Decentralization of Energy Resources

The electric power system, an inter-networked and intricately balanced collection of electricity generation and load, is experiencing a time of unprecedented change. Following decades of underinvestment, the power system has become a priority area to address the local issues of critical infrastructure rebuilding and resiliency as well as customer empowerment while also supporting the wider goals of climate change, energy sustainability and economic development. This includes a number of areas of focus including localized issues such as capital infrastructure deployment strategies, energy resiliency, and support of an electrified transportation infrastructure in addition to more broad issues such as the development of distributed energy resources (DER) both as standalone energy providers and as building blocks to the larger grid.

In particular, the grid of today is characterized by the technological maturity, declining cost, and commoditization of DERs. Such DERs are generally comprised of (1) generation resources such as photovoltaic (solar), wind, diesel, and natural gas generators; (2) demand resources controllable under demand response, energy efficiency programs, and premise energy management controls such as buildings, homes, and electric vehicles; (3) storage resources such as batteries, flywheels, capacitors, compressed air, fuel cells and pumped hydro; and (4) microgrid resources, which can be defined as a group of interconnected loads and combination of the above generation, demand and storage that can be controlled as a single entity and actively connect and disconnect from the overall grid as a self-sustaining “island”. 

The proliferation of DERs is impacting the design and operation of today’s grid in profound ways. DERs are being deployed in a distributed fashion where prosumers and other DER owners are choosing small and distributed installations mostly deployed with multiple purposes in mind. Some of these drivers include the reduction of use of grid based power, increased reliability/resilience and the ability to control generation and usage behind the meter. This shift moves the grid towards an increasingly distributed infrastructure where there are three main challenges on already aging and constrained infrastructure – decentralized energy supply, decentralized asset control and decentralized business models. The introduction of renewables based DERs and localized storage systems significantly transform the power flows of the system. A decentralized supply leads to unpredictable bi-directional power flow including complex (real and reactive) three phase AC unbalanced power flows. The ability to manage bi-directional power flow in real-time, for each node in the system, requires significant visibility into the system. Current distribution networks are run largely blind with infrequent and sporadic measurements used to infer nodal parameters between monitoring points. Increasing measurement to the level required to monitor and control bi-directional three phase AC power flow in realtime would be cost prohibitive simply for measurement equipment let alone the cost of system upgrades to accommodate to exponential increase in realtime data. This uncertainty in complex three-phase AC unbalanced power flow, with the potential for complex reverse power flow, impacts deployable system capacity, power quality and protection coordination. With each DER implementing independent controls, the coordination and optimization of resource usage is an increasingly complex issue. Competing objectives between distributed resources such as generation, storage, demand management, microgrids, and distribution automation (e.g. VVO, FLISR) has the potential to create conflict unless the overall system is managed to optimize system level objectives while interconnected. Each DER will has the potential for having a separate business and use case reflecting an individual cost of ownership which is ultimately reflected in cost recovery based pricing. Aligning individual controllers to system objectives while grid connected and to local objectives and control while in standalone mode may be one approach to minimizing competition between controllers. Beyond this, prioritization and/or coordination schemes can also be used. The traditional utility business model based on centralized generation and one way power and revenue flow will also be conflicted and disrupted. Traditional models are primarily built on cost recovery pricing mechanisms whereas DER based and distributed models rely upon inter-resource communications and peer to peer transactions linking suppliers to the demand. Traditional models were based on bi-directional transactions – between the utility and the end-user, this is now shifting to using multi-party transactions to ensure that all parties are included, regulations are complied with and the best practices in the industry are followed.

What is needed is a new paradigm that combines real-time power flow awareness and DER hosting capacity with a platform for prioritizing and coordinating objectives and for optimizing operations and performance for multiple entities and parties combined with new and innovative business models that support both utility and DER revenue generation and growth in a transactional marketplace.

This need is further driving an increasingly vibrant DER market at the customer level, at the community level, at the utility level, or aggregated at the fleet level to provide services to the utility or electricity market. This has created a complex array of ownership and operator models involving utilities, active customers/prosumers, third parties, and a mixture of the three, mapping out various own-to-operate business models including customer owned device, “rent-a-roof”, and aggregator models. As the system adapts to the increasing levels of DERs occurring on a daily basis, the grid must also evolve. The grid must evolve from a wires only physical network flowing electrons, to encompass a data network exchanging information, to a transactional network platform providing value for DER participants as prosumers. This platform encompasses a complete range of business models – including ownership, operation, and revenue from market based earnings. 

The electric power system and industry is experiencing an exciting time of evolution from the grid of yesterday - a one-way pipeline from centralized generation to distributed loads, to the grid of today - an increasingly distributed grid capable of supporting two-way power flow with intelligence and automation capabilities, to the grid of the future - a fully multi-party integrated platform model facilitating two-way value transactions between DERs and with the platform itself. 

Varun Khanna, VK Project Solutions

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