Study quantifies New England distributed generation, growth

Distributed generation – small-scale electric generation facilities installed at consumer sites – plays a growing role in the resource mix used to meet society’s needs. Typical distributed generation assets include solar photovoltaic panels and co-generation or combined heat and power units developed at homes and businesses. A study released yesterday found that distributed generation capacity in New England could roughly triple in the next decade – and that regional electric grid operator ISO New England Inc. needs to account for distributed generation in its planning.

As New England’s regional transmission organization, ISO New England plans for and coordinates the development of electric transmission infrastructure. In the past decade, New England ratepayers have spent approximately $5 billion on transmission additions and expansions. ISO New England’s 2012 Regional System Plan calls for the investment of another $6 billion in transmission projects in the coming years. As a result, regional transmission rates roughly tripled between 2006 and 2010, and continue to grow.

ISO New England’s plans are based on its forecasts of future system needs, including anticipated load growth and changes in the electric generation portfolio used to satisfy customer demand. But ISO New England may be underestimating the extent to which non-transmission alternatives like distributed generation can satisfy demand at a lower total cost than transmission line development. According to “Forecasting Distributed Generation Resources in New England: Distributed Generation Must Be Properly Accounted for in Regional System Planning”, prepared by Synapse Energy Economics Inc., ISO New England is significantly underestimating the current and potential distributed generation in New England, particularly with respect to solar photovoltaic resources.   According to Synapse, “This practice results in the ISO ignoring likely transmission and reliability benefits and overestimating electricity load—with ratepayers being asked to pay for larger, more expensive transmission upgrades than are needed.”

ISO New England predicts that about 800 MW of solar photovoltaic generation will be installed in New England by 2021, but excludes other types of distributed generation from its projection. But Synapse found that over 980 megawatts of distributed generation assets are already installed in the six New England states. By 2021, Synapse predicts that this could grow to over 2,855 MW based on existing policies and development trends.

Synapse Energy Economics, Inc., Forecasting Distributed Generation Resources in New England: Distributed Generation Must Be Properly Accounted for in Regional System Planning, at page 19.

State policies and the favorable economics of distributed generation projects are driving their adoption on a wider scale than in previous years.  For example, after exceeding its previous solar photovoltaic target, Massachusetts recently increased its target to 1,600 MW.  Renewable portfolio standards, net metering policies, and feed-in tariffs all contribute to the proliferation of distributed generation, as does a cost differential that makes natural gas-fired cogeneration more cost-effective than burning oil for heating and purchasing electricity in commercial and industrial applications.

Synapse’s report concludes, “It is essential that the ISO stop ignoring the impacts DG resources have on system planning—both their benefits and their challenges. This report provides a reasonable estimate of what the future holds for these resources and makes one thing very clear: assuming that these resources do not exist is unacceptable.”

Whether and how ISO New England and the states take distributed generation into account remains to be seen, but if the trends noted in the Synapse report play out to even a modest degree, non-transmission alternatives such as distributed generation may be able to limit further increases in regional transmission rates.