The Grid Edge Benefits from Asset Management

Overview

As the latest move in its ongoing initiative to modernize the state’s grid, California’s Public Utility Commission (PUC) recently issued a decision to update state policy related to distribution grid interconnection of distributed energy resources (DER).  Interconnection is the process by which utilities connect DER hardware and software to the outside electrical power system.

The revised policy requires utilities to publish distributed generation cost guides for electric generation developers.  It caps developer cost at 125 percent of a utility’s estimate for interconnection projects.  The ruling applies to projects that don’t fall within net metering.

The objective of the policy update is to help further standardize processes and provide more detailed information when estimating costs to help reduce cost uncertainty and streamline processes for utilities, developers, and consumers integrating DER.

The new interconnection rules represent an important step for California, as they add clarity to processes that have long been murky.  The update received considerable support from all involved parties; a rarity when it comes to DER.  Utilities, developers, and consumers seem to be finding pockets of common ground.

However, utilities shouldn’t overlook a significant implication at the heart of the policy.  Utilities are being asked to develop asset management plans and processes for assets they don’t own.  The California scenario points to what is likely to be more of an industry norm.  Should that occur, utilities will need to establish more pre-defined, service-based processes for dealing with customer-owned assets at the grid edge.  

What do utilities need to consider in the new world of service-based asset management? What is a manageable starting point? ARC Advisory Group believes that utilities must begin to innovate by using asset management for interconnection.   

Utilities No Longer Control the Pace of Change

Empowered consumers are increasingly acting on energy-related choices.  Utilities are being forced to modernize their customer engagement, operational processes, systems, and infrastructure to adapt.  When viewed within these larger market trends, the importance of DER interconnection becomes evident.

Distributed energy resources are rapidly on the rise across the globe, spurred on by technology affordability, favorable regulations, and other complex, interrelated market drivers.  Both residential and commercial and industrial (C&I) customers are increasingly choosing distributed generation, particularly solar photovoltaic and wind.  Electric vehicle growth is also accelerating, although it still remains a very small portion of automotive purchases.  Emerging storage solutions are providing new options for generation plus battery, or what is often referred to as “utility in a box.”

The Internet of Things (IoT) also accelerates grid edge complexity.  On one hand, IoT delivers potential for utilities to reinvent their business models by delivering value-oriented services.  On the other, consumers are plugging more IoT devices into the distribution grid without any input from utilities.

These devices are capable of multidirectional communication with utility-owned systems and equipment and other consumer devices.   They can also produce massive amounts of complex data.  This high-volume data communication is integral to smart home network energy management.  Though in the early adopter stage, the smart home market is expected to continue growing as technology interoperability improves.  When integrated at scale and sufficiently interconnected in residential markets, these devices and networks have the potential to cause significant issues for utilities related to planning, investment, reliability, revenue, and customer service. 

In addition to generating more of their own power via DER, C&I customers are also undertaking Industrial Internet of Things (IIoT) projects at scale.  They are adding layers of IIoT monitoring, control, and process automation via connected equipment and systems.  A major goal of many of these IIoT projects is to reduce energy consumption across business and operational footprints.  This is particularly evident among large and asset-intensive companies, where energy costs are a major portion of operating expense.  Given the disproportionate amount of total revenue gained from these customers, utilities’ revenue and profitability could suffer from these IIoT-enabled energy reductions.

Utilities have limited-to-no control over the pace at which these DER and IIoT devices are connected within and across homes, businesses, and the grid.  As a result, consumer-driven activities have the potential to massively disrupt energy consumption norms.  To navigate this disruption, utilities need to redesign and improve many processes, including DER interconnection, for a more service-based world.  Utilities too slow to adapt will likely be overtaken by market dynamics and competition.

DER Interconnection Process Improvement Necessary

Utilities have a good baseline from which to improve DER interconnection.  After all, they excel at connection, which is core to providing electric service.  Most can also leverage proven operational, safety, and customer processes.  Also, despite the aging infrastructure rife within today’s grids, many technology aspects of DER interconnection have become easier.  For example, inverters have simplified the integration of solar photovoltaic and wind generation into the distribution grid. 

The main challenge for utilities is that utility processes support linear generation/delivery/consumption models for both operations and revenue.  DER introduce variability and revenue loss into those models.  As a result, DER interconnection is typically a low priority or actively fought against.  Disconnect is the default mode should reliability or outage problems arise.  “Set it and forget it” is the customer service orientation, with problems addressed reactively as they arise.  As the electricity market becomes increasingly customer-centric, that orientation will not be sufficient.  

In a customer-centric environment, competition and immediacy of response are the norm.  Accordingly, utilities need to develop a new set of DER-specific connection processes that account for that norm, focusing on speed and service excellence.  As part of that process development, utilities will likely need to review and improve system capabilities across customer-to-operational processes.

Asset Management Delivers Grid Edge Benefits

How do utilities improve interconnection processes to support changing market dynamics? The answer lies in applying well-known and well-established asset management processes and systems in new, more service-oriented ways.

Network Visibility

Implementing service-oriented interconnection begins by eliminating a major operational roadblock: the lack of visibility to DER within the context of network models.  Without that visibility, utilities cannot use DER to support reliability and revenue goals.  To attain this visibility, DER data must first be centralized, and an asset management system can provide that capability.  

As the keeper of lifecycle data, the asset management system tracks utility assets from connection through retirement.  Utilities can leverage this same lifecycle capability for DER, including nameplate, configuration, work history, condition, criticality, etc.  Much as it does with substation assets, a distribution management system can use distributed resource data to populate the network model, providing visibility to DER within the context of the overall grid.

Once DER are visible within (as-operated) network models, utilities and their customers could benefit in many ways, including better management of DER variability to improve reliability.  Utilities could offer their customers, and not just those that own DER, innovative new programs, creating revenue opportunities.  Consumers would choose the programs in which they wished to participate, leading to improved customer satisfaction.

Utilities could use visibility to DER to significantly improve reliability planning and capital investing.  They could analyze DER data to improve distribution resource alignment and avoid additional generation costs by relying instead on more flexible load shifting options.  Utilities could also pinpoint the impact of individual or aggregated DER, providing more insight into the localized value of these resources.

Speed and Accuracy of Work

Having gained network visibility to DER, utilities will have an incentive to quickly add more of these valuable resources, particularly to combat areas of service disruption and distribution weakness.  That means speeding up interconnection.  Asset management can also play a significant role accelerating the completion of that work.

An asset management system can automate and manage many elements of work.  In doing so, it helps organizations optimize work processes and worker productivity using features such as estimating, compatible units, electronic work orders, planning and scheduling, routing, and alerts.

The same capabilities could be applied to support DER interconnection.  The only difference is that the utilities don’t own the assets to which the work optimization is applied.  Regardless of ownership, utilities could still expect to see the same “right work done correctly and faster” benefits for DER interconnection that they gain with their existing assets.  Quickly doing work the right way also improves customer satisfaction for those wanting to use DER.  In this scenario, asset management helps both sides win.

Interconnection processes could also be speeded up by using asset management to share data.  For example, DER data from the work and asset system could either be sourced by or sent to customer information systems using automation.  Doing so would provide a more seamless process flow, reducing time lags between when the asset is connected and the utility customer systems and processes are supporting the DER.  This level of data sharing does require some type of system integration and communication gateway, but that type of technology ecosystem is not unusual. 

Accuracy of DER interconnection processes could also be improved.  Most modern asset systems include extensive reporting and analytics tools for managing key performance indicators (KPI).  These tools drive continual improvement in work processes, so utilities could drive best practices for work into DER interconnection.  This process accuracy would reduce costly rework, ensures compliance, improves worker and customer safety, and increases customer satisfaction.

Recommendations

Spurred on by aggressive regulatory activities, intense market pressures, and engaged utilities, California is an undisputed global leader in building a digitally-enabled and sustainable modern energy infrastructure.  Other states, regions, and countries are taking note of California’s progress.  Regulatory authorities across the globe are likely to follow that lead to some degree and modernize their distribution grids by accelerating decentralization.

Based on ARC research and analysis, we recommend utilities embrace consumer control of the grid by considering the following actions:

• Implement a customer-centric mindset at the grid edge by speeding DER interconnection into the distribution grid.  The resulting process automation and standardization will deliver a wide range of reliability, efficiency, cost-reduction, and customer-satisfaction benefits.
• Create an asset registry for interconnected DER, enabling them to be managed at scale.  This registry should be specifically designed to support high-volume data devices versus legacy system workarounds.  Ideally, this registry should be a component within a centralized asset management system so DER can be incorporated within an overall optimized asset strategy.
• Design interconnection processes that are integrated across customer service, asset and work management, mobile workforce management, and network management.  This integration applies to data, not just workflow.
• Make sure the customer-facing side of the business plays a leadership role in operational solution decisions for DER.  DER integration is increasingly a customer issue, not an operational one.  This dynamic is particularly important to successfully manage DER growth as utilities become more service based and customer centric.

 

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Keywords: Utilities, Grid Edge, Electric Distribution, Asset Management, Distributed Energy Resources, Renewables, Internet of Things, Energy Storage, ARC Advisory Group.