Distributed Energy Resources Integration Research Program: Research and Development Plan

Publication Number: 500-03-095
Publication Date: October 2003

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Executive Summary The Distributed Energy Resources (DER) Integration R&D Plan is intended to serve as a living document to aid the California Energy Commission’s program managers in identifying and seizing upon the most appropriate and timely opportunities to further the advancement of DER as a viable energy tool in California given the work already accomplished and insights obtained.

California Energy Commission DG Strategic Plan

In June 2002, the California Energy Commission adopted a Distributed Generation (DG) Strategic Plan policy statement. The DER Integration Research Program (Program) is doing its part, along with the Renewables Program, Efficiency Division, and Commission policy oversight to help achieve the goals laid out. In translating some of the DG Strategic Plan’s policy goals into actionable research activities, the research activities of the Program are addressing these goals, wholly or in part (Figure 1).

Figure 1: DER Integration R&D Program Support for DG Strategic Plan

DER Integration R&D Planning Process

The DER Integration Research Program is pursuing DER research through a clearly articulated R&D planning process (Figure 2). An iterative feedback loop embedded in the planning process ensures the Program remains current and relevant, able to respond effectively to changes in the industry’s technological and commercial environment.

Figure 2: R&D Planning Process

Assess DER Research Activity

In 2001, significant developments in DER technology and the marketplace required a fresh analysis of the DER landscape to identify key challenges appropriate for public interest research. A research assessment was performed to help shape the Program’s research efforts in the focus areas of Interconnection, Grid Effects, and Market Integration. The key question this effort was trying to address was "are there research development, demonstration or commercialization opportunities that will make DER a significant resource in California’s power system?" There were also critical questions relating to each of the focus areas:

• Interconnection - Can a substantial amount of DER be interconnected in both radial and networked distributed systems?


• Grid Effects - Would a high penetration of DER have adverse and/or positive effects on the T&D system?


• Market Integration - Can DER access robust markets or be exposed to price signals that will maximize benefits to customers and the power system?

The research assessment documented a major step in the research plan development process - to understand current research being conducted by industry, nonprofit organizations and government, and to identify where gaps exist.

A framework was created for assessing the status of the DER research efforts. Issues are the critical questions facing the development of DER in the areas of interest. These issues have driven, or will drive, the creation of research initiatives to address these questions. Current and potential projects, in each of the three areas, are pursuing these research initiatives. There are also crosscutting projects that are addressing issues in more than one area. Each project/activity identified can be mapped to the appropriate research initiative and issue. From the information obtained, the following observations were drawn:

• Challenges involved with interconnection have just begun to be addressed.


• Research to better understanding the negative impact of DER on the grid needs to be balanced with efforts to better understand the benefits that DER may have on the grid.


• Microgrids are emerging as an important area with DER. However, there is not a common definition of the microgrid concept. In addition, details of how a microgrid is to be effectively operated and controlled to bring about meaningful benefits is still far from clear.


• A lack of a clear successful business model will continue to prevent DER from making a breakthrough into the electricity industry.


• DER integration, optimization and operation are vital to realizing a large penetration of DER. However, understanding the requirements for integration, optimization and operation may not be possible until a clear business model emerges.


• Regulations and policies need to keep pace with and reflect new information and understanding of DER. In many instances, technology is available but deployment is constrained by current policy.


• Significant gaps exist in Interconnection, Grid Effects, and Market Integration research activity where DER Integration Research Program funding can make a dramatic impact.

Identify Priority Research Initiatives

From the DER research assessment, a strong need was observed for a viable business model for the DER industry. This was deemed critical to developing DER as a viable tool in the electricity infrastructure. The effort began by examining the elements of a successful business model, driven by customer needs, technology and infrastructure, and rules and regulations. A business model defines how a company makes money and must factor in the following considerations:

• Value proposition
• Market segment
• Value chain
• Cost structure and profit potential
• Supplier/customer linkages
• Competitive strategy

Business models work together in a value network that supports a value proposition to the customer. For DER then, a value network is a group business models that interact to support a value proposition to a "DER user" market segment.

To determine each value network’s attractiveness to the DER Integration Research Program, a technical market analysis was performed to identify those value networks that would have the greatest impact, the value networks’ fit with the California Energy Commission’s research objectives was determined, and the feasibility of bringing the value networks into being was analyzed. After characterizing, identifying, and determining their attractiveness, the results of the value network analysis were combined with that from the research assessment to help the Program prioritize research initiatives.

In all, fourteen research initiatives from across the different focus areas were identified as high priority, based on their relative research gap size and importance. Promising research is already in the pipeline. DER Integration Research Program activities currently include a portfolio of 10 projects with a total estimated budget requirement of over $6 million for the lifetime of these projects.

Potential projects were scoped to address the high priority initiatives identified in the value network analysis. In addition to addressing the research initiatives, the proposed projects also have linkages to many other Energy Commission activities. The proposed projects were reviewed and characterized to simplify the project selection process.

The Value Metrics Tool was developed to further complement the DER Integration Research Program’s previous decision-making process by allowing program managers to better evaluate project proposals. It allows the Program Advisory Committee, comprised of external DER research stakeholders, to make portfolio recommendations considering the value generated by each project. The tool identifies the candidate projects that generate the most value while providing more structure to RFPs and proposal evaluation. Additionally, the Value Metrics Tool assesses the impact of external (e.g., regulatory, market and technology) and internal (e.g., budget) changes. Characteristics measured by the Value Metrics Tool were based on the objectives of the Program.

Construct Project Portfolio

Developing a project portfolio that balances the many goals of the DER Integration Research Program given an environment with uncertain funding can be a significant challenge. To help address this concern, portfolio analysis plotting tools were introduced where projects can be visually presented on axes displaying metrics and characteristics. These visual tools provide snapshots of projects that allow program managers to evaluate whether or not appropriate balance is being maintained against the critical project characteristics as new projects are added or taken away.

Apply Projects to R&D Roadmap

The R&D roadmap (Figure 3) offers a more concrete pathway toward achieving the vision outlined in the California Energy Commission’s Distributed Generation Strategic Plan. Careful thought was given to the expected schedule of activities and the timing of outside events that would have an impact on the different focus areas, within the DER Integration Research Program. The roadmap balances these complex factors and plots out a course for short, medium, and long-term action in order to reach the vision for DG in 2020. The current and planned projects are mapped against the roadmap to ensure that momentum is maintained to move toward the vision laid out by the Commission’s DG Strategic Plan.

Figure 3: Current Schedule and Projects Applied to Roadmap

External Linkages

The DER Integration Research Program works closely with other PIER programs where there is overlapping interest in DER. Co-funding activities relevant across PIER programs has proven to be an effective way to maximize the benefit and learning given the resource constraints inherent to any research program. External to the Energy Commission, the DER Integration Research Program has developed a close working relationship with the U.S. Department of Energy’s (DOE) Distributed Energy and Energy Reliability Program. Co-funding of microgrid research is already taking place through the Consortium for Electric Reliability Technology Solutions (CERTS), a jointly sponsored effort between the DOE and the Energy Commission. Plans for Program co-funding of DOE projects conducted at the National Renewable Energy Lab (NREL) are also being developed.

The Program Advisory Committee (PAC) was established to provide guidance to the DER Integration Research Program to help make the Program a success. The PAC members were selected based on their diverse backgrounds and ability to represent different stakeholder perspectives toward the work undertaken by the Program.

Implementation Activities

In the spring of 2003, the California Energy Commission allocated $7 million for the DER Integration Research Program to pursue research, development and demonstration (RD&D) deemed to be of the highest priority in the 2003-2004 fiscal year (Figure 1). These projects will be conducted in collaboration with the Energy Commission Public Interest Energy Research (PIER) Program’s Environmental, Demand Response, and Transmission program areas as well as the U.S. Department of Energy. The DER Integration Research Program will be implementing projects pursuing the following research initiatives: Market Design and Integration Projects ($1.2 million), Regional Grid Benefit Validation Demonstrations ($2.0 million), Interconnection Equipment and Installation Cost Reduction ($0.8 million), and Grid Effects/DG Penetration Testing ($3.0 million).

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Table of Contents

Preface

Executive Summary

1.0 Introduction to the DER Integration R&D Plan

2.0 California Energy Commission DG Strategic Plan

3.0 Identification of Research Gaps

4.0 Prioritizing Research Initiatives

5.0 Current and Proposed Projects

6.0 Evaluation of Projects

7.0 Project Portfolio Analysis

8.0 Roadmap

9.0 External Linkages

10.0 Plans for Implementation

11.0 Closing Comments

Table of Figures

Figure 1: DER Integration R&D Program Support for DG Strategic Plan

Figure 2: R&D Planning Process

Figure 3: Current Schedule and Projects Applied to Roadmap

Figure 4: R&D Planning Process

Figure 5: Strategic Plan Near, Medium, and Long-Term Goals

Figure 6. Commission-wide Activities

Figure 7. DER Integration R&D Program Support for DG Strategic Plan

Figure 8. Focus Areas

Figure 9. Framework of Analysis

Figure 10. Competitive Pathway

Figure 11. Interconnection Issues and Research Initiatives

Figure 12. Grid Effects Issues and Research Initiatives

Figure 13. Market Integration Issues and Research Initiatives

Figure 14. Business Model Overview

Figure 15. Value Network Concept

Figure 16. Pathway To Prioritizing Research Initiatives

Figure 17. Market Segment Value Analysis

Figure 18. Independent Value Networks

Figure 19. Supplemental Value Networks

Figure 20. Value Networks PIER Objectives Fit Analysis

Figure 21. Value Networks PIER Objectives Fit Analysis

Figure 22. Value Networks Feasibility Analysis

Figure 23. Most Attractive Value Networks

Figure 24. Interconnection Research Initiative Priority Ratings

Figure 25. Grid Effects Research Initiative Priority Ratings

Figure 26. Market Integration Initiative Priority Ratings

Figure 27. DER Technologies and Products Research Initiative Priority Ratings

Figure 28. High Priority Research Initiatives

Figure 29. Current Active Projects

Figure 30. Proposed Project for Priority Research Initiatives

Figure 31. Proposed Projects

Figure 32. Metrics Identification

Figure 33. Illustrative Metric Design

Figure 34. Illustrative Metrics Scorecard

Figure 35. Value Score of Current Projects

Figure 36. Strategic Fit of Current Projects

Figure 37. Value Score of Proposed Projects

Figure 38. Competitive Impact x Initial Project Time Frame Plot

Figure 39. $13 Million Portfolio

Figure 40. $13 Million Portfolio Characterization

Figure 41. $10 Million Portfolio and Characterization

Figure 42. $5 Million Portfolio and Characterization

Figure 43. R&D Roadmap

Figure 44. Current Schedule and Projects Applied to Roadmap

Figure 45. Desired Depth of DOE-Energy Commission Collaboration in DER

Figure 46. FY 2003-2004 Funding for DER Integration