The Value of Energy Resilience Continues to Elude Regulators: Report

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With the upsurge in catastrophic events such as wildfires and hurricanes, business leaders along with utility regulators are looking for ways to stem losses — to get the lights back on and the companies back to work. Enter distributed energy resources such as microgrids, solar photovoltaics, and batteries that have fallen in price and that provide energy resilience value.

energy resilience value

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But a key question now is how to monetize those investments at the regulatory level. While such assets are creating value for both the businesses that use them as well as society, regulators have yet to come up with a methodology to quantify those benefits. The most conspicuous attributes are that the electricity keeps flowing and the businesses keep conducting commerce. Still, regulators are tasked with figuring out just what is a public benefit and what is in the private interest — and where exactly that sweet spot lies.

“We are seeing bigger and badder outages that are eclipsing the ability of the infrastructure to keep up,” says Wilson Rickerson, a principle at Boston-based Converge Strategies, a consulting firm that specializes in energy resilience. “While three days of diesel fuel used to be sufficient, we are now seeing longer outages. The ultimate goal is to implement distributed energy resources to keep sites up and running for longer times: 14, 15, 16 days. Utility commissions must be able to evaluate these investments.”

The secret sauce

Converge Strategies authored a study for the National Association of Regulatory Utility Commissioners (NARUC) on this issue. “The Value of Resilience for Distributed Energy Resources: An Overview of Current Analytical Practices,” aims to help businesses and regulators quantify the economic and social benefits of distributed energy resources.

Rickerson, who is one of the authors, looked at how state regulatory commissions view these investments. His group’s goal is to come up with a standard “tool kit” to help regulators determine the value of energy resilience and guide investments in distributed energy resources.

“We need to get better in how we include this benefit in resource planning. It can help us avoid broad economic losses, which is a public good,” he said in an interview.

The value can range from preserving human life to maintaining the integrity of critical infrastructure. Consider that complex interdependency of utility systems: A loss of power can also take out the drinking water system, the wastewater facility and the communications infrastructure. Rickerson thus asks an important question: What is the role of regulators and what boundaries do their decisions have? Are they obliged to keep societal order?

Setting an energy resilience value: a new frontier

On the surface, it would appear easy to establish a value for energy resilience — the ability to get the power back on and businesses back up — especially when hurricanes and wildfires wreak havoc.

But regulatory commissions did not define a specific energy resilience value in three key microgrid decisions, described in the report for NARUC. Two of the cases were in Maryland and one in Illinois. In all three, the utilities sought recovery from ratepayers for microgrid costs.

Explore the value of energy resilience at a Microgrid 2019 pre-conference workshop on May 13 in San Diego.

Baltimore Gas & Electric, for example, asked to have two community microgrid pilots approved: one in Columbia, Md. and the other in the city of Baltimore. The Maryland Public Service Commission denied cost recovery, saying that the utility never quantified an energy resilience value.

For its part, the utility argued that the projects would serve the public interest by reducing peak demand, smoothing out voltage to avoid momentary lapses in power and reducing the overall cost of system upgrades.

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energy modernization
Energy Modernization through Microgrids
A microgrid is a discrete energy system consisting of distributed energy sources (e.g. renewables, conventional, storage) and loads capable of operating in parallel with, or independently from, the main grid. The primary purpose is to ensure reliable, affordable energy security for commercial, industrial and federal government consumers. Benefits that extend to utilities and the community at large include lower greenhouse gas (GHG) emissions and lower stress on the transmission and distribution system.

The report offered several options regulators might pursue — from ignoring energy resilience and instead focusing on other benefits that justify a distributed energy project to engaging in ongoing research efforts by several parties to identify the value of energy resilience.

All of the options, however, present limitations and trade-offs, the report said.

Proceedings Regarding Proposed Microgrid Investments by Utilities

Credit: “The Value of Resilience for Distributed Energy Resources:
An Overview of Current Analytical Practices,” NARUC

“Resilience is an important issue for regulators,” Rickerson says. “Regulators realize what they need to do but it is unclear how to do it well. There are no silver bullets. We are pushing the frontiers on how we make these decisions.” 

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  1. […] A VOR standard is sorely needed, and its absence represents a significant gap in the market for Community Microgrids. As Microgrid Knowledge has noted, valuing resilience “is not so simple, yet may be the primary reason an organization installs a microgrid.”  The issue is not limited to facilities considering a microgrid. Regulators need to consider VOR when conducting resource planning, but they are currently unable to do so because of a lack of standard values. Utilities wishing to engage in microgrid pilots have had their requests denied because they were not able to quantify the VOR. […]

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