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Missing Links in the Evolving Distribution Markets

Missing Links in the Evolving Distribution Markets

Full Title: Missing Links in the Evolving Distribution Markets
Author(s): Paul De Martini, Dale Murdock, Brenda Chew, Steve Fine, ICF
Publisher(s): ICF
Publication Date: December 1, 2016
Full Text: Download Resource
Description (excerpt):

Discussions are taking place across the industry exploring the value in distributed energy resources (DER) and the potential market mechanisms that can enable them in the future. Many of these proposed mechanisms, however, are not grounded in a manner that addresses the needs of the bulk power system or market participants. We learned from the past evolution of the wholesale markets that establishing a spectrum of economic and control mechanisms is needed in order to meet operational requirements. Drawing from these best practices, we believe the distribution market will need to evolve in a similar order, starting with long-term solutions (e.g., distribution capacity deferral), moving into operational controls (e.g., voltage management), and eventually reaching development of short-run operational services (e.g., congestion management). As DER adoption continues to increase, future distribution markets accounting for DER locational value may involve a variety of mechanisms from forward contracts to spot markets with granular locational marginal pricing. Several states are already beginning to develop distribution markets for grid services. It is therefore important to understand the path distribution markets may take and determine which mechanisms are appropriate to implement and at what stage of the distribution market’s evolution.

This paper takes a deep dive into the spectrum of market mechanisms and operational controls—looking at long-term infrastructure mechanisms and real-time operational controls to address the needs of a power system accommodating high amounts of DERs. We introduce an old concept of the Pareto approach to the discussion of the locational value of DERs to explain the evolutionary pathway distribution markets may take as they maximize the largest and most tangible value potential first, and incrementally add smaller and more complex DERs over time. What we find is a potentially optimal sweet spot where optimal value can be derived from DERs along this evolution. The increasing adoption of DERs across the distribution system will require sophisticated methods for integrated distribution planning and valuing customer DER as distribution system resources. We elaborate on these points below

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

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