Article by:
Davis Giles, Dover Janis
August 15, 2023
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When Policy Contradicts Physics: Unpacking the VNEM PD with Data

The California Public Utility Commission (CPUC) has tied itself in a knot, according to its recent findings in the VNEM PD which directly contradict accepted laws of physics. While Finding of Fact 45 states that sending the right price signals to the tariff customers would provide more benefits to the grid, Finding of Fact 25 contradicts this by suggesting that onsite consumption of renewable energy isn't a necessity for multi-tenant properties. This not only goes against the first principles of energy physics by claiming electrons do not follow the path of least resistance but also encourages behavior that could harm the grid. This is because the tariff design under the ACC price does not factor in the customers energy consumption in the value of onsite resources, which disaggregates onsite supply from onsite demand, ultimately telling customers there is no correlation between the onsite generation and their net load impact on the grid. 

The main cause for concern? Based on the proposed decision, if multi-tenant properties shift their energy use using solar and storage to support the grid, it would not have an effect on the financial benefits gained. Without a financial benefit, this would deter multi-tenant properties from grid supportive behavior and in effect have a negative impact on the grid and all ratepayers. Essentially, the proposed decision encourages anti-behavior that works against the objectives of Finding of Fact 45, and is a missed opportunity to benefit the grid through rate design.

What behavior are we talking about? Simple things like:

  1. Charging cars at better times that don’t rely on the grid imports.
  2. Running central building load when solar is available.
  3. Shifting peak time loads to better times that don’t rely on the grid imports.
  4. Automating appliance use during better times that don’t rely on the grid imports.
  5. Most importantly - Programming a battery to store surplus solar power and discharge it to avoid use of grid imports.

Real-World Data Analysis

Given the CPUC’s decision to label all energy generated from onsite solar and storage as ‘exports’ to the grid compensated under the ACC rates, Ivy took the initiative to model the potential impact. Utilizing real meter readings from a 130 unit apartment complex with a 375 kW solar array in California operating under the current VNEM tariff, Ivy simulated a 750 kWh battery paired to the solar array operating under various control logics.

Grid Implications of the ACC Rates

Using a battery controller optimized for self-generation value as provided by the ACC rates, Ivy aimed to understand how this would truly impact the grid and the CPUC's objectives.

The results were telling. The ACC price signal creates a convoluted communication line between the generator and load. As previously found on the record, the laws of physics such as Kirchhoff's voltage and current laws, apply to VNEM systems. This means that when onsite generators (solar+storage) are producing energy the electrons follow the path of least resistance and serve onsite loads before exporting to the grid. In the recent PD, the CPUC is designing the VNEM successor ignoring these fundamental principles. This directly explains the discrepancy in the grid beneficial behavior of a VNEM system maximizing its value with the ACC price as a signal because it does not have to consider its net-load impact on the grid when producing energy.

The Potential of Netting

A different approach, disregarded by the commission, is to simply net the energy based on the physics, that is to consider that energy generated onsite up to the energy consumption onsite is consumed onsite, and any generation greater than consumption is exported. Here, the battery maximizes onsite consumption, taking into account the actual load of the 130 benefiting accounts and the net-load impact of the property on its grid connection.

This strategy sends a clearer signal to both generator and load activity, ensuring a smoother 'duck curve' at their grid interconnection point. The resulting balance and demand planning benefits all ratepayers by avoiding costly transmission and distribution upgrades.

How does it do this? By reducing max energy demand in most months as well as reducing ramp rates and  peak power demand needs for this community.

Introducing the Hybrid Controller

However, it's not all black and white. Ivy explored a 'hybrid' approach, melding the ACC price signal with self-consumption. This controller adjusts its strategy depending on the month, promoting self-consumption for most of the year but switching to the ACC method during peak grid use months (August and September).

Quantifiable Grid Impacts: A Comparative Analysis

To understand the true implications of each controller, Ivy studied the net-load profile impacts. The key considerations:

Maximum Average Hourly Demand: By comparing just a solar system with a combined solar and storage system, it was observed that, for every month barring August and September, the ACC battery controller placed a higher maximum average hourly demand on the grid than self-consumption controllers.

  • Average Ramp Rate Between 4-9PM: Across all months, except August and September, batteries controlled by ACC exerted significantly more pressure on the grid during peak hours than those optimized for self-consumption.

In Conclusion

The CPUC's findings seem to be at odds with practical implications for the grid and ratepayers. Ivy's analysis demonstrates the potential challenges and offers easy alternatives to avoid negative impacts. It’s clear that any decision will have widespread implications, not just for the future of California's energy, but for ratepayers and the stability of the grid.

If you are interested in digging into the analysis in detail, go to this link.