6.1_adapting the integrated grid economic framework to microgrids_roark_epri/snl microgrid

1© 2016 Electric Power Research Institute, Inc. All rights reserved. © 2016 Electric Power Research Institute, Inc. All rights reserved.

Symposium on Secure and Resilient Microgrids

August, 2016Baltimore, MD

Jeffrey D. RoarkTechnical Executive

Power Delivery & Utilization

Adapting the Integrated Grid Economic Framework

to Microgrids

2© 2016 Electric Power Research Institute, Inc. All rights reserved.

The dynamic power system of the future requires an

end-to-end integrated approach.

AnIntegrated

Grid

EPRI’s Integrated Grid Initiative

30020027333002004878

At EPRI.com, search for the complete number: 300200xxxx


What do we mean by “Benefit-Cost Framework”?

Benefit-CostAnalysisProcess

Phenomena

Net Costs& Benefits

Cost & Benefit

Components∆ Fuel

∆ O&M

∆ RevenueRequirements

∆ Customer Costs

∆ InterruptionCost

Costs,Investments

Impacts &Phenomena

∆ Loss kWh

∆ Load kWh

∆ Gen kWh

∆ Ancillary Services

∆ T&DInvestment

A CBA “Framework” can be expressed in termsof impacts & phenomena to be included,

or in terms of cost and benefit components.A framework also specifies the perspective or point of view.

ProposedProject

Base/Comparison

Case

Costs,Investments

Phenomena


Types of Benefit-Cost Analysis

Economic

Analysis

Financial

Analysis

Regulated-UtilityPlanningAnalysis

Special Case

The distinctions are mattersof perspective: To whom do the costs and benefits apply?


EPRI’s Benefit-Cost Framework

SocietalImpacts

Customer Impacts

Bulk System Impacts

Distribution System Impacts

• Net Capital Cost Changes• Net Fuel/O&M Changes

(Avoided less Incurred)

• Net Capital Cost Changes• Net O&M Cost Changes

(Avoided less Incurred) Change inUtility Cost

(The Utility-Cost Function)

• Reduced/Increased Emissions

• General Economic Effects

Monetization Protocols

DirectCustomer Benefits

Net Societal Benefits• Reliability Improvement

• Resiliency Improvement• Customer Equipment Cost

Monetization Protocols

Societal Benefits


Steps to Apply Cost-Benefit Framework

Formulate Question

Define Scenarios and Assumptions

Evaluate Scenarios Using Benefit - Cost

Framework

Compare Scenarios and Identify “Best”

OptionThe economic and technical questions

for the framework are not pre-configured.


Challenges to Developing a Microgrid BCA Framework

Policy & Regulatory Challenges:• Ownership of microgrids, resources• Transactions within microgrid • Price/rate at point of interconnection

Economic Challenges: • DG technologies still costly

and lifetimes uncertain• Business model still undeveloped• New value streams

Technical Challenges:• Interconnection• Bi-directional power flows• Fault current contribution • Variable protection conditions


Challenges to Developing a Microgrid BCA Framework

Stakeholders in Microgrids: Distribution utility Microgrid owner/developer Internal customers External customers Surrounding market Community Society


Analysis is complicated by the variety of possible business/ownership arrangements.

3rd Party, or Utility?

One customeror mini-utility?

Non-utility3rd Party

Premium reliability/resilience district, regulated rates

PublicUtility

One Customer, multiple facilities,

regulated rate @ POI

OneCustomer

Mini-utility w/internal customers,

behind meter @ POIinternally unregulated

Mini-utility

POI = Point of Interconnection

Additional dimensions:• Existing loads, or green/brownfield?• Existing infrastructure? • Critical loads? Commercial loads?• Incidental (non-microgrid) Loads?• Surrounding system: Market or Integrated?• Rate structure at POI: Real-time, TOU, or Static Rate• Internal customers: retail access?

Provides continuityof essential services

for local area.


A complex project can be examined in stages, addressing a series of Benefit-Cost Analysis (BCA) questions.

Layer 1: Base w/o MicrogridExisting system: customers, loads,existing DER, and service levels.

Cost of DERcapital, O&M, fuel

IncrementalBenefits of

Energy-Producing DER

Layer 2: Energy-Producing DERoptimized with surrounding

system’s marginal cost

IncrementalReliability &Resilience

Benefits

Cost of Controlsand Capacity

controllers, sensors,installation, O&M

Layer 3: Complete MicrogridControls & Equipment

+ Capacity-Producing DER,Optimized with System

Change inOperating

Cost

Ownership & Operating

Changes

Layer 4: Business Arrangements

Ownership, Pricing at POI,Operating Objectives

Stacking of “Layers” for DER and Microgrid Analysis

BCA Q1: What is the net value of the energy-producing DER?

BCA Q3: Does the total value of the microgrid outweigh its cost?

BCA Q2: Does the value of incremental reliability/resiliency outweigh its incremental cost?

Avoided Energy $Avoided Capacity $

Avoided/Incurred Emissions $Avoided/Incurred Upgrades $

(Reliability unchanged)

∆ reliability∆ resiliency

Avoided Energy $Avoided Capacity $

Avoided/Incurred Emissions $Avoided/Incurred Upgrades $

∆ Op costs∆ Emissions∆ other costs


Other Comments and Issues Microgrid value proposition is resilience + reliability.

View as a bet or insurance against low-probability events.– Value of Reliability (short-term interruptions)

ICE* value is generic, indicative (longer-term interruptions)

Value is specific to customers involved

– Value of Resilience

EPRI has work underway to help establish the value of resilience.

New survey instruments may help value both reliability & resilience

– Cases should evaluate backup generation as an alternative.

A microgrid is not required for DER to exist or produce benefits– Does the DER in the microgrid offset other DER elsewhere?

– Is the incremental cost of the DER the cost of location/concentration?

* ICE = DOE’s Interruption Cost Estimator @ icecalculator.com


Microgrid Cost Evaluation

A crisp benefit/cost ratio may not always be practical, owing at least to the resilience value question.

Evaluation of microgrid costs under a range of assumptions may provide decision-makers with sufficient information.

Costs can be estimated across ranges of important assumptions, providing a parametriclook at the incremental cost of resilience.


Questions &Discussion

Together…Shaping the Future of Electricity

Jeffrey D. RoarkTechnical ExecutiveElectric Power Research Institute

[email protected]