IDEAS: Identify, Develop, Explain, Analyze, Solve
 Issue Identified:
The current DREAM Task Force is targeting market design improvements within the
existing electricity market structure. However, as more residential and business
electricity customers invest and install local solar PV, these present consumers are
becoming both producers and consumers – i.e. prosumers. With the advent and
expanding deployment of this new distributed generation technology, it is now time to
begin a project to review and update the electricity market structure in Texas to include
a distribution energy market.
 Issue Development:
With the advent and deployment of newer technologies, in particular, distributed solar
PV, which can generate electricity locally where it is consumed, the electricity market is
changing. Individual property owners now have access to technology in which they can
make individual private long term investments to generate electricity locally. And these
deployments are occurring at a rapid pace. Here are some statistics of the numbers of
installations by the end of 2014:
Across Australia – 1,400,000+ (similar electricity market to Texas)
Across the US – 600,000+
Across Texas – 10,000+
And by the end of 2015, installations across Texas will be 17,000+. In the US, the
numbers will be over a million soon, and expanding to the 100’s of thousands across
Texas in a few years.
To date, the current electricity market structure, which has worked well in Texas since
deregulation, is designed around transmission level wholesale pricing. However, the
growth of rooftop solar on existing homes and businesses, as described above, will
necessitate rethinking that market design. The market design will need to better
comprehend the value of the electricity delivered at the customer’s meter, not only from
a central power plant or wind farm far away, but from the next door neighbor’s local
solar PV system. This home to home electricity delivery model, which is more peer-topeer, doesn’t fit easily into the existing hierarchical model (generation –to- transmission
–to- sub-station –to- distribution –to- transformer) on which the current wholesale and
retail pricing electricity market is based.
Distributed generation in the form of rooftop solar PV, coupled with local energy storage
to support time shifting of loads, will further accelerate as more new homes are built
“net energy zero”. Recall, there was a time in Texas when new homes were built without
central air conditioning and heating. But over a period of about 15 years, it went from
being few or no new homes being offered with central A/C, to all new homes including
central A/C. With the recent technology innovation and cost reductions in solar PV and
the similar trends in energy storage, it is very likely that rooftop solar coupled with local
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energy storage will also be commonplace across new homes in Texas over the next 10
years– installed and maintained like any other “appliance” in modern homes. As further
evidence of this, the 2015 International Residential Codes now include an appendix to
define and describe solar-ready homes. (See Appendix U of the 2015 International
Residential Codes .) The Department of Energy has various programs around net zero
homes. See Net Zero Energy Ready Homes. The National Association of Realtors has
recognized the market growth for energy efficient homes and those with on-site
renewable energy and now provides realtor training and customer tools for the “green”
home market – see Find Green REALTOR
To further highlight the need for a market design update, see the following excerpts from
a recent article in the IEEE Power & Energy Magazine titled, “The Evolution of the
Market”, Oct 20, 2015:
“Now, however, market operators realize that variable renewables [wind energy and
photovoltaic (PV) solar energy], as well as other new types of resources such as
distributed energy, storage, and demand response, can impact the market
outcomes and needs for various market products. “
“Furthermore, operators continually recognize the need to reform these markets to
better incorporate the characteristics of novel technologies since how a market is
designed can have a huge influence on the ease of integrating those resources. Poor
market designs can dramatically impact the power grid in terms of increased costs,
degraded reliability, or increased gaming or competition issues. On the other hand, good
choices can provide an open, transparent, and level playing field, facilitating efficient
system operations and an easier transition to a market increasingly dominated by new
technologies.”
Significant market design update initiatives are underway in California, Hawaii, and
New York.
 Detailed Explanation:
A good detailed explanation of the challenges and opportunities are available in a
recently published (October 2015) report by Lawrence Berkeley National Laboratory,
titled, “Distribution Systems in a High Distributed Energy Resources Future - Planning,
Market Design, Operation and Oversight”.
(see https://emp.lbl.gov/publications/distribution-systems-high )
The following excerpts from this report highlight the need for a distribution energy
market in the future market design:
P3 “The key questions for utility regulators, then, are how best to define the value of the
distribution network and related operational structure for a high-DER future in their
jurisdictions, and how to structure the regulatory framework and rules to enable that
future. The authors hope this report will be helpful for addressing those questions.”
P10 “Because the value of any network is proportional to the number of interacting
entities or facilities connected to it, if defection picks up momentum the value of the grid
could drop precipitously. Thus, a question for policy makers to consider is whether a
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vibrant, beneficial distribution grid is important to their policy objectives and, if so, how
to modernize it so that customers will prefer to stay connected rather than exit.”
P24 – A representation of the potential grouping of four interrelated functional entities
in a high-DER electric system
P41 “A key focus in California, Hawaii and New York is optimizing distribution system
economics and reliability through the use of DERs as alternatives to utility
infrastructure expenditures.”
P47 “As the system evolves, it may be possible to combine the wholesale locational
marginal price (LMP) for energy and the distribution constraint/loss value to a
particular point on the distribution grid to create a distribution marginal price (DMP).
This is also referred to as “LMP+D.”
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P51 – the report’s representation of functions and interrelations in a “high DER electric
system”
 Analysis:
Further analysis is needed by the appropriate stakeholders in Texas using as a basis the
Lawrence Berkeley National Laboratory, October 2015 report “Distribution Systems in a
High Distributed Energy Resources Future - Planning, Market Design, Operation and
Oversight”.
 Solve/Solution:
While it may not be in the current scope of the current DREAM TF, the TF however
should take this issue to TAC for review and recommend, that together with the
appropriate stakeholders, a project be started to update the electricity market design to
include a distribution energy market to leverage the new DER technologies that are
beginning deployment now and expanding rapidly over the next 10 years.
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