As Xcel pushes non-wire alternatives, solar+storage pilot sparks utility ownership debate

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As Xcel pushes non-wire alternatives, solar+storage pilot sparks utility ownership debate

March 4, 2016

n a reversal of typical roles, Xcel Energy wants state regulators’ approval to move ahead quickly on a solar-plus-storage pilot while DER vendors and environmental stakeholders want to slow it down.

Recent filings from the investor-owned utility in its grid modernization proceeding urge regulators to approve special cost recovery from its rate base for building a distributed energy resource (DER) facility at a location in the city of Belle Plaine to defer a traditional substation upgrade.

“Traditional investment for that substation upgrade would have been $6 million and we are asking for recovery for the solar-plus-storage installation of $12.5 million,” Xcel Energy Regional VP Aakash Chandarana told Utility Dive. “But the long term benefits of learning from this pilot would outweigh the slightly higher cost.”

Xcel also wants the Minnesota Public Utilities Commission (MPUC) to approve $27 million for its Advanced Distribution Management System (ADMS), which would add new software and smart capabilities to its Minnesota distribution grid.

​The primary benefit Xcel sees in the project “is the ability to defer distribution capital investments associated with overloads,” its filing states, but the utility also expects to learn how solar and battery storage “might allow us to avoid investments down the road and save money for our customers,” Chandarana added.

Filings from other stakeholders in the grid modernization docket applaud Xcel for considering DER investments as an alternative to traditional grid infrastructure, but also raise questions over the regulated utility's plan to own and operate the solar-plus-storage station itself, rather than allowing a third party to do so.

Belle Plaine – the proposal

The City of Belle Plaine’s existing substation will approach its capacity within five years and Xcel plans to up its transmission source from 69 kV to 115 kV.

The utility wants to add a 2 MW, 6 MWh battery and a 1 MW solar array to reduce the load on the feeder and transformer at the location by shifting the load curve so there is “a smaller overload for a shorter length of time,” according to an Xcel filing.

Xcel also wants “to explore the benefits and complexities of storage working in conjunction with a variable generation resource,” it adds.

“Batteries can serve many roles and the much talked about 'blue sky' for battery energy storage will only be realized when we know all its capabilities,” Chandarana said. “With Belle Plaine, we want to learn the roles it can play in our distribution system over the next 15 to 30 years.”

Besides the potential savings, Xcel wants to assess the battery system’s potential to offer:

  • Volt/VAR control by optimizing feeder voltage and reactive power flow;
  • Transmission and Distribution system loss impacts analysis;
  • Regulation services to MISO and other grid operator’s markets;
  • The ability to protect customer loads by mitigating short duration power quality events, such as voltage sags;
  • Smoothing to variable DERs, specifically PV, to reduce voltage fluctuations, increase feeder DER hosting capacity, and minimize maintenance costs for voltage regulation equipment.

“Recent studies on energy storage have supported the importance of capturing more than one value stream for projects to be economically feasible,” the filing adds. “We intend to learn about complex interactions and limitations involved with stacking multiple battery systems.”

The proposed pilot would also offer “the learning that comes from a Minnesota-specific deployment,” the filing notes. “It is essential that we learn how best to integrate and leverage storage technologies before costs drop to the level where adoption becomes more widespread…[and] start now to build the in-house capabilities and knowledge necessary to effectively benefit from this technology.”

With DERs, Chandarana said, “the dialogue isn’t as black and white as it used to be when it was just about the least cost widget, but it is a dialogue our commission in Minnesota, which is fairly progressive, understands and sees benefit in.”

Stakeholder response

Stakeholders in regulatory docket — including the Energy Freedom Coalition of America (EFCA), a group led and co-founded by leading rooftop solar installer SolarCity — have few objections to the ADMS smart software undertaking, and appreciate Xcel's efforts in pursuing non-wire alternatives.

DER advocates say this kind of non-wire alternative (NWA) to traditional utility infrastructure investment, typified by the landmark Brooklyn Queen Demand Management Program, can lead to ratepayer savings and grid benefits. Spurred by New York’s Revising the Energy Vision regulatory and policy proceeding, Consolidated Edison used a $250 million investment in DERs to defer a $1.1 billion substation upgrade.

A recent grid modernization study from SolarCity argued on behalf of just this type of investment. DERs “can offer deferral and avoidance of planned grid investments…[and] if deployed effectively and placed on equal footing in the planning process with traditional grid investments, can ultimately lead to increased net benefits for ratepayers.”

“It absolutely is important that Xcel is looking at this idea because step one is not investing in traditional wires-based solutions and looking at alternatives like storage,” said SolarCity Policy and Energy Markets VP Becky Stanfield on behalf of proceeding intervenor EFCA.

Surprisingly, though, EFCA’s final proceeding filing recommended that the Commission reject Xcel’s project. The reason for this opposition captures the newest tension between utilities and DER providers in the state.

“Step two,” Stanfield said, “is can they get even more savings by opening the market to private parties to bid in to solve the problem even more cost-effectively?”

EFCA's issues with the project

Xcel is offered the option for the special cost recovery for DERs by legislatively-mandated grid modernization effort, but because that recovery has to go through a regulatory proceeding, it offers stakeholders insight and a voice in the utility's grid modernization planning.

All the stakeholders’ comments, including Xcel’s, recognized the core of the proceeding is modernizing Minnesota’s grid, EFCA noted in its filing.

Where stakeholders differ is who should own and operate the project. Xcel proposes to own the Belle Plaine project itself, arguing that it can learn more about how to deploy and manage DERs like solar and storage if it owns the project itself.

DER providers, led by EFCA, say an open bidding process that allows for third parties to compete for ownership and operation rights will deliver more benefits to the grid at a lower cost, and that allowing utility ownership for this project could set a dangerous precedent for projects to come.

“Innovation can be more rapid and diverse in a competitive market,” EFCA argued. “The proposed project—which includes utility ownership of each component—will likely be more cost-effective and beneficial if it leverages the competitive market.”

A competitive bidding process “could result in a broader set of options, including technologies and ownership models, beyond the limited scenarios Xcel considered,” it added.

The Hawaiian Electric Companies and PSEG Long Island are among utilities calling for private sector bids to best use DERs to defer traditional infrastructure investments, EFCA said. The California Public Utilities Commission launched a DER proceeding intended “to transform grid-edge values into utilities' sourcing policies.”

Unless Xcel modifies its proposal to include a detailed call for competitive bidding, the commission should deny it, ECFA argued.

If private sector vendors "cannot put forward cost-effective options, Xcel’s utility ownership model would be an acceptable approach. However, it should be the exception rather than the norm…[and] rather than approving Xcel’s project as-is, Xcel be required to bid out the grid services it requires in a competitive solicitation.”

Xcel’s proposal limits what can be learned, Stanfield said. “If there was a range of pilots and some were utility-owned and some were intended to be competitively bid, we would be having a very different discussion right now because the outcome of that range of pilots might show something really important about the benefits of competition.”


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