Blockchain-Based Market Approach to Non-Wires Alternatives
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- Sep 25, 2019 4:15 pm GMTSep 25, 2019 4:31 pm GMT
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This item is part of the Special Issue - 2019-09 - Blockchain in Utilities, click here for more
Global spending on NWAs is forecasted to grow from $63 million in 2017 to $580 million in 2026, according to Navigant Research. More and more distributed energy resources (DERs) are being connected to the grid every day. Utilities and grid operators must find ways to work with these assets and incentivize how they operate in order to provide the lowest cost, lowest carbon grid for consumers that also maximizes reliability.
One way utilities and grid operators have begun to do this is by deploying non-wires alternatives (NWAs). In November 2018, SEPA published a report, "Non-Wires Alternatives: CASE STUDIES FROM LEADING U.S. PROJECTS,” that featured 10 case studies from utilities implementing NWAs. The report was a joint effort between E4TheFuture, PLMA, and SEPA. A key part of the report was the information on best practices and lessons learned from leading utilities who have deployed DERs for NWAs. It revealed major opportunities for improvement. A blockchain-based transactive market approach would be a better solution to the challenges discussed in SEPA’s report than the traditional bilateral and proprietary vendor solutions that are typically deployed today. Here are three examples that illustrate why.
- Flexible Procurement: Utilities spend a great deal of time in the ideation and planning stage before procuring NWAs. However, forecasting is hard and it is difficult to know exactly what will be needed and when in the future. Given this uncertainty, it would be ideal to have flexibility in procuring resources. However, utilities most often choose direct procurement instead, typically resulting in 10-year bilateral contracts. These long term bilateral contracts lock the utility into fixed commitments at current prices that may or may not end up matching what is needed and don’t take advantage of expected future price declines. A market approach would speed up procurement time and provide more flexibility by allowing capacity commitments to be procured and adjusted closer to real time to meet needs as they change.
- Inclusive and Diverse: Overall in the report it was noted that projects that achieved the most success tended to have an open approach to solutions. Many different DERs have the ability to provide support to the grid and procuring grid services from a variety of DERs provides a more robust resource. With a blockchain-based transactive market, utilities could allow any eligible DER to provide response. A market-based approach also ensures that, as new assets join the grid in the future, the most suitable and competitive resources will have the opportunity to bid to provide services.
- Fewer Proprietary Platforms: Finally, a blockchain-based platform, such as Electron’s, allows the most technologies to be brought to the table through easier integration. Additionally, the open approach means that utilities don’t have to install yet another DERMs or other proprietary platform in order to manage resources. This cuts down on the number of screens that a grid operator needs to look at and reduces the training time needed to deploy an NWA solution. It also leaves DER dispatch optimization to the vendors, who specialize in precisely that.
Which technology to use to deploy these local markets is an IT decision, but, at Electron, we see several advantages with blockchain. First, blockchain features extensibility, which is critical for ensuring adaptability over time. We don’t know what the energy industry is going to look like 10 years from now, so we need technology that will adapt with us. Second, blockchain is a cooperative game, which makes it well suited to accommodate a wide variety of industry participants. Third, blockchain provides visibility and auditability. A platform built on blockchain can provide increased transparency while maintaining data privacy.
Utilities and grid operators must find ways to work with DERs and incentivize how they operate in order to provide the lowest cost, lowest carbon grid for consumers that also maximizes reliability. The technology exists to deploy these blockchain-based market solutions today. Please contact me to learn more.