What are distribution markets and how can CCAs

What are distribution markets and how can CCAs take advantage of them? Decentralization is coming, can CCAs play? J. David Erickson E 3 R Consulting 2/21/2018

The way we produce, deliver and use electricity is changing: Utility of the Future or Grid 2. 0 thanks to smart devices Today Tomorrow? Day after Tomorrow? AND Renewable/Low Carbon

Operational Benefits of Decentralization • Greater Reliability – no single point of failure • Reduced requirement for centralized computing power – parallel operation pushed to the grid edge • Resources can be “right-sized” to match demand with less “lumpiness” • Balancing of supply and demand done on a more local level with more granular forecasting • Variable resources (solar and wind) can be more efficiently integrated based on local forecasts and optimization with loads/storage • Distributed energy resources are becoming smarter and can increase system resilience if properly managed at the device level

Potential economic benefits of resource decentralization • Compensation for decentralized/distributed resources with a diversity of ownership arrangements • Community-based distributed resources can provide the economic benefits of localization: • • Greater sustainability through self-reliance for basic services Shared ownership “Keeping the money in the community” Local jobs • Economic dispatch of behind-the-meter resources increases efficiency • Possibility of non-monetary basis for exchange of services, e. g. , cryptocurrency and barter using P 2 P transactions? • Side benefit – support for a competitive landscape for new technologies

What does decentralization of the grid look like? And where do CCAs fit in?

Today – CCAs interact with centralized system Prices Set by Wholesale Market/Bilateral Contract Generation Transmission Prices Set by Regulator Distribution Energy + Capacity/Grid $ (Cost of Service)

Today - Independent System Operator (ISO), Wholesale Market and CCAs ISO Dispatch Merchant generator • • • $ CCA $ (Generation) Balancing Frequency Regulation System monitoring Reserve management Outage response Emergency Response • Operates market and • Dispatches generators

Today - Distribution Operator (under a CCA) Regulated cost of service + guaranteed return $ (Transmission and Distribution) Utility Distribution Company (UDC) CPUC CCA • • • Capacity Expansion/Capital projects Guaranteed return Monopoly ownership Operational control of distribution system Regulated rates

Today – Centralized Distribution Operation Rates set in General Rate Case nd sa Protection Maintenance/Stability Outage Response Power quality/Voltage Metering Interconnection Sta tu • • • Co n tro l Status and Control ?

Where do distribution markets fit in? • No example of a DER market today – net metering for generation is primary method of compensation for energy only • What is the best way to optimize DER both for location and operation? • What about the “prosumer? ” • DER can be aggregated and bid into the wholesale market today – this is a different animal • DER can provide both energy and services at the distribution level

Do distribution markets actually have a benefit? • It depends! • Maybe- • Can provide more options for consumers to manage their energy bills • Create an environment for greater competition among both in-front-of-themeter and behind-the-meter energy technologies • Provide a more competitive basis for distribution grid capacity expansion than utility-driven competitive solicitations • Can get prices paid and received for services and energy provided by distributed energy resources more appropriately set based on locational and temporal benefits to the distribution system • Automated, device-level dispatch tuned to the needs (“locational price”) of the system could enable DER portfolio optimization

Three Distribution Market Architectures Total DSO Less Decentralized Transactive Energy More Decentralized Cryptocurrency/Blockchain

Total DSO Transmission Operator Bulk System Market Distribution System Coordination DSO (Distribution Market Operator) Indirect DER control via DO DER Control and Monitoring (Internet) Prosumer (DER) Consumer Dispatch/ Market Schedule DO Distribution Owner (Network Operator) Settlement M&V Third Party (DER) Market Data (Internet) Energy Physical Energy Flow Utility Network Aggregator Independent System Operator Markets Coordination Energy & Services Distribution Network Energy & Services Network Control and Monitoring (SCADA)

Example Transaction Flow in Total DSO

Transactive Energy Participants

Device-level transactions and dispatch

Cryptocurrency/Blockchain – P 2 P

How can CCAs and Distribution Markets Play Together? Some Examples • Total DSO – CCA operates DER in a “zone” (feeder, substation, Transmission substation) as an aggregation to act as a “virtual power plant”. Participating DER are compensated based on market. • Transactive Energy – CCA operates the transaction platform and offers a tariff to participants that allows their devices to dispatch according to executed transactions • Blockchain – CCA can either: • Ignore – operation of blockchain P 2 P transactions looks like consumption decrease • Implement – develop “virtual microgrid” and recover cost through generation bill debit or credit

CCA Relationship with Distribution Operator • CCAs do not have any role in distribution system operations or planning • Maintenance, operation, repair/restoration and planning/expansion of the distribution system is handled completely by the DO • Distribution system is wholly owned by the DO/shareholders • All CCA customers are customers of the DO • DO manages interconnection process for all distribution-connected resources • CCA and DO can partner on capacity needs and harmonizing DER operation with distribution system operation.

How can CCAs expand interaction with DO? • CCAs (and everyone else) has access to • ICA (hosting capacity) maps • LNBA (Locational Net Benefit “hot spots”) • This information is being used on a pilot basis to direct “distribution deferral” projects • CCAs can use this data to specify locations and amounts of DER SCE LNBA/ICA Map

Thank you! jdaviderickson@Comcast. net 707 -292 -8175