Arizona Public Service Captures Opportunities in Distributed Resources Space

Arizona Public Service’s DERMS research is leading to a number of positive and innovative changes in its business models.
Published: Wed 13 Apr 2016

A dramatic drop in deployment costs, a change in regulatory environments and consumer behaviour have all driven a major shift towards the decentralisation of generation over the last decade.

The growing interest in distributed generation is creating a profound and real effect on the utility industry, not only threatening to disrupt present business models, but  jeopardizing grid stability.

As distributed energy resources (DER) penetration escalates, utilities will be forced to adopt Distributed Energy Resources Management Solutions (DERMS) in order to maintain grid stability. In fact, GTM Research expects the DERMS market to double - growing from about $50 million in 2015 to $110 million by 2018.

With DERMS, an operator’s real-time visibility into its underlying distributed asset capabilities will improve significantly, giving distribution utilities a heightened level of control and flexibility necessary to more effectively manage the technical challenges posed by an increasingly distributed grid – the future grid.

Innovative Solar Partner Programme 

Arizona Public Service (APS), which serves 1.2 million customers around Phoenix, has recognised the need for DERMS and has established an innovative way in which to understand its grid and customer needs.

APS initially proposed installing 20MW of solar on the utility side of the meter on rooftops across its service area for research purposes/as a test bed. Regulators scaled the proposal back to 10MW, resulting in a 1,500-customer pilot programme, called the Solar Partner Programme (SPP). Through SPP, the utility intends to learn how to better handle high penetrations of DERs on its system.

The programme involves the payment by APS of $30 each month to customers whose rooftops are used for the pilot. This leasing model gives the utility complete control over the solar energy produced which is ideal from a research perspective.

In addition to studying rooftop solar through its SPP programme in 2016, APS will install two new microgrids in its service area and launch a pilot programme to test a full suite of customer-sited DERs. The programmes have been designed to provide valuable insight into how to manage various distributed resources on the grid — and point to the need for a unified control system in the future.

The aim of the rooftop solar pilot is not to test it as a business model for later expansion, but rather to study the impacts of higher penetrations of solar. However, if the model is a success, it could grow into a larger rooftop solar offering for customers in the future.

DER providers have already expressed concern over the idea of utilities moving into one of the nation’s most vibrant solar markets. With the utility’s strong customer relationship and established presence, installers are concerned that more mature utility solar offerings would have an unfair advantage in the residential solar and DER marketplace.

Engerati has consistently argued that utilities will have a key role in a transformed decentralized, prosumer-driven energy system and that the most successful will be those that are starting to transform themselves to this new system by offering new services. [Engerati-Energy Industry In Crisis – Utilities Beware and Three Innovative Companies Fight Back With New Ideas]. While it is true that utilities have an existing customer base and an established presence, they still have to reinvent themselves and make changes to existing business models as the energy transformation tests traditional processes and business models. It is these gaps or shortcomings that competitors need to take advantage of.  The utility  cannot be expected to sit back and not take advantage of new market spaces. In addition, utilities would have to source from suppliers and aren't always in a position to grant loans so suppliers still have a competitive advantage. By partnering with these utilities, companies till stand the chance to benefit in this market.  

While the Solar Partner Programme aims to test the capabilities and challenges of rooftop solar from the utility side of the meter, APS wants to assess a fuller suite of DERs sited behind the meter. The Solar Innovation Study, an extension of the SPP, will help APS gain a better understanding of its customers’ needs.

The study will select 75 single-family households,selected to receive a rooftop solar array and a number of energy management and DER products. APS will then put the consumers on a rate structure that includes time-of-use rates and demand charges in an effort to assess how customers respond to those price signals when they have access to various self-generation and energy management technologies.

While in all cases rooftop solar will be installed, only some will  receive residential battery storage, load controllers and home energy management technologies, as well as high-efficiency, and variable-speed HVAC units.

The goal is to assess how APS can best provide new products and services to its customers. They will also assess how customers respond to new rate structures, particularly a residential demand charge.

The aim of the programme is to create readiness when it comes to catering for future prosumers.  

Microgrid research plans

In addition to its solar studies and two 2MWh battery arrays that APS plans to test this year, the utility is also entering the microgrid space in a very innovative way. It finalized  two new projects at the end of last year — one with a Marine Corps air base in Yuma, Arizona, and another with an undisclosed data centre customer.

While separate from the solar and storage initiatives, the programmes complement each other since all of them will provide meaningful insight into how to manage a diversity of distributed resources on the grid.

While the two microgrids won’t have any solar or storage and will operate on high-efficiency diesel generators to begin with, they will eventually allow for cleaner resources to be added when they become financially viable.

The utility’s microgrid offerings focus on securing supply for the defence industry, critical infrastructure (fire, police, water, etc.) and “economic development.”

The undisclosed data centre customer is a good example of “economic development”. Part of the decision was based on the utility’s willingness to share the cost of backup generation.  

Customers like data centres or military bases with critical operations plan on installing backup generation with or without a utility. But, when a utility shares some of the cost in constructing a microgrid, it can use the backup generation assets for grid services when not in use by the customer. In the case of the diesel generators at the data centre and Yuma air base, the microgrids will give APS the ability to run those units for frequency response or for local peak shaving, for instance.

In that way, APS is not only gaining a new resource for addressing grid needs, it’s helping create demand by attracting key accounts to its service area with microgrid offerings.

The tide certainly seems to be turning for forward-thinking utilities.

Check out our upcoming microgrid webinar sessions with insights from ComEd, Navigant Research, Pecan Street Inc, S&C Electric, Alliander and more ...

Further reading

Alstom-Innovation in Distributed Energy Resources Management Solutions (DERMS) Based on Pilot Project Experiences [pdf]