DER is changing the role of the utility to “Distribution System Operator” (DSO). In this new 21st century model, the utility, as grid owner, will transition to a combined ‘electron traffic controller’ and clearing house. In addition to assuring safety and reliable electric delivery, the utility will have to record each physical transaction at every point where power is added to the grid or delivered to the end user. It will also need to place a value on that transaction based on the real-time value of the electricity to the consumer, and the efficiency or inefficiency it contributes to the grid, and the cost to serve at each endpoint. In this way, the utility can determine the relative value of all transactions, and overall value of all assets on the grid. Near term, this will begin to facilitate better DER valuation and infrastructure planning. Longer term, it is the pathway to what may well become distribution locational marginal pricing (DLMP) similar to wholesale markets.
In this new transactive model, operational decisions will be made based on physical constraints and on financial considerations that can change on a minute by minute basis. DER owners/operators, that are not owned by the utility, will be making decisions based on financial opportunities or constraints. The traditional return on capital financial model becomes obsolete as the utility is no longer simply a delivery and infrastructure service entity, but rather a financial transaction management and settlement service.
In order to support the operational, revenue, and new-rate-case models that will ensure their survival, utilities require a more sophisticated, 360-degree holistic view of all grid assets to forecast their economic viability. Compartmentalized systems such as Distributed Energy Renewable Management Systems (DERMS) are helpful, but will not provide the highly granular and disparate data from every asset necessary to incentivize dispatchable load through the creation of price signals and day-ahead retail markets. Utilities will have to introduce software platforms that can converge and present meaningful data from commercial systems such as CIS and MDMS with operational systems such as SCADA and ADMS – and do it in near real-time.