The transition to inexperienced vitality is usually seen by way of two completely different lenses: a burden or a possibility. Grid modernization refers to a complete transformation of the standard energy grid to improve ageing infrastructure to boost reliability, resilience, effectivity, and sustainability of electrical energy era, transmission, distribution, and consumption. A key ingredient of grid modernization is designing the grid to permit larger deployment of distributed vitality sources (DERs). The push for sustainability all through the U.S. has resulted in lots of states setting renewable portfolio requirements or targets. Inexperienced vitality would require substantial investments from non-public people, entities, states, and the federal authorities. These vitality targets or requirements are aspirational when analyzing the funding required for the grid in comparison with the investments made.
One of many largest challenges to deploying renewable vitality is the associated fee related to interconnection. Integrating DERs onto the grid has essentially modified how the grid operates. Earlier than DERs, energy flowed in a single course; now, with the incorporation of DERs, energy flows bidirectionally with era sources in lots of areas of the grid. System upgrades and redesigns are sometimes deemed vital for the interconnection.
In an S&P World article, Bloomberg New Power Finance assessed that annual energy grid funding might want to develop to $100 billion by 2043 within the U.S., and 63% of the investments will likely be on the distribution stage. Historically, many utility corporations solely improve their system for capability wants, reliability enhancements, or ageing infrastructure. DER interconnection provides some complexity, as upgrades are wanted to facilitate grid interconnection. This results in prolonged and expensive interconnection processes. Many utility corporations comply with the cost-causer-pays mannequin, whereby the generator that triggers the distribution improve should pay for all interconnection prices and distribution system improve prices. The fee-causer mannequin additionally protects ratepayers by making certain that DER prices should not socialized and recoverable amongst them since they aren’t the direct beneficiaries; albeit, there are situations of secondary advantages, resembling growing reliability resulting from DER distribution system upgrades or deferring capability investments.
Because of expensive distribution upgrades, tasks are continually being deserted. Renewable builders and residential house owners within the present surroundings not solely face allowing challenges but in addition costly distribution system improve prices. Accordingly, many states are reviewing the applicability of the cost-causer mannequin. The fee-causer-pays mannequin creates a system of inequity and free ridership the place future tasks profit from the brand new upgrades with out incurring further prices. Thus, the triggering mission bears all the monetary burdens. Some states have created options to handle the inequity attributable to the applying of this mannequin for giant and small DER tasks.
Maryland
Through the years, the Maryland Public Service Fee (PSC) has mentioned the Maryland Price Allocation Mannequin (MCAM). The PSC’s working group has developed major and secondary MCAM to create a extra equitable allocation mannequin. MCAM will get rid of the causer-pay mannequin and implement a mannequin wherein interconnection prospects pay their proportional share for internet hosting capability upgrades for bigger DER builders. Utility corporations inside Maryland can be allowed to get well the prices for upgrades by way of charges. A proposed price for distribution upgrades per kilowatt will likely be charged for smaller DER installations. The Maryland PSC is within the technique of contemplating this alteration coverage in its latest rule-making course of.
Maine
In November 2023, Maine grew to become the latest state to revise its interconnection insurance policies to permit for price allocation even with opposition from curiosity teams, together with the Workplace of the Public Advocate (OPA). Maine’s price allocation rule permits for tasks underneath 25 kW interconnection prices referring to putting in new single-phase transformer prices to be socialized and recovered from all ratepayers. The commissioners of the Maine Public Utility Fee believed that the transformer set up will profit greater than DER prospects and must be handled the identical as transformers that profit load development. Moreover, a flat price of $150 is to be paid by tasks underneath 25 kW for different distribution upgrades not exceeding $5,000. The client pays the steadiness of distribution upgrades that exceed $5,000. For tasks from 25 kW to 250 kW, the interconnection pays a per-kW price to cowl all non-single-phase service switch distribution upgrades not exceeding $10,000. The charges will likely be pooled collectively for distribution upgrades. Even with the opposition of OPA, arguing that it was unfair to make ratepayers bear the price of distributed era upgrades, the commissioners took a holistic method to make sure that ratepayers weren’t unduly burdened but in addition centered on assembly the state’s renewable targets.
Minnesota
On Dec. 19, 2022, the Minnesota Public Utility Fee issued an order for small DER tasks. Beneath this order, tasks as much as 40 kW with improve prices of $15,000 or underneath will likely be coated by the utility firm with a price of $200. Upgrades to small DER interconnection are continually seen as a hindrance; as such, improve prices are principally seen as an unbudgeted expense. Insurance policies of this nature get rid of the cost-causer-pays mannequin (aside from low-income prospects) with a price of $200. Nonetheless, implementing this coverage didn’t embody price restoration from ratepayers; as a substitute, the price will likely be pooled for cost-sharing of upgrades. This coverage reveals the progressive strategies obtainable for extra equitable insurance policies that don’t embody socialization amongst ratepayers. There was the same proposal within the District of Columbia, the place a flat price of $280 was proposed for distribution system upgrades, with 20% being of the distribution system improve and interconnection facility prices recovered from all prospects proposed by Potomac Electrical Energy Co. (Pepco). It’s price noting that the District’s Public Service Fee in 2021 accredited a partial subsidy for distribution upgrades of as much as $25,000 or 50% for neighborhood photo voltaic tasks. The fee-sharing is capped at $500,000 yearly and is run by Pepco. The aim of the rulemaking was to extend the expansion of neighborhood photo voltaic throughout the District. Regulators have proven an openness to price allocation as a result of it’s seen as a way to extend DER development and take away price boundaries.
Massachusetts
Earlier than November 2021, Massachusetts struggled to deploy DERs onto its grid resulting from traditionally excessive interconnection prices. There have been 679 MW of photo voltaic tasks being studied in clusters stalled for over a yr in interconnection queues. Price allocation insurance policies had been mentioned over considerations that tasks would turn out to be cost-prohibitive and withdrawn with none cost-sharing mechanism. The Division of Public Utilities (DPU) created a provision plan to acknowledge a singular and instant concern for the reason that conventional method to DER improve prices would end in boundaries to interconnection. The capital funding tasks (CIPs) construction was devised, whereby prices associated to substation transformer replacements, transmission upgrades, reconductor distribution feeders, and distribution safety measures could be carried out by utility corporations, and ratepayers will likely be charged a non-bypassable greenback per kilowatt per hour cost to cowl the price of the CIP. The interconnecting buyer will likely be charged a CIP price assessed by their professional rata share of the CIP accredited by the DPU. The provisional order in Massachusetts was historic throughout the U.S. as a result of it was the primary to create a cost-sharing coverage on this method and finish the causer-pays mannequin.
New York
In 2021, New York carried out its Price Sharing 2.0 Plan, which goals to have cost-sharing for DER tasks to extend internet hosting capability. This coverage additionally eliminated the cost-causer-pays methodology, whereby certified tasks would pay their professional rata share for particular distribution internet hosting capability upgrades quite than the complete improve price. The coverage is predicated on utility-initiated upgrades and market-initiated upgrades. Utility-initiated upgrades are deliberate capital investments on the substation by the utility; if there may be DER curiosity on the location, the asset and builders share in the associated fee for the upsize of the asset of upgrades of a minimal of $250,000. In the meantime, market-initiated upgrades are system modifications that enhance capability attributable to a triggering mission and have a minimal cost-sharing set off quantity of $250,000, resembling substation upgrades, substation switch upgrades, and underground secondary community upgrades. Inside this coverage, builders would obtain a refund if greater than the professional rata share is paid when the mission is totally coated.
Moreover, there’s a price restoration of two% of uncovered prices of their utility/sub-transmission electrical capital funding per fiscal yr. This cover reveals the steadiness that have to be struck between the vitality transition and the burden positioned on ratepayers when analyzing price allocation insurance policies. After the two% p.c is exhausted, triggering tasks must present complete funding earlier than the development of upgrades. Lastly, the commissioners ensured that free ridership ended by the New York State Normal Interconnection Necessities for substation upgrades and substation transformer installations/upgrades.
Price Allocation Options
Excessive interconnection prices have led to the event of progressive workarounds for DER deployment, resembling versatile interconnection and good inverters. Versatile interconnection emerged to fight costly distribution upgrades and lengthy interconnection timelines. This precept identifies grid working constraints utilizing an influence circulate evaluation within the interconnection research course of. The facility circulate evaluation examines the affect on the system to create and optimize interconnection parameters for versatile interconnection.
Versatile interconnection isn’t extensively utilized within the U.S. as a result of many electrical distribution corporations imagine extra improvement of DER administration techniques are wanted to watch these interconnection methods. States resembling California, New York, and Maryland are creating insurance policies to drive the adoption of versatile interconnection. In contrast to versatile interconnection, good inverters have been well-received in lots of states. Goal good inverter deployments can enable the grid to accommodate further energy by adjusting DER efficiency to mitigate violations that may have in any other case triggered upgrades.
The change in insurance policies in varied states to create a extra equitable panorama for distribution upgrades for DERs reveals that the present causer-pays mannequin is impractical for larger deployment of DERs. The expansion of DERs requires the evaluate of insurance policies to counter the challenges, resembling the price of distribution of upgrades. Price-sharing or cost-allocation fashions will likely be basic to growing the affordability of renewable tasks. States which have carried out price allocation for DER upgrades have abolished the causer-pays mannequin to create a extra equitable system whereas making certain that ratepayers should not unfairly burdened. Nonetheless, exploring alternate options, resembling good inverters and versatile interconnection, are necessary to cut back mission prices the place the causer-pay mannequin prevails.
—Janique Williams is a licensed lawyer, working as a Senior Regulatory Analyst with Pepco.
