EP 4: CA & MD: Leading the Future of DER Policy
Prepare to have your mind energized as we navigate the latest trends reshaping the electric grid, with a special focus on the policy revolutions in California and Maryland. These aren't just changes; they're seismic shifts at the grid's edge that promise a smarter, more sustainable future. As your host, I've seen firsthand in my course on distributed energy resources the costly overbuild of our grid for peak demand—a problem these policies are directly addressing. I guarantee, by the end of our discussion, you'll see the electric grid in a whole new light, understanding the intricacies of solar and storage interconnection and the transformative potential of electric vehicle-to-grid technologies.
The conversation heats up as we dissect the California Public Utilities Commission's groundbreaking ruling and Maryland's DRIVE Act, unpacking their implications for everything from power quality to peak demand. With insights gleaned from industry experts and my own classroom experiences, we examine the challenges and opportunities these changes herald for utility companies and consumers alike. As we analyze the drive towards more distributed, low-carbon assets, we'll reveal how bidirectional energy flows could lead to a more efficient and resilient grid. Tune in for a power-packed session that will electrify your understanding of the energy landscape.
Transcript:
Speaker 1: 0:01
Two recent policy stories in late March and early April suggest an unfolding future on the grid edge. First, on March 21, 2024, the California Public Utilities Commission issued a ruling permitting renewable energy assets really meaning solar and storage to be approved for interconnection to the electric grid by means of an energy export schedule, referred to as a Limited Generation generation profile, or LGP. This approach is meant to avoid impacts to the distribution grid that can occur with unscheduled bidirectional flows, while accommodating more distributed low-carbon assets on the grid. Second, the Maryland legislature passed a bill on April 4th. The Distributed Renewable Integration and Vehicle Electrification Act, or DRIVE. Drive, will require utilities to compensate customers for providing grid services through virtual power plants, while specifically calling for utilities to speed up electric vehicle-to-grid V2G bidirectional charging. Utilities must submit V2G plans by April of next year and the virtual power plant plans three months later. Having already cleared the Senate, the bill now goes to the governor for signature. What do these activities mean and why are they so important?
Speaker 1: 1:14
Well, I teach a three-day course on distributed energy resources for the Smart Electric Power Alliance and one of the points I consistently hammer home is that today's grid is woefully inefficient. Points I consistently hammer home is that today's grid is woefully inefficient. It's designed to serve peak demand without skipping a beat, and that peak demand may vary considerably from year to year. There are relatively few hours or days when the grid is stressed, but it's built to handle that. And since it's built to handle max demand, it's overbuilt. In fact it runs at around a 41% average annual capacity factor. If we ran our airlines like that, it would mean anybody could get on a plane on Thanksgiving weekend and fly anywhere in the country pretty cheaply. Nobody would be turned away, even if they showed up to the airport at the last moment. It'd be great for me, with my 6'4 frame as the rest of the year, I'd have plenty of free seats to stretch out on and planes less than half full. But we'd all pay for it in the form of higher ticket prices. Well, the grid's no different. We pay a lot for that ability to always get what we want, and it shows up in the form of higher distribution rates. In fact, if we could cut our demand by just 1%, we could reduce our capital expenditures by roughly 8%, and if we could cut peak demand by 10%, we'd cut total costs by roughly a quarter.
Speaker 1: 2:29
Another point I make in my workshops is that solutions providers on the grid edge often have a difficult time interconnecting their assets to the distribution grid. In large part, it's because they cannot see where the constraints and opportunities are on a system that's quite opaque. Few utilities have up-to-date and transparent hosting maps or interconnection policies, so it can take a long time for developers to cite and connect certain assets. Talk to a community solar developer in Massachusetts and many other states and they'll tell you stories. To be fair, there's a legitimate concern on the part of the utilities. Millions of rooftop solar arrays have been installed across the country, with concentrations in certain states, and they typically produce much more energy during the middle of the day than the hosting facilities consume, with the net exported to the grid, resulting in bidirectional flows of power. The country also now has over 5 million electric vehicles, also concentrated in certain states, largely on both coasts. They have large batteries, up to almost 10 times the size of a typical home battery storage system. If and when they start to go bidirectional, like Maryland is calling for, they can store and release significant energy and capacity, and while they can flatten those peaky and costly demand curves, they need to be coordinated. What we're doing now on our distribution grid is converting what were one-way cart paths into bidirectional roads. This has implications for operations and local power quality that could in fact be greatly aided by these distributed energy resources, if the planning has taken place and the right systems have been installed to create the requisite situational awareness.
Speaker 1: 4:07
So back to the California ruling. There are limited times, especially when demand is low and when the grid is so chock full of rooftop solar-generated electrons that parts of the grid simply cannot accept any more exported power. In dealing with this scenario and in establishing rules for hosting new projects, utilities have typically assumed that each project is at maximum output, while at the same time they assume customer demand is at its lowest point. They've required developers wanting to be connected to pay for system upgrades under this paradigm. While this generally doesn't affect smaller energy projects, it can be quite painful for megawatt-scale commercial rooftop solar or community projects, with associated upgrades being lengthy, time-consuming and often destroying the project economics.
Speaker 1: 4:53
The reality is that this combination of circumstances rarely occurs and the approach overstates the challenge to local circuits. Thus the overbuilding continues, even as the grade misses out on a chance to further decarbonize and inject more clean energy for most of the year. Recognizing this, the California Public Utilities Commission has issued a new ruling that requires clean energy for most of the year. Recognizing this, the california public utilities commission has issued a new ruling that requires utilities to make available hourly hosting capacity information for each circuit. That allows asset developers to design projects that stay within predefined limits. Export levels can vary 24 times per year, so, for example, solar assets are simply not allowed to export to the grid during specified periods when there is zero ability to absorb that energy, and then it's either curtailed by smart inverters or used to charge an affiliated battery.
Speaker 1: 5:41
This first-of-its-kind regulatory approach has the effect of avoiding unnecessary grid upgrades while allowing distributed solar and batteries to reduce potential strains on the grid and flow more electrons across the same infrastructure. It still gives the utilities control, allowing them to curtail projects during emergency situations or if the supply-demand balance on a local circuit rapidly changes. Moving to Maryland, the development of virtual power plants and bidirectional V2G capabilities specifically adds flexibility, creating the conditions that can increase system capacity utilization factors, making the grid more efficient and reducing costs per kilowatt hour delivered. If these models work successfully in California and Maryland, each system should see significant economic gains. But if the two models were combined so that one had both better transparency and hosting capacity and explicit commitments to virtual power plants and V2G capabilities, then we'd really have something. Utilities elsewhere would do well to begin planning for these eventualities, as many other states will likely be making similar decisions in the very near future.