Are Non-Wire Alternatives Reducing the Need for Infrastructure Investments?
by Bob Shively, Enerdynamics President and Lead Facilitator
“The need to replace aging electric grid infrastructure amidst rapidly evolving utility roles, customer demands and improved distributed energy resource (DER) technology is clear. Utilities – and others – are exploring lower cost, higher consumer and environmental benefit solutions with non-wire alternatives (NWA)." [1]
Utilities across the U.S. are getting hit with a double whammy when it comes to grid costs. Aging infrastructure needs to be replaced to maintain reliability while the changing electric grid requires significant modernization investments in communications, monitoring, IT systems, and automation. Grid infrastructure upgrades can be expensive. For example, Xcel Energy plans to spend more than $1.8 billion over a 10-year period to upgrade its facilities in eight states including Colorado, Minnesota, and Texas:
Source: Xcel Energy East Coast Investor Meeting Presentation, February 26-27, 2018
As infrastructure needs rise, utilities will find themselves pressured by regulators and consumers to keep costs as low as possible. One strategy is to utilize the growing number of customer- or third-party-owned distributed energy resources (DERs) as an alternative to constructing utility facilities. This approach is most commonly called non-wires alternatives (NWA) but is sometimes called non-wires solutions or non-transmission alternatives. Non-wires alternatives are defined as:
“an electricity grid investment or project that uses non-traditional transmission and distribution (T&D) solutions, such as distributed generation (DG), energy storage, energy efficiency (EE), demand response (DR), and grid software and controls, to defer or replace the need for specific equipment upgrades, such as T&D lines or transformers, by reducing load at a substation or circuit level.”[2]
The key to NWAs is that consumers benefit from lower rates due to less utility investment. In many states regulators are exploring or have implemented ways to share some of those benefits with utility shareholders so that both parties are incented to pursue such projects. Let’s look at a hypothetical example of a non-wires alternative (NWA):
- Due to load growth, the utility needs to expand a distribution feeder at a cost of $50 million
- As an alternative, a third party offers to provide an aggregated battery storage project for a 10-year contract with a full-life cost of $30 million
- The utility saves $20 million of overall expenditures but foregoes earnings on capital investment
- In return, the CPUC allows the utility to put 4% x $30 million into the ratebase
- The result is the utility earns a rate-of-return (profit) on the contract cost, while ratepayers see lower rates than the alternative
Source: Enerdynamics, The Future of the Utility seminar materials
So NWA sounds great in concept, but does it really work? Here are a few successful examples that have been implemented across the U.S.[3].:
| Project |
Grid issue |
Traditional solution |
NWA solution |
Active date |
| Arizona Public Service Punkin Center, Arizona |
Thermal constraint on a distribution feeder |
Rebuild 17 miles of distribution line |
Deploy a 2 MW, 8 MWh battery system to provide energy during peak hours |
2018 |
| Con-Ed Brooklyn Queens Demand Management Plan, New York |
Sub-transmission feeder constraint |
Build a new substation |
Implement 52 MW of load reduction using energy efficiency, demand response, distributed generation, distributed storage, and conservation voltage optimization |
2014 |
| Consumers Energy Swartz Creek Energy Savers Club, Michigan |
Distribution constraint |
Upgrade a distribution feeder |
Implement 1.4 MW peak load reduction using energy efficiency and DR |
2017 |
| Southern California Edison Distribution Energy Storage Integration, California |
Distribution constraint |
Upgrade a distribution feeder |
Contract with a third-party to provide a front-of-meter battery energy storage system |
2015 |
Implementation of non-wires solutions require changes in regulatory practices and in utility planning processes. This will take some time. But while current uses of NWA are limited to a few examples, we can expect it to be a growing strategy for upgrading utility grids while containing costs.
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