There has been a lot of talk in both public and private quarters lately about making improvements to the power system, of making it smarter, greener, more localized, and more responsive. Everyone from the Minister on down is getting involved, and all kinds of exciting ideas are coming forward.
What many of these propositions have in common, even if they don’t say so, is that they all require significant investment in the expansion or reinforcement of local distribution systems in Ontario. Although it seems like a minor technical matter to most people, connecting new generation to the local grid is not always easy, and it can sometimes face unexpected hurdles. Any effort to significantly step up the use of small local generation, whether in Ontario or anywhere else, has to carefully consider the needs and circumstances of the local distribution networks.
Ontario’s distribution system, unlike many in Europe and other parts of the world, was not designed to accommodate large amounts of local generation. It was meant to distribute power to consumers, usually power produced far away in central generating stations and sent over bulk transmission lines at high voltage, gradually being stepped down in voltage on its way to the consumer. In the green distributed generation world, power would come from an ever-changing variety of local sources, as close to the consumer as possible. However, gathering power from many different sources and adding it to a network with shifting flow patterns requires that there be a range of protection and control devices ready to deal with power moving in any direction, just about anywhere on the system. A number of local utilities have learned that, even in places where local generation would be beneficial, significant upgrades would be needed if power is likely to start flowing in the opposite direction from its usual path.
Distribution expansion is expensive, time-consuming and frequently problematic in terms of how upgrades are paid for. It doesn’t need to be so challenging, or to operate as a brake on broad-based policy initiatives, but unfortunately making such expansion a practical reality can’t be accomplished with a single sweeping motion.
Distribution expansion is important because it’s part of the solution to several of the current challenges facing the system. The RESOP program, currently being reviewed, is in suspense right now, precisely because it has started to bump up against the limits of many distribution systems’ capacity to connect safely. RESOP would likely be born again in a new and more positive form if there were clear resolutions on how much distribution reinforcement was in the cards and how it would be managed. Similarly, the Minister’s new directive to increase the penetration of renewables and community-based power will face practical limits with distribution connection capacity. The directive can only come to full fruition if there is significant progress on distribution expansion.
Perhaps even more compelling is that the distribution owners, and indeed all users of the system, would benefit from having a more fully developed system for considering expansions – purely so that balanced system planning can take place. Ideally, decisions about new or expanded infrastructure would be made in a completely balanced and integrated fashion, in which the most economic combination of investments in generation, transmission, distribution and efficiency would be encouraged to occur in each area, regardless of which players are backing the various investments. But unfortunately in our system, it’s not that simple. Because the investors in the four kinds of infrastructure are quite different, and because the planning and approval systems are so separate, proposals to expand transmission, distribution, generation and efficiency tend to occur, for the most part, in their own individual worlds. It’s not that proposals for generation development don’t consider transmission, or that proposals for distribution development don’t consider the other factors, because they do. It’s more a problem of the way data is collected, and the huge differences between the ways proponents operate in the various sectors.
The proponent for distribution system expansion is always the local distribution utility, and the expansion is almost always driven by reliability-related concerns supported by load forecasts and engineering data. Expansion proposals go into the utility’s capital budget, which is periodically submitted for review to the regulator. If approved, the investment goes ahead and is charged out to users of the distribution system in proportion to their usage. The process could hardly be more straightforward.
The proponent for new generation, however, is a totally different animal. Generation proponents are not one entity, but an open field of competitors, in a changing pattern of corporate relationships that is intended to allow a great deal of financial flexibility. The impetus could be reliability-related, but more often the driver for locating generation is a combination of site-specific circumstances, along with an assessment of the 20-year province-wide market conditions for sale of kilowatt-hours. Generation developers respond to totally different factors than do managers of the distribution system. And that’s fine because they are meeting different kinds of needs.
If you look at the different planning cycles, and the factors being watched, for generators and distributors, you might conclude that they could not be more divergent. But now consider efficiency. In this case the proponent could literally be every single consumer in the province. And their applications are affected by the introduction of new technology at the consumer level. Most of the proponents don’t file a plan with anyone before they make an investment in efficiency. How could you coordinate all those players, particularly considering that some of them are probably trying to protect information they consider proprietary, while others are short of information they consider essential for planning?
The IPSP of course has gone a long way in terms of instituting high level coordination of generation and transmission in principle, but it would be another kind of plan entirely if it were to delve into distribution planning. John Dalton, a consultant with Power Advisory LLC, when asked to identify strategic issues for the Ontario Energy Board this summer, anticipates that “In Ontario policy direction (will be) sought regarding whether distribution facilities should be built to connect renewables and from whom the cost for these facilities should be recovered.”
Under the current circumstances, because it’s unclear when and how a distribution expansion might occur, when a developer, planner or policy maker is looking at supply options, those which are transmission-connected can be costed, set into a timeline, and worked out through a relatively predictable process. Distribution-connected options, even if they are ultimately more cost effective, don’t enjoy the same kind of certainty and consistency in terms of who pays, or what the timelines will be. Based on the principle that the most economic solutions are those that consider not just the cost of their own installation but which enable or create efficiencies elsewhere in the system, integrated planning in the future will ideally look at proposals for distribution expansion and associated infrastructure changes as part of a greater picture and judge them accordingly. Unfortunately, at the moment, if regional or provincial planners see a need for 100 MW in a certain region, a single facility with a transmission connection will frequently have a certain advantage over the same facility with a distribution connection, even if distribution connection is more economic, because planning and approval processes are often better established at the transmission level. Even the physical capability to deal with interconnection is better at the transmission level, for the same historic reasons mentioned above. Don’t even think about how the system would deal with comparing 20 5-MW facilities in a number of adjacent distribution areas against an alternative of a single 100 MW facility in one location. Few jurisdictions can plan at that level, and Ontario’s IPSP has explicitly excluded the distribution level from its considerations.
Smart grids seem to be an idea that is gaining popular attention of late, and that represents another area where building out the distribution system could be very attractive. Everyone wants to have more control over what goes on around them, the thinking goes, so if I want to use smart technology in my house to manage usage more closely, why shouldn’t the system assist me in that effort? An exciting idea no doubt, but significant work remains to be done – to think through how much new intelligent infrastructure should be built, what kind, and who would pay for the additional investment on the local grid.
If Ontario wants to move ahead with the exciting promises of smart grids, DG, and local control, it will need to accept three basic facts:
1. Expanding and reinforcing distribution infrastructure will be costly, and the additional cost has to be acceptable to ratepayers.
2. The rules and procedures governing who pays for each kind of upgrade still have to be worked out, and after many years of regulatory work, this question has not shown itself to be easily resolved so far.
3. Even when the financial issues are settled, there are significant physical challenges: It takes time to make these upgrades, they are often in heavily populated areas, and the skills and materials to design and build the upgrades are in short supply.
Distribution is in many ways more complicated than transmission. Without going into all the details, one of the primary reasons for the complexity is the diversity that exists between distributors. It is possible to have provincial policy that is respected by all the distributors and implemented in their own various ways to suit the local conditions. But that doesn’t happen automatically, and it can almost never take hold immediately as a result of a single directive from above. Policy change, if it is to work, usually needs to be an amalgam of initiatives meeting local needs with those meeting province-wide needs, ideally built with the participation and knowledge of those at all levels.
No one has all the answers but most of the solutions are within reach if the right minds are brought together and focused on the question of distribution expansion. The timing would be excellent right now for a some co-ordinated partnership initiatives between LDCs, generators, policymakers and other stakeholders on distribution expansion. Among other things it might be the surest way to produce a fulsome response to Minister Smitherman’s recent directive.
Some reformers are calling for relatively radical change in the form of new legislation establishing a “right to connect” for certain forms of generation. Such an approach would encounter resistance partly because it could mean seriously uneconomic expenditures being added to the cost of the system, and partly because it could limit the options for local knowledge to be used in making choices between propositions. In a system as complex as ours, with as many stakeholders as there are, a mixed approach is more likely to find success. While increasing the capacity to connect will serve a range of purposes, a broad-based initiative at the policy, regulatory and system management level is more likely to achieve these ends than is a blanket right-to-connect approach. Rights need to be tempered with responsibilities, and a number of factors need to be considered before allowing new costs to be added to the consumer rate-base. Some stakeholders are suggesting that a coordinated initiative to develop policy and procedures for new connection, building on what’s already established, might be the way to go. It’s possible that with the right kind of collaboration at the early stage, new policy can be designed to meet challenging targets while being reasonable to implement from the perspective of those in the field.
Distribution expansion holds a lot of promise. It could make the system more responsive, smarter, more efficient, and accommodate a range of innovative and exciting initiatives. But it will take time, money, and most important, serious attention at the policy level for both government and regulators.
— Jake Brooks