Initial Results Eight Distribution Planning Opportunities

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Initial ResultsEight Distribution Planning
Opportunities

• Discussion Document
• Distribution Planning Working Group
• Massachusetts Distributed Generation
  Collaborative
• October 19, 2005

2
Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps

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Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps

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The major purpose of the analysis of the eight
opportunities is to test the DG/Distribution
Planning hypothesis.
Introduction

• Hypothesis DG contributes value to
  distribution planning and meets customer needs
• There are three conditions that must be met for
  the hypothesis to be correct
• There must be enough DG capacity to meet the
  distribution system shortfall (forecasted load
  2005 distribution system capacity).
• The DG reliability must meet distribution
  planning needs
• The economics for DG customers/owners and
  utilities must be favorable.

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Our analysis will consider a status quo and
active scenarios for each of the eight DG and
distribution planning opportunities.
Introduction
Status Quo
Active
DG grows without tight integration with
distribution planning
DG is tightly integrated with distribution and is
relied upon to meet demand
Customer Ownership
Utility Ownership
Customer Ownership
Distribution Deferral Value Included Customer
Case - Similar to passive analysis but will also
include distribution deferral payment and
customer recruitment.
Distribution Deferral Value Included Utility
ownership and control of DG

• Status Quo Analysis Include only DG values that
  can be captured today
• Assumptions
• DG penetrates the customer base on the eight
  distribution planning opportunity areas based on
  the savings that DG will provide customers.
• Current customer incentives are included in
  economic analysis.
• DG penetration is based on customer payback.
• No new incentives (e.g. value of distribution
  deferral).

• Other values included
• Customer case add additional values and
  associated costs

• Other values included
• Utility case add additional values and
  associated costs

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Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps

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Without an active program DG is not likely to
meet the capacity shortfalls.
Preliminary Conclusions Capacity
? DG alone meets capacity requirements ? DG is
part of a portfolio that meets capacity
requirements ? DG does not meet capacity
requirements
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DG could provide adequate reliability in some
cases.
Preliminary Conclusions Capacity

• Status Quo/Customer Ownership DG doesnt meet
  the reliability requirements in most cases since
  it will not provide enough capacity.
• Active/Customer Ownership Under certain
  circumstances, DG could meet the reliability
  requirements if there is enough diversity of
  resources and other resources (energy efficiency
  and demand response) are used to firm DG
  capacity.
• Active/Utility Ownership The analysis assumed
  that the utilities would add enough DG capacity
  to meet their needs for reliability.

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In some cases DG provide positive NPVs for
utilities.
Preliminary Conclusions Economics
Customer Ownership
Active Utility Ownership
Active Utility DG Ownership
Status Quo and Active Utility DG Ownership

• Customer Perspective An underlying assumption
  for the analysis is that a customer will not
  install DG unless it meets their requirements for
  savings.
• Utility Perspective The impact on utility
  economics has not been evaluated.

Results have not been optimized, NPVs may improve
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Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps

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Preliminary Conclusions
Status Quo/Customer Ownership Preliminary
Conclusions

• In most cases, DG alone is not enough to meet the
  capacity shortfalls. Energy efficiency combined
  with DG can meet shortfalls in some cases
  however, the deferral period is short.
• Small recip engines are the most attractive
  technologies PV can beat recip engines in some
  cases.
• Characteristics of a good opportunity for DG in
  distribution planning
• System near capacity, but need is still several
  years out
• Large customers with thermal demand
• Slow growth
• Shortfall is small relative to the load

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Assumptions
Status Quo/Customer Ownership Assumptions

• Distributed Generation
• Customer maximum demand and annual energy use are
  provided by the electric distribution companies
• Electric and gas prices for Jan 1, 2005 to Dec
  31, 2005 (For some utilities the Nov Dec cost
  of gas and electric generation are estimated)
• DG performance parameters, installation and
  operating costs as provided in the NREL report,
  Gas-Fired Distributed Energy Resource Technology
  Characterizations, October 2003
• Cumulative market penetration determined from the
  curve -- Average of Kastovich and ADL
• Linear market adoption, with 100 occurring in
  year 10
• Energy Efficiency
• The amount of energy efficiency that can be
  achieved is 10 of all customers' maximum demand
• The payback for all customers is 5 years
• Cumulative market penetration determined from the
  curve -- Average of Kastovich and ADL
• Linear market adoption, with 100 occurring in
  year 5

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In the Norwell Opportunity, DG and Energy
Efficiency could provide a one-yr deferral.
Status Quo/Customer Ownership National Grid
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In the Lunenberg Opportunity, DG and Energy
Efficiency could provide a one-yr deferral.
Status Quo/Customer Ownership FGE
15
For the Framingham Opportunity, DG alone may meet
the capacity shortfall.
Status Quo/Customer Ownership NStar
16
In the WMECO opportunities, DG and Energy
Efficiency could provide one-yr deferrals.
Status Quo/Customer Ownership WMECO
17
The DG opportunity may be understated, since the
analysis doesnt address growth and is limited to
the 2004 customer loads.
Status Quo/Customer Ownership Missing
Opportunities?
Targeted Customer Load as a Percentage of
Forecasted Load
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Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps

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Preliminary Conclusions
Active/Utility Ownership Preliminary
Conclusions

• In most cases, DG was not an economic solution
• Despite the higher capital costs, several smaller
  units are more attractive than one large unit in
  meeting reliability requirements.
• The characteristics of the best opportunities
• Shortfall is small relative to the forecasted
  load
• High cost distribution solution relative to the
  need
• Deferral value per kW is much higher in the
  earlier years
• The amount of DG needed to meet the reliability
  threshold is significantly higher than the
  shortfall.
• The number of hours that DG needs to run is short
  (most cases capacity factor 1-3)
• The results of this analysis have not been
  optimized.
• For example, improving diversity by using smaller
  units could improve NPV, since fewer MWs are
  required to meet the reliability limits.

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Assumptions
Active/Utility Ownership Assumptions

• Utility Model
• Utilities are allowed to own small, distributed
  generation
• DG can be moved when it no longer can meet
  reliability criteria (i.e., TD Solution is
  implemented)
• Last year of NPV analysis is 2015 (to coincide
  with prior utility economic case studies) Note
  that shorter (or longer) timeframes could alter
  results
• Discount rate based on utility weighted cost of
  capital
• Have assumed sufficient DG must be installed to
  meet a peak load reliability threshold of 0.999
• We assume the existing system is 100 reliable in
  setting the 0.999 threshold
• DG only operates when loads exceed equipment
  ratings
• Most utility ownership cases include installation
  of diesels w/o emission control systems (Range
  400 - 600/kW)
• DG units operate independently a forced outage
  of one unit does not influence the likelihood of
  an outage of other units
• The utility can receive capacity and energy
  benefits for DG based on market rates
• Used the same load profile (LDC) and load factor
  for all cases
• Revenue requirements model used to calculate NPV
• DG costs include cost of capital (rate base),
  working capital, depreciation, property taxes,
  state and federal taxes, fuel and OM
• DG asset life and depreciation schedule set at
  approximately 35 years depreciation is
  straight-line
• Property taxes assumed to be 2 for all cases
• 2) Customer and Deferral Savings Model

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The deferral savings are calculated using a
revenue requirements approach.
Active/Utility Ownership Assumptions
WMECO Substation Opportunity
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Explain how cost module works
Active/Utility Ownership Assumptions
WMECO Substation Opportunity
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In the Norwell opportunity, 6 MW of DG would be
added over a 7-yr period to meet the capacity
shortfall and reliability requirements.
Active/Utility Ownership National Grid Norwell
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The Norwell Opportunity would have a negative
NPV.
Active/Utility Ownership National Grid Norwell
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In the Worcester opportunity, 12 MW of DG would
be added over a 10-year period to meet the
shortfall and reliability requirements.
Active/Utility Ownership National Grid
Worcester
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The Worcester Opportunity would have a negative
NPV.
Active/Utility Ownership National Grid
Worcester
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In the Lunenberg Opportunity, 6 MW of DG would be
added to meet the capacity shortfall and
reliability requirements.
Active/Utility Ownership FGE Lunenberg
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The Lunenberg Opportunity would have a negative
NPV.
Active/Utility Ownership FGE Lunenberg
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In the Leominster Opportunity, 225 kW of DG would
be added to meet the capacity shortfall and
reliability requirements.
Active/Utility Ownership FGE Leominster
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The Leominster Opportunity would have a positive
NPV.
Active/Utility Ownership FGE Leominster
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In the Woburn Opportunity, 500 kW of DG would be
added to meet the capacity shortfall and
reliability requirements.
Active/Utility Ownership NSTAR Woburn
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The Woburn Opportunity would have a negative NPV.
Active/Utility Ownership NSTAR Woburn
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In the Framingham Opportunity, 4.5 MW of DG would
be added to meet the capacity shortfall and
reliability requirements.
Active/Utility Ownership NSTAR Framingham
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The Framingham Opportunity would have a negative
NPV.
Active/Utility Ownership NSTAR Framingham
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In the WMECO Substation Opportunity, 4 MW of DG
would be added to meet the capacity shortfall and
reliability requirements.
Active/Utility Ownership WMECO Substation
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The WMECO Substation Opportunity would have a
positive NPV.
Active/Utility Ownership WMECO Substation
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In the WMECO Circuit Opportunity, 5 MW of DG
would be added to meet the capacity shortfall and
reliability requirements.
Active/Utility Ownership WMECO Circuit
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The WMECO Circuit Opportunity would have a
negative NPV.
Active/Utility Ownership WMECO Circuit
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Alternatively, by adding fewer DG units, the
WMECO Circuit Opportunity would have a shorter
deferral period.
Active/Utility Ownership WMECO Circuit
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Active/Utility Ownership WMECO Circuit
A shorter deferral period would provide a
positive NPV.
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The reliability module calculates the peak load
availability for each year.
Active/Utility Ownership Reliability
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For the WMECO Substation case enough DG is added
to provide gt99.9 peak load availability.
Active/Utility Ownership Reliability
Set at gt99.9
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Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps

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Preliminary Conclusions
Active/Customer Ownership Preliminary
Conclusions

• Including incentives makes DG, EE and DR more
  attractive (e.g. extends deferral 1-3 years).
• An Active/Customer Ownership program is not
  likely to provide 10-yr deferrals in most cases.
• A program could be developed for a 1-3 year
  deferral.
• Small recip engines are the most attractive
  technologies PV can beat recip engines in some
  cases.
• Characteristics of a good opportunity for DG in
  distribution planning
• System near capacity, but need is still several
  years out
• Large customers with thermal demand
• Slow growth
• Shortfall is small relative to the load

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Assumptions
Active/Customer Ownership Assumptions

• Active Distributed Generation
• Same conditions as in Status Quo case, except
  there is now a one-time incentive payment in year
  1 corresponding to
• Annual deferral savings were determined from the
  utility DG module
• The NPV of the savings from 2006 to 2015 was
  determined for each opportunity
• This was then divided by the capacity shortfall
  in 2015 to determine the value of the one-time
  incentive payment, /kW
• Cumulative market penetration determined from the
  curve -- Average of Kastovich and ADL market
  penetration curves
• Linear market adoption, with 100 occurring in
  year 5

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Assumptions (continued)
Active/Customer Ownership Assumptions

• Active Energy Efficiency
• The amount of energy efficiency that can be
  achieved is 10 of all customers' maximum demand
• The payback for customers is adjusted based on
  the incentive, assumes EE measures to achieve 10
  reduction cost 3,000 per kW
• Cumulative market penetration determined from the
  curve -- Average of Kastovich and ADL market
  penetration curves
• Linear market adoption, with 100 occurring in
  year 2
• Active Demand Response
• Customer reduction must be at least 50 kW (same
  as Brockton Pilot)
• The achievable demand response is 5 of a
  customer's maximum demand
• Same payback as energy efficiency case
• Cumulative market penetration determined from the
  curve -- Average of Kastovich and ADL market
  penetration curves
• Linear market adoption, with 100 occurring in
  year 2

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With incentives for DG, DR and EE, the Norwell
Opportunity could have a 2-yr deferral.
Active/Customer Ownership National Grid
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With incentives for DG, DR and EE, the Lunenberg
Opportunity could have a 2-yr deferral.
Active/Customer Ownership FGE
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With incentives for DG, the Framingham
Opportunity could have a 10-yr deferral.
Active/Customer Ownership NStar
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With incentives for DG, DR and EE, the WMECO
Opportunities could have 1-3 year deferrals.
Active/Customer Ownership WMECO
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Reliability
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Agenda

• Introduction
• Preliminary Conclusions
• Status Quo/Customer Ownership
• Active Case/Utility Ownership
• Active Case/Customer Ownership
• Next Steps