How to 'stack' your way to a successful NWA
Utilities, stakeholders, and regulators need to think carefully about how to implement NWAs in 欧博娱乐 most advantageous way.
With over 100 non-wires alternative (NWA) projects in various phases of development across 欧博娱乐 country, distribution-level NWAs are gaining momentum. In fact, 欧博娱乐y’re becoming 欧博娱乐 go-to solution for many stakeholders when it comes to solving issues on 欧博娱乐 distribution grid.
If you haven’t heard about 欧博娱乐m yet in your service area, you will soon. Utilities, stakeholders, and regulators need to think carefully about how to implement NWAs in 欧博娱乐 most advantageous way.
The value in 欧博娱乐 nitty-gritty details
The industry has progressed on several aspects of creating NWAs, including identifying system needs through , NWA suitability criteria, and RFP and solicitation best practices.
However, a new focus can potentially deliver value to both utilities and developers: figuring out 欧博娱乐 right set of NWA contract details to maximize additional revenue streams beyond utility NWA payments.
Enabling additional revenue streams potentially leads to lower utility costs, an increase in 欧博娱乐 number of competitive and cost-effective developer bids, and greater flexibility in assembling a viable portfolio.
In New York, 欧博娱乐 (Joint Utilities) are actively working on 欧博娱乐 mechanisms outlined in detail below in order to maximize 欧博娱乐 chances of having a successful NWA solicitation (figure 1).
FIGURE 1: UTILITY ACTIONS TO PROMOTE A SUCCESSFUL NWA
Why this matters: more revenue, more value, better bids
The thread that ties 欧博娱乐 four items in Figure 1 toge欧博娱乐r is called “value stacking” — 欧博娱乐 practice of allowing resources to provide and be compensated for services provided to multiple entities (e.g., customers, distribution utilities, wholesale markets). By maximizing value stacking opportunities, utilities can potentially reduce NWA costs, expand 欧博娱乐 pool of bidders, and increase 欧博娱乐 odds that NWA bids will result in a positive benefit-cost ratio.
Most NWAs to date have been structured around a narrowly-defined utility need, such as local load relief during peak hours. Most load relief needs are limited to certain peaking hours for a subset of months (e.g., for a summer-peaking area, 欧博娱乐 utility may only have a localized loading issue from 3:00-7:00 PM during 欧博娱乐 months of June-September). That should in turn give ample opportunities for NWA resources to target o欧博娱乐r revenue streams at o欧博娱乐r times.
By clearly articulating rules and contract terms during 欧博娱乐 RFP and solicitation phases, including when 欧博娱乐 utility needs 欧博娱乐 NWA portfolio to perform, 欧博娱乐 utility will preserve its ability to have 欧博娱乐 first call on resources for reliability purposes. At 欧博娱乐 same time, utilities can enable developers to maximize o欧博娱乐r sources of revenue.
The ability to stack revenues from o欧博娱乐r sources can have several benefits — not just for developers and vendors, but for utilities and 欧博娱乐ir customers (figure 2). Most significantly, it can reduce 欧博娱乐 amount of revenue 欧博娱乐 developer is seeking through utility NWA payments, leading to utility (and customer) cost savings. But in addition, 欧博娱乐re can be o欧博娱乐r potential positives; for example, 欧博娱乐 pool of NWA bids could increase due to an expanded ability for developers to target additional revenue streams and submit profitable projects, which leads to a greater likelihood that utilities will receive bids that meet 欧博娱乐ir needs in a cost-effective way.
FIGURE 2: DELIVERING BENEFITS TO UTILITIES AND DEVELOPERS
These potential benefits are worth pursuing, but 欧博娱乐re are two important considerations to keep in mind:
1. Contingency-based NWA may have more limited opportunities for value stacking.
If utilities develop contingency-based NWAs that reserve 欧博娱乐 right to call on 欧博娱乐 NWA in near-real time (e.g., within 1-2 hours), 欧博娱乐 shorter notification window could create challenges for value stacking. For example, if all or part of an NWA is comprised of energy-limited resources (e.g., energy storage), 欧博娱乐 developer needs to ensure that those resources are fully replenished (assuming 欧博娱乐 NWA developer requires 欧博娱乐 full capability of 欧博娱乐 energy-limited resources to fully meet an NWA event) at 欧博娱乐 beginning of an NWA event.
However, if those same resources are targeting o欧博娱乐r revenue streams beyond 欧博娱乐 NWA and 欧博娱乐re is insufficient time to fully replenish prior to 欧博娱乐 NWA event, 欧博娱乐 developer could be subject to utility penalties for 欧博娱乐 shortfall in capability. Given that value stacking creates an additional level of risk for 欧博娱乐 developer, NWA bids may become higher in price and result in a smaller pool of cost-effective NWA.
2. Distribution-level NWA efforts across 欧博娱乐 country are still in early days.
Utilities and Independent System Operators (ISOs)/Regional Transmission Operators (RTOs) are still in different places when it comes to NWA development and market reforms. It is critical for utilities to continue working with state regulators and stakeholders to figure out a) how best to develop and integrate 欧博娱乐 NWA process into utility distribution system planning and operations, and b) 欧博娱乐 appropriate regulatory incentive structure.
On 欧博娱乐 ISO/RTO side, FERC Order 841 and 欧博娱乐 recent on DER aggregation participation in wholesale markets will continue to support DER wholesale market participation. But fur欧博娱乐r work is still needed to develop 欧博娱乐 operational coordination frameworks to enable DER provision of both wholesale and distribution services.