DSP Isn’t Just Any Old Energy Acronym. National Grid Shows Why in Buffalo

The energy industry loves its acronyms. One often heard in New York is DSP, which stands for distributed system platform. The three letters hold a lot of meaning for those in the distributed energy business, as a National Grid project in Buffalo has begun to demonstrate.

DSP describes a new utility business model that the state is moving toward as part of its Reforming the Energy Vision (REV), a strategy designed to open up markets for distributed energy. While DSP specifics are still being worked out, the general idea is that the utility acts as a platform for independent energy projects — but not as a market actor itself. Competitive players develop and own the projects.

National Grid has launched a DSP pilot program at the Buffalo Niagara Medical Campus (BNMC) to foster what it describes as a transactive energy marketplace. The 120-acre campus consists of 13 institutions and close to 100 businesses. Because many of the organizations provide health services, they are required to have backup generation, making the campus a good starting point for a DSP pilot.

The utility is identifying the locational value of distributed energy owned by facilities on the campus and then providing a platform where they can sell the energy or ancillary services to the electric distribution system. This opens up revenue streams for businesses and services on the campus that own microgrids or other forms of distributed energy; they gain a way to earn market rate compensation for their energy.

The idea is to use the revenue to reduce the cost of ownership of distributed energy, and therefore encourage more of it. The grid benefits too with the new resources directed to needed circuits, increasing overall efficiency.

“I see this as a win-win for customers and for the grid itself, since the use of this leading-edge technology makes the grid stronger; more resilient and reliable,” said Paul Tyno, strategic advisor for energy initiatives for BNMC, in a news release issued Thursday by the utility about the Buffalo project.

Utilities also will be compensated for serving as DSPs. In fact, New York conceived of the idea as a way to change the utility business model, transitioning it away from one based on the sale of kilowatt hours. New York regulators see a new utility business model as necessary because in a REV-envisioned world, customers buy less electricity from the utility; they generate more on-site.

Distributed system platforms (DSP) are the foundational network platforms of the electric grid envisioned under REV, enabling market-friendly connections between distributed energy resources (DER), large-scale power generators, customers, and other parts of the energy system. As utilities mature as a DSP, energy and data will flow across the grid in multiple directions to allow storage, microgrids, demand-response technology, and other innovative services to increase efficiency while lowering costs and harmful emissions. — Source REV Connect, NYSERDA

Under National Grid’s plan, the local price for the energy is set under a formula: LMP + D + E. (More acronyms. Sorry!) As the utility explained to state regulators in a filing, LMP stands for a locational marginal price set by the New York Independent System Operator, which manages New York’s bulk power market. ‘D’ refers to the value the energy will provide to the distributed grid. For example, it may provide relief to overtaxed substations or feeders. ‘E’ is the external or societal value of the distributed energy, a measure of such things as emissions reductions or use of renewable energy.

Within the Buffalo campus, an early participant in DSP testing was Kaleida Health, western New York’s largest health care provider. Next National Grid will be testing the DSP concept in additional locations across its service territories in New York. The utility plans to engage new customers and a wider variety of technologies. New participants will help define current and developing market mechanisms as they participate in the DSP through October 2019, the utility said.

Software provider Opus One Solutions is developing and testing the financial model for the medical center’s DSP, and will also work with National Grid to apply the model at other locations.

“The demonstration is proving that our strategy for DSP development and market engagement can be viable and beneficial to all parties involved,” said Carlos Nouel, vice president, New Energy Solutions for National Grid. “We’ve made a strong commitment to the adoption of distributed energy resources as a benefit to customers, and our experiences in Buffalo will help guide our efforts going forward.”

More details are available within the New York Department of Public Service REV filings, (Case 14-M-0101, 4-30-2018).

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