For utilities of every size, the goal of distribution planning is to meet today’s energy demands while preparing for tomorrow’s growth. This is typically achieved through forecasting load and integrating distributed energy resources (DER).
However, things are moving quickly. Customers and developers are increasingly inquiring about load/DER capacity, such as solar photovoltaics (PV) and electric vehicle (EV) charging. In the past, utility investments in new capacity have primarily been “just in time,” waiting until there was near certainty that the additional capacity would be necessary to serve new customer loads. In fact, this is a prudency requirement for regulatory bodies approving capital investments: to demonstrate that the investment is reasonable and necessary.
While the typical “just in time” approach works well for ensuring prudency, it does not get the utility out in front of what’s coming—and that is the rising demand for energy. To enable more forward-looking, proactive capacity investments—without compromising on investment prudency—requires a new approach and new structures: a proactive investment framework.
Removing Roadblocks to Clean Energy Goals
It’s understandable to want to minimize the risk of underutilized investment and allow for costs to be allocated effectively by waiting until the specific driver for a capacity investment is known. Unfortunately, there are also risks to waiting that must be considered.
Large utility capacity investments, such a new substation, may be 5 years or more in the making, when you consider acquiring land and right-of-way rights, ordering custom components with long lead times, and civil and electrical construction. For customers looking to electrify their fleet or developers deploying EV charging hub infrastructure, the prospect of waiting several years to connect is generally not workable. Similarly, from the state regulatory perspective, lack of available capacity for new connections creates a significant barrier to achieving clean energy goals. Proactive planning and investment can be an effective tool for improving customer outcomes and achieving state policy goals.
Proactive Planning Approach
When considering utilizing proactive investments, there are some key questions that can inform decision-making:
- How high is confidence in the forecast?
- What specific risks result from waiting?
- Where are there long construction timelines?
- Where are potential construction or material procurement bottlenecks?
- What are the current limitations in that area?
- What other benefits are achieved by the project?
- Who is impacted and how will they benefit?
- How will costs be recovered?
Because proactive investments have inherently higher risk of underutilization (and, subsequently, unnecessary rate increases), they should only be used where they provide the best method to achieve specific goals.
Three use cases where proactive investments are most effective are:
Anticipate Adoption Speed
Adoption of DER and electrification loads can occur faster than utilities can construct infrastructure. Proactive investments can be used to prevent utility construction timelines from slowing clean energy technology adoption, improving the likelihood of achieving state policy goals. Accurate, granular forecasting is critical to justifying investments intended to accelerate adoption speed.
State Growth Example: View Minnesota’s 2025 Energy Action Plan PDF, “Stakeholder-driven Strategies for Success.”
Coordinate Impacts
Workforce and system limitations can make it impractical or costly to construct too many facilities in a single year. Contributing factors include a scarcity of specialized labor, limited materials and equipment, constrained system switching capability, and limited availability of mobile substations. Proactive investments can spread utility construction (and subsequent rate impacts) over an appropriate period of time to prevent rate shock, construction bottlenecks, and resource procurement bottlenecks. This approach is only necessary if the volume of upgrades or construction costs rise significantly above the historical baseline.
Efficiency
Proactive investments can empower utilities to take a longer-term view of system needs, which can help reduce overall lifecycle costs by eliminating the need for repeated capacity investments in the same area. In addition, upgrades to address future needs can be paired with upcoming maintenance work or capital investments to eliminate redundant labor or other costs.
For instance, many legacy voltage regulator controllers are not capable of handling reverse power flow, which can limit available hosting capacity. While the upgrade itself is relatively low cost, it can be difficult to take the necessary equipment out of service to perform the upgrade safely. Pairing voltage regulator controller upgrades with existing maintenance activities such as feeder circuit breaker maintenance (illustrated below) can reduce the need for repeated switching events and repeated substation site visits, improving operational efficiency.
Case Study: Minnesota Framework
Electric Power Engineers (EPE) participated in Minnesota’s Proactive Planning working group, the end product of which is a framework detailing how proactive investments can be identified, justified, approved for construction, and tracked for effectiveness. This framework will enable Xcel Energy to propose proactive investments in their upcoming Integrated Distribution Plan. Minnesota’s public order for their framework can be found here.
Within the Minnesota working group, EPE provide key contributions, including:
- Utilizing proactive investments only where necessary at specific locations to achieve specific outcomes including:
- Anticipate Adoption Speed
- Coordinate Impacts
- Efficiency
- Recommendation to focus on residential and small commercial customer adoption within the initial framework to minimize cost allocation concerns and accelerate framework utilization.
- Reducing investment risk by considering other potential benefits from project capacity investments, such as reliability and asset health.
Considering Equity Impacts
Equity is an important consideration when developing a proactive investment framework. Future capacity needs are identified using forecasts, which are often based on econometric and demographic data and related assumptions about customer adoption of clean energy technologies. Where forecasts underrepresent the willingness and ability of disadvantaged communities to adopt clean energy technologies, lack of investment in capacity can make low technology adoption a self-fulfilling prophecy. At the same time, investments in underserved communities are only valuable if those investments actually benefit those communities: constructing new capacity that doesn’t get utilized benefits no one. Navigating investment decisions within historically underserved communities requires engaging with those communities to understand their actual needs.
Viewpoint: See the “Energy Justice Workbook,” published by the Initiative for Energy Justice.
How EPE Can Help
Proactive distribution planning is a powerful tool for achieving clean energy goals but comes with potential risks and drawbacks that must be accounted for and effectively managed. EPE’s experienced team can help utilities of all sizes develop a framework for navigating the process of identifying, justifying, and gaining approval for proactive investments to help achieve clean energy goals and ensure customers can connect their resources in a timely manner. Our unique approach and experience allow us to provide exceptional support to clients interested in achieving the benefits of proactive investments and minimizing the risks in the face of an increasingly complex and decentralized energy landscape.
