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CEIC-05-08

"The regulatory environment for interconnected electric power micro-grids: Insights from state regulatory officials"

Douglas E. King

Abstract:
Targeted use of distributed energy resources (DERs) can have considerable benefit for customer-generators as well as legacy utilities and their customers. The micro-grid concept is an extension of traditional DER applications that in some contexts can yield greater benefits at lower per-unit costs. Despite the expected benefits, micro-grids suffer from underadoption and underinvestment, partly because of an uncertain regulatory environment in which micro-grids are perceived neither as traditional utilities nor conventional DERs. Results from a survey of regulatory officials across the country support this argument. Only 17 of 27 participating states indicated that the installation and operation of a micro-grid is probably or definitely legal, and then only under certain circumstances and subject to varying stipulations. Among those 17 states, only 4 indicated that existing laws for the interconnection and operation of DERs would apply to micro-grid systems. No states have clear guidance for the regulatory oversight of micro-grid systems once they are installed, and most respondents indicated that such oversight would be conducted on a case-by-case basis. This paper discusses the survey and relevant insights, and concludes with a summary of recommendations for regulatory changes that could reduce uncertainty and facilitate micro-grid market development.

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