1. EE379K/EE394V Smart Grids: Smart Grid, A Contrarian View
Roger Duncan
Research Fellow
Energy Institute
Ross Baldick, Department of Electrical and Computer Engineering
Spring 2017

2. Outline Smart Grid and Complexity Valuation of DG/Smart Grid
Platform Model Issues
AI and Autonomy
Conclusions

3. Complexity and Smart Grid
Failure due to complexity
Flash Crash like NYSE
Uber “surge” pricing
Complicated rate structures
Emergent behavior
Privacy
Ownership and control

4. Valuation of Distributed Generation and Smart Grid
Benefit Cost Analysis
California Standard Manual
Participant Test
Ratepayer Impact Measure
Societal Test
Utility Test

5. Background: Demand-Side Management (DSM)
DSM encompasses mainly three energy and demand-reducing activities:
Conservation:
Using less of a resource
By making a behavioral choice or change
last for a short duration or may be incorporated into a habit or lifestyle
Energy Efficiency:
permanent installation of energy efficient technologies / elimination of energy losses in existing systems
Demand Response/ Load Management:
changing the patterns of energy use, at times of peak demand

6. California Standard Practice Manual (Oct, 2001)
on behalf of different stakeholders’ interests
conservation and load management (C&LM) programs
five tests to evaluate the cost-effectiveness of programs
Purposes:
To help ensure that ratepayer dollars are prudently spent (if the benefit/cost ratio is larger than or equal to one, then the program is cost-effective)
To help program managers make decision among resource/program options (larger benefit/cost ratios deliver more benefits per dollar)

7. Five Cost Effectiveness Tests
Participant Test (PT)
Ratepayer Impact Measure Test (RIM)
Total Resource Cost (TRC)
Societal Cost Test (SCT)
Program Administrative Cost Test (PACT)

8. 1. Participant Test (PT)
Evaluates from the perspective of the participant (customer)
compares bill savings against incremental costs of the efficient equipment
measures a program’s economic attractiveness to customers
used to set rebate levels and forecast participation
Ignores benefit to the Utility or Society

9. 1. Participant Test (PT)

10. 2. Ratepayer Impact Measure Test (RIM)
Evaluates from the perspective of the non-participate of DSM program
What happens to average price levels due to changes in utility revenues and operating costs caused by a program.

11. 2. Ratepayer Impact Measure Test (RIM)

12. 3. Total Resource Cost Test (TRC)
Evaluates from the perspective of an entire service territory
a program passes the test indicates total resource costs will drop, and the total cost of energy services for an average customer will fall
Most widely used test by regulatory bodies

13. 3. Total Resource Cost Test (TRC)

14. 4. Societal Cost Test (SCT)
Evaluates from the perspective of the whole society
A variation of the TRC
with the exception of including environmental externalities
avoided pollutants
water savings
detergent savings
other non-energy benefits

15. 4. Societal Cost Test (SCT)

16. 5. Program Administrator Cost Test (PACT)
Also known as the Utility Cost Test (UCT)
Evaluates from the perspective of the sponsoring utility or program administrator
Based on costs incurred by the utility
Excludes net costs incurred by the participant
The test ensures that the benefits to ratepayers will exceed the costs

17. 5. Program Administrator Cost Test (PACT)

18. Conclusion
Benefit-cost testing can be informative, and useful for decision-making
Reliance upon TRC for cost-effectiveness screening is very widespread, and it is the primary benefit cost test
Combines most of the perspectives: participant, rate payer, and utility
customers may be motivated by factors other than energy savings, and costs used in the tests are not necessarily directly tied to the energy benefits.

19. Value of DER Capacity Energy Reliability Ancillary Services Storage
Demand Response
Energy Efficiency

20. Value of DER to D
Generally small
Location Dependent
Characteristics

21. Individual DER Value Decreases
Distance
Market Penetration
Granularity of Measurement
“Greening” of the Grid

22. Value of Solar Tariff Avoided Peaker Avoided Transmission Avoided Fuel
Avoided Line Loss

23. Energy Efficiency and Smart Grid
Main Components of Building Energy Efficiency, in order of importance:
Building Envelope
Appliance Efficiency
Turning appliances on and off (Smart Grid)

24. Platform Business Model
Platform for services
Individual product increases in value with number of connections
Customer growth
Collect from both buyer and seller
Reduce transaction costs
New Products and Services

25. Platform Model in new Utility Business Models
New York Reforming Energy Vision
LBNL Studies
Rocky Mountain Institute
California Proceedings
Transactive Energy model

26. Limited Applicability to Electric Distribution System
Market Penetration and Value
Customer Growth
“Prosumer” – both buyer and seller
New Products and Services

27. Smart Grid and distribution markets
Facilitates markets
Reduce transaction costs
May not be robust
Seasonal
Minimal platform system revenues

28. Artificial Intelligence and Smart Grid
Automation
Autonomy
Pass our ability to understand

29. Summary Reliability may go down due to complexity
Value of DER will decrease as market penetration increases
Integration of Smart Grid with IoT and AI may lead to security and privacy issues

30. Homework Exercise: Due April 27
4. In a high DER scenario values will move in the following direction:
Savings on utility bills will move UP
Financial incentives will move DOWN
Saved taxes will move DOWN
Customer Additional Cost Incurred will move DOWN
Avoided supply Costs will move DOWN
Program Administrative Costs will move UP

31. Homework Exercise: Due April 27
Revenue Losses will move UP
Increased supply costs will move UP
Avoided supply costs will move DOWN
Avoided collection costs will move DOWN
Revenue Savings will move DOWN
Quantifiable Environmental Externalities will move DOWN

32. Homework Exercise: Due April 27
Given the above trends, review the following tests, assume the results are currently 1.0, and determine whether they would PASS (>1.0) or FAIL (<1.0) in a high DER scenario:
Participant Test
RIM test
Societal Test
Program Administrator (Utility) Test