Last month the National Association of Regulatory Utility Commissioners released the final version of an important manual, “Distributed Energy Resources Rate Design and Compensation.”
This Manual provides regulators with a comprehensive understanding of the question of how various types of DER affect how regulators should set the price of electricity. The report considers regulatory issues associated with all DER, including solar photovoltaic (PV), wind, combined heat and power (CHP), energy storage, demand response (DR), electric vehicles (EVs), microgrids, and energy efficiency (EE). It lays out a background on the principles of rate design and compensation, the availability and use of new technology resource aggregators as a type of market participant that can participate in the organized wholesale.
The process is not intended to be static, but rather will support utilities as the evolve across various stages of adaptation as shown in the diagram below, with the focus on the development of policies to enable distribution-level markets, which help in determining the role of the distribution utility as a market facilitator.
Conceptually, the curve from the NARUC report identifies three stages of activity: grid modernization, DER integration, and distributed markets.
Each stage is identified with two characteristics: adoption of DER and installation of technology to support DER development.
Most jurisdictions, according to the report, are still located in stage 1, where there is a low amount of DER adoption and utility investments in grid modernization are still underway.
According to experts cited in the report, the move into stage 2 occurs when DER adoption “reaches beyond about 5 percent of distribution grid peak loading system-wide.” Then, stage 3 occurs when “a high amount of DER adoption occurs and regulators construct a system to allow for multi-sided transactions to occur between DER and the distribution utility, but also to and from customers.”