CER and finding the price/quality balance
Valuing Customer Energy Resources
TL/DR: The growth of flexible energy options within the home requires us to reset our energy service model. Limits on flexible home energy need to be valued differently. E.g; deferring the charging of an EV for 2 hours overnight is not the same customer impact as an outage. Updating our model is critical to avoid a massive overbuild of network asset and loss of customer value.
Energy policy and monopolies
Electricity networks are natural monopolies. As such, electricity customers cannot choose their network provider.
This means that networks don't see pricing/service competition - you cant just up and choose a different electricity network if you don't like what your local provider is offering. Because customers cant reflect their desires through choice, networks may find it difficult to identify just where the right balance is in terms of price/quality.
Energy regulation in Australia seeks to reduce this limitation through incentive pricing models. This model is effective in placing downward pressure on network prices.
But what about service quality? How does the network know what level of service the customer wants? In particular, how many outages a year are acceptable and what is the cost to the customer of these interruptions?
To address this, the Value of Customer Reliability (VCR) was introduced. This relatively simple value has transformed how electricity networks are constructed, operated and maintained. The VCR allows for a much more precise linking of price and quality.
Customers have benefited from the VCR in a number of ways including;
Customer Energy Resources
Along comes a new crop of home energy devices such as EVs, batteries and rooftop solar (PV).
These appliances have two key traits that change the the old price/quality trade-off: connectivity and flexibility.
These traits mean that homes of the future can now contribute to network pricing and quality. While this activity is still in its infancy (adolescence?) we can imagine a future where CER can flex up and down to avoid overloading the local network.
On a hot summer evening, a home battery or EV may choose to delay charging if the network is nearing its limits. Similarly, during a mild sunny day, a rooftop PV system may reduce output to avoid a network constraint.
These limits on CER are essentially a limit on customer choice. The EV may have been needed for an evening trip, or the battery could have been providing other services (i.e. FCAS).
Overall, each time the operation of CER is limited represents a loss of value to that customer and potentially all customers.
Discretionary or not
The historical model for residential electricity network planning was to forecast the adoption rates of appliances within the home, as well as new home connections. This provided a future trajectory of maximum consumption periods and allowed the networks time to build the necessary infrastructure.
In the rare cases when the network did not build sufficient capacity to meet consumer demand the lights would go out. This doesn't happen often, but when it does it tends to focus attention.
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The underlying assumption here is that all the appliances within the home are non-discretionary and not responsive to external signals. They are turned on when the customer wants then and operate until turned off.
If you have got this far in this document, you are probably noting that time-of-use tariffs and critical period pricing can influence behaviour and peak period consumption. Let's agree on that but note that overall peak behaviour has proven hard to shift.
Aside: I note that there are also models where the EV and battery could keep the household lights on through an outage. This would impact how a future VCR could be calculated, and is therefore an existential threat to the whole price/quality model. I propose to set this concern aside for now as it deserves its own discussion.
CER can respond to network limits and the customer impact of this response is often quite small. Losing complete power to the home is a very different experience to delaying the charging of an EV or battery. Likewise reducing the output of rooftop PV causes a small loss to the customer, but not as large an impact as losing power altogether.
The regulatory bodies in Australia have already moved to provide a value on the curtailment of rooftop solar exports. The Customer Export Curtailment Value (CECV) identifies the foregone value to all consumers when rooftop solar is limited in providing energy to the grid.
This is a great step forward, and has already shifted the behaviour of the electricity networks. (Ref: NSW and ACT recent proposals). These proposals include expenditures to allow more rooftop PV to connect to the grid and to operate with less overall restrictions. Subject to AER review, these changes will benefit all electricity consumers.
The next challenge for policy makers is to replicate the CECV for load flexible devices.
Value of Customer Energy Resources
This is an important step for energy policy. If the uptake curves for CER follow the typical technology trajectory, then we have to get this right.
If we get it wrong, we will likely build more network than we need (adding to prices) and get less value from all of the CER being connected. All customers would be worse off.
Let's call this next step: Valuing Load Flexibility.
If we can identify the value that a customer is denied when CER is limited in operations, we can build the right amount of network.
The following diagram seeks to bring the valuation models together into an understandable framework. At the extremes of operations (load and/or export) we impact reliability and the VCR essentially sets the limits of how customer loss is measured.
In between these extremes we have CER (PV, EV, batteries and other flexible devices) being curtailed. The Value of CER (in blue) represents the overall framework for valuing restrictions on CER operations and within that we have models for (a) load and (b) exports.
In summary, we need to expand the excellent work already done on the CECV in two dimensions:
While these values will change over time, their initial creation will help frame conversations, drive investment and ultimately help all consumers benefit from the energy revolution.
CEO at Analytical Engines - Renewable energy consulting and software development startup
1 年Anthony Seipolt And yet there's a stream of reports from other parts of the world with much higher EV penetration that their grids are coping with EV charging loads using the standard approaches of TOU tariffs etc Do you see something different about the Australian grid that requires flexible load curtailment? And do you think flexible load curtailment should be realised by circuits under direct DNSP control that can't be supplied by onsite PV? That would definitely reduce the customer value of flexible load curtailment. And increase the cost of front-of-meter infrastructure required. And result in more PV export due to less onsite consumption. Be great to get some comments on this from grids in Europe and the US with high EV penetration.
Director at Withywindle Consulting
1 年Wouldn't VLF be very different for different customers? A flexible and resonsive load/export could be very valuable on a constrained feeder and much less valuable where there is a lot of headroom. If VLF reflected this, then "LF"s would be encouraged into areas where they are needed. This implies a more granular (or market-based) VLF being made available.
Developing policy toward energy transition and distributed renewable energy integration
1 年Nice piece. There is definitely some changes needed in thinking about our 'rights' to do things that place costs on others. I think EVs are a particularly interesting example as well. As you say there is a big difference between unlimited charging anytime, behaviours nudged by price and external limits on how fast you could charge to reflect local network constraints. Importantly, an EV usually has an additional option of charging elsewhere, which is often overlooked in initial backlash against flexibility.
Real Time Information and Transaction Specialist
1 年Anthony Seipolt great article. Rather than play <1250 Char tictac are you available for a chat about it?
Senior Grid Transformation Engineer
1 年What’s the difference between a customer and consumer energy resource?