Distributed Energy Resources

No standard approach for determining DER resilience value: report

A new report from the National Association of Regulatory Utility Commissioners (NARUC) found that there is no standardized approach for determining the resilience value of distributed energy resources (DERs).

The report, which was done with Converge Strategies, was undertaken to assess the various methodologies used to calculate the value of DERs and, in particular, to address questions utility regulators have identified as being of interest.

 “State policymakers are increasingly interested in understanding how they could ensure that the resilience benefits of DERs are included as part of clean energy programs and grid modernization efforts,” Danielle Sass Byrnett, director at NARUC’s Center for Partnerships & Innovation, said in a statement. “A key sticking point has been how to measure resilience.”

The premise of the paper, “The Value of Resilience for Distributed Energy Resources: An Overview of Current Analytical Practices,” is that the vulnerability of the electric power system has been highlighted in recent years by extreme weather events, natural disasters, and cyber incursions that have highlighted the need for planning for long-duration power interruptions caused by high-impact, low-probability events. Those events will require new approaches to power system resilience that go beyond previous hardening efforts, the report’s authors said.

In response to those challenges, policymakers across the country have established resilience programs that often include DERs and microgrids. The authors note, however, that it is often unclear how to determine the resilience value of those benefits. “Identifying appropriate methodologies to calculate the value of resilience will be an important step toward ensuring that resilient DERs are considered alongside alternatives and integrated into future energy infrastructure and investment planning efforts,” the report said.

The report examined both regulatory decision-making and non-regulatory cost-benefit analyses to determine if, and how, a value of resilience was calculated and applied.

The paper reviewed three regulatory proceedings – two in Maryland and one in Illinois – in which resilience was identified as an important benefit of DERs but found that regulators in those cases did not “establish a precedent for quantifying and monetizing resilience.”

The report also examined methodologies used in four case studies outside of the regulatory environment: three projects in New York and a Department of Defense project.

In all four cases, the value of resilience was incorporated into the decision-making process. The report examined the methodologies that were used and found that while some of the methodologies may be useful in the regulatory sphere, none met all the criteria identified in the report for regulator usefulness and usability. “No single method is capable of capturing all regulatory concerns regarding the resilience value of DERs,” the authors wrote.

Reviewing their findings, the authors concluded that there is a balance for regulators to consider. They can do without a value of resilience cost-benefit analysis, but without that analysis undervalues the benefits created by resilient DERs are potentially undervalued and DER project investment potentially constrained. In turn DER projects are not likely to move forward.

Given the difficulty of a specific benefit for resilience, the authors said that other methodologies could be used, such as a cost effectiveness assessment, but that would likely require that a resilience objective be established by policymakers or lawmakers.

Alternatively, the methodologies used in the non-regulatory realm could be used as a starting point for regulatory analysis, though, the authors noted, there are tradeoffs for each of those methodologies.

The authors of the report also suggested that regulators could actively engage in ongoing research efforts that are exploring new approaches to valuing resilience. In conclusion, the authors wrote: “Regulators seeking to build resilience will need to continue to grapple with these issues against the backdrop of increasingly severe threats to the electricity grid.”

The report is available here.