Let's remove the barriers to more NTAs
Monday, July 13, 2015 By Tom Stanton
Non-Transmission Alternatives are electric utility system investments
and operating practices that can defer - or even possibly completely
replace - the need for specific transmission projects, at lower total
resource cost, by reliably reducing transmission congestion at times of
maximum demand in specific grid areas.
Yet with all those potential benefits, why are NTAs providing difficult
to model, plan and implement?
The Federal Energy Regulatory Commission focused on NTAs in Orders 890
and 1000, to make sure NTAs would be given fair consideration. In
several locations around the U.S., lower-cost NTAs are already proving
capable of deferring or displacing some needs for higher-cost
transmission projects. Thus, there is growing interest about NTAs in
state public utility regulatory commissions and among other interested
parties.
Important questions being addressed include:
- What are the technical and economic potentials for NTAs?
- Are there any particular identifiers, in the course of
transmission and integrated resource planning, of important
opportunities for NTA analysis?
- Who might be responsible for modeling and planning NTAs, and
what will be the procedures for bringing information about possible
NTAs into the relevant utility planning process(es) at either the
state or regional levels?
- How should potential developers plan, seek approval for, and
implement NTAs?
- What are the appropriate venues for NTA planning and approvals?
- Are there appropriate roles for regulated utility companies in
NTA analysis, design, operations, and management, or should third
parties and customers assume those roles?
- How can system operators be certain that NTAs will prove at
least equivalent to and as reliable as the transmission options they
might postpone or replace?
- How will NTA cost recovery and cost allocation be handled?
NTAs can be identified through least-cost planning and action, one
geographic area at a time, considering any and all means available for
managing electricity supply and demand, including demand response,
distributed generation, energy efficiency, electricity and thermal
storage, load management, and rate design.
One critically important aspect of NTA analysis is timing. Transmission
line development can easily take several years for all approvals, siting
decision and construction. During the delay between the time that
a need for a transmission improvement is identified and when it could be
completed, at least some NTA components can be developed and operated,
enabling NTAs to demonstrate their capabilities.
NTAs can also be developed gradually, organically and incrementally, in
conjunction with ongoing changes in consumer demand. Thus, NTAs can buy
time, producing positive option value, while planners observe
longer-term changes in supplies and demands, compared to transmission
investments that tend to require more lumpy, long lead time, go or no-go
decision-making.
Still, multiple barriers are preventing NTAs from receiving all the
attention they might deserve though transmission planning processes.
Those barriers include:
- Transmission planning that is limited by a culture that
traditionally puts transmission first and struggles to believe that
NTAs can be equivalent.
- No agreed-upon mechanisms for determining when an NTA is fully
capable of postponing or permanently deferring a transmission
project.
- Supplementary NTA benefits, especially distribution system and
customer benefits, that are not typically valued in transmission
planning.
- No ready source of funding or cost allocation methodology for
NTAs.
- No entity with the obligation to propose or implement NTAs.
Related to all of these barriers is the challenge that NTAs might not
fit neatly into an existing utility's business model, because the NTAs
rely in part on customer-side options that might reduce the needs for
traditional utility capital expenditures. NTAs are selected for
implementation when they cost less than the transmission option, thus
reducing a utility's opportunity to invest and earn a return on that
larger investment. In addition, not all NTA expenditures lead directly
to utility earnings: some, like energy efficiency improvements, will
tend to decrease utility sales and earnings and others, such as DG or
on-site storage, will sometimes provide opportunities for non-utility
investments and earnings.
These challenges leave state public utility regulatory authorities with
the task of providing leadership to facilitate NTA modeling, planning,
and implementation. Two states, Maine and Vermont, have legislation
explicitly addressing NTAs, and related actions are under way in
California, Connecticut, Maryland, Massachusetts, Michigan, Wisconsin,
Minnesota, New Jersey and New York.
Still, more work is needed to ensure that utilities and interested
parties have tools that are fully capable of modeling, with sufficient
accuracy, the many potentially useful components that can serve NTA
purposes, including energy efficiency, demand response, load management,
DG, and energy and thermal storage.
The tools need to be simple, inexpensive, and easy enough to gain
reliable insights at reasonable cost, so that planners can readily:
(a) identify and quantify system needs;
(b) compare system needs with the different capabilities of each major
type and size of potential distributed energy resource;
(c) decide which technologies to subject to more complete power flow
modeling; and
(d) estimate the expected costs of meeting system needs using various
combinations of the available technologies.
Regardless of progress being made in modeling distribution systems and
the effects of individual and combined NTA components, planning
capabilities eventually need to be sufficiently valid and robust so that
modelers can determine with adequate precision that an NTA will be
capable of providing the same or more benefits, compared to a given
transmission option.
With the possibility that NTAs could produce meaningful cost-savings for
utility customers, it is worth some effort to enhance existing state
procedures, or even develop new ones if necessary, to ensure
opportunities for NTAs to compete. Until modeling results prove
otherwise, planners would be well-advised to believe that every utility
service territory has at least one specific location where ample
distributed energy resources are accessible to develop a successful NTA.
States can use integrated resource planning and certificate of need
proceedings, requiring the rigorous analysis necessary to determine when
NTAs can prove to be cost-effective choices, deferring or displacing
transmission investments.
###
Stanton is a principal energy and environment researcher at the National
Regulatory Research Institute. He can be reached at
tstanton@nrri.org.
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