New York State Department of Public Service WG1
New York State Department of Public Service WG-1: DSPP MARKETS COMMITTEE July 10, 2014 NYSDPS
About this Presentation This presentation includes input from all sectors and parties This presentation does not nor was it intended to represent a consensus view For this committee, policies and facts are intertwined, and development of the issues requires consideration of both Page 2 07 -10 -2014 WG-1: DSPP Markets Committee
Agenda Committee Overview Products & Services Challenges & Pathways to Increased DER Penetration Initial Model Interaction with Wholesale Markets Summary Page 3 07 -10 -2014 WG-1: DSPP Markets Committee
Committee Overview: Participation & Structure Other ESCOs Utilities DER Providers Consumers Governmental Agencies Steering Committee Environmental Groups Each sector represented on a Steering Committee members coordinated with parties within sector/sub-sector Weekly working meetings of the Steering Committee Weekly reports to and requests for information from the full Committee Interaction with Wholesale Markets subgroup Page 4 07 -10 -2014 WG-1: DSPP Markets Committee
Committee Overview: Scope The scope and objectives of the Markets Committee was to: • Identify potential products, services and transactions between various parties under the new REV construct • Develop information on the value of the products and services • Focus on the near term or initial stage of REV rather than end state market structure • Define challenges and pathways to further proliferation of DER provision of products and services • Recommend a potential initial model or procurement structure to facilitate DER • Describe interaction of DSPP and other parties with NYISO wholesale markets Page 5 07 -10 -2014 WG-1: DSPP Markets Committee
Committee Overview: Key Takeaways There are numerous potential products and services that DER can provide • Some exist today; it is expected that new and innovative products will develop in the future Precise definitions of DSPP products and services will be of great importance; the varying legal, industry, and customer context leads to ambiguity in such basic terms such as energy, capacity, demand response, and distributed energy resources Distributed energy resources exist today • Programs and initiatives by PSC, NYSERDA, utilities, ESCOs, NYISO etc. • Resources may be under utilized • More resources are needed to optimize efficiency and achieve the goals of REV There a number of challenges to further proliferation of DER In the initial stage: • The utilities will play a key role in further developing and utilizing DER • Utilities and DER providers need to be engaged and share information • There are regulatory actions that can help facilitate DER development • NYISO market rules may also need to be aligned Page 6 07 -10 -2014 WG-1: DSPP Markets Committee
Agenda Committee Overview Products & Services Challenges & Pathways to Increased DER Penetration Initial Model Interaction with Wholesale Markets Summary Page 7 07 -10 -2014 WG-1: DSPP Markets Committee
Products & Services: Overview The Committee broadly defined DER to include: • Distributed generation (e. g. , fuel cells, PV, CHP, etc. ) • Energy storage • Demand response • Energy efficiency • Microgrids • Other distributed resources New innovative resources are expected to be developed in the future For this effort, products and services viewed from two perspectives: • Procured by the DSPP for the benefit of the electric distribution system or to meet public policy requirements • Procured by and among customers, ESCOs, DER providers and other third parties Page 8 07 -10 -2014 WG-1: DSPP Markets Committee
Products & Services: Bought by the DSPP Potential Benefits Multiple benefits can be expected from some products: Product or Service Examples of anticipated benefits Base load modifications (e. g. , local energy production/supply side increases; permanent load shift/reduction) Avoided or deferred T&D investments Reduced line losses Increased system flexibility Reduced operating costs Fuel diversity Emission reductions Peak load modifications (e. g. , capacity – DER output offsetting generation; demand response/peak management; flexible capacity/ramp rate) Improved asset utilization/load factor Improved local reliability Improved system stability Improved capacity utilization Climate change mitigation Lower energy/capacity costs Page 9 07 -10 -2014 WG-1: DSPP Markets Committee
Products & Services: Bought by the DSPP Potential Benefits Product or Service Anticipated benefits Non-bulk ancillary services (e. g. , frequency response and regulation; spinning and nonspinning reserves; power factor correction; voltage support) Local optimization of services Improved power quality Improved efficiency Improve reactive support Additional revenue to offset operating expenses Reduced fuel consumption Contingency/Planning (e. g. , resource adequacy; black start; emergency power islands) Improved resiliency Improved emergency response Improved system restoration Increased proliferation of DER, particularly clean Public health and safety benefits * NOTE: The Committee disagreed as to whether energy and capacity are products that the DSPP would buy/make a market for and whether they provide value to the distribution system. Page 10 07 -10 -2014 WG-1: DSPP Markets Committee
Products & Services: Bought by the DSPP Potential Benefits The value of benefits of DER products are dependent on specifics of DER and system conditions. Potential benefits will be influenced by: • • Location Resource Time of day Resource variability Predictability and visibility Price Other factors Page 11 07 -10 -2014 WG-1: DSPP Markets Committee
Products & Services: Bought by Others Product or Service Examples Delivery Services • Value added service • DG/DER Interconnection service • Non-bulk ancillary services • Smart technology and load management services End Use Customer Services • Enhanced power quality • Energy efficiency programs Pricing and Billing Services • Time differentiated pricing • Billing for third parties • Management of transactions between customers/ESCOs and the DSPP or the DSPP and the NYISO Metering and Information Services • Customer usage data • Load research data • Market potential or saturation studies • Data analytics Page 12 07 -10 -2014 WG-1: DSPP Markets Committee
Products & Services: Provision of DER products and services may provided though various markets or funding mechanisms • • Bilateral agreements DSPP tariffs (e. g. , tiered) Fee based aggregation DER funding based on future savings Wholesale markets On-bill financing Property Assessed Clean Energy (PACE) DSPP, DER, ESCO and/or Third-Party provision of services Page 13 07 -10 -2014 WG-1: DSPP Markets Committee
Agenda Committee Overview Products & Services Challenges & Pathways to Increased DER Penetration Initial Model Interaction with Wholesale Markets Summary Page 14 07 -10 -2014 WG-1: DSPP Markets Committee
Challenges and Pathways: DER Penetration & Utilization DER penetration is not currently at a level where an “end-state” market would function Need to identify and remove challenges to entry, expansion and integration of DER Penetration Need to provide appropriate market structures and incentives Build Asset Base Establish Day 1 Market Time Page 15 07 -10 -2014 WG-1: DSPP Markets Committee Adapt and Improve Market
Challenges & Pathways: How to Facilitate DER Penetration Pricing • Monetize DER benefits • Varying compensation based on distribution level benefits (location, level and timing of system needs, and resource performance) • Monetize public policy and customer benefits • Develop appropriate pricing for services based on values and costs (e. g. , incentives for performance of DER) Information availability • Distribution system needs and capabilities • DER performance and commitment • Customer account/usage information Billing and Metering • Standardization of metering, verification and reporting requirements Page 16 07 -10 -2014 WG-1: DSPP Markets Committee
Challenges & Pathways: How to Facilitate DER Penetration Technical • Interconnection rules • Streamline • Coordinate electric, gas and steam operations • Establish monitoring, control and verification of DER installations • Deployment of communication infrastructure Other • Address cost and financing of DER • Incentivize utilities to consider DER alternatives to T&D investments • Continue RPS, EEPs, SBC through transition • Revisit standby rates (cost allocation) • Clarify future of net metering • Improve LSE/customer data submitted to the NYISO for capacity and energy settlements • Revise benefit/cost analysis framework to include societal benefits and costs (e. g. , environmental) • Ensure use of DER maintains reliability of the T&D system Page 17 07 -10 -2014 WG-1: DSPP Markets Committee
Agenda Committee Overview Products & Services Challenges & Pathways to Increased DER Penetration Initial Model Interaction with Wholesale Markets Summary Page 18 07 -10 -2014 WG-1: DSPP Markets Committee
Initial Model: Utility Roles Third-Parties DSPP Bought by customers Bought by DSPP Integrated Resource Planning Customer engagement Services (e. g. metering and financing options) Aggregation Product valuation and pricing (i. e. Tariff ) Page 19 07 -10 -2014 WG-1: DSPP Markets Committee Customers
Initial Model: Utility Roles An entirely market-based system in the near term is probably unrealistic Utilities will likely play an integral role in facilitating and integrating DER Utilities should do the following in the near term: • Identify areas where DER would have near term value • Provide information and develop sufficient price signals to reflect distribution system needs for planning and real-time operations • May require DSPP explore DER opportunities as alternatives to T&D investment through a targeted RFP or rates • Partner with customers in identifying, designing and developing DER projects • Integrate DER in system planning • First establish visibility into new and existing DER • Develop standard methods for predicting, measuring, observing, and verifying performance • Where feasible, utilities should standardize (e. g. , information to be exchanged between utilities and DER providers; contracts; etc. ) Page 20 07 -10 -2014 WG-1: DSPP Markets Committee
Initial Model: Potential Regulatory Actions Regulatory actions may be needed to help facilitate utility procurement of DER and incorporation into its planning and operation functions Some potential actions include: • Provide guidance on “values” to be monetized and develop appropriate metrics (e. g. , environmental benefits, resiliency, etc. ) • Adopt a cost/benefit valuation methodology for DERs as alternatives to T&D investment • Multiple types of market and procurement models will able to be developed using the same valuation methodology but applied to different compensation mechanisms • Leverage and expand existing programs as a bridge to sufficient DER penetration to animate markets • Create a platform for communication, monitoring and dispatch of distribution level DER • Address tariff, pricing and billing issues and policies (e. g. , standby rates, net metering, capacity tags, access to customer information, utility rate design) Page 21 07 -10 -2014 WG-1: DSPP Markets Committee
Initial Model: Potential Regulatory Actions Potential actions include (continued): • Address technical challenges (e. g. , interconnection requirements, equipment limitations associated with two way flow; DER measurement/verification) • Provide incentives, through performance-based ratemaking, for the utilities to pursue DER deployment opportunities • Create or modify rate structure to more appropriately reward customer load responsiveness • Begin transitioning toward advanced metering technology and direct load control where economic • Ensure proper market rules are in place to create a level playing field and give all competitors equal opportunities to sell their products • Develop a common portal to exchange information and solicit interest in products between Utilities, Customers, DER Providers, ESCO’s and other third parties • Continue to address barriers or conflicts as they arise Page 22 07 -10 -2014 WG-1: DSPP Markets Committee
Agenda Committee Overview Products & Services Challenges & Pathways to Increased DER Penetration Initial Model Interaction with Wholesale Markets Summary Page 23 07 -10 -2014 WG-1: DSPP Markets Committee
DSPP Interaction with Existing Markets and Programs NYISO Markets Energy Markets Capacity Markets Ancillary Services Demand Response Opportunities in NYISO Programs Day Ahead Demand Response Program – Energy Demand Side Ancillary Service Program – Ancillary Services Special Case Resources - Capacity Emergency Demand Response - Reliability Existing Utility DER Programs Con Ed Demand Response Programs/NYPA and LIPA programs Page 24 07 -10 -2014 WG-1: DSPP Markets Committee
DSPP Interaction with Existing NYISO Markets • DSPP use of DER to interact with the wholesale market: • Offsetting energy purchases by flattening load • Aggregating customer demand response capability • • Page 25 DER visibility and control: • Enhances market efficiency and operational control • Provides distribution and bulk power system reliability benefits Aligned market rules: • Ensure efficient and appropriately valued DER participation in both arenas. • Avoid double payment for the same product purchased in both markets • NYISO rule changes subject to NYISO governance 07 -10 -2014 WG-1: DSPP Markets Committee
Maximizing the Benefits of DSPP Interaction with the NYISO • Assess short-term impacts of increasing DER integration on the wholesale markets. • Avoid unanticipated adverse impacts on bulk power system: • Page 26 • Market commitments • Real time operations • Reliability rules and requirements Plan DSPP market/program design to avoid unanticipated impacts requiring redesigns 07 -10 -2014 WG-1: DSPP Markets Committee
Understanding the Impacts of Increased DER for Program Design and System Planning • • • Is an evaluation of the impact of DER penetration on the New York bulk electric system valuable? • Reliability, including installed reserves • Increased regulation and other ancillary services • Impacts on production costs Planners must: • Recognize increased penetration of DERs • Account for its value • Understand reliability impacts Design DER programs to ensure load forecasting and system planning can rely on results • Page 27 Align measurement and verification requirements 07 -10 -2014 WG-1: DSPP Markets Committee
Maintaining Demand Response Capability • Uncertainty as a result of the recent D. C. Circuit ruling on the FERC’s authority • Ongoing DER value to the wholesale market through DSPP rates / programs that: • • Shape the peak energy use/price • Satisfy the installed capacity obligation and • Reduce energy purchases Reliability can be facilitated by providing load reduction at NYISO request • Page 28 Provide timely, transparent compensation to the DSPP for any bulk power reliability benefit and DSPP administrative services 07 -10 -2014 WG-1: DSPP Markets Committee
Agenda Committee Overview Products & Services Challenges & Pathways to Increased DER Penetration Initial Model Interaction with Wholesale Markets Summary Page 29 07 -10 -2014 WG-1: DSPP Markets Committee
Summary There are numerous potential products and services; some exist today; it is expected that new and innovative products will develop in the future Distributed energy resources exist today and they provide products and services today In order to fully achieve the goals of the REV initiative, including more efficient distribution and bulk power systems, additional resources and better utilization of existing resources is needed There a number of challenges to further proliferation of DER In the initial stage, the utilities will play a key role in further developing and utilizing DER More information sharing and engagement from both utilities and DER providers is needed Page 30 07 -10 -2014 WG-1: DSPP Markets Committee
Summary (continued) • There are regulatory actions that can help facilitate DER development (e. g. , performance based regulatory design, address tariffs and pricing) • NYISO market rules also need to be aligned to ensure efficient use of DER participants • Approaches to increasing the penetration of DERs should occur systematically, reliably and safely. Page 31 07 -10 -2014 WG-1: DSPP Markets Committee
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