Avoided Cost Comparison Levelized Cost of Energy ($/MWh)

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IEE Institute for Electric Efficiency IOU Investor Owned Utility IREC Interstate Renewable Energy Council ITC Investment Tax Credit LCOE Levelized Cost of Electricity LOLP Lost of Load Probability MACRS Modified Accelerated Cost-Recovery System MADRI Mid-Atlantic Demand Resource Initiative MLP Master Limited Partnership NARUC National Association of Regulatory Utility Commissioners NEM Net Energy Metering NERC North American Electric Reliability Council NIST National Institute for Science and Technology NNEC Network for New Energy Choices NREL National Renewable Energy Laboratory NYISO New York Independent System Operator OATT Open Access Transmission Tariff ORC Organic Ranking Cycle PHEV Plug in Hybrid Electric Vehicle PPA Power Purchase Agreement PRD Price Responsive Demand PURPA Public Utility Regulatory Policies Act PTC Production Tax Credit PUC Public Utility Commission PV Photovoltaic QF Qualifying facility RAM Reverse Auction Market RAP Regulatory Assistance Project REC Renewable Energy Credit REPPS Rucksack Enhanced Portable Power System RPS Renewable Portfolio Standard SAIDI System Average Interruption Duration Index SAIFI System Average Interruption Frequency Index SCADA Supervisory Control and Data Acquisition SGIP Self-Generation Incentive Program (California) T&D Transmission and distribution UPS Uninterruptible power supplies V2G Vehicle-to-grid VNM Virtual Net Metering WACC Weighted Average Cost of Capital aSSESSIng THE ROlE OF dISTRIBuTEd POwER SySTEmS In THE u.S. POwER SECTOR Ix
executive summAry The U.S. power system is the backbone of the country’s economy. Yet, with growing stress on the aging existing electricity grid, increasing integration of information technology with the power sector infrastructure, and an imperative to reduce the environmental impact of power generation, the system faces an unprecedented range of economic, environmental, and security-related challenges. The situation has given rise to increased interest in the potential for Distributed Power Systems (DPS): a combination of distributed sources of power production, and distributed energy storage. This study examines the economic, environmental, and energy security case for DPS. It finds that increased penetration of DPS has the potential to make a significant positive contribution to the US power system. It also finds a strong case for DPS as a resource for the defensive and offensive operations of the U.S. military. In general, the economics of DPS are still unproven: using a traditional cost-comparison model, our analysis shows that most DPS technologies are currently uncompetitive when compared with central station fossil-fuel generation. However, in certain regions of the country, some DPS technologies are already cost competitive with large-scale fossil-fuel generation. These include internal combustion engines with combined heat and power; large-scale solar photovoltaic; and medium and community-scale wind generation. The economic analysis also shows that a mod- aSSESSIng THE ROlE OF dISTRIBuTEd POwER SySTEmS In THE u.S. POwER SECTOR x erate price on carbon of $30 would increase the competitiveness of some renewable energy DPS applications. Moreover, many DPS technologies, such as solar photovoltaic, are realizing rapid declines in unit costs that are likely to continue with sustained research, development and deployment of such systems. Economic analysis and extensive outreach to power sector stakeholders show that the benefits of DPS are location and time-specific, and that DPS is more valuable in areas with high levels of system congestion or peak demand and no excess capacity. There is also widespread agreement among power sector stakeholders that existing economic models do not capture the full range of potential benefits that DPS can provide. These include improved efficiency of the distribution system, reduced strain on the grid during peak demand period, greater reliability, environmental and land-use benefits, possible job creation, the harnessing of untapped energy resources, and other region-specific benefits. They also include the security value of DPS, both as a means of decreasing the vulnerability of the civilian grid to disruption and attack, and as a resource for the defensive and offensive operations of the U.S. military. In addition, many stakeholders see that there is insufficient information on the full spectrum of costs and benefits of DPS. Federal and state policy makers have an opportunity to better capture the economic, envi-
Page 1 and 2: Energy Security Initiative at BROOK
Page 3 and 4: About The Brookings Energy Security
Page 5 and 6: Acknowledgements The authors would
Page 7 and 8: tAble oF contents LIST OF ACRONYMS.
Page 9: list oF Acronyms ACEEE American Cou
Page 13 and 14: introduction The U.S. power sector
Page 15 and 16: • Chapters 2 and 3 assess the eco
Page 17 and 18: were accorded the right to sell ene
Page 19 and 20: on-site generation. 11 There is far
Page 21 and 22: 1.3 Overview of DPS technology Dist
Page 23 and 24: figure 2: disTribuTion of The Purch
Page 25 and 26: uses an organic, low boiling point
Page 27 and 28: can be used as energy storage, and
Page 29 and 30: Similar to battery technologies, a
Page 31 and 32: solar project. Known as “Project
Page 33 and 34: CHAPTER 2 economic And environmentA
Page 35 and 36: Table 2: lcoe financing assumPTions
Page 37 and 38: figure 8: e3 analysis of economics
Page 39 and 40: CHAPTER 3 security-relAted beneFits
Page 41 and 42: scale sources of renewable generati
Page 43 and 44: total square footage occupied by th
Page 45 and 46: The integration of DPS into militar
Page 47 and 48: CHAPTER 4 current dPs Policy lAndsc
Page 49 and 50: also avoid, reduce, or sequester ai
Page 51 and 52: pendent System Operator 115 —and
Page 53 and 54: • Microgrid, defined as “an int
Page 55 and 56: In addition, states are potentially
Page 57 and 58: Rules and Regulations Renewable Por
Page 59 and 60: figure 10: groWing number of neT me
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energy outputs of CHP will not be a
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Permit Act, which will “limit sol
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nancial markets like corporate stoc
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are state renewable portfolio stand
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Many respondents (mostly developers
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Several IOUs pointed out the challe
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more DPS-related information and kn
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dent noted that the leveling of dem
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to “pull” innovative and early
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Net Metering and Interconnection Ad
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Advocates of dynamic pricing saw it
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ally—is the categorization and qu
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CHAPTER 6 conclusions And recommend
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DPS may have a positive impact on r
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ing new energy technologies into th
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The Solyndra Effect Many DPS projec
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at home and abroad; and provide adv
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quotas or upper limits to discrimin
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of 2006, also required the Californ
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anneX 1 figure 1: dg assumPTions in
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anneX 2: sTaTe Policies CATEGORY: F
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through additions to their property
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ments are below value of energy sav
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Oregon: The Oregon Energy Trust Sma
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program. There is a choice for comm
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nies in the market and tracked elec
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Net excess generation (NEG) - this
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for example to 25 kW in New York. 2
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State Rate Case Direct Cost Recover
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STATE POLICIES CATEGORY: Policies a
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STATE POLICIES CATEGORY: Policies a
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State Regulatory Update: Smart Grid
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CATEGORY: Financial Incentives summ
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jobs.” 285 The Program received 3
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FEDERAL POLICIES CATEGORY: Strategi
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ANNEX 4: STAKEHOLDER SURVEY Definit
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) National Renewable Portfolio Stan
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9. Aside from the policy measures o
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