| | MARCH 20198CIOReviewIN MYOPINIONDISTRIBUTION ENERGY MARKETS ­ THE NEXT EVOLUTION FOR THE POWER INDUSTRYBy Stuart McCafferty, Managing Director, Black & VeatchThe energy industry is experiencing a transformation unlike any in history. Similar to the telecommunication industry's wireless transformation, the adoption of renewables, batteries, and electric vehicles is changing the electric power grid from a one-way, centralized, analog system, to a two-way, distributed, digital platform. This is profound in not only the mechanics of how electricity is delivered to end customers, but also in how customers and other non-utility actors can interact and participate in power generation and consumption for the benefit of system reliability and resilience.This transformation has been slowly chugging along for over a decade as more solar photovoltaic (PV) systems are attached to the grid, electric vehicles gain acceptance and market share, and energy storage systems are installed in commercial and residential buildings. The same phenomenon is occurring at scale as larger grid systems emerge with large PV and wind systems that replace peaker plants, corporate and public transportation fleets of electric vehicles bring new capabilities and challenges to power networks, and grid-scale energy storage that allow portions of the power network to operate as independent microgrids.We have reached the tipping point in numerous locations within the United States and abroad that have inspired federal and state policy makers to discuss the idea of establishing Distribution System Operator (DSO) functions to not only enable and manage this new paradigm of Distributed Energy Resources (DER), but to also establish market systems to help balance power supply/demand and encourage investment and innovation.Unfortunately, this is easier said than done. In the monopoly world of electric power utilities and non-homogenous policy goals, weather, DER adoption and penetration, and other local factors, a "one-size-fits-all" DSO implementation is not only impractical, it is untenable. It's complicated and scary. But these new DSO functions are also necessary.Solving the "Duck Curve"It's important to recognize that historically the utility's responsibilities and visibility end at the meter. As more and more DER are added "behind the meter," the line of demarcation at the meter creates new challenges for the utility in predicting, planning, and managing power flow on distribution networks. The California Independent System Operator (CAISO) explains these challenges with its famous "duck curve" forecast that shows increasing probability of over generation during daylight hours from PV systems and a rapid ramp up for demand at sunset due to the loss of PV generation and increased consumption as homeowners return home.Figure 1: CAISO Duck CurveIn California, CAISO's duck curve is becoming reality. The need to manage or potentially flatten this curve is becoming urgent. Our existing systems and the physical constraints of the grid itself were not designed for this type of demand curve. This is the genesis of the DSO conversation, and regulators' recognition that we need to do something different ­ and it needs to happen sooner than you think.
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