Background
Recent legislation in Maryland required BGE to develop and propose a mechanism for providing compensation for new solar and battery energy storage connections in accordance with the value they can provide to the distribution system.
Challenge
Much of the industry reports and programs related to Value of Distributed Energy Resources (DER) have not effectively addressed the locational nature of distribution value of DER, particularly with regard to system capacity needs. As a result, compensation for distribution value has been relatively rare in program implementations or has taken such a broad approach that the resulting incentives are low because the value is spread across the entire system (rather than focused on specific areas of need).
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Solution
EPE developed a Locational Value of DER (LVDER) framework that starts with inputs directly from the distribution planning process, which is the process by which utilities identify capacity needs and the investments needed to support future growth. Using the Planning team's growth forecasts, EPE developed calculations to determine the financial value of deferring large capital investments in capacity at specific locations with actual anticipated capacity needs. EPE's key value addition was the methodology for determining the number of years of deferral and the corresponding size of DER needed to achieve it, which provides the basis for the incentive on a $/kw (for solar) or $/kWh (for energy storage) basis using the nameplate values for new or existing resources. These incentives can be effectively calculated and updated on an annual basis, changing in response to changes in growth forecasts or as DER are connected and the corresponding value is achieved.
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Result
BGE presented EPE's proposed framework to various stakeholders in Maryland and it was relatively well received. BGE has indicated they plan to utilize it in an upcoming filing to construct a locational incentive program for new and existing DER.