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Project Information Center

STATEMENT OF WORK

Project Title:

Distributed Energy Infrastructure Analysis and Pilot Project for New Jersey and Pennsylvania

Contractor:

NJ Board of Public Utilities, Office of Clean Energy (NJBPU)
P. O. Box 350
Trenton, NJ 08625-0350
(609) 777-3335

Program Area:

Distributed Energy Resources

Partners:

PA Dept. of Environmental Protection, Office of Energy (PADEP)
National Association of Regulatory Utility Commissioners (NARUC)
Center for Energy, Economic and Environmental Policy, Rutgers (CEEEP)
Madison Energy Consultants (MEC)
National Council on Electricity Policy (NCEP)
PJM
Conectiv, PSE&G and JCP&L

Project Description:

This STAC Project will build upon and expand work currently underway in New Jersey that is providing the Board of Public Utilities a baseline evaluation of existing distributed energy resources (DER), related policy issues and methods of reducing financial, regulatory and technical barriers to DER. The STAC project has six major elements:

1. The results of the “SEP/ 2003-04 Distributed Energy Analysis” study and the STAC project will be disseminated to interested stakeholders in Pennsylvania, the mid-Atlantic region and the nation.
2. Conducting new studies to identify appropriate DER technologies and the impacts that the wholesale PJM market has on the value of DER in the region.
3. Organizing a workshop for utility planners to learn about the uses of DER in providing reliability through grid integration of distributed resources.
4. Organizing a workshop for a cross section of DER developers, utilities, smaller commercial customers and regulators in order to examine ways to provide fair and meaningful incentives to customers, DER developers and utilities that recognize the specific values that DER can bring to the electricity enterprise in New Jersey and Pennsylvania.
5. Designing and implementing an RFP process that will encourage meaningful partnerships and collaborations among utilities, technology providers, installation contractors and customers.
6. Working with the team that is selected through the proposal evaluation process to implement a load management project that addresses grid congestion, uses innovative technology and explores the creation of sustainable business models to expand the pilot beyond the scope of the STAC project.

The STAC project will be divided into fourteen Tasks. Each task will address one of the six areas shown above:

1. Disseminate the results of the following Tasks that are part of the “SEP/ 2003-04 Distributed Energy Analysis” study to interested stakeholders in Pennsylvania, the mid-Atlantic region and the nation. Conduct a forum at the end of the project to disseminate the project findings to NCEP and NARUC members.
   
   Task Two - Current Status of DER Policy and Deployment
   Task Four - Baseline- Where Are We Starting From?
   Task Five - DER Industry Survey
   Task Six - Grid Interconnection Issues
   Task Nine - DER Asset Ownership
   Task Eleven - Costs and Financing of DER
   Task Twelve - Policy Options and Recommendations
   Task Fourteen - Conduct a Forum to Present Project Findings
    
2. Undertake new studies to identify appropriate DER technologies and the impacts that the wholesale PJM market has on the value of DER in the region.
   
   Task Three - Technology Assessment
   An examination of the breadth of technologies that can be utilized in DER projects will be completed. It will include examples of load management and distributed generation equipment that could be used in the load management pilot that is the centerpiece of the STAC project.
   
   Task Eight - Value of DER in Wholesale Markets
   An exploration will be undertaken of the additional values that wholesale demand response programs (administered by PJM) can bring to customers utilizing distributed energy applications and ways that the PJM market influences and/or determines the prices paid for DER by customers and utilities.
    
3. Conduct a workshop for utility planners to learn about the uses of DER in providing reliability through grid integration of distributed resources.
   
   Task Seven - Valuing DER Within the Local Grid
   Distribution engineers and planners will be brought together to discuss issues such as equipment reliability, cost, controllability, diversity for planning outages, timing of demand response projects, etc. in an attempt to educate utility technical staff about the potential and problems of using DER as an arrow in the utility planner’s quiver.
    
4. Conduct a workshop for a cross section of DER developers, utilities, smaller commercial customers and regulators in order to examine ways to provide fair and meaningful incentives to customers, DER developers and utilities that recognize the specific values that DER can bring to the electricity enterprise in New Jersey and Pennsylvania.
   
   Task Ten - Rate and Incentive Issues with DER
   The project team will work with DER developers, customers, utilities and the regulatory communities to determine how the benefits of distributed energy can be taken from the theoretical to the practical. In Task Ten the team will explore how incentives and rates can be structured so that least cost/ high value solutions using distributed technologies can bring value to all participants.
    
5. Design and implement an RFP process that will encourage meaningful partnerships and collaborations among utilities, technology providers, installation contractors and customers.
   
   Task 13 - Design and Manage the Load Management Pilots
   Using the knowledge acquired by all stakeholders during the preceding Tasks, the project team will issue a Request for Proposals that will offer innovative partnerships the opportunity to cost share the implementation costs of the pilot program with the Board of Public Utilities Clean Energy Fund.
    
6. Work with the successful bidding team to implement a load management project that addresses grid congestion, uses innovative technology and explores the creation of sustainable business models to expand the pilot beyond the scope of the STAC project.
   
   Task 13 - Design and Manage the Load Management Pilots
   A project implementation team will be formed to monitor the winning bidder’s implementation of the project goals, attainment of results and dissemination of information to non-participants.

Management Plan (Approach):

The unique nature of STAC requires that projects be supported by multiple State entities, and to the extent necessary any other entity. As indicated in the STAC Agreement, it is the Contractor’s responsibility to coordinate the execution of work under the Contract, incorporated by reference hereto. Contractor, in conjunction with the other State entities, and to the extent necessary any other entity, shall conduct the project in accordance with the Management Plan (approach) described below.

NJBPU Office of Clean Energy with PADEP Office of Energy will be the primary sponsors and project managers. PJM’s Load Management Program will be a key partner offering in-kind services to the program. Madison Energy Consultants will be the lead technical support, with major assistance from the Center for Energy, Economic and Environmental Policy at the Bloustein School of Planning and Public Policy (CEEEP) at Rutgers University. The outreach dissemination across the states will be coordinated through NCEP and the regulatory reciprocal will be coordinated through NARUC.

Task 1: Project Management

MEC will provide overall project management coordination. MEC will call a meeting to be attended in person by key individuals at CEEEP and via conference call by participating consultants. MEC will provide an advanced agenda. There will be a minimum of one project team meeting or phone conference during each of the tasks. A draft report for each task will be sent to the project team for review and critique. There will be a minimum of three briefings during the course of the project as well as quarterly progress reports to the program managers with a summary of work and task reports completed to date and the degree of project completion. MEC will submit final reports as required by the contract.

NJBPU Office of Clean Energy with PADEP Office of Energy will be the primary sponsors and project managers. Madison Energy Consultants (MEC) will provide overall project management coordination of all partners and subcontractors.

Task 2: Current Status of Distributed Energy Policy and Deployment

The “SEP/ 2003-04 Distributed Energy Analysis” study funded by the New Jersey Board of Public Utilities is examining the current status of distributed resources policy and the issues affecting deployment of DER. The study includes the following elements:

• A definition of distributed energy resources to provide a common starting point for discussion.
• A description of the benefits of distributed generation , including lower end user costs, air quality improvements, increased security of regional electricity supplies, enhanced reliability, job creation, economic development, etc.
• A survey of regulatory proceedings recently completed in New York and California concerning DER.
• An analysis of current issues in DER around the country
• A description of the potential benefits and risks of DER.

In Task Two, Madison Energy Consultants (MEC) will gather similar work that has been completed in Pennsylvania by the Electricity Industry Center at Carnegie Mellon University. MEC will share the analytical work done under the New Jersey SEP DER project with Pennsylvania regulators and the researchers at Carnegie Mellon. MEC will prepare a Task report that brings together the work already done in each state regarding existing DER policy and barriers.

Task 3: Technology Assessment

A technology A technology assessment will be provided that will indicate the current status of development and commercialization for key DER technologies and tools. Included will be fuel cells, solar photovoltaics, wind, micro turbines, landfill gas, biomass, and small hydro. Estimates will be provided for their applicability in NJ and PA. In addition to generation technologies, assessments will be provided for load management and load control devices, interconnection hardware, and communication systems and software. MEC will be responsible for providing primary input to the development of the technology assessment as well as coordinating subcontractor activity and review by CEEEP. MEC will provide an assessment of those companies whose products are currently available in NJ and PA or may become available in the next two years. Particular attention will be paid to NJ and PA companies who are developing promising new technologies that may have applications in the STAC pilot program.

Madison Energy Consultants will be responsible for providing primary input to the development of the technology assessment as well as coordinating subcontractor activity and review by Center for Energy, Economic and Environmental Policy (CEEEP). MEC will provide an assessment of those companies whose products are currently available in NJ and PA or may become available in the next two years, with a focus on companies that could participate in the load management pilots.

Task 4: Baseline NJ and PA – Where Are We Starting From?

The “SEP/ 2003-04 Distributed Energy Analysis” study will present information on the perspectives of key stakeholders regarding DER. Twenty members from the following groups are being surveyed:

• The renewable energy industry
• Regulators
• public interest groups
• utilities
• DER equipment suppliers
• Competitive electricity suppliers

Approximately fifteen of the interviews are being held with stakeholders who have their principle operations in NJ or PA. The other five interviews will be held with national or regional representatives. MEC is summarizing the interviews and collecting them for inclusion in the report for this task.

MEC and CEEEP will disseminate the results of the NJ SEP DER Task report on stakeholder perceptions of DER on a regional and national basis.

Madison Energy Consultants and the Center for Energy, Economics and Environmental Policy at the Bloustein School of Public Policy will disseminate the results of the stakeholder interview activities undertaken as part of the “SEP/2003-2004 Distributed Energy Analysis” project.

Task 5: DER Industry Survey

An assess The “SEP/2003-2004 Distributed Energy Analysis” study will provide an assessment and census of the DER industry in the region. Sectors included in the study are R&D, manufacturing, engineering, installation and service. Information concerning companies working in the DER area is being collected and merged with existing information.

Madison Energy Consultants and the Center for Energy, Economics and Environmental Policy at the Bloustein School of Public Policy will disseminate the results of the “SEP/2003-2004 Distributed Energy Analysis” survey throughout Pennsylvania, New Jersey, the mid-Atlantic region and the nation.

Task 6: Grid Interconnection Issues

The “SEP/2003-2004 Distributed Energy Analysis” study will provide an assessment of interconnection experiences after the passage of technical interconnection standards. The study will examine whether the passage of IEEE, FERC and state interconnection standards has in fact simplified the process of connecting DER projects to the grid. Through interviews with DER developers, utilities and local officials, non technical issues such as municipal land use permits and building code compliance are being examined.

Madison Energy Consultants and the Center for Energy, Economics and Environmental Policy at the Bloustein School of Public Policy will disseminate the results of the “SEP/2003-2004 Distributed Energy Analysis” grid interconnection survey throughout Pennsylvania, New Jersey, the mid-Atlantic region and the nation.

Task 7: Value of DER to the Local Grid

The value of DER to the local electric distribution grid is being characterized in the work New Jersey currently has underway as part of its “SEP Distributed Energy Analysis” project. Issues examined in that effort include whether DER can lower the costs of meeting peak demands on distribution circuits and substation banks; increase overall distribution assets utilization factors; economically defer construction of new lines and substations; etc. Examples of uses of DER by electric distribution companies in New Jersey and elsewhere are being presented, as well as discussion of limiting factors to wider DER deployment for grid support. These limiting factors may include planning cycles for distribution upgrades, lack of DER scale relative to capacity upgrades and cost. Reliability requirements will be examined in the context of controlling and dispatching DER for use by the distribution utility. Alternatives such as shared Internet control networks and contractual mechanisms will be presented. The study will also examine models being used around the country to provide incentives to customers and to utilities that will encourage both parties to enter into agreements that will allow cost effective utilization of distributed energy to be deployed.

The STAC project will build upon the above work by applying the lessons learned and best practices to specific problems existing in the New Jersey/Pennsylvania region. In this task, the project team will organize a workshop to bring together utility distribution planners and engineers to explore issues regarding the use of distributed energy alternatives for meeting reliability needs. Using the knowledge gained from the “SEP Distributed Energy Analysis” work, the project team will work with utility planners, engineers, technologists, load management staff and financial planners to identify the minimum criteria that distributed energy must meet for cost, reliability, contract terms, control, etc. if it is to become a legitimate alternative to utility construction.

Madison Energy Consultants will be responsible for planning and conducting the utility workshop with the logistical support of CEEEP Rutgers.

Task 8: Value of DER in Wholesale Markets

The wholesale The wholesale power markets (e.g. PJM) have a profound effect on the price, availability and deliverability of retail energy in NJ and PA. The PJM market structure also affects the opportunities to extract full value from distributed resources and distributed generation. Understanding how the PJM market works and how the PJM market rules are implemented on a daily basis is critical to understanding the role that DER can play at the wholesale and retail level. This Task report will give an overview of how the PJM market works, will identify the wholesale value propositions for renewable energy and will suggest the collaborative work that could be done with PJM to monetize renewable energy benefits. Examples of these benefits include the coincidence of solar energy with peak summer demands and the congestion relief value of distributed renewable resources (providing a leveraged reduction in locational marginal prices (LMPs) across wide areas). MEC will be responsible for coordinating the activities of this task with PJM. MEC will subcontract the job of providing an overview of the PJM market and where it may be evolving, to a consultant with expertise in the structure of the evolving PJM market. MEC will work with employees at PJM who are responsible for the PJM Demand Response Program, ancillary services, etc. Key issues relative to the inability of renewable resources to participate in various PJM markets and programs will be identified. MEC will then work with CEEEP and others to find possible solutions to the identified barriers within PJM. MEC will be responsible for synthesizing the results of the above inquiries and analysis into a Task report recommending ways that PJM and regional government entities might work together to reduce barriers to the participation of renewable resources in the PJM wholesale market.

Madison Energy Consultants will coordinate the completion of these activities with the support of the Center for Energy, Economic and Environmental Policy (CEEEP).

Task 9: DE Asset Ownership

The “SEP/2003-2004 Distributed Energy Analysis” study will provide an assessment of policy issues regarding DER asset ownership by distribution utilities. Should distribution utilities be permitted, restricted, or encouraged to own and operate DER systems? Is the correct policy different for customer sided DER vs. grid side DER? Various national models and rationales will be collected and the implications of policy choices will be presented. MEC will collect the experiences and issues that have been explored in other regulatory settings across the country. This information will be summarized in a draft report. MEC and CEEEP will prepare a summary of the various policy options on this issue.

Madison Energy Consultants and the Center for Energy, Economics and Environmental Policy at the Bloustein School of Public Policy will disseminate the results of the NJ SEP DER asset ownership study throughout Pennsylvania, New Jersey, the mid-Atlantic region and the nation.

Task 10: Rate and Incentive Issues with DER

There are a number of pricing, tariff design and rate-making issues that are being addressed in the review of DER policy options being done in the “SEP/2003-2004 Distributed Energy Analysis” study. Included will be analyses of the following topics: distribution tariffs, time sensitive rates, net metering, performance based ratemaking, de-averaged distribution tariffs, exit fees, standby charges and fixed vs. usage based rates.

In addition to certain technical barriers slowing the use of distributed resources to solve grid problems, previous work has indicated that the incentives currently in place for customers, DE developers and utilities tend to discourage the adoption of such DE alternatives. Averaged distribution rates and tariffs that link profitability with increased usage do not encourage the cost effective utilization of customer based technologies that control and manage load at the local feeder level.

The STAC project team will build upon the “SEP/2003-2004 Distributed Energy Analysis” study by conducting a workshop to bring together a working group of utility financial and rate department people, DER developers, state regulators and customer representatives to develop specific pilot proposals for incentives to be offered to customers who install DE in locations and within reliability specifications set by participating utilities.

Madison Energy Consultants will take the lead on this task with logistical support from CEEEP Rutgers.

Task 11: Costs and Financing

The “SEP/2003-2004 Distributed Energy Analysis” study will provide an assessment of the cost of many clean DER technologies and solutions. The cost of DER will be compared to more traditional solutions. Since long-term financing is a key issue for renewable and clean DER, project financing mechanisms currently in use around the country will be presented. In addition, Madison Energy Consultants will be responsible for preparing a report suggesting alternative financial structures that could facilitate renewable energy project financing.

Madison Energy Consultants and the Center for Energy, Economics and Environmental Policy at the Bloustein School of Public Policy will disseminate the results of the “SEP/2003-2004 Distributed Energy Analysis” cost and financing study throughout Pennsylvania, New Jersey, the mid-Atlantic region and the nation. In addition, Madison Energy Consultants will be responsible for preparing a report suggesting alternative financial structures that could facilitate renewable energy project financing.

Task 12: Policy Options and Recommendations

The “SEP/2003-2004 Distributed Energy Analysis” study will provide an assessment of policy options regarding DER. Recommendations regarding future work that will be required and potential policy initiatives that could be undertaken by state regulatory bodies will be presented. MEC and CEEEP will be responsible for coordinating the dissemination of these reports to policy makers and interested stakeholders in Pennsylvania, the mid-Atlantic region and the nation.

The Center for Energy, Economic and Environmental Policy and Madison Energy Consultants will be responsible for disseminating this information to policy makers and interested stakeholders in Pennsylvania, the mid-Atlantic region and the nation.

Task 13: Design and Manage the Load Management Pilots

Using the knowledge acquired by all stakeholders during the preceding Tasks, the project team (led by MEC) will issue a Request for Proposals that will offer innovative partnerships (e.g. collaborations among utilities, technology providers, installation contractors and customers) the opportunity to cost share the implementation costs of the pilot program using $1 million from the New Jersey Board of Public Utilities Clean Energy Fund.

MEC will work with the successful bidding team to implement a load management project that addresses grid congestion, uses innovative technology, involves small commercial customers, incorporates the PJM Demand Response Programs, offers innovative incentive and rate treatment approaches and explores the creation of sustainable business models to expand the pilot beyond the scope of the STAC project. A project team will be formed to monitor the winning bidder’s implementation of the project goals, attainment of results and dissemination of information to non-participants. The project team will recommend how the results from the pilot can be incorporated into regional energy policies.

New Jersey Board of Public Utilities (NJBPU) and PA Dept. of Environmental Protection, Office of Energy (PADEP) will lead this task with support from MEC. Using the knowledge acquired by all stakeholders during the preceding Tasks, MEC will assist the NJBPU in issuing the Request for Proposals, managing the work of the Project Team and summarizing the results in a final report on the Task.

Task 14: Conduct a Forum to Present Project Findings

CEEEP, with support from MEC, will work with NCEP and NARUC to organize a roundtable forum to discuss ways other states can incorporate and adopt the appropriate policies developed as part of the report to advance and promote DER in their state. The forum (to be held within 3 months of the completion of the final report) will focus on Northeast and Mid-Atlantic States, but will be open to all NCEP and NARUC members. The findings of the report will be presented by NJBPU, PADEP, MEC and CEEEP. The materials presented at the conference will be collected and distributed to NCEP and NARUC members.

The Center for Energy, Economic and Environmental Policy will lead this task with support from MEC. The National Council on Electricity Policy (NCEP) and National Association of Regulatory Utility Commissioners (NARUC) will be involved in the outreach activities in this Task.

Project Tasks, Status, and Deliverables

Last Updated: 10/24/06