California’s New Solar Energy Plan: Replacing Grid Upgrades for Good
As the demand for solar energy increased, California power companies and regulators have had to weigh the expenses of grid upgrades. Under a new plan, known as Partnership Pilot, rooftop solar panels, behind-the-meter batteries, and other distributed energy resources (DERs) could be used as substitutes. The concept has been considered since 2014 not only in California, but other states as well. It turns out DERs have grid value that can be captured by utilities, third-party aggregators, and customers, especially at times of peak load.
In other states, distribution system planning, integrated distribution planning, and other programs have been implemented that use the same principle. Grids must be able to handle peak loads even if they only last for a few hours. To achieve that, utilities must upgrade equipment such as power lines and transformers, which is costly and time-consuming.
How Does the Plan Work?
The idea is to potentially put off utility upgrades for years. Non-wires alternatives, or NWAs, have yet to take off, and some utilities aren’t sure if they’re as reliable as a grid upgrade. Lots of barriers have prevented most NWAs from going past a few proposals, but the pilot project awaiting a California Public Utilities Commission (CPUC) vote could change that. If it is approved, many barriers in the state’s distribution investment deferral framework could be eliminated.
Partnership Pilot in its current form could:
Create a tariff-based “ratable procurement” structure to reward customer-owned DERs individually; the structure scales up targets annually to account for grid needs in the future. It could then be possible to build a customer base with DERs rather than commit to increasing capacity years ahead of schedule. Distributed resources could then be used to meet incremental needs over time. Investor-owned utilities in California have argued against open-ended, tariff-based procurements (which could lead to oversubscriptions or a failure of enough customers to subscribe).
To avoid such situations, the CPUC will require aggregators to fill at least 90% of annual needs identified before signing contracts with utilities. Once subscriptions hit 120% of the target, the CPUC will close subscriptions. It has also found a way to ensure customers aren’t overcharged. Thus, contract costs will be set at 85% of the cost of an alternative upgrade.
Is Solar Energy a Better Alternative?
Predicting he needs for distribution grid investments is challenging. From the time they’re determined to when upgrades are completed, the requirements can change. While load increases are often hard to predict, those for new residential subdivisions, factories, and office parks are much easier to calculate. However, gradual load increases can occur downstream of a specific substation or circuit; for example, due to installations of all-electric appliances or electric vehicle chargers.
With DER subscriptions, industry professionals have predicted that incremental growth and changes in forecasted growth can be accounted for. The approach is therefore more cost-effective. It can also rely on tariffs to support new upgrades and builds when necessary. California utilities will need to determine these tariffs if the program is approved by the CPUC. However, state utilities spend billions of dollars every year on distribution grid upgrades, and DER deferral will probably make up for only a fraction of that. In addition, the program will address double payments and other issues that have impacted DER developers.
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