Maintaining the operational reliability of the electric grid is of paramount importance to electric utilities, who are mandated to provide reliable service. By facilitating onsite generation, utilities can help customers with critical loads maintain their operations when the utility grid goes down. When critical infrastructure is made more resilient through energy planning processes that ensure electricity will still be accessible during an outage, these facilities can serve as a place of refuge for the community while the utility works to restore power in other areas. Investments in distributed generation can also help limit service disruptions and unplanned outages during normal operations. For more information on the need for a more resilient power system, see EPRI’s 2016 report, Electric Power System Reliability. It discusses resiliency planning from a utility perspective and describes how utilities are following resiliency plans to assess and fix system vulnerabilities.
Some utilities have developed their own energy resiliency plans that outline investment strategies for hardening the grid’s infrastructure and protecting against unplanned outages. Customer solutions, including installation of distributed generation and CHP at critical facilities, can be prioritized in these plans. For example, ConEdison undertook a long-term planning process to ensure that their system is less susceptible to storms and more responsive to customer needs in three distinct ways: (1) hardening their systems; (2) improving the information provided to customers; and (3) strengthening partnerships. The plan specifically describes strategies for maximizing distributed generation, including using CHP and solar generation. For example, ConEd is expanding efforts to use customer-sited CHP to upgrade the distribution system, give grid operators more options for restoring service to feeders, and supply supplemental power during outages. The utility is also exploring solutions that would enable its solar customers to rely on their solar energy sources in the event of a system outage.
Utilities should collaborate with state emergency planners and other policy makers about resiliency planning activities. The City of New York developed a utility chapter within their resiliency plan, A Stronger, More Resilient New York, which proposes more than 20 different strategies for partnering with utilities and regulators to address system reliability, including during extreme weather events. To learn more about how cities and states are approaching efforts to enhance resiliency through distributed generation, visit the policymakers section of this tool.
Customers have very similar needs and concerns when it comes to enhancing the resiliency of critical infrastructure, but differences in state regulatory structures impact how utilities are involved in addressing those needs. Electric utilities have not historically been incentivized to support distributed generation, but new regulatory models are leading to greater utility involvement in deploying onsite generation at their customer sites. By considering the areas of opportunity and examples described below, utilities can gain value and benefit from improving resiliency with distributed generation. While many examples focus on CHP, similar opportunities exist for energy efficiency and other distributed technologies.
Improve Customer Relationships
When utilities support investments in CHP, it creates an opportunity to increase the value they can offer to some of their larger customers. Working together to enhance onsite resiliency provides an opportunity for utilities to interact with customers and learn more about how to best serve their needs. Utilities that communicate with customers about technology options and assist with technical requirements and interconnection procedures for distributed generation can strengthen their long-term customer relationships.
In emergency situations, establishing strong relationships with customers with CHP systems can come in handy. South Oaks Hospital in Amityville, NY utilized its 1.25 MW, black-start-equipped CHP system to assist their utility, Long Island Power Authority (LIPA), in power restoration efforts after Hurricane Sandy. Even though LIPA was able to restore power to the substation serving the hospital within five days of the storm, the grid remained unstable and LIPA requested that South Oaks stay disconnected. While the utility continued resolving issues for the community, the hospital stayed isolated and continued to rely on their CHP system to provide critical services for two weeks after the storm. The South Oaks CHP system is integrated with a 47 KW rooftop solar PV system.
Utilities can also enter into partnerships with customers that are interested in CHP for resilience. In many cases, utilities are well-positioned to help reduce the upfront costs of CHP for their customers, while also providing a stable source of power for grid customers. For example, in Missouri, the City of Macon entered into partnership with a local ethanol plant, POET Biorefining, to jointly invest in a 10 MW CHP system. The facility is located onsite and provide steam to meet 60% of the biorefinery's thermal requirement, but it is owned and operated by the City of Macon and provides electric power to serve the local grid. The ethanol plant and the municipal utility split the costs of purchasing natural gas to fuel the system, which decreases costs for both entities. Further, in the case of a grid outage, the CHP system is designed to disconnect from the grid and supply the full load of the ethanol plant. It has maintained plant operations during numerous outages since CHP operations began in 2003.
Increase Energy Efficiency
Many utilities are required by states to meet energy efficiency savings targets, and CHP can help utilities achieve their goals. For example, Maryland made CHP an eligible technology to contribute energy savings toward efficiency targets established for utilities by EmPOWER Maryland. As a result, utilities in Maryland now offer CHP programs that provide financial incentives and other assistance to encourage customers to deploy CHP systems and utilities count the energy savings toward their efficiency goals. Baltimore Gas & Electric (BGE), Pepco, Delmarva Power, and First Potomac provide incentives to support CHP projects with incentives for capacity ($/kW) and for production ($/kWh) and report savings acheived toward their targets. BGE provided a $1.5 million incentive to support a 2 MW CHP system at the University of Maryland Upper Chesapeake Medical Center and BGE estimated that savings from this system and additional CHP projects would contribute 19.5% of the utility's total commercial and industrial (C&I) savings for the 2015 - 2017 program year.
In Massachusetts, a similar energy efficiency resource standard recognizes CHP as an eligible technology and electric and gas utilities in the state administer a CHP program through the MassSave initiative to help meet their savings targets. Launched in 2010, the program provides incentives based on CHP system size and efficiency requirements. Utilities provide three tiers of incentives and each tier provides a greater reward to systems that are designed to achieve ideal performance and cost effectiveness.
Upgrade Grid Infrastructure
Several utilities are beginning to develop strategies that encourage deployment of distributed generation and other “non-wires alternatives” in targeted areas with distribution or capacity needs. By siting distributed energy resources at strategic locations on the grid, utilities can help address distribution system constraints and unload the grid in areas where congestion is causing reliability issues. Supporting CHP at critical facilities that are also located in constrained areas is a win-win-win for the utility, the customer, and all users of the electric grid.
A good example is Con Edison’s Brooklyn Queens Demand Management (BQDM) Program, which targets deployment of distributed energy resources in an area where the utility grid was constrained due to major demand growth. To encourage commercial-building owners and industrial facilities to install CHP in this targeted area, ConEdison matched state incentives for CHP already offered by NYSERDA, effectively doubling the incentive levels for CHP in the BQDM zone. Through initiatives like BQDM, utilities can have greater control over how and where distributed generation is deployed within their service territory. In this way, CHP and other technologies can provide an opportunity for utilities to mitigate investments in new grid infrastructure, gain access to grid services such as power quality and voltage management, and improve overall system security and resiliency as part of a targeted strategy.
Build, Own, and Operate Resilient Assets
Some utility companies have found new value in building, owning, and operating distributed generation and CHP located at customer facilities. Some critical facilities may be good candidates for CHP, but have not been able to justify deploying limited capital for an energy investment that is not related to their core business. In this case, the utility could be a good partner, capable of stepping in to install CHP as a rate-based asset to help these customers become more resilient. Traditionally regulated utilities, or those operating in vertically integrated markets, should be able to follow existing regulatory procedures for owning a CHP system and recovering their costs. For distribution utilities operating in deregulated markets, it can be more complicated. In these states, utilities are typically prohibited from owning generation assets, but some regulators have recognized the value of allowing utilities to own distributed energy resources when they are in the public interest, classifying them as transmission and distribution upgrades that improve the reliability of the electric grid.
A good example of utility-owned CHP is the Eight Flags Energy CHP Plant, a 21.7 MW system, owned and operated by Florida Public Utilities (FPU) and located at an industrial customer site on Amelia Island, Florida. The CHP system has the ability to support critical services to the residents of Amelia Island, who are especially vulnerable to severe weather and outages. Reliability and resiliency were strong drivers for FPU’s investment and the CHP system is designed to survive a category 4 storm surge. During normal operations, electricity from the CHP system is a source of reliable baseload electricity for approximately 16,000 of FPU’s customers, while thermal energy is supplied as steam and heated water to the host facility, a large paper mill. The Florida Public Service Commission was supportive of FPU's involvement and applauded the project as a "creative solution" for regulators and other states to consider.
Duke Energy has also pursued ownership of CHP at its customer sites and included the model as a strategy in its integrated resource planning (IRP) activities. A proposal for a 16 MW CHP project at Clemson University was approved in 2017. The system will provide electric service to Duke retail customers and thermal energy to supply the Clemson campus. In the event of a major grid outage, the CHP system will be capable of islanding to supply power to the University. For Clemson, the project comes at a time when the campus is upgrading and replacing sections of its aging electrical infrastructure to improve system reliability. For Duke Energy, the project is part of its plan to meet energy needs in its service territory by installing smaller, highly efficient, distributed gas generation as part of their grid resources. The utility's IRP for the Carolina's also notes that investments in CHP can result in CO2 emissions reductions, deferral of T&D investments, and economic development opportunities for the state.
Boost Reliability Performance
Electric utilities measure their own reliability performance using indicators like the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI). They are an average measure of how long and how often customers experience interruptions and are typically expressed in minutes. Critical facilities and communities served by utilities that perform poorly on SAIDI and SAIFI measures are likely to be more motivated to invest in onsite generation. By supporting these customers in deploying resilient distributed generation assets, the utility can ensure reliable service to their most at-risk customers. Additionally, the resulting reduction in demand for grid electricity can help utilities improve reliability performance for all of their customers, especially in congested areas.
Develop Procedures that Support Distributed Generation
Utilities play a role in several key policy issues that can impact the implementation of customer-sited DG and CHP. Some policies, such as standby rates and interconnection standards, can be streamlined in order to reduce perceived barriers to distributed generation. Utilities can also offer incentives for DG and CHP installations as part of resiliency initiatives and energy efficiency programs, and include consideration of distributed generation in integrated resource planning exercises. When developing procedures and policy frameworks, utilities should value the resiliency attributes of distributed energy resources where possible, and take these considerations into account when assessing the range of costs and benefits associated with different distributed technologies.