By Heather Donaldson, Stuart McCafferty and Dr. Soundrapandian Sankar
Ask anyone who’s been in the utility world for a while, and they’ll assuredly tell you: most utilities have operated in silos, separate groups focused squarely on their own little corner of the business. The silo mentality thrives when members of one department don’t share information with other departments, operate with separate goals, use different tools, and follow different processes than those folks across the hall.
Utility managers have been wringing their hands about silos for decades. Now, at least when it comes to planning, utilities are starting to break down those silos and operate more cross-functionally. Here’s why: They must if they want to successfully meet the challenge of distributed energy resources (DER) and non- wires alternatives (NWA) to traditional utility resources.
Awareness of this reality shows up in responses to Black & Veatch's 2020 Strategic Directions: Smart Utilities Report survey. When asked how their organizations rated the importance of integrated planning, nearly half (46 percent) of respondents said, "very important" and another 37 percent replied, "extremely important". Ass these responses to the ones who said it was slightly or moderately important, and 96 percent of survey respondents think planning teams should include representatives from a variety of functions, including transmission, distribution and resource planning.
This cross-functional collaboration is a non- traditional approach in the utility world, but it’s an important shift. Supply resources, once only on the transmission system, are now also on the distribution system in increasing numbers. These distributed resources typically rely on highly variable solar or wind as their fuel source and, in some cases, are customer-owned. These conditions require utilities to evaluate and adapt system planning and operating capabilities to ensure reliability, support customer choices, meet regulatory requirements and progress toward corporate sustainability goals. Now more than ever, it is essential for utilities to implement an integrated system planning capability.
It’s clear utilities are starting to see the importance of integrated planning. More than half (53 percent) of of survey respondents said their organizations have “mostly integrated planning functions.” Another 39 percent have started the integrated approach, and 5 percent recognize the need.
Utilities also are operating with planning horizons that reflect both transmission and distribution needs to some extent. Planning horizons need to look at timing from two perspectives: the time to need, and the time to build and maintain optionality as long as possible. Maintaining optionality helps mitigate the risk of stranded costs by over-investing in assets. Most utilities outside California — where transmission projects can take 15 years — can finish siting, permitting and construction in fewer than 10 years on transmission projects.
Distribution planning looks out five years, which is the typical time to build a substation. However, most distribution investment decisions are made in the nearer term, about one to two years ahead. Nearly half (48 percent) of respondents look four to seven years out in strategy building, which means these construction realities are showing up in utility planning horizons.
The Forces Uniting Them
What’s driving the need for integrated planning? DERs, which are turning out to be both a challenge and an opportunity. Utility departments must unite to leverage that opportunity.
Now there are five primary criteria that utility managers must accommodate in planning efforts. These include delivering safe, reliable power, an electric utility’s main function. Affordable power is important, too, and traditional planning is about figuring out how much load and generation you expect on your system and making sure you can support that load at the best price possible.
Now, however, clean power is becoming increasingly important. The U.S. Energy Information Administration’s November 2019 Short-Term Energy Outlook forecasts that U.S. power sector electricity generation from renewables other than hydropower — principally wind and solar — will grow from 408 billion kilowatt hours (kWh) in 2019 to 466 billion kWh in 2020. Because wind and solar resources have intermittent generation, flexibility will become more important, too. That is, utilities will need fast-ramping resources to manage sudden shifts in wind or solar power output.
Finally, resiliency is a key issue addressed by utility planners, and climate variability is making a resilient grid ever more vital. According to the U.S. Global Change Research Program, heat waves across the U.S. have generally become more frequent in recent decades, and tree ring data suggest that the drought in the western U.S. over the past decade represents the driest conditions in some 800 years, which is bad news for utilities in the West battling wildfire threats.
The rest of the country won’t fare better, though. These same scientists who produce climate assessments for the U.S. government also say heavy downpours have increased 30 percent compared to figures from the 1901 to 1960 averages in the Northeast, Midwest and upper Great Plains. “There has also been an increase in flooding events in the Midwest and Northeast, where the largest increases in heavy rain amounts have occurred,” the climate assessment team says on its website. And, hurricanes have seen a “... substantial increase in most measures of Atlantic hurricane activity since the early 1980s,” the scientists note.
Whether they’re facing heat, storms or wildfires, utilities must push resilience up in planning.
Given these criteria, utilities increasingly are looking at non- wires alternatives (NWA) options that may offer more cost- effective solutions than traditional resources. Resiliency could be augmented via microgrids. Flexibility may come from remote or customer-sited batteries. And clearly, utilities are seeing this. Nearly one in four (24 percent) consider NWAs as part of standard operating procedures, while another 46 percent are beginning to consider or are piloting studies.
Regulators are looking at non-wires solutions, too. In some areas, like California, sustainability goals drive that focus. In the East, New York’s Reforming the Energy Vision (REV) initiative has launched several NWA opportunities, including Consolidated Edison’s (ConEd’s) Brooklyn Queens Demand Management project, which helped the utility defer a $1 billion traditional investment with just over $500 million in demand management and traditional resources
Regulatory pressure on the U.S. coasts and Hawaii explains why NWA solutions are closer to being adopted in the Northeast and West, while utilities in other areas of the country are just starting down the NWA path.
Ahead, NWAs could well become more prevalent. After all, climate change is becoming a national imperative. This past year, 62 percent of U.S. survey respondent told Gallup researchers that the government is doing too little on the environment, and similar concern showed up in a Pew Research Center’s 2018 survey, in which 67 percent of Americans said the U.S. government “wasn’t doing enough to reduce the effects of global climate change.”
At the same time, coal plants are under fire. “Between 2010 and the first quarter of 2019, U.S. power companies announced the retirement of more than 546 coal-fired power units, totaling about 102 gigawatts (GW) of generating capacity,” notes the U.S. Energy Information Administration.
“Plant owners intend to retire another 17 GW of coal-fired capacity by 2025. Another trend: Electric vehicle adoption is on the rise. BloombergNEF (BNEF) expects “annual passenger EV sales to rise to 10 million in 2025, 28 million in 2030 and 56 million by 2040,” according to the BNEF 2019 Electric Vehicle Outlook. “Sales of internal combustion passenger vehicles have already peaked, and may never recover unless EV growth falters,” the BNEF analysts stated in their report.
These circumstances will influence regulatory decisions and infrastructure requirements at the local and national level. This survey shows two-thirds of survey respondents saying they see drivers happening now or ahead that will prompt their utilities to consider the NWA approach to meeting system needs.
NWAs offer one way utilities can add more renewables, thereby supporting sustainability goals. They’ll also help with reliability and resiliency. This is a major driver behind the New York REV initiative that Gov. Andrew Cuomo launched as a comprehensive energy strategy for the Empire State. NWAs provide cost savings, too, as seen in the ConEd Brooklyn Queens project, which was designed to defer a $1.2 billion substation investment with a $200 million program. And, NWAs are flexible — a must for a greener grid.
That’s why NWAs will continue to grow in importance, as will integrated system planning. Distribution, transmission, and resource mix will all be impacted by DER and NWAs. Utilities know it, and their planning approach is evolving accordingly.