Market-Based Options for Minimizing Maryland Congestion Costs

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Market-Based Options

for Minimizing Maryland Congestion Costs

Presentation to Maryland Retreat

on Reducing Congestion Costs & Reviewing Renewable Portfolio Standards

Tom Stanton

Principal Researcher – Energy and Environment National Regulatory Research Institute


Major takeaways

 FERC Order 1000 focuses useful attention on

market-based, distributed alternatives but does not, by itself, fix the “transmission first” culture in utility planning, nor in utility cost recovery

 States have multiple opportunities to advance

cost-effective market-based alternative (MBAs)

through existing IRP and certificate of need proceedings

 States might usefully consider MBAs to be present –

necessary and sufficient for avoiding congestion costs – unless and until they are proven to be absent:

Find at least one opportune place on the grid and see to it that someone prospects it for MBA practicality


Presentation Outline

Defining and describing MBAs

(a.k.a. non-wires or non-transmission alternatives)

Briefly: Why care about MBAs?

Challenges to MBAs

MBA “triggers” in transmission planning

Examples of early MBA progress


Definitions and Description

 MBAs are electric utility system supply- and

demand-side investments and operating practices that defer or replace the need for specific

transmission projects, at lower total resource cost, by reliably reducing transmission congestion

at times of maximum demand in specific grid areas.

 MBAs utilize all means available and necessary,

including: demand response; distributed generation (DG); energy efficiency; electricity, thermal,

chemical, pumped hydro, and any other energy storage; load management; and rate design.


Why care about MBAs?

 FERC Order 890 and 1000 obligations

 Lower cost, many measures are fully cost-effective,

without counting deferred or avoided T&D assets

 MBAs often add environmental and economic benefits

 Many measures will help with 111(d) compliance

 Reliability, resilience, redundancy

 Reduced siting concerns and obstacles,

even “WIMBY” (“want in my back yard”) preferences

 Less lumpy expenditures; gradual, incremental growth  Facilitates democratized, community-based, integrated,


Challenges to MBAs

 Culture of “transmission first” utility planning

 No multi-jurisdictional cost allocation mechanism  No entity identified to model and plan MBAs

 Uncertainty about “comparable consideration” and

what it means for an MBA to produce and deliver equivalent services and reliability

 Most RTOs claim authority to determine whether or

not an MBA is to be implemented

 MBAs challenge traditional utility business models


What transmission planning “triggers” show a need for MBA consideration?

 Congestion costs or reliability needs with proposed

high-cost transmission solutions

 Adequate lead time to plan and implement MBA

components, before the otherwise needed G, T, and D solutions would need to be ordered

 But, planners and potential actors capable of

developing and maintaining a critical mass of MBA resources must be readily available, either already working full time or on-call like a SWAT team.


Examples of MBA progress

 Bonneville Power transmission deferrals

 Public purpose microgrids moving forward in Connecticut,

Maryland, Massachusetts, New Jersey and New York

 Maine’s Booth Bay Harbor Pilot Project

 Massachusetts’ required grid modernization plans

 New York’s “reforming the energy vision” (REV), and

Brooklyn/Queens Demand Management Program

 Clean Coalition’s microgrid projects at San Francisco Hunters

Point and on Long Island

 Vermont’s transmission deferral projects

 Many more states are already examining REV-like, distributed

value, and energy storage questions: Arizona, California, Colorado, Connecticut, D.C., Georgia, Hawaii, Maine, Massachusetts, Minnesota, New Jersey, New York, Oregon, South Carolina, Texas, Washington


Options for State PSC MBA Actions

 Check and adjust if necessary rate designs and

utility incentives for MBA resources, such as energy efficiency, demand response, load

management, distributed generation and storage

 Determine whether geo-targeting can be

accomplished under existing authorities, and clafiry or add that authority if necessary

 Find at least one opportune place on the grid and see


Steps towards utility incentives

 Decoupling sales from revenues

 Carefully articulated, 21st Century, customer-value-centric,

performance-based regulation (PBR)

 Utilities reinventing business models, either directly or through

affiliates, with appropriate separations and monopoly-abuse preventatives:

 Aggregated purchasing and/or operations for any and all distributed resources (e.g., rooftop solar; demand-response)

 Specific MBA infrastructure (e.g., grid modernization & geo-targeted deployment; community-shared solar and other renewables;

advanced inverters; electric and thermal storage)

 Other (e.g., in-home & cloud-based equipment; indoor and outdoor lighting; bundled telecomm, internet, home-security; warranty and repair services; financing)


Learn more about MBAs…

 Related NRRI Research Papers (available free at

DER rate design policies (NRRI Report No. 15-08), Non-transmission alternatives (15-02), Energy storage (14-08), Solar economies of scale (14-05), Solar policies (13-07), Coal challenges (13-02), Microgrids (12-15), Smart grid strategies (11-05).

 Architecture 2030,

 Callaway et al., 2015, Location, location, location: The variable value

of renewable energy and demand-side efficiency resources.

 Electric Power Research Institute, 2014 & 2015, The Integrated Grid,

 Patterson, 1999, Transforming Electricity

 Lovins et al., 2002, Small is Profitable,  Lovins et al., 2011, Reinventing Fire,  Solar Electric Power Association’s 51st State Project,