The increasingly rapid adoption of distributed solar photovoltaics (DPV) is forcing utilities, customers, solar providers and state regulators into a dog fight over the value that these resources deliver to the electricity system. But framing the conversation as a fight isn’t productive for anyone, says the Rocky Mountain Institute, which released a comprehensive review of the cost and benefits of DPV.
The Colorado think tank’s analysis of the existing structural misalignment, which includes net-metering and volumetric rates, offers a framework to help policy makers decide on electricity pricing structures across different states.
Understanding the costs and benefits of distributed energy services is critical to ensure better technical integration and economic optimization. As DPV increases, accurate pricing and market signals can help align stakeholder goals, minimize total system cost and maximize total net value, says the review.
With market penetration increasing for DPV, the authors Lena Hansen and Virginia Lacy stress that it’s vital to see it as an integral, fundamental part of the electricity system and not just as a ‘bolt-on’ solution. Properly evaluating solar PV and the other distributed energy services provided by every resource in the energy equation is part of this process of realignment, they say.
The rapid adoption of DPV is driving a heated debate about whether it creates net value for the electric system due to its unique location, operational and ownership characteristics, compared to conventional centralized resources. Yet, while methods for identifying, assessing and quantifying the benefits and costs of distributed resources are advancing rapidly, important gaps need to be addressed before these methods can provide a sufficient foundation for policymakers and regulators engaged in determining levels of incentives, fees, and pricing structures.
The most significant methodological gaps include :
- Distribution value: DPV’s benefits in the distribution system are local, so accurately estimating its value requires much more analytical detail, which is also more difficult.
- Grid support services value: Uncertainty as to if and how DPV can provide additional grid support services, or need the services, but this could potentially become an increasingly important value.
- Financial, security, environmental and social values: These values are largely not monetized as part of the electricity system and some are very difficult to quantify.
The wide variation in analysis and quantitative tools used by different parties in different jurisdictions is inconsistent (as shown in the chart), confusing and frequently lacks transparency, says RMI. While individual regions must adapt approaches based on their local context, greater standardization of categories, definitions and methodologies is possible.
As the current centralized model of power generation, transmission, and distribution grows ever more costly, the use of renewable distributed energy generation sources such as distributed solar photovoltaics, small wind power and stationary fuel cells is set to triple by 2017, according to a report last year by Pike Research. Annual worldwide installations of renewable distributed generation will reach 63.5 GW a year in 2017, up from 20.6 GW in 2011, according to Renewable Distributed Energy Generation. Nearly 232 GW of distributed renewable energy will be added between 2012 and 2017, the Pike report says.
Image courtesy: Rocky Mountain Institute