Task Force Feature: Building the Fractal Grid - Release #2
Digging into Non-Wires Alternatives with Kyle Baranko
Hey there Task Force! As promised, we are excited to publish Parts III and IV of Kyle Baranko’s Building the Fractal Grid as a follow-up to Parts I and II released on Tuesday. If you haven’t gotten around to Parts I and II, we recommend stacking up all 4 for a great weekend read!
The tyranny of peak load – Data is the new copper – Telemetry hardware
As mentioned in Part II, unlocking the full value that Distributed Energy Resources (DERs) can provide to the distribution system depends on real-time awareness of infrastructure constraints. In turn, the Distribution System Operator’s (DSO) degree of visibility into these constraints and operating parameters depends on how well they can infer the state of the electrical network from available data, a technique called “state estimation”. The quality and comprehensiveness of the data generated from the system’s telemetry equipment is paramount to determining how close the DSO’s digital representation captures the physical reality of the network.
The ultimate goal of state estimation is to establish electrical connectivity between nodes in the network. In other words, the inferred state needs to reconcile the electrical relationships between all the meter sockets, secondary wires, service transformers, primary wires, fuses, jumpers, switches, feeder breakers, substation buses, and finally, substation transformers in the distribution network, each of which has the ability to redirect or modify power flow and therefore change relationships. This level of awareness is critical for system optimization because it enables the DSO to attribute value and fair compensation to load shaping. Without knowing which feeder breaker a home is drawing power from at the moment the price signal is sent, the DSO cannot determine whether load shaping from the home’s battery would alleviate the target constraint or have unintended impacts elsewhere. Without detailed state estimation, DSOs don’t know whether DERs are doing what they are getting paid to do.
Today, utilities have selective real time visibility into important larger junctures in the network, like substations and some medium voltage switches, but minimal real time visibility into meter data at final points of consumption and often no visibility at all into the intermediate nodes in the network, like secondary transformers and line switches. Some utilities have not even rolled out AMI across their full service territories (currently around 75% of consumers have AMI) and even fewer make real-time usage data available to customers (only 2.9% of federally-funded smart meters have this capability, according to Mission: Data).
Topological awareness – monitoring the path and status of lines – is even more desolate, as the geo-coordinates of every line and status of every switch and feeder breaker are often unrecorded or belately recorded in digital models of the network. Some electrical infrastructure generates data from Supervisory Control and Data Acquisition (SCADA) systems and can be updated remotely, but most of the essential and sometimes improvisational adjustments that linemen make to jumpers, switches, and elbows on a week-by-week basis evade the digital model, despite having severe implications for electrical topology and connectivity. These challenges grow with the complexity of the network; the percentage and quality of telemetry coverage deteriorates as the quantity of nodes, interlocking switches, and junctures increase. Some feeders even tie back to themselves. Any digital model hoping to lay the foundations for state estimation must accurately capture this complexity and quickly respond to every lineman, tree, or snowplow that advertently or inadvertently changes topology (and therefore power flow).
However, the biggest challenge could be that the hardware that has been deployed might not be capable of generating data with sufficient granularity to establish electrical connectivity between nodes. Most smart meters and SCADA systems are asynchronous, meaning they can measure volt and amp magnitudes but not the phase angles of the alternating voltage and current. Some argue that asynchronous measurements can only determine how much power is flowing through a given node, not where that electricity is coming from; therefore only synchronous measurements, which record phase angles, can enable the DSO to determine which upstream transformer a meter is electrically connected to at a given point in time.
Phasor Measurement Units (PMUs) are a telemetry technology that records voltage, current angles, and magnitudes of every present electric phase of an alternating current at a frequency measured in milliseconds. Theoretically, assuming there is a PMU at every node, electrical connectivity between nodes can be calculated by comparing their phase angles, making it possible to reliably link meters to upstream feeder breakers or transformers. Although PMUs have actually been around longer than their more prevalent counterparts, they are more expensive, and as a result only a fraction of smart meters and telemetry hardware installed by utilities have the capability to take synchronous measurements.
Due to these data and telemetry challenges, state estimation has largely been confined to academic papers and the transmission system. On the bulk grid, every node above 230 kV is equipped with the telemetry equipment needed to produce input data for the power system optimization software used by ISOs. Although it is unclear what connectivity awareness exists below the microgrid demarcation, resiliency service providers at the consumer level always install the requisite telemetry and controls required to ensure 99.99% uptime at reasonable cost to the socially-essential hospitals and… hydroponic cannabis farms they service. Even residential products sold by companies like Span and Sense market visibility within the home as a defining feature and selling point.
The distribution grid represents the hardest technical and collective action problem. The smaller the lines, the more likely switches are opened and closed without any digital representation and the less likely telemetry coverage is close to sufficient. As a result, distribution planning runs primarily via static reports, DER interconnection is done via manual, bespoke projects, and real time operation is highly conservative and ruled by the extremes at the upper tail of the distribution. With minimal awareness, operators responsible for reliability have to assume the worst, creating tyranny by static, maximal ratings where constraints and their corresponding price signals are updated infrequently and set almost exclusively by peak load events.
However, some startups are betting that advances in software and machine learning can help distribution system operators roll back a bit of fogginess and capture unrealized value even without PMUs at every node.
Kevala provides data-driven distribution planning services for utilities, and in doing so, is amassing the data required to build a "1:1" map of the grid capable of running power flow analysis down to the service point level, a critical first step towards state estimation. It seems natural that automated interconnection and active network management would live within the same data ecosystem, and as outlined in “The Digital Rate Case” by Jake Jurewicz, analyzing, siting, approving, and efficiently managing DERs via one service offering is a great product experience for developers, utilities, and regulators alike.
Camus, like Kevala, is selling directly to infrastructure owners but focused on real-time management for smaller municipally-owned utilities before expanding to investor-owned behemoths. Inspired by recent advances in distributed computing, their product is focused on providing the operational visibility and decentralized control required to coordinate DERs owned by multiple independent parties.
Both companies, as well as established players like Palantir and GoogleX, are approaching the visibility gaps from different angles and could eventually be well-positioned to approximate the state of a distribution network with enough granularity to realize the vision of a fractal distribution grid, especially with potential hardware partners like SunRun and Sunnova already planning on building community microgrids. However, state estimation will advance the frontier of awareness only to the point where the marginal cost of additional granularity exceeds the marginal value provided by intelligent DER coordination. Some see distribution-level price signals as contingent on complete deployment of PMU telemetry because without the ability to couple meters to upline feeder breakers and transformers, the DSO cannot have faith that a specific action will alleviate the targeted constraint nor could they properly compensate DERs for load shaping behavior. Regardless, the point of diminishing returns may arrive sooner than anticipated unless utilities install more telemetry hardware. Even then, the overhead required to continuously run these types of markets at the distribution level might be cost-prohibitive.
Despite the technical and economic risks, the biggest open question of all rests with institutional barriers to entry. Ultimately, we can never know if this vision will work without the buy-in from those who own, operate, and control distribution infrastructure in the US: utilities. Do they have the capability, and the motivation, to build the distribution grid we need?
Institutional inertia – Units of fracturing – What to build?
“Infrastructure, and the institutions that support them, lag behind.” — Gretchen Bakke
The standard decarbonization template is to electrify the energy-intensive sectors of the economy currently dependent on fossil fuels and shift electricity production to renewable resources. Electrifying heating, transportation, and industrial processes will dramatically increase demand, requiring utilities to build substantially more lines, substations, and generation capacity at the grid edge to serve new load as efficiently and resiliently as possible. Whether the current institutional environment will facilitate construction of this grid, at least to the magnitude required for the energy transition to occur, is controversial.
Two friends walk into a bar. Tyler DERden builds dope microgrids at the grid edge and has a fairly deep interest in cryptocurrency and past energy transitions. He hates franchise rights and is a bit cynical and skeptical of those in positions of power. DERblius is a wonky (in a good way) power systems optimization modeler from MIT who has been working on capacity expansion models and considering cost allocation on decarbonized grids for a long time. She dabbles in political philosophy in her free time and generally has faith in institutions but is not naive.
Tyler DERden: Derb! Great to see you. Did you read that essay about data and the challenges of building on distribution grids?
DERblius: Sure did, Tyler. That fractal stuff was kind of out there but I think I got the gist of it. My first thought is that this information asymmetry on the distribution grid, or rather the lack of any trustworthy information at all, makes it hard to know whether our DER Bill of Rights is being violated. We can’t enforce rights like “reasonable interconnection times” without the requisite data. What are your reactions?
Tyler DERden: It got me heated.
DERblius: Yeah, I saw that coming.
Tyler DERden: To me, this series illustrates that the top-down management of the distribution grid disincentivizes the build-out of a truly distributed, two-way network and puts an arbitrary ceiling on distributed generation. We have a pure market for on-site resilience at the grid edge and imperfect but functional wholesale markets, but the monopoly for delivery, interconnection, and distribution of power is a black box whose inefficiency is now leaking out in the form of high delivery costs and painful interconnection processes. We need to find a way to put the infrastructure for power delivery in the hands of the people and the market because the current institutional environment impedes beneficial evolution.
DERblius: I don’t think setting everyone loose tinkering with the most complicated machine in the world is a good idea. Private and decentralized development of substations and wires would be bedlam. You’re underestimating how difficult it is to link the physics of a power system to a financial market; distributing electricity is, and will remain, a natural monopoly.
Tyler DERden: The logic of this monolithic natural monopoly is unwinding before our eyes. The reason we have such limited awareness on the distribution grid, a masochistic interconnection process, and nonexistent NWA opportunities is because utilities only care about what they can rate base, which tend to be big infrastructure projects.
DERblius: To be fair, we have seen regulators force utilities to rate base new types of infrastructure, like smart meter rollouts.
Tyler DERden: True, but even if they can legally rate base more complex operations they are still not built to do it well. In fact, they have no financial incentive to spend intelligently at all, or record a timely, accurate inventory of the assets they own, or provide quality services and products for the litany of private companies, non-profits, and consumers that are forced by law to depend on them to get anything done.
DERblius: We can selectively introduce markets and add transparency to existing institutions by providing utilities with the hardware, telemetry, data and software tools they need to build faster and more efficiently. But I don’t think the model that has worked for a century is fundamentally broken. Even the mesh network of the future will be a natural monopoly, and therefore the assumptions underpinning key laws like franchise rights will hold true. The solution is to leverage more direct political pressure, better research, and new regulatory structures align incentives and provision services from innovators like Camus and Kevala, who are systematically breaking down every reasonable excuse a utility might have to not do something.
Tyler DERden: I don’t think an adoption model dependent on regulatory pressure can create the hockey-stick growth curve we need. Investor-owned utilities routinely manhandle regulators because their shareholders have a vested interest in providing them with the resources required to maintain the status quo.
DERblius: I think you’re casting a lot of good, hard working people as ill-intentioned. Plus, not all utilities are made equal. Smaller and municipally-owned co-ops and utilities like Green Mountain Power have made great progress. There is much better incentive alignment when the person running your power grid is your neighbor.
Tyler DERden: I don’t think they’re ill-intentioned, but on a macro-level, the incentives and logic of this techno-economic system only allow marginal changes and peripheral tinkering. We need to think in orders of magnitude and big paradigm shifts, which are brought into existence via carrots, not sticks. Every exponential technological transition we’ve had in the past was stimulated by willing adoption of products and processes undeniably better than their alternatives; if we are to create a fractal grid and decarbonize fast enough to address climate change, we need to realign the institutional environment.
DERblius: What you’re missing, and what that fractal guy didn’t dive into deep enough, is how institutions scale differently than physics, which makes it much more difficult to implement the solutions you envision on the distribution grid.
Tyler DERden: Ah, enlighten me.
DERblius: As mentioned in those earlier essays, we’ve seen the most change at the highest and lowest levels of the grid. On the bulk grid, we largely broke up vertically integrated utilities and introduced various types of market products to reduce costs but still have a single orchestrator that steps in unilaterally as a last resort. Change slogs through a sort of oligarchy consisting of political appointees, stakeholder advocacy groups, private lobbyists, utility commissions, etc. which requires an enormous amount of cooperation just to function, nevermind initiate change, and as evident by Winter Storm Uri, things still break.
Tyler DERden: Things will always break because they’re inherently unpredictable externalities, which is why we need resiliency at the grid edge.
DERblius: Right, and we’re starting to see people and organizations take power into their own hands by deploying DERs and microgrids to hedge that risk. These independent actors have strong motives and the means to “exit” the grid. But the intermediate section of the grid reflects the “community” level, which has limited grassroots gusto in its ability to exit, small amounts of power and money flowing through its poles and wires, and the most difficult technical challenges. This makes it the hardest collective action problem, which is why we’ve underinvested in it, and therefore requires a top-down solution. It’s a public good.
Tyler DERden: What I’m hearing is that markets always generate data sufficient for their existence but the telemetry, hardware, and data processing investments required to safely run wholesale markets stop above the distribution sinks. We see underinvestment in the remaining delivery infrastructure precisely because we didn’t expand markets past the arbitrary threshold where monopoly delivery service begins.
DERblius: Three points. First, the threshold isn’t arbitrary. Second, you’re conflating markets for energy and ancillary services with markets for building infrastructure. There are no markets for building infrastructure and adding transmission is arguably just as painful and opaque as adding feeders and substations.
Tyler DERden: I think that’s somewhat debatable because of market products on the transmission grid like Financial Transmission Rights (FTRs), where participants pay for the right to transmit electricity and therefore have incentives to optimize power flow. If the constraints create enough price pressure, there is a market-based mechanism to justify building a new line.
DERblius: Perhaps. My main concern, however, is about the disparities in power, money, and value flowing through the bulk grid vs. distribution grid. Microgrids have lower coordination costs because there is one independent actor procuring resilience; bulk grids have higher coordination costs but a few independent actors with huge financial incentives and political power. The distribution grid contains many independent actors with limited interest in participation, high coordination costs, and proportionally lower value per transaction. The cost of administering a market at this level is not worth it. It’s working against one of the most powerful laws in the universe: returns to scale.
Tyler DERden: I see a few reasons why the window for decentralization and more market constructs may yet crack open. The rise of variable, zero marginal cost energy production has raised the relative importance of delivering power at the exact time and place it is needed, rather than simply generating it cheaply. This makes our outdated process for building delivery infrastructure increasingly burdensome on consumers and magnifies the importance of optimizing the flow of electricity through existing wires and building quickly. Additionally, the growing importance of resiliency at the community level and technological breakthroughs from software players like Camus and Kevala, as well as hardware players like SunRun and Sunnova, could create the political opportunity for a CCA-like movement of distribution infrastructure ownership. If technology can make mini-ISOs financially viable, I can imagine many smaller T&D and generation owners springing up yet remaining interconnected using the common standards and equipment enforced by regulators today.
DERblius: Who exactly owns the infrastructure? And who, or what, coordinates the market activity of so many houses and service providers in a neighborhood? Moving up the distribution grid from single party microgrids to community microgrids with many independent parties will have seriously high standards for transparency and fairness in an environment where stakeholders, namely, individual homes and business owners, will have minimal appetite for understanding and advocating for their own interests.
Tyler DERden: A community fund with consumer shareholders owns the substations, poles and wires, independent actors and service providers own the generation and load flexibility assets, and the futuristic ADAS providers like Kevala or Camus compete to manage the network, market, and mini-RFPs.
DERblius: How do you ensure the entity providing the DSO service, building infrastructure, and running the market does not abuse its power? You’re proposing the same information asymmetry the utility has today with less regulatory oversight.
Tyler DERden: Transparency will be the market standard. Communities with the most at stake, such as those threatened by wildfire shut-offs, will invest in auditing the service provider. Eventually, we might even have decentralized coordination and decentralized control so no central party would have to be trusted.
DERblius: Sounds like crypto-babble.
Tyler DERden: Imagine all members of the community microgrid using their computers to solve the state of their distribution network, getting rewarded for it, and having the means to validate power flow calculations and payments. You could even provide fractional ownership and governance of all the poles and wires to create added rationale for not violating constraints. Who wants to damage something you own?
DERblius: Idealistic and cool… in theory. Sounds like Bitcoin but instead of solving math riddles with no purpose you’re using that computational power for something useful. Anyways, it still sounds like an expensive and risky way to deliver a public good. Plus each community’s grid is a snowflake.
Tyler DERden: Ah, baiting me with a jab at Bitcoin’s energy consumption. Anyways, that’s why I think if this is to occur, the most likely approach is for a microgrid developer to aggressively provide off-grid services for commercial and industrial loads and co-located power production. An industrial campus with a few independent actors has a strong incentive to audit their mini-market and ensure power and resilience is traded fairly and efficiently. In this way, the microgrid operator would genuinely be acting like a utility by setting rates and owning delivery infrastructure.
DERblius: Ah, so if they can drive down the cost of this service they could attack the distribution grid market from the outside-in, pending the regulatory revolution you anticipate. But I still don't see how that necessarily means that it has to break the utility’s natural monopoly. With better performance-based regulation, utilities would pay this company to deploy a community-level microgrid, as they would pay Kevala or Camus.
Tyler DERden: True. But I think the lack of a utility incentive to provide cost-effective community resilience breaks the natural monopoly model.
DERblius: That's where we disagree, although I think we see different means converging to the same end.
Tyler DERden: Agreed. Now let’s finish our beers, we are going to be late for the DERTFest 2022!
Thank you to Bryce Johanneck, Elias Hatem, Colin Bowen, Jake Jurewicz and the DERTF community admins for their valuable feedback on earlier versions of this essay series.