Distributed Generation (DG)
for Resilience Planning Guide
Distributed Generation (DG)
for Resilience Planning Guide
The electric grid is increasingly under pressure from natural disasters and physical attacks that can have profound physical and financial consequences. Government officials, military leaders, decision makers, policy makers, and disaster preparedness planners have become increasingly aware of the need to protect critical infrastructure facilities and to better prepare for energy emergencies. After critical infrastructure sites have been identified for protection, an important next step is evaluating options available to enable a faster response to disasters when they occur, mitigate the extent of damage and suffering that communities endure, and speed the recovery of critical functions. Access to energy is a high priority for ensuring critical facilities can continue to deliver services and assist in recovery, especially in the event of an unplanned grid outage.
Most facilities currently rely on diesel generators for backup power in the event of a grid outage. They are the default for emergency backup power and have provided critical power and enhanced resilience for many facilities. However, there have been cases where diesel generators have not performed as expected for a variety of reasons. Generators have failed to start or experienced mechanical failures in emergency situations due to lack of regular use or ongoing maintenance. They are also limited by the amount of fuel that can be stored on-site or trucked in during a disaster. Energy-efficient distributed generation, such as CHP, and onsite renewables, can solve many of the challenges with traditional approaches to back-up generation. Distributed systems provide electricity at or near the point of use and can be equipped to ensure uninterrupted power during unexpected outages, which provides safety and security during emergencies. In general, distributed energy systems that run consistently throughout the year are more reliable in an emergency than a backup generator system that only runs during emergencies. Energy efficiency is also an important consideration for enhancing resilience and enabling the integration of distributed resources at critical facilities. By lowering overall demand and decreasing backup power needs, energy efficiency investments enable optimal sizing of distributed systems so they achieve the highest efficiencies and greatest cost savings, while improving energy resilience.
As identified in the National Academies report on Enhancing the Resilience of the Nation's Electric System, no single entity is responsible for, or has the authority to implement a comprehensive approach to assure the resilience of the nation's electric system and a local process is needed to develop an integrated perspective that addresses a number of needs at critical infrastructure. At the state and local level, and throughout the many U.S. federal facilities and military bases worldwide, many decision makers and policy makers already integrate resilience considerations in planning priorities across a number of existing functions, such as emergency preparedness, energy assurance plans, and hazard mitigation strategies. These efforts often prioritize critical infrastructure, as directed by federal guidelines for implementing the Nation’s Infrastructure Protection Plan (NIPP) and developing plans to manage risk at critical infrastructure. Improving and advancing resilience requires coordination among a number of stakeholders including government emergency planners, facility operators, and the electricity sector. For stakeholders that are new to resiliency planning, several approaches are described in the following resources:
Some states, local governments and military institutions have initiated resiliency planning from a post-disaster point of view, developing strategies for providing recovery and relief after a significant disruption. Other approaches to resiliency planning have focused on pre-disaster planning and preparedness, providing guidelines for enhanced preparation and response for all types of natural and man-made emergencies. While not all planning exercises address the same factors, the examples below demonstrate how a few states and cities are identifying and addressing the resiliency issues most important to them within a planning process:
A number of market and regulatory factors at the state and utility service territory level impact how and where distributed generation is deployed during normal operations. Consideration from policymakers in the fundamental areas described below can help encourage the use of distributed technologies generally, and lead to increased opportunities to enhance resiliency of critical infrastructure. Several of these key policies are common across most distributed generation technologies, such as the ability to interconnect to the grid, how utility rates and tariffs are applied, and opportunities to access financial incentives through clean energy programs. Other policies may apply only to CHP, such as air permitting requirements. The following section summarizes policies common to distributed generation and, in some cases, provides specific examples related to CHP. For more detailed information on each of these policy areas, including best practices examples and policy recommendations from leading states, see the Next Steps portion of the Take Action section.
Interconnection is the process of connecting a distributed energy resource to the electric transmission or distribution grid, which gives facilities with onsite generation the option to purchase power from the grid or to use their onsite generation. Interconnection standards are procedures that must be followed by system owners and utilities to ensure the protection and safety of the larger distribution grid. Historically, utilities have managed the interconnection process and some require complex and costly studies that have discouraged distributed generation. However, many states have begun to require interconnection procedures that promote broad participation by utilities and customers. For more general information, see the Regulatory Assistance Project's report, Interconnection of Distributed Generation to Utility Systems: Recommendations for Technical Requirements, Procedures and Agreements, and Emerging Issues. The American Council for an Energy-Efficient Economy (ACEEE) tracks how interconnection standards apply to CHP on a state-by-state basis and identifies best practices of leading states.
Standby rates are charges typically paid by commercial and industrial customers that operate onsite generation systems, but remain connected to the grid in order to access services from an electric utility such as supplemental, standby, and backup power. Without appropriately designed rate structures for these services, the financial viability of a distributed generation project can be significantly reduced. For example, standby rates that primarily use fixed customer charges or ratcheted demand charges, rather than energy charges, significantly reduce the financial viability of a CHP project. For more information, see the National Regulatory Research Institute’s report, Electric Utility Standby Rates: Updates for Today and Tomorrow and the Regulatory Assistance Project’s report, Standby Rates for CHP Systems, which examines utility standby rates for CHP in five states.
Net energy metering (NEM) is a method that adapts traditional monthly metering and billing practices to compensate owners of distributed generation facilities for electricity exported to the grid. The customer can offset the electricity they draw from the grid throughout the billing cycle. The net energy consumed from the utility grid over the billing period becomes the basis for the customer’s bill for that period. The level of compensation varies by state, depending on the policies in place. For more general information about net metering, see NREL's technical assistance page on Net Metering. EPA's CHP Policies and Incentives Database specifically details state net metering policies that apply to CHP.
Clean energy portfolio standards, such as Renewable Portfolio Standards (RPS), Energy Efficiency Resource Standards, and Alternative Energy Portfolio Standards, set goals for clean energy deployment and have promoted the use of distributed energy technologies. Due to its high efficiency, several states have included CHP in their portfolio standards. For more general information on renewable portfolio standards, see NREL's technical assistance page on Renewable Portfolio Standards. The EPA CHP Partnership’s report, Portfolio Standards and the Promotion of Combined Heat and Power, details how portfolio standards can specifically encourage CHP.
A variety of incentives to encourage distributed energy and energy efficiency can be offered at the federal or state level. For example, some states offer tax credits based on a percentage of system costs. Others provide grants, low-interest loans, bonds, or other forms of financial assistance that help cover capital or other costs associated with deployment. For more information, the Database of State Incentives for Renewables and Efficiency (DSIRE) provides information on programs that offer incentives for renewable distributed generation. EPA’s CHP Policies and Incentives Database and ACEEE’s State and Local Policy Database track significant state policies and financial incentives related to CHP. Some states also assist by organizing activities that help educate stakeholders about distributed technologies by hosting outreach events, leading workshops, and facilitating working groups.
Some utilities implement programs that help their customers save energy or generate clean energy by providing incentives, rebates, or technical assistance for distributed generation and energy efficiency. Depending on the utility's goals, programs may be designed specifically to encourage energy efficiency measures, CHP systems, or solar installation at their customer’s sites, which help with cost savings or new generation options for both the customer and the utility. For example, Baltimore Gas & Electric offers incentives for the design, installation, and production phases of CHP projects development for their customers.
Distributed generation systems that use prime mover technologies must also meet air permitting and other emissions requirements. Some states have streamlined air permitting procedures that can help reduce the time and cost involved in permitting eligible technologies, such as CHP units, in recognition of its efficiency and environmental benefits. In addition, adopting output-based emissions regulations are more effective ways to regulate air emissions from CHP than traditional input-based standards.
When installing distributed generation systems, facilities are required to obtain permits from local authorities to ensure the system is constructed and operated in compliance with local and state regulations. Coordination among agencies, such as the city or county planning agency, fire department/authority, building department, environmental health department, and others can be challening and is important to project success. For more information, see EPA's guide to CHP Siting and Permitting Requirements.
States most directly affected by natural disasters have become good models for how to approach policies that enhance energy resiliency. For example, a series of storms including hurricanes and flooding have exposed significant vulnerabilities to infrastructure along the Gulf Coast, motivating Texas and Louisiana to develop legislation that would protect critical facilities from future disruptions. Similarly, several East Coast states impacted by Superstorm Sandy including Connecticut, Massachusetts, New Jersey, and New York have since initiated state programs aimed at increasing resiliency.
Many existing state policies focus on allocating funding for implementing energy resiliency projects, which is a strong driver because it helps compensate facilities for the additional costs associated with designing systems that can continue operating during a grid outage. However, other approaches such as state energy assurance planning, resiliency roadmap exercises, and stakeholder education and awareness-building, can also be effective strategies. The American Council for an Energy-Efficient Economy (ACEEE) identified several Indicators for Local Energy Resiliency, which may help decision makers set goals, inform plans, and develop policies to increase the energy resilience of their communities.
The following section briefly summarizes how some leading states have specifically addressed distributed generation technologies in their policies to enhance resiliency in critical infrastructure. For additional information on various approaches to developing resiliency policies and programs, see Resilient Power: A Guide to Resilient Power Programs and Policy.
The Department of Energy and Environmental Protection (DEEP) has passed a number of bills to support distributed energy generation at critical facilities. Public Act No. 12-148 established a Microgrid Grant and Loan Pilot Program to support the development of microgrids powered by CHP and onsite renewables. Many of these projects may also be eligible for financing from the Connecticut Green Bank. Another law, Public Act 17-144, provides support for fuel cell projects that incorporate CHP and enhance the reliability and resiliency of the electric grid.
The Community Clean Energy Resiliency Initiative is a $40 million grant program that supports the use of clean energy technology solutions to protect communities from interruption in energy services due to several climate events. Grants help cover a variety of costs, including the cost of adding black start and island mode capability to CHP systems located at critical public facilities. Funding for the program was provided by Alternative Compliance Payments, which are paid by electric retail supliers with insufficient credits to meet their compliance obligations under the state's Renewable and Alternative Portfolio Standard programs.
New Jersey launched the country’s first Energy Resilience Bank (ERB), a resiliency financing initiative aimed at funding distributed energy technologies, including CHP, at critical facilities. The bank was created using $200 million of Community Development Block Grant-Disaster Recovery funds allocated to New Jersey by the U.S. Department of Housing and Urban Development (HUD). For CHP, the ERB financed all costs associated with resiliency, including black start components, interconnection costs, flood-proofing, and third-party service contracts. The first project to receive funding approval was the installation of a CHP system at St. Peter’s University Hospital in New Brunswick. The program was fully subscribed and is no longer accepting applications.
The New York State Energy Research and Development Authority (NYSERDA) provides incentives to support CHP for resiliency through it's CHP Program. Systems are required to have the ability to operate during grid outages in order to be eligible for funding. The base incentive through the program is increased by 10% if the CHP system is installed to support critical infrastructure. NYSERDA is also leading the NY Prize Community Grid Competition, which provides funding to study the feasibility and implementation of microgrid projects, the majority of which include CHP systems integrated with other distributed energy technologies and energy efficiency.
Texas (HB 1831; HB 1864) and Louisiana (SR 171) passed legislation requiring consideration of CHP for public buildings and critical facilities during times of upgrade or new construction. These policies do not provide funding for projects, but they require building owners to conduct feasibility assessments and evaluate the cost-effectiveness of CHP at critical sites.
Puerto Rico’s energy commission opened a docket to investigate ways to encourage distributed generation, energy storage, and microgrids as part of the island’s strategy for restoring and rebuilding its electric system after Hurricane Maria. To encourage deployment, the commission developed and proposed a regulatory framework, Regulation on Microgrid Development, outlining a set of rules and terms related to the rights, responsibilities and obligations of owners, operators and customers of a microgrid.