The Political and Technical Advantages of Distributed Renewable Power

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The Grid Benefits of Distributed Generation


While utilities have yet to experience serious issues from distributed solar generation, they are already experiencing benefits to the grid.

Distributed solar power has value to the grid (above the electricity produced) of 14 to 30 cents per kilowatt-hour.

 

Distributed solar power provides electricity on-site or near to demand, reducing transmission losses, as well as wear-and-tear on utility equipment by mitigating peak demand. It also eliminates the need to hedge against fuel price swings. A recent study found that these benefits add 3 to 14 cents per kWh to the utility bottom line.

Distributed solar also provides value to society, by reducing the economic losses of blackouts (just 500 MW of distributed solar could have prevented the massive 2003 Northeast blackout), reducing pollution and greenhouse gas emissions, hedging against finite fossil fuel supplies, and creating jobs. These benefits add 11 to 16 cents to the taxpayer’s bottom line for every kWh of distributed solar. Combined, distributed solar power has value to the grid (above the electricity produced) of 14 to 30 cents per kilowatt-hour.

In a CPUC study, the researchers found that, “As a result of the local PV generation, electrical heating losses on the PG&E distribution circuits analyzed were reduced from 1.7-2.4% at the time of peak circuit loading.”

The value of solar PV to the grid reflects its high capacity factor during hours of peak demand. During peak periods in California, solar produces close to 60% of its rated capacity.

 

The study concluded that PV reduced peak demand on a distribution line by 0.35 kW for every kW of “rebated PV,” and reduced peak demand on transmission lines by 0.3 kW for every kW of “rebated SGIP capacity.” Rebated capacity reflects the system size that received a cash rebate and may be less than the system’s nameplate capacity. The value of solar PV to the grid reflects its high capacity factor during hours of peak demand. Solar delivers close to 60% of its rated capacity during the entire peak demand period, e.g. hot, sunny days.

In two recent decisions (described below), the CPUC has estimated the value of distributed generation to the grid system in terms of avoided infrastructure costs.

In the first – a hearing before the Federal Energy Regulatory Commission on California’s standard offer program for combined-heat-and-power (CHP) producers – CPUC asserted that, “for CHP systems located in transmission-constrained areas, there should be a 10 percent price adder to reflect the avoided costs of the construction of distribution and transmission upgrades that would otherwise be needed.”

The cost savings from distributed generation are not restricted to transmission-constrained areas. In its second decision – to establish a Renewable Auction Mechanism (RAM) to develop 1,000 MW of distributed generation – the CPUC emphasized that the concerns of investor owned utilities (IOUs) about needing additional transmission infrastructure were unfounded.

IOUs argue that such an expansive approach will increase costs by necessitating construction of additional transmission and distribution (T&D). We are not persuaded.

CPUC noted that the short timeframe of the auction would minimize demand for new infrastructure and that developers would have to share those (reasonable) costs. Finally, CPUC challenged the utilities’ assertion than there are large bulk power transfers burdening their transmission networks. Rather, these exchanges are largely on paper.

A California Energy Commission working group on distributed generation estimated that distributed generation created avoided capacity costs of $34 per kilowatt-year on both the distribution and sub-transmission systems (based on the avoided cost savings from energy efficiency measures of similar capacity). Presumably this is because on-site generation is treated as load reduction.

Cost savings from distributed solar were also found in a study for the Austin, TX, municipal utility. While the energy value of the solar power was only around 7 cents per kWh (the value of the electricity it would displace), the available capacity, deferral of grid infrastructure upgrades and avoidance of delivery losses (e.g. transmission) added significantly to the value of PV to the utility as shown in the chart to the right.

Distributed PV Has Non-Electricity Value, Too:

Another study by Arizona Public Service will put 1.5 MW of distributed solar PV on a single distribution feeder in order to more clearly identify the integration costs of distributed generation and its unique value to the grid.

<<– Page 2: Distributed Generation & the Grid

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John Farrell

John directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.

John Farrell has 518 posts and counting. See all posts by John Farrell