March 25, 2021 Calling All Resources for Utility Procurements

March 25, 2021

Rapid technology changes are driving renewed interest in all-source competitive solicitations by electric utilities. This type of procurement allows all potential resources — utility-scale and distributed energy resources (DERs), whether owned by utilities, customers or third parties — to compete to meet a utility’s needs.

A new Berkeley Lab report, All-Source Competitive Solicitations: State and Electric Utility Practices, describes principles, practices and emerging issues for resource acquisition. Drawing on regulatory documents, resource plans, solicitation materials, independent evaluator reports and scholarly literature, the report examines the history and recent results of all-source competitive solicitations, design tradeoffs, and implementation options and issues. Comparing technologies with different operating characteristics on an equivalent basis is the central challenge.

Lead author, Dr. Fredrich Kahrl, will present a free public webinar on the report on April 8, 2021, at 10:00 AM Pacific. Lisa Schwartz, technical editor and project manager, will moderate a discussion with questions from the audience. Register for the webinar at https://lbnl.zoom.us/webinar/register/WN_U5KvKDJcQUuFyO7fbH24Lg.

Potential benefits of all-source solicitations include:

  • Discovery of competitive pricing across a range of resources
  • Reduced cost uncertainty
  • Integrated procurement of resources that have interactive effects — for example, wind, solar and storage
  • Improved coordination between procurement of bulk power system resources (including utility-scale storage) and DERs

While new opportunities are emerging for DER participation in all-source solicitations, programmatic approaches will remain an important procurement mechanism (see figure).

In addition to all-source solicitations for bulk power system needs, the report examines competitive solicitation practices for DERs as non-wires alternatives for distribution system needs. It also discusses nascent practices for integrating procurement of DERs across all levels of the electricity system.

Among the report's findings:

  • State regulators play a critical role in building confidence in the fairness and integrity of the solicitation process for jurisdictional utilities.
  • Technology-neutral procurement can complement, rather than supersede, state energy policies.
  • Net value — benefits minus costs — is a more important metric for evaluating bids than cost alone.
  • Ongoing efforts are needed to improve bid evaluation methods, especially for assessing capacity credit, value of real-time flexibility, congestion management, transmission and distribution deferral, and natural gas price risk.
  • Unique characteristics of energy storage pose new evaluation challenges, including short lead time, modularity, siting and operational flexibility, energy limits, and potential to serve as both a bulk power system resource and non-wires alternative.

Kahrl is an independent researcher and consultant. Previously, he was a director at Energy and Environmental Economics, Inc. (E3). He has worked with North American regulators and utilities on issues such as grid modernization investment economics, distribution system platforms and markets, wholesale market design and evaluation, resource planning, retail rate design and resource adequacy.

The U.S. Department of Energy’s Grid Modernization Initiative supported this work with funding from the Office of Electricity and the Office of Energy Efficiency and Renewable Energy's Solar Energy Technologies Office.

The report can be downloaded here.

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