Michigan Needs to Modernize its Electric Grid. Here Is Where to Start.

The increasing affordability of solar panels, lithium-ion batteries, and other clean energy technologies has made big changes in the way we power our lives possible.  Never before have average residents and businesses had access to more ways to generate, store, and manage their own power. As a result, their relationship with their utility is changing.

For the clean energy revolution to continue, it is not just about how the power is generated. The wires that carry that electricity—the distribution system—are just as important. As power generation becomes decentralized, with residential and commercial solar panels and other distributed energy resources (DERs) being installed throughout the electric grid, the distribution system will need to evolve as well. That means evolving beyond a one-directional model, where electricity flows from power plant to transmission line to distribution system and finally to end consumer, to a two-directional model where the user is both taking electricity from and supplying electricity to the grid. It also means a more open, flexible, smarter grid where utilities, customers and third-party providers alike can work together to determine how to most effectively coordinate distributed generation, energy efficiency, storage, electric vehicles, demand response and future innovations.

Right now, Michigan has an opportunity to revolutionize its distribution system and create opportunities and benefits for customers, businesses and the state’s utilities. The Michigan Public Service Commission (MPSC) has launched a series of workshops on distribution system planning, the first of which took place last week on June 27. Against the backdrop of the five-year distribution plans recently filed by Michigan’s utilities, the Michigan Energy Innovation Business Council, along with many other stakeholders, is participating in these sessions to encourage the incorporation of advanced energy technologies and services into Michigan’s distribution system planning process.

Here are some of the major topics that distribution system planning should tackle to modernize Michigan’s grid, making it more resilient and reliable:

Non-wires alternatives: Historically, if a distribution system needed upgrades, the utility built more infrastructure (“poles and wires”). Today, however, distributed generation, energy storage, demand response and other DERs can work as powerful cost-savers by deferring or eliminating the need for traditional grid infrastructure projects. This concept has been dubbed “non-wires alternatives” (NWAs). One of the best examples of an NWA project is the Brooklyn-Queens Demand Management program, in which New York City utility Consolidated Edison spent $200 million on contracts with third-party providers of energy efficiency, demand-side management and storage to avoid building a $1 billion substation.

To encourage the use of NWAs, the MPSC should develop a regulatory framework that requires utilities to consider NWAs and realigns utility financial incentives by placing NWAs on a level playing field with the traditional infrastructure upgrades that they can help avoid.

Hosting capacity: As defined by the Electric Power Research Institute, “hosting capacity” means “the number and kilowatt capacity of distributed energy resources that distribution feeders can accommodate without adverse impacts to the grid’s power quality and reliability.”

In order to prevent the growth of distributed energy resources from harming the grid and to help customers and DER providers know where the grid can best accommodate new distributed resources, information about hosting capacity should be public, easily accessible, and updated regularly.

For example, Minnesota utility Xcel Energy has developed a digital map based on hosting capacity data. The map allows users to zoom in on individual distribution feeders and see where capacity to connect to the grid has been used up so that they know either to put distributed generation at a different site or to add storage or energy efficiency at that site to free up additional capacity.

Performance-based regulation: As mentioned above, Michigan’s utility regulatory framework, which encourages utility capital investment in traditional assets, does not always provide utilities with the right financial incentives for grid innovation. Regulators in other parts of the country have dealt with this misalignment of incentives by introducing performance-based regulation (PBR), in which utilities are rewarded based on their ability to meet specific goals.

PBR could be used to improve the distribution system in many ways. The MPSC could require utilities to deliver on metrics like peak load reduction, number of customers satisfied with the process of connecting distributed generation to the grid or amount of energy waste reduced, to name a few.

You can read more about the distribution planning process in MPSC case U-20147.