Valuation of Transactive Energy Systems -Technical Meeting #2CHRIS IRWIN, RON MELTON AND JULIET HOMERPacific Northwest National LaboratoryValuation of Transactive Systems – Technical MeetingTaylor, TXSeptember 29-30, 2015

Agenda – Day 1

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8:30 – 10:30 am GWAC business

10:30 – 11:00 am Transactive Energy Valuation Meeting – Welcome, recap of previous meeting, scope and desired outcomes Chris Irwin, DOE Ron Melton, PNNL Juliet Homer, PNNL

11:00 – 12:00 am Transactive Energy Valuation Methodology – Introduction and overview of methodology Don Hammerstrom, PNNL

12:00 – 1:00 pm Lunch and presentation: Distributed Energy Resources in the ERCOT Kenneth Ragsdale, Principal Market Design & Analysis ERCOT

1:00 – 2:00 pm Mixed panel discussion - Insights From Practitioners Moderated by Steve Widergren, PNNL

• Gordon Matthews, BPA • Jeff Roark, EPRI • Cynthia Wilson, U.S. DOE / EPSA • Ron Bernstein, RBCG LLC

2:00 – 2:30 pm Group discussion Steve Widergren, PNNL

2:30 – 3:00 pm Value of Transactional Building Energy Systems Chad Corbin, PNNL

3:00 – 3:15 pm Introduce hands-on exercise #1 – Energy and Building Services That are/are not Suitable for Transactive Systems Juliet Homer, PNNL

3:15 – 4:00 pm Hands-on exercise #1 – Energy and Building Services that are/are not Suitable for Transactive Systems

4:00 – 4:45 pm Working group report out and group discussion Juliet Homer, PNNL

4:45 – 5:00 pm Day 1 summary and wrap up Ron Melton, PNNL

Agenda – Day 2

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8:30– 9:00 am Day 1 summary Juliet Homer, PNNL

9:00 – 9:30 am Worked example of methodology Don Hammerstrom, PNNL

9:30 – 10:30 am Mixed panel discussion – Predicting and Measuring Value Moderated by Steve Widergren, PNNL

• Al Galiunas, Navigant • Stephen Knapp, Energy Alternatives Solutions • James Sherwood, Rocky Mountain Institute

10:30 – 11:00 am Group discussion Steve Widergren, PNNL

11:00 – 11:15 pm Introduce hands-on exercise #2 – Insights About the Ideal Transactive System Valuation

Ron Melton, PNNL

11:15 – 12:00 am Hands-on exercise #2 – Insights About the Ideal Transactive System Valuation

12:00 – 1:00 pm Lunch and continue hands-on exercise

1:00 – 2:30 pm Report out from working groups and discussion Ron Melton, PNNL

2:30 – 3:30 pm Summary and next steps Ron Melton, PNNL Don Hamerstrom, PNNL Chris Irwin, DOE

3:30 pm Adjourn

Background

Project funded by U.S. Department of EnergyOffice of Electricity Delivery and Energy ReliabilityOffice of Energy Efficiency and Renewable Energy

Buildings Technology Office

DOE views transactive systems as key enabler for engaging distributed energy resources (DERs) in both the electric power system and building energy management systems.

About the project:Developing a valuation methodology for transactive systems When applied, the methodology will yield costs and benefits of alternative scenarios that can be compared or rankedCosts and benefits can be mapped to relevant stakeholders in order to understand impacts from multiple perspectives

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Project Context

Goals of transactive systems include:Providing a means for engaging and coordinating large populations of customer-owned, third-party or utility-owned distributed assetsUse of transparent, competitive means Providing flexibility required by an adaptive, reliable, environmentally sensitive, and cost-effective future electric system

In DOE’s Quadrennial Energy Review (QER) energy priorities were developed. Valuation came down strongly as a priority.Many studies have attempted to determine the value of solar and other distributed energy resources (DERs)Existing valuation methodologies are not well suited for considering transactive/market-based resourcesIncorporating transactive into valuations is challengingValuation methodologies are not consistent, repeatable and transparent

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Project context, cont.

Project desired outcomes Foundational methodology that adequately considers transactive systems, from both the grid and building perspectivesConsider all relevant stakeholder perspectivesValuation methodology with broad applicability for:

Those designing and conducting comprehensive energy valuationsThose who want to compare valuation studies (and their methods) against each other

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Previous Technical Meeting

Held July 7-8, 2015 in Richland, WAKey purposes of meeting

Exchange knowledge related to past and ongoing valuation effortsReceive feedback on initial approach

Included individual presentations and working group sessions

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Organizations represented:Bridge Energy Group Northwestern University E3 OATI Electric Power Research Institute (EPRI) Pacific Northwest National Laboratory

(PNNL)ERCOT QualityLogic, Inc.Navigant Consulting Rocky Mountain Institute (RMI)National Institute of Science and Technology (NIST)

University of Washington

National Renewable Energy Laboratory (NREL)

U.S. Department of Energy (EPSA and OE)

Prior meeting - key takeaways

Current valuation and resource planning methodologies don’t consider temporal and locational value – this is important!Heterogeneity of systems and associated value is a reality –drivers/value vary by region and feeder; No one size fits all valueNeed for consistent, repeatable and transparent analytical processes

Be able to compare studies on the same value basisNeed same generally recognized methodology

Value of resilience is important and difficult to quantify – methodology should include resilience even if its clumsy and inadequate at firstFor IOUs, regulators establish whether utilities can recover their costs

Case must be made to regulators Regulators need to be part of the conversation

Important and hard-to-quantify value of increased customer choice and local control should be built into methodologyEquity issues matter – must consider impact on non-early adopters and those on fixed incomes 8

Key takeaways, cont.

Transactive systems are not the only answerAncillary services provided by smart inverters may be more readily achieved through equipment standards, than transactive marketsAdoption needs to be part of conversation - if no adoption, no value

Substantial value is derived through planning timeframeCapital budgeting priorities established through planningDistribution system (planning) is changingCurrent planning methods are limited

Vendors are approaching utilities with new products/services –methodology could objectively show which are cost effectiveImproved asset utilization and oversupply mitigation are valuablePlatform and markets can create new opportunities and valueUtilize tools already developed – don’t reinvent wheelInclude more utilities in the conversation

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Meeting purpose

Desired outcomes - MEETING: a) Feedback from participants on how to improve

applicability, design and uptake of methodology being proposed

b) Information about established models or data sources that could be used in this project

c) Agreement on basis of comparison of valuation methodologies

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Methodology - Context

Valuation methodologies have been developed by othersSome theoretical/concepts, others actual models

For this project we reviewed:Lawrence Berkeley National Lab (LBNL)

FINDER ModelNational Renewable Energy Laboratory (NREL)

Integrated Distributed-generation PV Value Study (DGPV)Rocky Mountain Institute (RMI)

EDGE ModelElectricity Policy Research Institute

Integrated Grid FrameworkNavigant

Smart Grid Regional Business Case for the Pacific NorthwestUtility

Integrated Resource Plans (IRPs)Noted similarities, differences and innovations

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LBNL’s FINDER Model

Source: http://emp.lbl.gov/finder-model

NREL’s vision of a comprehensive, integrated distributed-generation PV value study

13Source: NREL “Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic Generation to the U.S. Electric Utility System September 2014

RMI’s EDGE Model

Source: Rocky Mountain Institute; EDGE Model Progress Update; Spring 2014

EPRI’s Integrated Grid

Source: EPRI, The Integrated Grid: A Benefit-Cost Framework, Executive Summary, Feb 2015

NavigantSmart Grid Regional Business Case for the Pacific Northwest

Source: http://www.bpa.gov/Projects/Initiatives/SmartGrid/DocumentsSmartGrid/Navigant-BPA-PNW-Smart-Grid-Regional-Business-Case-2013-White-Paper.pdf

Sample IRP diagram - PacifiCorp

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Phase 1: Case Definitions

Phase 2: Price Forecast Development

Phase 3: Optimized Portfolio Development, no RPS

Phase 4: Selection of Resource to Meet RPS

Phase 5: Optimized Portfolio Development, with RPS

Phase 6: Monte Carlo Production Cost Simulation

Phase 7: Top Performing Portfolio Selection

Phase 8: Preferred Portfolio Selection

Source: PacifiCorp 2013 IRP available at www.pacificorp.com/es/irp.html

So What’s Missing?

Ability to value technologies or programs based on services provided in time and space Standardized way to represent valuation methodsTransparent visibility of assumptionsHarmonization of terminology among practitionersExtensibility to new situations and to introductions of new value streamsSystems view that will be needed to evaluate transactive systemsClear baseline comparisonsClear mapping to an extensible set of stakeholdersOrganized repository for best valuation practices

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Questions?

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