As distributed energy resources come onto the grid in increasing numbers, the distribution system may need a new level of regulation to ensure new services get delivered efficiently, according to a proposal from Jon Wellinghoff, former FERC chair and current partner at Stoel Rives, and James Tong, vice president of strategy and government affairs at Clean Power Finance.
Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) have, in partnership with utilities, expanded and streamlined the grids electricity markets over the last decade.
Now, utilities need a partner at the distribution system level to do the same for retail electricity, according to the proposal.
Why the grids needs an Independent Distribution System Operator
In order for solar and other distributed energy resources (DERs) to add more value to the bulk system and cause less stress, Wellinghoff and Tong are calling for the creation of an Independent Distribution System Operator (IDSO) to handle the planning and operations of the distribution network.
Today, utilities own and rate base transmission system assets while answering to the Federal Energy Regulatory System (FERC) and leaving day-to-day operations to RTOs and ISOs. Under the proposal, they can own and rate base distribution system assets while answering to state regulators and leaving moment-to-moment operations to the Independent Distribution System Operator.
The consolidation of balancing authorities and operational control of the wholesale market system through system operators has proved a much more efficient model, Wellinghoff, co-author of Rooftop Parity: Solar for Everyone, including Utilities, told Utility Dive in an interview.
The proof is a 2009 study by FERC and four Southeastern state commissions that showed Entergy could save a minimum of $700 million over ten years by joining the Midcontinent Independent System Operator, he said.
Now we have the software tools and computing capability to bring those benefits down to the distribution level, Wellinghoff said. That will grow the system and give DER entrepreneurs greater visibility into where the value is in technologies like solar PV and storage. They will go get that value. And that will benefit customers who use and invest in DERs.
And that also will create new incentives for innovation, added co-author and Clean Power Finance VP James Tong.
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