California to Include Avoided Transmission Costs in DER Benefits Calculation

Share Button

The California Public Utilities Commission has agreed to consider avoided transmission costs for the state’s three investor-owned utilities as part of its cost-benefit analysis for distributed energy resources (DERs).

DERs

By gopixa/Shutterstock.com

The issue centers on the PUC’s “avoided cost calculator,” or ACC, a methodology used to determine the benefits of DERs that is used across commission proceedings such as net energy metering.

Since it was first approved in 2005, the calculator has evolved to cover six types of avoided costs: generation capacity, energy, transmission and distribution capacity, ancillary services, renewable portfolio standard and greenhouse gas emissions. The ACC is updated each year.

However, until now, the calculator only included avoided transmission costs for Pacific Gas & Electric.

In response to concerns raised by the Clean Coalition, Vote Solar, the Solar Energy Industries Association and 350 Bay Area, the PUC on April 16 revised a proposed decision so avoided transmission costs would also apply to Southern California Edison and San Diego Gas & Electric.

True value of DERs

PUC staff was also directed to refine PG&E’s methodology for calculating its avoided transmission costs, which the Clean Coalition contends may significantly undervalue the savings DERs can bring to transmission costs.

“Including the true value of the transmission costs that can be avoided through deploying DER and DER-driven microgrids is a critical part of assessing the cost-effectiveness of any DER project, program, or policy,” said Craig Lewis, executive director of the Clean Coalition, a non-profit that designs microgrids.

Transmission service in California costs more than $20/MWh and its levelized cost for the next 20 years is forecast to be $30/MWh, the Clean Coalition told the PUC in testimony early this month.

High transmission costs avoidable

“These costs approach or increasingly even exceed the cost of the energy itself, and are largely or even entirely avoidable in many cases,” the group said. “As such this should be recognized as a very substantial component of potentially avoidable costs in the ACC, and evaluated based on the operational profile and characteristics of the DER being evaluated.”

Not including avoided transmission costs raised the cost of DERs in the avoided cost calculation by up to 50%, according to the Clean Coalition. 

transmission costs

Illustration of how transmission access charges artificially inflate the cost of local energy. Courtesy of Clean Coalition

The group said failing to include avoided transmission costs in the ACC would lead to flawed planning and program development, potentially saddling ratepayers with billions of dollars of misdirected investments, and less than ideal outcomes for grid resilience and environmental effects.

Looking ahead, the PUC directed its staff to immediately hold a workshop to discuss a methodology for calculating avoided transmission costs as well as calculations for the net cost of new entry for battery storage and avoided costs for “high” global warming gases.

Free Resource from Microgrid Knowledge Library

Energy-as-a-Service Municipal Microgrids
California’s Critical Facility Challenge: The Case for Energy-as-a-Service Municipal Microgrids
If California does not modernize its grid and power delivery infrastructure via sustainable premium power provided by microgrids, the state will be thwarted in its efforts to meet not only its economic and public safety needs, but aggressive carbon reduction and renewable energy goals. Download the new white paper commissioned by Schneider Electric that answers one of the most commonly asked questions: How can today's governments pay for the vital energy infrastructure upgrades they need? Enter Energy-as-a-Service municipal microgrids.
We always respect your privacy and we never sell or rent our list to third parties. By downloading this White Paper you are agreeing to our terms of service. You can opt out at any time.

Get this PDF emailed to you.

Track news about California regulatory proceedings on DERs and microgrids. Subscribe to the free Microgrid Knowledge Newsletter.

Share Button

Sign up for our newsletter and get the latest microgrid news and analysis.

Comments

  1. Hence the widespread deployment of modular fuel cells amid Small-Medium Businesses as well as Residential customers will increase the overall contributions of DERs – underscoring additional Cost Avoidance in Transmission, not to mention Demand Charges amid Large Commerical/ Industrial customers – reeling in annual Installed Capacity [ ICAP ] charges. Microgrid solutions are relative, scaling from rather large capacity systems from providers like Ameresco, S&C, Schneider etc. then downward via InstantOn’s emerging focus on Residential Solutions via proven modular Solid Oxide Fuel Cells as demonstrated across Australia, Europe & Japan.

Leave a Comment

*