TOPIC #5
Integrated System Planning: The Next Evolution
An evolving energy ecosystem drives utilities toward comprehensive planning approaches.
Utility Evolution Drives Planning Process Integration
- Historically, utilities planned for customers’ energy needs assuming additions of centralized generation, then planned the transmission and distribution networks to support energy delivery. This method has become insufficient in the current, rapidly changing utility environment.
- The energy transition continues to bring about an evolution of utility systems, accommodating new goals, such as greenhouse gas emissions reductions, distributed energy resources (DERs) and two-way flows, and increasing renewable resources. These and other factors are driving change within each of the electric generation, transmission, and distribution planning processes, as shown in Figure 5.1.
Figure 5.1: Drivers of Change for Utility Segments
Note: Some drivers may be common across multiple segments.
Source: ScottMadden analysis
KEY TAKEAWAYS
Utility systems are growing more complex and interconnected, necessitating planning that accounts for these changes. As planning processes evolve, they must ensure goals are aligned within different segments of the utility, as well as with the policy that is driving the change.
All types of electric utilities are exploring comprehensive planning approaches and are at various stages of the exploration process. Some utilities have been driven by policy or regulatory requirements, while others have enacted changes of their own volition, in many cases doing so with the expectation that it will help them reach aggressive net-zero targets.
Gas utilities are also facing a turning point, as uncertain market conditions and changes in regulatory approaches on the future role of natural gas are driving early conversations on updating long-standing planning practices.
Utility systems are growing more complex and interconnected, necessitating planning that accounts for these changes. As planning processes evolve, they must ensure goals are aligned within different segments of the utility, as well as with the policy that is driving the change.
All types of electric utilities are exploring comprehensive planning approaches and are at various stages of the exploration process. Some utilities have been driven by policy or regulatory requirements, while others have enacted changes of their own volition, in many cases doing so with the expectation that it will help them reach aggressive net-zero targets.
Gas utilities are also facing a turning point, as uncertain market conditions and changes in regulatory approaches on the future role of natural gas are driving early conversations on updating long-standing planning practices.
Utility Evolution Drives Planning Process Integration (Cont.)
- These changes have not only led to increased complexity within the utility segments, but they have also increased interdependency with their counterparts. A few examples are illustrated in Figure 5.2.
- As utility evolution continues, planning processes will need to adapt to keep up with changes in the industry. In particular, utilities must optimize system investments across generation, transmission, and distribution to support the achievement of corporate and policy objectives. Many see modifications to planning processes and assumptions, designed to address these change drivers, as required to support the continuation of reliability and affordability objectives, while adapting to achieve national, state, and local policy goals.
Figure 5.2: Change Drivers Impacting Utility Planning Processes
Source: ScottMadden analysis
What Is Integrated System Planning?
- There is growing discussion within utilities and industry groups regarding the alignment and integration of disparate utility planning processes: electric generation/resource, transmission, distribution, and potentially gas. There is, however, much variation between these groups regarding the definition and scope of this integration.
- Integrated system planning is still relatively nascent, and as such, it is being considered independently by utilities and regulators. Given this independent development, various utilities have developed different monikers for processes which include parts of the planning environment (see Figure 5.3).
- Further, in some cases, this integration is being discussed within the context of other established planning processes (e.g., as modifications to the integrated resource planning or distribution system planning processes).
Figure 5.3: Myriad Names for and Approaches to Utility Planning Integration
Source: ScottMadden research
What Is Integrated System Planning? (Cont.)
- In 2018, in response to changes in the electricity sector, NARUC and the National Association of State Energy Officials (NASEO) created a task force to look at the need for planning integration, calling it Comprehensive Electricity Planning (CEP).
- The task force gave the following definition for CEP: “a comprehensive electricity planning process refers to the alignment or integration of distinct planning processes that, historically, have not significantly informed one another (i.e., resource, distribution, and transmission planning processes).”
- The task force noted that CEP may look different for various utilities based on key operational characteristics, such as whether the utility:
- Owns generation assets
- Operates in an organized wholesale market
- Focuses on aligning distribution, resource, and transmission planning (or one or two of those segments)
- The task force released its findings in early 2021 outlining the following objectives for CEP:
- Improve grid reliability and resilience
- Optimize use of distributed and existing energy resources
- Avoid unnecessary costs to customers
- Support state policy priorities
- Increase the transparency of grid-related investment decisions
- The task force notes the overarching goals of CEP above; however, the process will look different depending on the utility. For example, wires-only utilities will not be able to integrate planning for generation assets they don’t own. The task force designed roadmaps as starting points for state-specific efforts to improve planning processes, differentiated by market structure, utility generation ownership, and planning processes to be aligned (distribution, resource, and/or transmission).
- Several utilities have begun to discuss or signal interest in different forms of integrated planning and are in various stages of implementing related processes.
- It is noteworthy that the push to better align or integrate planning processes is not unique to specific utility types, those operating in specific regions, or market structure or business model (e.g., vertically integrated vs. wires-only utilities, investor-owned utilities vs. public or municipal utilities, and utilities operating inside or outside of organized markets).
- Among the various utilities engaged in integrating their planning functions, common drivers include the desire to:
- Better manage increasing penetrations of DERs and associated complexities
- Achieve aggressive net-zero/carbon emission reduction targets
- Optimize investments at the system level (for effectiveness and lowest cost)
- Fairly and accurately account for the full value of non-wires alternatives
- Share data required to transition from deterministic to probabilistic forecasting
- Better support system scenario planning
- In some cases, utilities are pursuing planning integration on their own, while others are pursuing it due to regulatory guidance; however, in both cases, the drivers above appear to be relatively consistent.
A Closer Look at a Few Utilities Advancing Planning Integration
- Utilities across the country are in various stages of developing integrated planning processes across multiple segments of the utility system. A few that are further ahead in their development are highlighted in Figure 5.4.
- Xcel’s subsidiary Northern States Power proposed its Integrated Distribution Plan (IDP) in 2019. It was accepted by the Minnesota PUC in 2022. The IDP presaged more comprehensive integrated planning. Xcel noted that it is “taking steps to align and integrate our distribution, transmission, and resource planning processes. We support a shift toward more integrated system planning… We are currently evaluating our existing planning processes and tools to determine how to better align and integrate the distribution, transmission, and resource planning processes in the future.”
- There is emphasis in the IDP on the impact of the growth of intermittent resources like wind and solar that has led to a reversal of the typical planning timeline, putting transmission planning first, compared with the historical approach which would put generation planning first.
- With greater integration, not only is Xcel updating its processes and tools, but it is also adjusting its organization. Xcel recently announced that it has assembled all of its planning activities—generation, transmission, distribution, and natural gas service—into a single, company-wide planning department.
- Additionally, an emphasis is placed on maximizing the benefits of DER integration. In its IDP, Xcel notes: “We support a shift toward more integrated system planning, where utilities assess opportunities to reduce peak demand using DER and to supply customers’ energy needs from a mix of centralized and distributed generation resources.”
- Xcel’s Alice Jackson, senior vice president of system strategy and chief planning officer, noted: “Historically…generation planning would come first. Transmission would come after. You locate generation, and then the extension to bring it to the city.”
- Other utilities that have revisited planning processes, driven particularly by increasing current or expected DER penetration are Hawaiian Electric Company (HECO), Salt River Project (SRP), and Duke Energy’s North and South Carolina operating companies, Duke Energy Carolinas and Duke Energy Progress (DEC/DEP). Brief summaries for each of the drivers of planning changes and key elements are shown in Figures 5.5 through 5.8.
Figure 5.4: Selected Utilities That Are Implementing Variations of Comprehensive Electric Planning
Source: S&P Capital IQ Pro
Figure 5.5: Hawaiian Electric Integrated Grid Planning
Source: Hawaiian Electric Company
Figure 5.6: Salt River Project Integrated System Planning
Source: Salt River Project
Figure 5.7: Duke Energy Carolinas/Progress System and Operations Planning
Source: Duke Energy
Figure 5.8: Duke’s Integrated System and Operations Planning (ISOP) Process
Notes:
AMI means advanced metering infrastructure
EE means energy efficiency
GIP means Grid Improvement Plan
NTS means non-traditional solutions
PV means solar photovoltaic systems
EV means electric vehicle
Source: Duke Energy
Coordination of Growing Interest: Gas vs. Electricity Planning
- The NARUC/NASEO task force notably dubbed the concept of integrated planning as Comprehensive Electricity Planning; however, gas will not be left on the sideline as utilities evolve.
- There is a large focus on clean energy and decarbonization as a part of the energy transition, yet gas is expected to remain a key component within the energy sector for many years to come. That said, the gas industry has experienced significant disruptions and increasing attention from policymakers in recent years, highlighting the need for planning to adapt to keep up with changing market and political environments.
- There are early conversations about changes to gas forecasting and planning processes. Key topics in these conversations include:
- Moving from deterministic forecasting and planning models based on historical data to probabilistic models that incorporate anticipated impacts from energy efficiency programs (e.g., electrification) and extreme weather events.
- Increasing the granularity of gas forecasts to support the evaluation of non-pipes alternatives and align more closely with the granularity of electric system forecasts (i.e., developing gas forecasts for more specific locations on the gas network and, in some cases, planning for design hours vs. design days).
- Planning perspectives apply divergent assumptions for electric and gas. In each case, planners are preparing to meet demand under worst-case scenarios. For heat pumps, this may result in gas assuming low heat pump adoption while electric assumes high adoption.
- Differing from the objectives of CEP, which adapts and combines existing planning structures to help manage increasing levels of complexity, changes in planning on the gas side will require analyses not typically performed in the gas forecasting and planning processes today.
IMPLICATIONS
An evolving utility environment requires planning that can accommodate evolving objectives. Policy and technological advancements have led to significant changes in the electricity industry, and comprehensive planning can help capture potential value brought about by these trends. By broadening the scope of planning to incorporate once independent processes, utilities can streamline and optimize their efforts, as well as align goals between systems seeking common objectives (e.g., net-zero and greenhouse gas emissions reductions).
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