Non-Wires Alternatives Growth in a Non-Uniform Regulatory Landscape

Jessie Mehrhoff's picture
Energy Analyst, Guidehouse Insights

Jessie Mehrhoff is a research analyst contributing to Guidehouse Insights’s DER Solutions service. Mehrhoff’s work focuses on demand response, utility customer value-added solutions, and DER...

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  • Nov 14, 2019

While a limited number of fully implemented projects exist, the term non-wires alternatives (NWAs) is gaining traction across the utility and broader energy industries. NWAs (or non-wires solutions, non-transmission alternatives, or distribution deferral opportunities) signify the use of non-traditional transmission and distribution (T&D) technologies to defer the need for specific system upgrades, typically for a definite period. Such alternative technologies include distributed generation, energy storage, energy efficiency, and demand response. Where NWA approaches are embraced, they represent a dynamic and changing utility business model. This use of distributed energy resources (DER) to defer expensive T&D upgrades may drive regions of the US to become global leaders in modernizing the energy grid.

Grid Modernization as a Driver for NWA Deployment Across the US

Utilities and regulatory bodies are exploring and implementing NWA projects at various speeds across the US and are catching the attention of international grid operators. While most states have not acted on NWA proceedings or created formal screening criteria, states like California, New York, Vermont, Minnesota, and Nevada are beginning to more formally consider NWAs (called distribution deferral opportunities in California) as part of broader grid modernization efforts.

Q3 2019 State and Utility Action on Grid Modernization

(Source: DSIRE, NC Clean Energy Technology Center)

Grid modernization efforts are leading to a changing view of the traditional utility, which may help to reduce barriers to NWA development. Traditionally, vertically integrated utilities were disincentivized to adopt NWAs as higher levels of T&D meant higher returns. However, a trend toward decoupling utilities and deregulating markets may assist in the removal of this barrier. Neither market regulation nor deregulation are tied to grid modernization at this time. However, both measures signify that the future utility may profit from providing services in addition to energy generation, transmission, or distribution.

For utilities in some densely populated areas, a more immediate concern is the rise of capacity constraints on traditional grid infrastructure. As NWAs rely on demand side management, distributed generation, and storage at specific points on the energy grid, these projects may be able to reduce grid strain, prolonging the life of expensive utility equipment. Where T&D infrastructure does need to be upgraded, NWAs may be posed to provide a lower cost, or higher overall value, solution. In urban areas where adding utility-scale infrastructure may be challenging due to population density, battery storage could provide relief at specific periods without major infrastructure siting headaches. Further, NWA technologies like behind-the-meter storage may help to improve customer engagement and relationships among utilities and end-users. As grid modernization pushes for development of utility business models, strong customer ties will prove invaluable and allow the utility to venture into a greater array of service-style offerings.

Requests for Information Easier than Implementation

Despite the promise posed by the conceptual NWAs, utilities across the US still face challenges when implementing the technology. Factors hindering the growth of NWAs include:

  • Cost-effectiveness: Traditional cost-effectiveness models and benefit-cost analyses may favor new generation when compared to one or more locationally targeted DER.
  • Absence of a standard business model: While providing utilities with the creativity to explore a variety of NWA solutions to capacity constraints and other challenges, the absence of standard procedure creates the need for case-by-case evaluations of how NWA would manifest in different utility and regulatory contexts.
  • Natural disincentive for utility implementation: A challenge in areas where utilities earn primarily based on selling kilowatt-hours.

The US as a Model for Foreign Project Development?

Other countries are exploring NWA-like mechanisms to reduce grid strain as well; consideration has been relatively serious across parts of the European Union (EU). However, as utilities abroad investigate non-traditional upgrades to their own T&D infrastructure additional challenges emerge. For example, deregulated or unbundled markets in the EU ensure that system operation is separate from energy generation and supply activities sometimes used as part of NWAs.

Barriers like this are possible to overcome, however. While non-binding until translated into national law, the EU’s 2019 directive on common rules for the internal market on electricity requires EU distribution system operators to incentivize DER technologies to avoid costly network expansions. Such language, while open to multiple interpretations, may help catalyze opportunities for NWA development in the region.

Despite the overall nascency of the market, as more utilities implement NWAs and navigate the regulations guiding their development, the energy industry should develop more clarity surrounding non-traditional T&D upgrades. Navigant Research, a Guidehouse company, will continue to track NWA program growth. It forecasts that, despite current market challenges, more than $333 million will be spent on these projects by the end of this decade in the US alone.


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Thank Jessie for the Post!
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