Making Way for Wholesale Distributed Generation: Not for the Faint of Heart

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Craig Lewis, founder and executive director, the Clean Coalition, is taking on the formidable task of galvanizing policy support in California for wholesale distributed generation, or WDG.

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By Eviart/Shutterstock.com

This means nothing short of changing the way transmission costs are considered. In addition, the Clean Coalition is advocating for the use of feed-in tariffs (FITs), never an easy sell in the United States. These efforts can help create a grid based on community microgrids.

“The Clean Coalition doesn’t do anything that’s easy,” he says. “If it’s easy, we let others do it.”

What is wholesale distributed generation?

WDG systems are distributed generation projects that are connected to the distribution grid, but sell their electricity wholesale.

“Wholesale means a sale to a load-serving entity, which could be a utility or community choice aggregation agency. A load serving entity buys WDG and re-sells it to customers on a retail basis,” he says.

In California, about 17 percent of the renewable energy in the state comes from local solar, such as solar panels on rooftops and parking lots. These resources offer great potential as WDG, but the potential is largely untapped, Lewis says.

WDG systems avoids the need for expensive transmission

Because WDGs are produced and used locally, they can avoid expensive transmission costs and save money. However, that value is not always recognized, creating an obstacle to WDG use.

No need exists for utilities to charge transmission access rates for WDG, says Lewis. Consider how solar delivers it’s energy to the homes and businesses close by. The power stays within the local distribution node and local substations, rather than being distributed to the larger, high-voltage transmission network.

It’s expensive to transmit electricity over large, high-voltage lines, about 3 cents/kWh in California, nearly half the total wholesale cost, which is about 8 cents/kWh, says Lewis.

“Nobody realizes how much Californians are paying for transmission,” says Lewis. “If you make it really clear how much transmission costs, the value of WDG goes up. When you add 3 cents/kWh to the value of WDG, it’s like adding 50 percent to the price of what utilities should be paying for WDG.”

How to open up the WDG market

A major way to open up the WDG market is to look differently at utility transmission costs, an effort the Clean Coalition has launched in California.

The Clean Coalition this year introduced, but then withdrew, legislation (SB 692) into the California State Senate to create policy that recognizes the benefits of WDG and makes the costs of transmission more transparent.

After the California Independent System Operator balked at the proposal, saying it wanted more buy-in from the California Public Utilities Commission, the Clean Coalition withdrew the bill and plans to create a new version that will be similar, but will direct the CPUC to launch a proceeding, says Lewis.

While investor-owned utilities in California impose the 3 cents/kWh transmission charge on WDG, municipal utilities in the state don’t, which is a plus for WDG. The municipal utilities meter at transmission-to-distribution substations, so it’s clear whether DG is coming from the larger lines or the local lines.

“We don’t want this charge; the local energy is not going through the transmission grid, only through the distribution grid and stays local,” says Lewis.

Value of feed-in-tariffs

In addition to taking a hard look at the cost of transmission, the Clean Coalition aims to promote the use of FITs because they provide long-term, predictable payments for distributed energy.

“Essentially it’s a rate tariff that’s pre-defined and standardized so any party knows in advance the cost they will sell energy for. There’s no negotiation. It’s standard,” says Lewis. “We’re seeing more WDG purchases in places where there are FITS, and they have figured out how to value WDG properly.”

For example, a FIT in Gainesville, Fla. begun in 2009 helped Florida increase its solar PV capacity by 3,500 percent, while energy prices have increased by less than 1 percent.

“The intelligent way is community microgrids”
Wholesale Distributed Generation

Coast Village Community Microgrid diagram, courtesy the Clean Coalition

Along with FITs and more WDG on the grid, the Clean Coalition wants to see green community microgrids create locally produced energy. Ideally, WDG would play a role in community microgrids, with utilities paying for the energy provided by microgrids.

“Community microgrids are a new approach for designing and operating the electric grid, with significant levels of local renewables,” Lewis says.

However, many existing regulations prevent utilities from embracing community microgrids, says Lewis.

“We are slowly but surely getting regulations changed. The intelligent way is community microgrids,” he says.  As for taking on the many challenges of getting more WDG and community microgrids online, Lewis says, “It’s not for the faint of heart.”

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