
– SCE changed approach to several issues
– Win-win = distribution deferral
– Solicitation not yet begun
© 2005 Electric Power Research Institute, Inc. All rights reserved.
6
Stakeholders Addressed Potential
Show Stoppers
• DG Deferral Value: Will SCE disclose a dollar value for DG?
– Yes, based on carrying cost of capital for distribution deferral
• Physical Assurance Requirement: 24x7?
– No, just 200 – 400 hours/year, decided by contract
– Demand limitation agreement
• Availability of Distribution System Data: What data will SCE provide?
– Two-step process, detailed information in 2nd step
• Additional DG Values: Wholesale electricity, generation savings from
curtailment or demand response?
– Yes, curtailment and DR
• Eligibility for Other Incentives: Self-Generation Incentive Program?
– No
© 2005 Electric Power Research Institute, Inc. All rights reserved.
7
Solicitation Specific Issues
• Simplification of the Process and Agreement: Reduce costs
– Simpler, less onerous agreement
– Reasonable solicitation process
• Eligible Resources: DG and DR?
– Both, but DG is required to cover critical loads (as
defined by customer)
• Tailoring SCE Deferral Agreement to DG Project Realities:
Can deferral periods be extended?
– Two to three years, with option to renew
• Facilitating Interaction between SCE Customers and DG
Developers:
– SCE will facilitate interactions
© 2005 Electric Power Research Institute, Inc. All rights reserved.
8
Broader Issues
• Alternatives to the RFP Process: Feeder-specific tariffs,
distribution credits, or other options to simplify process?
– SCE will not issue an RFP, but directly solicit
customers
• Business Model: What will advance DER?
– Role of utilities as proactive DER facilitators and
integrators should be enhanced
© 2005 Electric Power Research Institute, Inc. All rights reserved.
9
Results and Stakeholder
Recommendations
Results
• Stakeholders can resolve showstoppers
through collaboration
• Distribution deferral value is small
• Outstanding issue: will customers
propose?
Recommendations
• Capture all sources of value and allocate
to achieve win-win
• Simplify
• Adjust regulated business model to motivate utilities to
adopt DER
© 2005 Electric Power Research Institute, Inc. All rights reserved.
10
Working Group Participants
Developers
• Kevin Best, Real Energy (Sub: Robin Luke)
• Tom Drolet, DTE Tech
• Chach Curtis, Northern Power Systems
• Jeff Lyons, US Power
• Gordon Savage, Simmax Energy
Suppliers
• Tod O’Connor, STM Power
• George Wiltsee, Ingersoll-Rand
• Eric Wong, Cummins
• Kevin Duggan, Capstone
• Bob Bjorge, Solar Turbines
Customers/Customer Representatives
• Justin Bradley, SVMG (Sub: Jeff Byron) *
• Howard Choy, LA County ISD (Substitute:
Steve Crouch)
Southern California Edison
• Stephanie Hamilton, Tom Dossey,
• Ishtiaq Chisti, Dan Tunnicliff, Lynn Ferry
• Brian Stonerock, Gary Green
© 2005 Electric Power Research Institute, Inc. All rights reserved.
Advisors
• Valerie Beck, CPUC
• Mark Rawson, CEC
• Nag Patibandla, NYSERDA
• Valerie Harris, CPS San Antonio
• Fran Cummings, Mass Tech Collaborative
(Substitute: Gerry Bingham)
• Tony Prietto, SDG&E
• Sephir Hamilton, CHG&E
• Eileen Buzzelli, First Energy
• Pat Hoffman, DOE. (Designee: Joe Ianucci)
• Jim Armstrong, NStar Electric and Gas Corp
(Invited by Mass Tech Collaborative)
EPRI Pilot Project Team
• John Nimmons, Nimmons & Associates
• James Torpey, Madison Energy Consultants
• Snuller Price, E3
• Dan Rastler, Ellen Petrill, EPRI
11
California DER Pilot Working Group
© 2005 Electric Power Research Institute, Inc. All rights reserved.
12
CEC CHP Assessment Results:
High CHP Penetration and Positive Societal
Benefit not Necessarily a Win-Win
NPV Benefits through 2020 (2005$)
10,000
Total CHP Owner savings
Wholesale Export
Facilitated
Total utility operating margin lost
$8,000
8,000
Total Societal Net Benefits
Cumulative MW
Millions (2005$ )
$6,000
6,000
Wholesale Export
Difficult
$4,000
4,000
$2,000
2,000
$-
0
High Deployment
Aggressive
Market
Moderate Market
Increased
Incentives
Hi R&D
-4,000
Streamlining
$(4,000)
No Incentives
-2,000
Base Case
$(2,000)
2020 Cumulative CHP Penetration (MW)
$10,000
Source: CEC Report Assessment of California CHP Market and Policy Options for Increased Penetration
13
http://www.energy.ca.gov/distgen_oii/documents/index.html#042805
© 2005 Electric Power Research Institute, Inc. All rights reserved.
Exit Strategy for Subsidies
$kWh
Advancing CHP Market
(policies to improve economics of current CHP
industry and phase out over time as industry grows)
CHP Market Structure
(policies that pay CHP based on services they provide)
Time
© 2005 Electric Power Research Institute, Inc. All rights reserved.
14
DER Partnership 2: Create Utility Incentives
for Win-Win DER
• Bring together key stakeholders from multiple states
– Massachusetts, New York, California, Wisconsin
• Create innovative business and regulatory models, such as
–
–
–
–
Decouple utility revenues from kWh sales
Utility ownership
Accounts to recover revenue shortfalls
Establish shareholder incentives for DG
• Capitalize customer incentives and other DG costs
• Provide shareholder return on avoided investment
– Performance-based rewards
• Demonstrate in pilot projects
Join our collaborative!
© 2005 Electric Power Research Institute, Inc. All rights reserved.
15