IEEE Power & Energy Magazine - May/June 2016 - 73

An economist would argue, correctly, that storage investment will only occur up to the point that the remaining
arbitrage value allows recovery of the investment over
time. However, an investor who believes that storage technology will continue to improve and realize lower costs
will be wary of seeing the monetized value disappear. Only
very short paybacks will be acceptable if there is not some
guarantee of revenues over time. This brings us back to the
argument for capacity markets or longer duration purchase
power agreements made above.
The big unknown in understanding how things will play
out is trying to predict how independent investors and consumers will react to incentives and the market opportunities
in terms of increased/altered DER investments. For instance,
anything that makes PVs more attractive economically will
increase adoption since consumers look at the energy economics and payback closely. But the decision to buy an EV
is probably not going to be influenced much by DSO market economics; the cost of electricity isn't anywhere near as
big a factor in the consumer's decision to buy a Tesla or a
Chevrolet Volt as compared with range, charging time, and
the propensity to go green. While we can hope to understand the DER economics under different policy scenarios
and estimate customer adoption based on payback period,
we would have a more difficult time estimating the green,
convenience, or cool factors. We also know that new technology adoption tends to cluster. If your neighbor installs

PV panels or buys an EV and likes it, one can argue that
you are more likely to follow. However, that isn't necessarily beneficial to the grid.
The DR markets are ones where the interplay of energy
economics and convenience factor or opportunity cost has
played out and some experience has been gained, especially
in the customer sector. Commercial establishments such as
large retail stores do look at energy economics and will participate in DR if it makes economic sense, but only if it does
not adversely impact the core business. For instance, big box
stores understand very well that on really hot days, customers
will stay longer in the store if the air-conditioning is colder
rather than not, and there are more sales due to the increased
time in the store. This motivates against DR. Conversely, if a
big box store discovers a way to reduce consumption for DR
purposes, it will immediately look to see if that reduction can
be put into effect all the time or most of the time to realize
greater savings but eliminating the DR potential.
Another important dimension to the DER cost benefit ecosystem is the DER impact on wholesale market economics.
Some DERs such as PVs are highly variable and may or may
not correlate exactly with peak load. Thus, we have the infamous California ISO's "duck curve" shown in Figure 2 that
has a dip in net load in the afternoon as PV production peaks
and wind production is low, followed by a steep rise in the
early evening as PVs drops off and customer load picks up
with evening air-conditioning.

Typical Spring Day
28,000
26,000
24,000
22,000
2012
(Actual)

Megawatts

20,000

2013 (Actual)

18,000

2014
2015
2016
2017

16,000
14,000

2018
2019

12,000

0
12 a.m.

2020

Overgeneration
Risk

10,000

3 a.m.

6 a.m.

9 a.m.

Ramp Need
~13,000 MW
in Three Hours

Net Load 14,160 MW
on 5 April 2015
at 15:46
12 p.m.
Hour

3 p.m.

6 p.m.

9 p.m.

figure 2. California ISO's "duck curve."
may/june 2016

ieee power & energy magazine

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