Benefit-Cost Analysis for Grid
Modernization Investments
Key Elements and Jurisdictional Survey
May 15, 2024

Snuller Price, Senior Partner, E3
Prepared for Berkeley Lab with support from the U.S. Department of Energy

Agenda Introduction and context• New Mexico context – grid modernization statute, state policies• Grid modernization in other states, federal policy

 Developing a BCA Framework• Least Cost / Best Fit vs. Benefit-Cost Analysis (BCA)• Mapping technology investment to use cases and then to benefits• BCA Perspective (which benefits to include)• Additional Issues (Equity, Cost Recovery) Survey of 10 Jurisdictional Benefit Cost Analyses• Technologies Evaluated, Benefits Applied, BCA Analysis Results Methods in use today and examples• Putting Together the Analysis• Cash Flow, Uncertainty• Methods for computing specific benefit categories
2

Introduction and Context

What a Difference a Few Years Makes!
2020 Grid Modernization Activities

2020 Smart Grid System Report_0.pdf (energy.gov)

NCCETC, 50 States of Grid Modernization: Q1 2024 Quarterly Reporthttps://nccleantech.ncsu.edu/wp-content/uploads/2024/05/Q12024_gridmod_exec_final.pdf

4New Mexico Policy and Program Considerations

House Bill 233
Energy Grid
Modernization
Roadmap

House Bill 521
PRC Application
For Vehicle
Electricity

Senate Bill 489
EnergyTransition Act

Senate Bill 29
Solar Market
Development
Income Tax
Credit5

Grid Modernization Act (1 )

1.
2.
3.
4.

Advanced metering infrastructure and associated communications networks;Intelligent grid devices for real time or near-real time system and asset information;
Automated control systems for electric transmission and distribution circuits and substations;
High-speed, low-latency communications networks for grid device data exchange and remote and automated control
of devices;
5. Distribution system hardening projects for circuits and substations designed to reduce service outages or service
restoration times, but does not include the conversion of overhead tap lines to underground service;
6. Physical security measures at critical distribution substations;
7. Cybersecurity measures;
8. Systems or technologies that enhance or improve distribution system planning capabilities by the public utility;
9. Technologies to enable demand response;
10. Energy storage systems and microgrids that support circuit-level grid stability, power quality, reliability or resiliency
or provide temporary backup energy supply;
11. Infrastructure and equipment necessary to support electric vehicle charging or the electrification of community
infrastructure or industrial production, processing, or transportation; and12. New customer information platforms designed to provide improved customer access, greater service options andexpanded access to energy usage information.

Broad range of Grid Modernization Investments

 Grid Modernization improvements to the electric distribution and transmission infrastructure

6

Grid Modernization Act (2)…
Section 3.
…
B. When considering applications for approval, the commission
shall review the reasonableness of a proposed gridmodernization project and as part of that review shall consider
whether the requested investments, incentives, programs andexpenditures are:(1) reasonably expected to improve the public
utility's electrical system efficiency, reliability, resilience andsecurity; maintain reasonable operations, maintenance andratepayer costs …
…

Commission is told to review‘reasonableness of a proposed gridmodernization project’…
Among other requirements is to‘maintain reasonable … ratepayer
costs’…
Goal of this presentation is to
discuss how various states address
reasonableness and provide
examples7New Mexico’s IOUs are planning for extensive electrification anddeployment of renewable resources
Forecasted Peak Load DER Impacts: PNM2
(MW)
Building
Electrification

Planned Renewable Capacity: PNM, EPE, SPS 1(GW)Storage

Bulk scale energy
storage spending may
be reduced by gridmodernization
investment

EVs
BTM Solar
TOU Rates
2023

Solar

Wind

Grid modernization
can enable demand
responsiveness tocost and carbon
signals that varythroughout the day

2042

Grid modernization
investment is required
to support and manage
electrified loads from
EVs and heat pumps,
including with more
dynamic rates

Forecasted DER Energy Impacts: PNM2
(GWh)

2023

2042

1 Based on most recent IRP reports. Includes builds for both NM and TX service territories.
2 Based on most recent IRP report. Building electrification forecast is incremental to existing levels.

8Federal Policies Affect New Mexico’s Grid
 Federal CAFE standards require widespread EV adoption, and IRA rebates and tax credits incentivize accelerationof building electrification
Estimated 2032 Light Duty EV sales share required to meet CAFE Standards

Initial E3 Analysis based on Proposed 2023 CAFE Rule for Light Duty
Advanced Clean Car II is a package of regulations for car manufacturers thatwould result in about 80% of all new cars sold by 2032 being emission free.
New Mexico Governor Announcement.

https://assets.ctfassets.net/v4qx5q5o44nj/7LiHS6hhVK https://assets.ctfassets.net/v4qx5q5o44nj/3FYfJiYMI
aIdph8bdVV8b/aec9fc3a35985027af3f97111304db7a/f LiXGFghFEUx0D/279f180456183d560d9c68d4de8baa
actsheet_Electrification_Rebates.pdf
67/factsheet_25C_25D.pdf

9Developing a BCA FrameworkCore Question
Grid Modernization Scope

How does the utility demonstratethat proposed grid modernization
investments are reasonable for its
customers?

DOE Modern Distribution Guide Volume IV
11

Grid Modernization Framework Keep Customer Top of Mind
• Affordability, Service Quality, and Customer Insights• Access, Equity, and Environment

 Universal Themes• Keep the objectives in focus throughout the process• Learn from states that are underway (e.g. GMAG)

Modern Distribution Grid

Grid Modernization Lab
Benefit-Cost Analysis

Playbook for Modernizing
the Distribution Grid

12

Principles of Grid Modernization Assessment

Be responsive to
stakeholders
and theirconcerns

Use forwardlooking
estimates ofbenefits overthe life ofinvestment

Consider interdependencies between components where feasible

Group
investmentsthat work
togetherConsider customer equity issues
Minnesota Department of Commerce, Review and Assessment of Grid Modernization Plans: Guidance for Regulators, Utilities, and Other Stakeholders, prepared by
Synapse Energy Economics, Attachment to Department of Commerce Letter. Docket No. E002/M21-814, February 9, 2022 (available through eDockets)

13

Objectives Drive Investment Decisions• "Regulators are unlikely to approve grid modernization investments perceived as “gold-plating” or providing
limited benefits for customers and relative to a state’s priorities. Therefore, the analytical starting point for thedevelopment of a modern grid includes customer needs and state policy goals and objectives."1• The Grid Modernization Act identifies a wide-ranging set of objectives, including cost reduction andimprovement of “electrical system efficiency, reliability, resilience and security”• Objectives are not mutually exclusive
Example Objectives

Targets and Constraints

Example Investment Priorities

Service quality

Maximize reliability &resilience

Hardening, FLISR,
sensing

Affordability

Service at lowest
possible cost

Prioritize Bill
Reduction, Limit
Spending

GHG mitigation

Minimize cost toachieve policy target

Demand flexibility,
VVO, other efficiency

1 US Department of Energy, Modern Distribution Grid Volume I, November 2019.

Accessed: Modern-Distribution-Grid_Volume_I_v2_0.pdf (pnnl.gov)

14

Foundational Components vs Applications
Applications, or modules,
represent additional, singlepurpose components that can belayered on top of the platform
components to provide additional
functionality that is desired orneeded.
Core, or platform, components
represent foundational
components that are necessary
for providing the services
required of modern grids.

Source: DOE Guidebook IV
15

Utility Facing vs. Customer Facing Capability

Benefit-Cost Analysis for Utility-Facing Grid Modernization Investments: Trends, Challenges, and Considerations,February 2021, Tim Woolf, Ben Havumaki, Divita Bhandari, and Melissa Whited, Synapse Energy Economics
Lisa Schwartz, Berkeley Lab, p. 3

16

Least-Cost / Best-Fit vs Benefit-Cost Analysis
 Full cost-benefit analysis is not required when an investment is needed for policy compliance• This does not exempt those investments from cost control mechanisms

Economic Assessment of Grid Modernization Plans, Synapse and BeCrkeley Lab, 2022
Source: US DOE, Modern Distribution Grid: Strategy &Implementation Guidebook, 2020, page 113.

17

Examples of State Requirements for LCBF vs BCA
More Comprehensive BCA

More Least Cost / Best Fit
California
10-Year Grid
Modernization
Plan
Utility-facing
investments ingeneral rate case
(GRC)
Least-cost/best fit
framework

HawaiiPhase 1 AMI,
Meter DataManagement,
telecomPhase 2Distribution
Devices

New York
BCA for AMI withcustomer- andutility-facing
capabilities
Standardized BCA
Handbook forDistribution
System Platform

Minnesota

Massachusetts

Xcel Nov 2019 IDP
includes BCA for
AMI, Field Area
Network (FAN),
VVO, FLISR — as aportfolio andeach component
separately

10-Year Grid
Modernization
Plan, 5-year
short-term
investment planrequire BCA.
Includes AMI,
ADMS, VVO,FLISR, DERMS,
Workforce18

Mapping from investments to benefits
 Connections between
investments and benefits canbe unclear, especially fortechnologies that enable
benefits indirectly or have avariety of applications
 Drawing a clear connection
from investments to use cases
for the investments, to benefits
associated with those use
cases, articulates moretransparently how benefits will
be achieved

Example investment / use case / benefit mapping1
Benefits
Investment

Use case
TOU rates

AMI

Energysavings

GHG
savings

X

X

Automatedmeter reading

Reliability
improvement

X

Avoided
O&M

…

X

…
VVO

VVO

FLISR

FLISR

X

X
X

…

1 Additional mapping information available through Modern-Distribution-Grid_Volume-I_v1_1.pdf (pnnl.gov)

19

Which Costs and Benefits – ‘Which Cost Test?’
Participant Cost Test
(PCT)

UCT is used for energy
efficiency programs in
NM
Rate impact is widely
evaluated for utility
investments andprograms

Opt-in customerfacing programs use
PCT to evaluate
participation

TRC includes customer
out-of-pocket costs
Utility Cost Test
(UCT)
Ratepayer Impact
Measure (RIM)

Total Resource
Cost Test (TRC)
Societal Cost Test
(SCT)

SCT can include
externalities andreliability
improvements

Reviewing Grid Modernization Investments: Summary of Recent Methods and Projects (brattle.com)

20

Benefit categories present different challenges and opportunities
Service Quality
Improvements

Revenue Requirement Reductions
Direct Cost Savings
•
•

•
•
•

Energy savings
Capacity savings• Generation• Transmission• Distribution
Renewable integration
Avoided O&M (e.g., labor,
truck rolls)
Avoided capital (e.g., oldtechnology replacement)

Enabled Cost Savings••

Energy savings
Capacity savings• Generation• Transmission• Distribution

•
•
•
•

Reliability improvement
Resiliency improvement
Improved DERinterconnection
Customer service
improvement

Externalities
•

•
•
•

Environmental• GHG savings• Particulate emissions
reductions• Avoided land use• Avoided water use• Avoided methaneleakage
Macroeconomic benefits• Jobs, GDP
Improved safety
Improved customer choice

Legend for example: Quantified in the BCA, Quantified and used in justification, Qualitative benefit of Grid Modernization
21

Addressing equity in grid modernization plans Most grid modernization plans do not address customer equity issues in BCA analysis
 Key equity considerations that can be addressed

Rate levels andaffordability ofelectricity service

All studies
conducted tominimize total
cost do thisDifferential
reliability by area,
service restoration
times

Access to newtechnology
including distributed
energy resources
and EVs

Targetdisadvantaged
communities,
worst performing
feeders

Hosting capacity
mapping andinterconnection
timelines, EV
potential

Local air quality andthe opportunity to
improve air quality.

Electrification,interconnection
potential

Jobs and workforce
development

Sometimes
included within
the scope of gridmodernization
investment

Economic Assessment of Grid Modernization Plans, Synapse and LBNL, 2022
Advancing Equity Through Grid Modernization - Center for American Progress

22

Utility Cost Recovery and Cost Control
 Generalized framework for planning and utility cost recovery
Longer Term Grid Modernization Plan in the Context of Distribution Planning – 10 or 15 years
Specific funding requests

Specific funding requests

Specific funding requests

Specific funding requests

 Cost control mechanisms• Accelerate benefits to offset near-term rate increases– National Grid (Rhode Island)– 80% of expected operational benefits included as a credit on customer bills in year 1 of grid modernization• Limitations on recovery based on utility return on equity (ROE)– PSEG (New Jersey)– Biannual grid modernization rate filings reviewed by regulator, no adjustment to rates allowed if ROE exceeds target level– Capital charges found to be imprudent by the regulator will be refunded to customers

23Survey of Jurisdictional Benefit Cost Analysis

Jurisdictions Included

Ameren (Illinois)
Multi-Year Integrated Grid
Plan, 2022

Dominion (Virginia)
Grid Transformation
Plan, 2019

Eversource (Massachusetts)
Electric Sector
Modernization Plan, 2024

National Grid (Massachusetts)
Electric Sector Modernization
Plan, 2024
Unitil (Massachusetts)
Electric Sector
Modernization Plan, 2024
National Grid (Rhode Island)
Grid Modernization Plan, 2021

Ameren (Missouri)
Smart Energy Plan, 2019
HECO (Hawaii)
Grid Mod Strategy, 2017

PSEG (New Jersey)
Clean Energy Future, 2020

Xcel (Minnesota)
Integrated Distribution Plan,
2019

25

Technologies Included by Jurisdiction
 All jurisdictions included a communications network and data platform necessary for each technology
Jurisdiction

State

AMI

Fault Indicators &OutageManagement

Voltage & VAR
Management

DER
Management

Customer
Information
Platform

Ameren

IL

Yes

Yes

Yes

No

Yes

Ameren

MO

Yes

Yes

Yes

No

Yes

Dominion

VA

Yes

Yes

Yes

Yes

Yes

Eversource

MA

Yes

Yes

Yes

Yes

Yes

HECO

HI

Yes

Yes

Yes

Yes

Yes

National Grid

MA

Yes

Yes

Yes

Yes

Yes

National Grid

RI

Yes

Yes

Yes

Yes

Yes

PSEG

NJ

Yes

Yes

Yes

Future use case

Yes

Unitil

MA

Yes

Yes

Yes

Yes

Yes

Xcel

MN

Yes

Yes

Yes

No

Yes

26

Benefits Included by Jurisdiction
 High-level categories of benefits included in the cost test, by utility
Jurisdiction

State

ReducedOperational Costs

Energy Savings(e.g., throughTOU rates)

Avoided Capacity
and/or T&D
Investment

ReducedOutagesSocietal Benefits (e.g.,
reduced emissions)

Dominion

VA

Yes

Yes

Yes

Yes

Sensitivity

Eversource

MA

No

Yes

Yes

Yes

Yes

HECO

HI

Yes

Yes

Yes

Yes

Yes

National Grid

MA

No

Yes

Yes

Yes

Yes

National Grid

RI

Yes

Yes

Yes

Yes

Yes

PSEG

NJ

Yes

Yes

No

No

No

Unitil

MA

No

Yes

Yes

Yes

Yes

Xcel Energy

MN

Yes

Yes

Yes

Yes

Yes

27

Benefit Cost Analysis Results by Jurisdiction
 All costs and benefits expressed as a Net Present Value over the CBA timeframe; benefit-cost result of 1 or greater
indicates net benefits
Jurisdiction1

State

Total Cost($M)

Cost perCustomer ($)

Total
Benefit($M)

Benefit per
Customer($)

Benefit-Cost
Results(Base Case)

Sensitivity Results (if applicable)

Dominion

VA$2,704 M$770$3,026 M

$865

1.1

1.2 (additional benefit categories2)

EversourceMA$643 M$460$1,092 M

$780

1.7

National Grid

MA

$2,137 M$1,640$2,958 M$2,275

1.4

National Grid

RI$224 M$450$533 M$1,0752.4 (opt-out AMI
installation)

PSEG

NJ

$641 M

$280$887 M$385

1.4

Unitil

MA

$42 M

$396

$43 M

$405

1.0

Xcel

MN

$656 M$505$571 M$440

0.87

1.9 (opt-in AMI)
2.9 (opt-out with social discount rate3)
2.3 (opt-in with social discount rate3)

1.03 (high)0.86 (low)

1 Did not find publicly available results for HECO, not included here
2 Sensitivity includes GHG savings, job creation, and EV ownership savings as benefits
3 Social discount rates tend to be lower to reflect society co-prioritizing future generations

28

Methods in Use Today and Examples

Process for Benefit Cost Analysis
Investment Cost

Define Measure Case(includes investment)
Define Reference Case(lacks investment, existing
standard practice)

Estimating Benefits

Impacts over study
horizonEnergyCapacity
Reliability
Environment

Annual Revenue
Requirement

Ratepayer Cost
Reduction

Service Quality
Reliability Benefits
Environmental
Benefits
Etc

Revenue Requirement
Rate Impact Analysis
Includes costs andbenefits that affectcustomer bills

Lifecycle Benefit Cost
AnalysisPresent Value Benefits –Present Value Cost
Includes all commission
required benefits andcosts for decision making
30

Process for benefit-cost assessment
Define Measure Case(includes investment)
Define Reference Case(lacks investment, meetssame policy goals)

Peak kW
impactOn/Off-peak
MWh savings

O&M savings (e.g.
reduced VMT, labor)

SAIDI, SAIFI,CAIDI impact

Avoided equipment
capitalRenewableinterconnection

Forecasts of electricity cost, capacity costs, equipment costs, O&M costs, Value of Lost Load, etc.
Calculate measure impact on revenue
requirement components
Generation
capacitysavings

Energysavings

Transmission
capacitysavings

Distribution
capacitysavings

Reduction in revenue
requirement

Calculate measure impact on service
quality
Customers
seeing service
improvement

Monetized Improvement incustomer service quality

Calculate measure impact on
externalities
GHG
emissionsavoidedParticulate
emissionsavoided

Avoided land
use

Avoided wateruse

Monetized change inexternalities
31

Example impact calculation methods
AMI outage notification
Average time
between outage
event and utility
awareness

Estimate of outage
notification timewith improved
system visibility

Average number ofcustomer outages
per year (SAIFI)SAIDI improvement

VVO energy savings
Estimate of energy
savings % due to VVO(from literature)

Load on circuits
where VVO would
be deployed

kWh savings fromVVO

32

Accounting for Benefits and Costs Over Time
 Reflect All of the Costs• Cash Flow
• Revenue Requirement

Example BCA Results with Uncertainty:
National Grid Filing on Advanced Metering Functionality

 Rate Impact Accounting• Costs are paid by all customers in thenear term• Benefits include some offsetting
utility costs and other benefits not inrates

 Lifecycle Accounting• Threshold test to evaluate whether
this investment is reasonable forcustomers

 Transparency

Source: National Grid BCA• Clear articulation of assumptions,
methods, and references33

Accounting for Uncertainty
 Given uncertainty around technology deployment and flexible load participation level, including number ofcustomers participating and level of customer engagement, it is valuable to present a range of benefits thatreflects the variety of potential futures• Development and execution of a robust customer engagement plan can strongly influence customer response to usage
information and flexible load signals

National Grid RI AMI Business Case_schedule KPK-SL-1_page 73.pdf

34

Long-term Forecasts of Load and Load Impacts
 Long-term Load Forecasts• Significant growth in most states, from data centersand electric vehicles primarily and also building
electrificationPNM Load Forecast 2023-42(MW) Load Impacts• Energy savings by time and year
• Capacity savings• Distribution savings

 Flexible loads

Peak Load (MW)• Avoided procurement of utility-scale energy storage• Reduced renewable curtailment

35

Benefits of Energy and Generation Capacity Savings
 Example technologies that lead to energy savings over time
• Volt/Var Optimization

Example Avoided Costs of Energy andGeneration Capacity• Customer Information Management System• Time of use and dynamic pricing

 Typical approach• Use adopted forecast of marginal energy and capacity savings• Use valuation framework adopted for energy efficiency evaluation• Marginal costs should be closely linked to Integrated Resource Planning (IRP)
process Full integrated planning approach• Use IRP to evaluate benefits of flexibility by running production cost cases withand without technology• Differences between cases provide several benefit values: energy, capacity,
reduced renewable curtailment, reduced system storage requirements

Reference: MASS Save Avoided Energy Supply
Cost 2024 Draft Report
36

VVO Example of Utility Cost Test - Energy Savings
Large Municipal Utility Example of VVO Investment Analysis – Utility Cost Test
System Study

Financial Assumptions

Potential # Feeders
Targeted # for VVO

1,012
608

Costs

Lifecycle
Discount Rate

15 Years5%

Benefits# of DVC Dynamic VAr Controller units

6,590

Energy Delivered on VVO Feeders (GWh)

13,337CVR Factor used in the filing

0.67
2.50%

Hardware Costs$

20,626

Average Voltage Reduction

Software License

$

2,067

Energy Savings per Year (MWh)223,389

Maintenance

$

2,686

Professional Services

$

2,377

Installation

$

5,601

Average Wholesale Price $/MWh

32

TOTAL Capital Cost ($000)$

33,357

Energy Savings per Year ($000)

Scaler (Prop tax, Contributions)
PV Revenue Requirement ($000)

$

7,148

1.4
$

46,699Levelized Cost per MWh of Energy Savings $20

Net Present Value Energy Savings ($)$74,198

37

VVO Example Contribution to Energy Efficiency Portfolio
 VVO adds 223 GWh peryear of energy efficiency
upon installation
 Levelized cost of 2.00¢/kWh is 50% of theaverage cost of the existing
portfolio
 Supply-side energy
efficiency performance
benefits are cumulativewith existing energy
efficiency efforts

Additional Metrics
Adds 46% to the sizeof the EE portfolio
Savings of 97,000
tonnes per year of GHG
emissions (assuming
marginal gas plant)

Evaluating VVO as Energy Efficiency; TRC and UCT are Positive, RIM Test Negative
38

Distribution Capacity Savings
 Example technologies that lead to
distribution capacity savings over time
• Utility-facing– Volt/Var Optimization and Conservation
Voltage Reduction– Telemetry and system status– Smart switching / load balancing• Customer-facing– Energy efficiency– Distributed Energy Resources
Management System (DERMS)– Dynamic pricing and customer load
shifting• Smart EV charging control• Grid-interactive water heaters

 Typical approach• Multiply marginal distribution avoided cost ($/kWyear) by estimated distribution peak load reduction– GRC distribution marginal cost filings are available, but
are not generally forward looking– Area-specific studies are done in some states (e.g.,
locational net benefit analysis tool in California, see
Berkeley Lab report)1– Distribution plans with short time horizons limit ability
to capture of load flexibility in the long term Integrated Distribution System Planning• Develop long-term load forecasts with and without
load flexibility enabled• Develop distribution capital investment plan for
distribution with and without grid modernization• Calculate savings based on difference in revenue
requirement over time
1 LBNL Report Locational Value of Distributed Energy Resources

39

Integrated Distribution System Planning Approach
Example Shift from Providing Distribution Capacity
Peak Load(MW)

5MW Load Reduction

 Original PV Revenue Requirement• $10 million
Capacity Limit New PVRR (Shifted Investment)• $9 million

Load Growth Forecast

 Savings
Years

Project Cost($M)

How Much is Saved?

5MW Enables a 2-year
shift of Investment$10M• $1 million = $10 million *(1+ 2%)^2(1+ 7.5%)^2• $200/kW = $1 million / 5,000kW• $20/kW-year annualized at 7.5%

Years

Assumptions: Inflation = 2%, WACC = 7.5%
40

Location-based Distribution Value Capacity Example
 California Example for PG&E, SCE, and SDG&E

LBNL Publication: Locational Value ofDistributed Energy Resources
41

Load Flexibility
 Availability and reliability of load flexibility are
key reasons to enable it through gridmodernization strategies

CA potential study example
residential sector• Achieving flexible load benefits requires support froma top-to-bottom suite of infrastructure and software
improvements, including improved telemetry, data
management, and communication networks

 The value of flexible load, especially in thecontext of reliability, is an active area of study• Real-world data is becoming available forbenchmarking to model results, but uncertainty
remains about the timeline for achieving widespread
automation of flexible load for the most reliable
outcomes

https://eta-publications.lbl.gov/sites/default/files/ca_dr_potential_study_-_phase_3_-_shift_-_final_report.pdf

42Reliability and Resiliency
 Key functionality of many grid modernization investments
Reliability

Resiliency

Level of service continuity,
measured in customer outage
duration and frequency

Ability to prepare, adapt,withstand, and recover rapidly
from disruptions

 Two ways states are approaching this topic
1. Quantified positive change in customer reliability metrics (SAIFI, SAIDI, CAIDI)
2. Structural system redesign to address climate change (e.g., undergrounding) based on threat-based risk assessment

43

Reliability Methodology: Interruption Cost Estimate (ICE) Estimates of customer interruptions and outages translated to economic costs to customers
 Based on Customer ‘Willingness to Pay’ Survey and Commercial GDP
 PNM, Ameren, and Dominion explicitly cite using the ICE Calculator
Before Grid Mod

How the ICE Calculator
quantifies reliability
benefits:
Benefit of reliability
improvement

Number ofoutages(SAIFI)

Avg. Durationof outage(CAIDI)

Outage Cost
(before improvement)

After Grid Mod

Number ofoutages(SAIFI)

Avg. Durationof outage(CAIDI)

Outage Cost
(after improvement)

Tools and Documentation at https://icecalculator.com/
44

ICE Calculator Example – New Mexico Values

SAIFI, SAIDI, CAIDI Metrics
Translate to EstimatedEconomic Costs to
Customers

Reliability
Inputs:
SAIFI
SAIDI
CAIDI

Number of Customers:
Non-Residential
Residential

2.000
60.0
120.0

1,000
10,000Main Output:

SectorMedium and Large C&I
Small C&I
Residential
All Customers

No. ofCustomers
128
872
10,00011,000

Cost Per
Event(2016$)$6,066.3$1,050.6$6.4$159.7

Cost Per
Average kW(2016$)$75.7$366.7$7.4$82.0

Cost Per
Unserved kWh(2016$)$37.8$183.3$3.7$41.0

Total Cost of
Sustained
Interruptions(2016$)$1,552,982.7$1,832,284.3$128,530.9$3,513,797.9

Forecast of Improved
Metrics Results in Lower
Interruption Costs Overtime

Total Sustained Interruption
Costs (Million $)Forecast of Total Sustained Interruption Costs$7

Without Improvement (Baseline)

With Improvement

$6
$5
$4
$3
$2
$1
$0
2020

2025

2030
2035
Forecast Year

2040

2045

45

Resiliency
 In utility practice today, resiliency focuses on planning for low frequency, high-impact events such as hurricanes, forest fires,
tornados, and cyber attacks that can result in long and widespread outages
 Resiliency planning is largely undertaken separate from traditional grid reliability planning today and is at the nascent stage ofdevelopment• New analysis tools and methods are required to assess risk, evaluate, and prioritize investment options• Additional regulatory guidance is required to define requirements and to better
integrate resiliency planning with other traditional grid planning processes• Metrics development and standardization is needed to measureperformance and drive accountability

 Risk analysis and benefit assessment models are utilized toprioritize programs and projects and to support investment levels• California’s Wildfire Mitigation Model• Tampa Electric’s Storm Resilience Model Investment levels are often established separate from GRCs,
but generally consider rate impacts and workforce capacity
1 B. Obama, "Presidential Policy Directive - Critical Infrastructure Security and Resilience (PPD-21)," The White House, Office of the Press Secretary, Washington, D.C., 2013
2 Resilient Electric Grid Defining, Measuring, and Integrating Resilience into Electricity Sector Policy and Planning, September 2023

U.S. Climate Resilience Toolkit
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Environmental Benefits
Sacramento Municipal Utility District Example
 Environmental benefits come from both energy
savings (less air pollution and water usage) andless generation capacity (and associated land
usage)
 Emission reductions decrease over time as thegrid supply becomes more renewable Common categories of environmental benefits
that are explicitly valued• Greenhouse gas emissions

Most common• Criteria emissions• Reduced water use• Reduced land use• Other benefits

Less common
SMUD Value of Solar and Solar + Storage Study, Technical Report, 2020
https://www.smud.org/-/media/Documents/Rate-Information/2022-2023-Rate-Action/VOSstudy.ashx

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Summary and Q&A

Key Choices to Define BCA for Grid Modernization
 Key Decisions in Grid Modernization Framework• Which investments should be evaluated using Least Cost
/ Best Fit and which should use BCA• Scope of benefits

Core Question:
How does the utility
demonstrate that proposed
grid modernization
investments are reasonable
for its customers?

– Customer service and reliability– Environmental benefits• How to address equity for low-income customers

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Key Choices to Define BCA for Grid Modernization
 Key Decisions in Grid Modernization Framework• Which investments are core and should be evaluatedusing Least Cost / Best Fit and which should use Benefit
Cost Analysis (BCA)

Core Question:
How does the utility
demonstrate that proposed
grid modernization
investments are reasonable
for its customers?

• What the scope of benefits are in BCA– Customer service and reliability– Environmental benefits• How to address equity for low-income customers

 Key Decisions on Methods to Estimate Benefits• Estimating Impacts Relative to Reference Case
• System Energy and Capacity• Distribution Capacity• Load Flexibility• Reliability and Resilience• Environmental Benefits
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Questions?

Thank You

References Grid Modernization Applications• Ameren, Dominion, Eversource, HECO, National Grid (MA and RI), PSEG, Unitil, Xcel MN

 DOE Publications and Meta-Analyses• Interstate Renewable Energy Council and GridLab, A Playbook for Modernizing the Distribution Grid: Volume I, May 2020
• NC Clean Energy Technology Center, 50 States of Grid Modernization, May 2024
• New York Department of Public Service (DPS), Proposed Commission Guidance for the Electric Utilities’ DSIP Update Filings: Case 16-M-0411,
January 2023
• Synapse Energy Economics and U.S. Department of Energy’s Grid Modernization Laboratory Consortium. , Economic Assessment of Grid
Modernization Plans, June 2022
• The Brattle Group, Reviewing Grid Modernization Investments: Summary of Recent Methods and Projects, December 2018
• US Department of Energy, Modern Distribution Grid: Objective Driven Functionality Volume I, November 2019
• US Department of Energy, Modern Distribution Grid: Strategy and Implementation Planning Guidebook Volume IV, June 2020
• US Department of Energy, 2020 Smart Grid System Report, January 2022
• U.S. Department of Energy’s Grid Modernization Laboratory Consortium, Benefit-Cost Analysis for Utility-Facing Grid Modernization Investments:
Trends, Challenges, and Considerations, February 2021

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Contact Snuller Price, Senior Partner

 Areas of Interest• Distribution planning and load forecasting• Benefit cost analysis• Greenhouse gas reduction planning• Grid modernization• Rate design

 Example projects• Load forecasting (California EV charging Proposition 30,
Forecast Anywhere, Pathways)• California energy efficiency avoided cost framework(2004 to 2018)
Contact Information
snuller@ethree.com(415)391-5100• Many non-wires transmission and distribution
alternatives assessments (BPA, PG&E, ConEdison, TVA,
PECO, ComEd, PSE)

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