We all need principles to guide us in our lives. Principles set forth “a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning [Oxford Dictionaries].” They encompass values to identify what’s important, and can apply to many circumstances, such as cultural, legal or economic.
This is what the National Standard Practice Manual (NSPM) has set out to do. It is meant to provide guidance to assist states and program administrators in delivering energy efficiency and other distributed energy resources (DERs). The growth of DERs and changing goals and strategies in the utility distribution system, as well as state policies, create challenging circumstances. Guiding principles such as those in the NSPM can help the industry navigate these changes.
The NSPM for Assessing the Cost-Effectiveness of Energy Efficiency (NSPM for EE) – developed by the National Efficiency Screening Project and managed by E4TheFuture – provides a comprehensive framework for cost-effectiveness assessment of energy efficiency resources. The manual describes principles, concepts, and methodologies for economically sound, balanced assessment of resource cost-effectiveness. Since its publication in 2017, states have begun to actively apply the framework (see case studies).
And with the guidance of an advisory group comprised of clean energy stakeholders, E4TheFuture is now developing a NSPM for DERs that will address benefit-cost analysis (BCA) for DERs beyond energy efficiency, including distributed generation, demand response, storage and electric vehicles. Funded by E4TheFuture and the U.S. DOE, the NSPM for DERs will be published in summer 2020.
Why an NSPM for DERs?
The NSPM for EE helps states critically review their current primary cost-effectiveness test to ensure that EE is treated as a resource, accounting for the full range of utility system impacts, and that the test is aligned with applicable public policies, and as such, accounts for relevant costs and benefits. The NSPM does not advocate for the inclusion of certain non-energy impacts, but instead helps states identify any non-energy impacts to the extent that a state’s public policy goals articulate the purpose of EE (or other DER investment), such as carbon reduction, deferred or avoided T&D costs, improved health, safety, resilience, and economic development.
Growing interest in the range of DERs as grid resources and for distribution planning has led to regulator interest in BCA considerations and a common framework for DER analyses. With states currently using different techniques, methodologies, and assumptions for DERs, there is a need for consistency and transparency in order to meaningfully interpret results within and across states. The forthcoming NSPM for DERs will help states establish a framework that can lead to successful future program design and planning.
Value of DERs
A couple of Northeast states are undergoing processes to evaluate the value of DERs: Connecticut and New York. As states continue to look at the value of DERs, they should consider the NSPM as it provides guiding principles to align state policy goals.
New York has evaluated the value of DERs as part of developing its “Value Stack” mechanism; the mechanism is a way to compensate DERs like solar power. It replaces net metering and compensates projects based on when and where they provide electricity to the grid. Case 15-E-0751 opened in December 2015 intends to identify this new approach for valuing DERs. The approach was to include a transition plan for moving from net metering to DER valuation (with a Phase I decision outlining a "Value Stack" methodology issued on March 9, 2017) and a methodology and process for establishing a full value of DER based on the locational marginal price plus distribution value (LMP+D) approach (Phase II).
Under Phase II, the Commission recently issued a draft order on a whitepaper published on the value of DERs, with comments due October 28, 2019. The paper focuses on an element in the Value Stack which reflects the environmental value of the generation. The environmental value applies to resources eligible to participate in the Clean Energy Standard (CES) and compensates those resources for their renewable energy credits. This is an example of where a state’s valuation process and policy goals are in alignment.
In Connecticut, the Department of Energy and Environmental Protection (DEEP) and the Public Utilities Regulatory Authority (PURA) opened the 19-06-29 proceeding in June 2019 to study the value of DERs, as required by Public Act 19-35. They will submit a report on their findings to the General Assembly by July 1, 2020. DEEP and PURA released, and invited comment on, a draft outline for the DER study with the following sections: state DER program and policy principles; defining value categories; conducting BCA modeling analysis; and, analyzing additional value categories. NEEP, the Connecticut Fund for the Environment, Northeast Clean Energy Council, E4TheFuture, and Acadia Center responded to DEEP and PURA’s request with a joint comment letter encouraging DEEP and PURA to fully review and articulate applicable policies to inform the DER study. As DEEP and PURA consider the range of costs and benefits of DERs with a focus on those that align with their policy goals, they will be able to identify which programs are likely to help maximize benefits to all customers. As work on the NSPM for DERs progresses, research can help to inform the Connecticut proceeding, and vice versa.
Below is a summary of the different types of benefits proposed for consideration in the Connecticut study by DEEP and PURA.
Types of benefits to consider:
Distribution System Benefits: DERs provide distribution system benefits by reducing demand on the transmission and distribution systems from fossil fuel generation resources though localized energy resources. This improves reliability of the distribution system, reduces customer costs, and avoids capital investments in transmission and distribution infrastructure.
Macroeconomic benefits include market system benefits and impacts that more broadly impact GDP and economic performance, such as job creation. Macroeconomics can include the direct and indirect economic effects of DERs. It is important to consider how the macro level impacts intersect with micro (decision-making) and meso (sectoral) level impacts.
Resilience identifies the ability to recover quickly during and/or after a difficult time. DERs provide resilience impacts by enabling a distribution system to withstand or recover from extreme weather events by deploying energy efficiency, microgrids, solar PV, energy storage, and other DER technology. This can include avoided restoration costs by preventing power disruption and quickly restoring power when an outage does occur.
Health: DERs have a direct impact on health by lowering energy waste levels and the need to burn fossil fuels, which reduces criteria air pollutants and greenhouse gas emissions. This then reduces health impacts from pollution, including improved air quality, avoided illness and premature death, and assistance in mitigating climate change.
Other DER impacts, the values of which have not been extensively researched but are relevant to resource valuation, can include: energy security, equity, affordability, and impacts on other fuels. While these impacts may be harder to quantify, they exist and should not be excluded from the study. Methods for including hard-to-quantify impacts can include the establishment of an “adder.” Adders are typically used to describe a factor applied to quantify impacts for various reasons, such as cases where the impact is difficult or costly to monetize, as well as when it is convenient to bundle multiple impacts into one factor.
To stay apprised of what is happening with the NSPM, sign up to receive the NSPM Quarterly, a newsletter chock full of essential current events and resources. Take a look at the most recent newsletter here and email NSPM@nationalefficiencyscreening.org to receive the free newsletter going forward.