Recent market and regulatory drivers are significantly increasing the interest in and volume of distributed generation (DG) systems being installed at residential and commercial customers’ premises.

It’s no surprise that recent market and regulatory drivers are significantly increasing the interest in and volume of distributed generation (DG) systems being installed at residential and commercial customers’ premises. Just last month, President Obama’s Climate Action Plan called for, among other things, an additional 100 megawatts (MW) of distributed renewables to be installed on federally subsidized housing stock by the end of the decade. On top of favorable federal tax incentives and a plethora of state renewable incentives/portfolio standards, the stable outlook for natural gas prices and falling cost of renewable technologies are providing a strong market push for domestic DG resource growth.

To complement these regulatory and economic drivers, nearly all states are easing the approval process for DG resources, including granting non-discriminatory grid access of DG resources through standard interconnection rules. The Federal Energy Regulatory Commission (FERC) encouraged this trend with the 2006 Small Generator Interconnection Procedures. In January 2013, FERC published a Notice of Proposed Rulemaking (NOPR) that intends to further reduce the time and cost to process small generator interconnection requests and allow for more efficient interconnection of these resources to benefit customers.

What does all this mean for the electric power companies?
For the moment, let’s set aside the conversation regarding the ‘disruptive potential’ that these DG resources may have on the distribution utility business model – the Electric Edison Institute (EEI) shined a light on this issue in its commissioned study Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business,” released January 2013. Tactically, growth in DG resources places a new set of administrative and technical challenges in front of US distribution grid operators. In particular, utilities are keenly aware that high-application volumes cause process bottlenecks and on-going load predictability.

By the numbers:
536: the number of electrical generators greater than 1 MW capacity (about the size that could power a local hospital), interconnected to the US grid in 2011. Currently, the USDOE’s data collection arm, the Energy Information Administration, only requires utilities to report capacity additions of systems 1 MW and larger.

61,000: the approximate number of grid-connected solar photovoltaic (PV) systems installed during the same time period. (This number rose to 83,000 additional systems in 2012, according to the Solar Energy Industries Association)

Translation: whereas high-voltage transmission system operators dealt with the addition of several hundred utility-scale power plants, a large number of distribution utilities enrolled and collected data about thousands or more of customer-sited generation resources.

With the vast increase in DG interconnection requests, utilities are turning to new tools and systems to evaluate/manage DG interconnection growth along three unique touch-points:

  1. Enrollment efficiency
    State-required standard processes have utilities turning to technology solutions to ease variable application volumes and manage staffing resources. Electronic enrollment tools can be self-built or hosted, but they all have the same net effects: improved accuracy, reduction of submission error, automated workflow management, and milestone tracking and transparency. In fact, the Interstate Renewable Energy Council (IREC)’s “2013 Model Interconnection Procedures” report lists online application submission as a recommended best practice (New York Public Service Commission already requires utilities to offer this submission route for systems of <25 kilowatts).
  2. Performance intelligence
    Once systems are operational, utilities can track these ‘assets’ to measure and forecast load impacts across the service territory. At low adoption levels, utilities that track DG performance are rewarded with improved load predictability and forecasting. As DG resources begin to reach higher penetration levels, DG performance directly links to the utility’s load balancing to ensure cost-effective, reliable, and stable power service.
  3. City coordination
    An emerging trend is for cities and utilities to work in parallel to approve and inspect DG systems. City-utility coordination is a best practice element identified within the US Department of Energy’s Solar Market Maturity scorecard. This makes sense, given that the two entities are the ‘gate-keepers’ in allowing DG systems, especially rooftop solar PV, for commissioning. Utilities generally focus on the equipment certifications and localized grid circuit capacity, whereas cities focus on the life safety of the system’s electrical and structural components. During the design approval stage, cities and utilities can communicate their documentation and sign-offs. During the system inspection, cities and utilities are able to coordinate (if not merge) field inspections.

For some distribution utilities, the demand of DG resources has already provoked solutions and accommodation strategies--namely in Hawaii & California. For most utilities, the various regulatory and market drivers will necessitate a transition to efficiently accommodate growth. Is your organization prepared to address this trend?

Jeffrey Smith, CEM, is a Principal in West Monroe Partners’ Energy & Utilities practice. Jeff leads the firm’s distributed generation services offering and is a product architect of ConnecttheGridTM, a cloud-based platform that enables utilities to manage distributed generation resources more effectively.