The cumulative value of residential solar installations for utilities is comprised of two different parts: the generation of electricity to the grid, and the avoided cost of building new generation. While the former is fairly straightforward and owners are compensated through net metering or other rate schemes, the latter is difficult to assess and thus far homeowners have received little compensation.
In Minnesota, for example, the Public Utilities Commission in March asked Xcel Energy and stakeholders to find a way to value location-specific solar generation from residential customers. Initial comments on the process are due by June 20 and reply comments are due by July 10, 2019.
An earlier proposal to value location-specific solar was to establish the utility’s service area into nine separate price zones, but this idea was rejected as administratively burdensome without substantial benefits.
Few states are successfully grappling with the Value of Solar (VOS) question, but California, New Hampshire, New York, Vermont and Maine have had studies underway for several years, among other state initiatives. The California Public Utility Commission (CPUC) DER Action Plan and the New York Public Service Commission (NYPSC) Reforming the Energy Vision (REV) efforts are the most advanced at VOS.
One solution suggested in the industry is paying customers near specific over-burdened substations a bonus for generation keyed to the projected cost of adding utility generation at that location. The cost of purchasing and maintaining a back-up diesel generator in such a location could represent the value of avoiding power interruptions, and in turn at least one value stream for VOS.
The MPUC also agreed in March on a general rate of 8.53 cents per kilowatt-hour for rooftop solar production, with increases over the following 25 years to 14.55 cents per kWh. That agreement stemmed from a December 2017 PUC order to Xcel to file an analysis of the rate-impacts of adding a residential-adder to the Value-of-Solar (VOS) bill credit rate for Xcel’s community solar program, as well as an analysis of how a solar residential carve-out for the community solar program would be implemented and enforced, according to Advanced Energy Economy.
The Commission has required this analysis as it is trying to balance the adoption of a VOS rate with Minnesota Statute’s requirement “that solar garden programs must reasonably allow for the creation, financing, and accessibility of solar gardens,” according to the statute.
One potential roadmap for utilities to value residential solar as a class of distributed energy resource (DER) is a study released in April by the The National Association of Regulatory Utility Commissioners (Naruc) entitled The Value of Resilience for Distributed Energy Resources: An Overview of Current Analytical Practices.
Conducted by Converge Strategies and was funded by the Alliance for Sustainable Energy, LLC, Managing and Operating Contractor for the National Renewable Energy Laboratory (NREL) for the US Department of Energy (DOE). Funding provided by US Department of Energy Office of Energy Efficiency and Renewable Energy Solar Energy Technologies Office.
“Identifying appropriate methodologies to calculate the value of resilience will be an important step toward ensuring that resilient DERs are considered alongside alternatives and integrated into future energy infrastructure and investment planning efforts,” the study authors say.
Unfortunately, no one solution was found in the study, which sought to investigate methods that met four regulators’ requirements: the method’s ease of use, scope of outputs, geographic scalability, and power interruption duration analysis capability.
“Some of the valuation methodologies examined in this report may be useful in regulatory decision-making, but none of the methods reviewed met all four criteria for regulator usefulness and usability. No single method is capable of capturing all regulatory concerns regarding the resilience value of DERs,” the report concludes.
One aspect of VOS is the pairing of energy storage with rooftop solar, so that even during evening periods, the solar+storage system could be called upon to support the local utility grid.
Another complicating factor in VOS is whether a local microgrid exists, and if so, who pays for the cost of the microgrid, and who benefits from the provision of grid services from the microgrid.
While the cost of a community microgrid is projected to exceed the value of resiliency services for the local grid, members of the community also benefit directly from the microgrid resilience, and other value streams are typically also associated with microgrids — like selling electricity to the grid at peak hours for peak rates.
“The rapid growth and declining costs of distributed energy resources (DERs) such as microgrids, solar photovoltaics, and batteries have introduced new technology options for energy resilience,” the Naruc study observes.
“New technologies such as resilient solar systems offer distinct advantages over diesel generation, including emissions-free generation, an unlimited fuel supply, and the ability to generate savings and revenue streams when not serving in an emergency power role,” the authors suggest.
“Consequently, state policymakers across the country have established electricity resilience policies and programs, with several states focusing specifically on resilient DERs as part of clean energy programs and grid modernization efforts,” the study authors conclude.