Opinionated: Remaking the Grid

2 Apr 2019

Q & A with Lorenzo Kristov

The California Independent System Operator’s former principal of market design and infrastructure policy

PART 1

Editor’s Note: In a recent editorial in the San Francisco Chronicle, Lorenzo Kristov and Mark Ferron, former CAISO board member, advocated for an “open access” distribution system and indicated that local planning increasingly is “where the action is.” This is the first part of Current’s two-part question and answer series with Kristov.

Current:  Recently, there was a big push to create a western grid, which begs the question of whether a regional grid and decentralized power system are mutually exclusive.

Kristov: “The best way to ensure that nothing gets done is to convince people they’re on one side or the other of a false dichotomy,” a wise person once noted.

Greater regional integration and greater decentralization of electric power can and should be complementary strategies, not set in opposition to each other.

There are areas of the West with bountiful renewable energy resources—wind, solar, geothermal—that are not located close to the major load centers. The western power grid is already an interconnected electrical system, so let’s use it better, try to better coordinate grid operations, planning and power markets.

I can’t say whether this is best done by creating a regional ISO, or more simply by adding day-ahead elements to the western Energy Imbalance Market. But, some form of improved regional integration should be part of our vision of the future.

Simultaneously, there’s great societal value to implementing local energy systems for decarbonization and resilience. Broad decarbonization and electrification of transportation, buildings, and other fossil-intensive uses should be designed and implemented at the local level, through coordination of urban or county planning with electric system planning.

Things like land use, zoning, housing densification, mobility services, building codes—these have enormous impacts on greenhouse gas emissions and are the subjects of local government planning. And resilience is always about local capabilities.

Extreme climate-related events hit people and businesses where they live, so resilience must be about building local capabilities.

Think about electric power as a whole system, from the level of the West-wide interconnected grid down to the individual end-use meters. Fortunately, we have all kinds of new technologies that can provide electricity services cost-effectively at practically any scale, from devices behind the meter at a private residence, to inverter-based grid-scale resources now able to replace the inertia provided by conventional generators.

Current: What is your vision of “open access” to the distribution system?

Kristov: We want to update the industry structure, in particular the roles and responsibilities of the distribution utilities, to address the new policy objectives of decarbonization and resilience, in addition to traditional objectives like reliability, affordability and safety.

When you consider that the future is going to be shaped by local needs, local government planning and all the distributed technologies at various scales, you realize that distribution utilities were never designed for that future. They were designed for the ‘one-way-flow’ model, where power comes from the bulk system, and the only job of the distribution utility is to move the power from the bulk system out to the end users. That model is no longer valid.

So the task is how to advance the distribution utility model to enable a distribution-level network where end-users participate not just consume, local energy resources serve a large share of local needs, microgrids provide resilience for key facilities, and local resources realize their full value by providing grid services and deferring grid infrastructure upgrades. The open-access distribution system and distribution system operator comprise a feasible path forward, and if implemented well will align well with California’s big goals.

The following changes to the current distribution utility are suggested for creating an open-access distribution system operator:

  • Unbundle the distribution service from the retail load-serving function. Today the utilities offer “bundled” service that includes both the energy kilowatt hours and the delivery charges. But while it makes sense to treat the distribution system operator as a regulated “natural” monopoly, the retail function is not a natural monopoly and should be a separate function with its own regulatory rules.
  • Create an open, participatory distribution planning process where third parties can provide distributed resource solutions to meet grid infrastructure needs. Today distribution planning is completely internal to the utility with almost no transparency and no participation by stakeholders or potential developers of local solutions. The CAISO’s transmission planning process is a useful model for greater transparency and participation, though it also needs to increase opportunities for non-wires alternatives.
  • Require the distribution system operator to partner with local governments and agencies to develop community energy resources and community microgrids. This is where electric system planning needs to coordinate with urban and county planning, to develop distributed energy resource solutions that meet both community needs and grid needs. For example, a microgrid in a community with high fire risk can allow the utility to de-energize lines under dangerous conditions without cutting off service to the community. The state will need to provide support to local governments to ensure all communities in the state are able to plan and develop local energy.
  • Enable rooftop solar, energy storage and other distributed resource providers and flexible customers to earn fair compensation by offering grid services to the distribution system operator. This requires defining specific services, performance requirements, procurement, measurement and compensation rules.
  • Adopt non-discrimination standards for all wire system operators’ core functions, to ensure all qualified entities and resources receive equal treatment in planning, interconnection, service provision, solicitations and operations. For example, formulate transparent real-time operating procedures governing distributed energy curtailment and other operating orders, to ensure fair treatment of all third-party resources when the distribution system operator must direct some distributed resources to quickly modify behavior due to grid conditions.
  • Establish a data access framework that protects privacy while enabling full participation by local governments, utilities, distributed energy and third parties as described above.
  • If the distribution system operator is the for-profit utility, revise the financial incentives to incorporate performance metrics related to the above functions and de-emphasize return on assets, which is the basis of profit today.

Lorenzo Kristov, as the CAISO market design and infrastructure principal from 1999-2017, worked on initiatives to integrate distributed resources into markets, operations and planning and to advance transmission-distribution coordination between the distribution utilities and the ISO.

Editor’s Note: Part 2, which focuses on what a distribution system operator should look like, will run next week.

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