Distributed solar transactions nem and beyond mec conference october 2013
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Distributed Solar Transactions: NEM and Beyond MEC Conference October 2013. About SEPA. Educational 501(c)3 non-profit. 430+ Utilities. 52% of electricity customers. Formed by utilities for utilities 20 years of service Balanced perspective

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Distributed Solar Transactions: NEM and Beyond MEC Conference October 2013

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Distributed Solar Transactions:

NEM and Beyond

MEC Conference

October 2013

About SEPA

Educational 501(c)3 non-profit



52% of electricity customers

  • Formed by utilities for utilities

  • 20 years of service

  • Balanced perspective

  • Research, education, collaboration and advisory services


solar stakeholders


of installed solar capacity


Aligning Solar and UtilitiesSampling of 340 Utility Members

Role of DG in Top 10 Solar States

Critical DG Issues

  • Grid integration

    • Distribution grid operational concerns – safety, reliability, operations, and grid management

  • Customer expectations

    • Satisfaction tied to the experience of “going solar”

    • Customers now perceive “choice” in electricity source

  • Business impacts of net metering

    • Revenue loss

    • Rate inequity, upward rate pressure

    • Obscured subsidies/lack of transparency

Net Metering: What’s the Issue?

Is net metering in and of itself the problem?

Or is it net metering in combination with how rates are currently designed?

SEPA Position on NEM

  • Customer-sited solar generation will play an increasingly important role in the energy mix for utilities and consumers.

  • NEM policies promote the deployment of customer-sited distributed solar generation in many markets.

  • However, NEM and rate design, inherently linked, need to evolve to transparently allocate costs and benefits, compensating all parties for their value contribution.

  • This transition will only be effective when utilities, the solar industry and customers collaborate to create a sustainable solar distributed generation marketplace.

Financial Impacts of NEMTiming dictates impacts on shareholders & customers

Impact on shareholders

(Between rate cases)


Revenue Requirement

Not Collected



Impact on non-solar ratepayer

(Post-rate case)



Impact redistributed

to ratepayers

Total Annual


  • Variable Costs:

  • Operating costs saved after solar installation

  • Fuel and potentially O&M

  • Fixed Costs:

  • Costs previously incurred in deploying utility infrastructure

  • Generation, T&D, etc.

  • Total Annual Incentive:

  • Sum of Production-based incentive payments

  • Revenue Requirement:

  • Authorized returns

  • Tax and depreciation

  • Operations and Maintenance

Ratemaking and NEM

Not Typically Impacted


For more information, see SEPA’s “Ratemaking, Solar Value and Solar Net Energy Metering – a Primer” (July 2013)

Rate Design Alternatives

Demand-Based vs. Volumetric

Demand-based Rate Design

(Typical Non-Residential)

Volumetric Rate Design

(Typical Residential)

NEM Transaction

Value of Solar OverviewSolar FiT, Clean Contract, etc.

The Value of Solar (VOS) transaction is based on a rate, reflecting the benefits and costs of distributed PV resources, which is offered to customers in exchange for PV output

Attributes of the VOS transaction model

  • Rate is established through a transparent and repeatable analysis, potentially annually

  • Customer continues to pay their full retail rate based on consumption

  • PV systems are interconnected on the “utility side” of the meter

  • PV system production is individually monitored

  • Customers are compensated based on system production and the VOS rate

  • Market analysis is used to establish incentives to facilitate PV market above and beyond the VOS (if necessary)

  • Incentive program design demonstrates support, with established declines, if necessary

  • VOS sends appropriate market signals

  • VOS can be established for the system as a whole, or it can be designed to send specific locational signals

  • Maintain simplicity for both communications and transaction administration

  • Retains conservation signal for customer

Value of Solar Components

Value Analysis and PeriodSimilar valuations presented differently

CPS Energy – VOS Study

Source: T. Hoff et al, “The Value of Distributed Photovoltaics to Austin Energy and the City of Austin”; March 17, 2006

Importance of Program Design

Calculating a Value of Solar is only the first step

Pitfalls of Stakeholder Processes

  • Stakeholder perception that outcomes have been predetermined, with stakeholder process used only to justify results

  • Talking “at” stakeholders rather than discussing “with” stakeholders

  • Positive components of the plan getting overshadowed by items stakeholders disagree with

Stakeholder Engagement PlanCommunicate the End Objective FIRST

  • Clearly articulate to stakeholders what the end objective of the process will be

    • Ex 1: a viable and transparent solar transaction that supports XYZ Utility’s goals, keeps costs down for distributors, and creates a functioning solar market

    • Ex 2: review of VOS compared to current program (retail rate +incentive until 2016), with determination if a change needs to occur

  • Lay out at the beginning what the stakeholder process will look like, how feedback/suggestions will get incorporated, and what will happen with the stakeholder process ends

Stakeholder Engagement PlanIdentify players/roles, and outline process

Level of Engagement

Phases of Process

Contact Information

Julia Hamm

President & CEO



Eran Mahrer

EVP, Strategy & Research



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