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This conference discusses the role of distributed solar generation regarding Net Energy Metering (NEM) policies and their financial impacts on shareholders and customers. SEPA, an educational nonprofit, presents insights into the challenges of grid integration, customer expectations, and rate design. The session delves into the transition required for utilities, the solar industry, and customers to collaborate effectively. It explores the dynamics of NEM, solar transaction values, and the importance of stakeholder engagement in shaping sustainable solar markets. For more information, SEPA provides resources on rate design alternatives, the Value of Solar (VOS) concept, and the significance of program design in valuing solar contributions.
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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 • Research, education, collaboration and advisory services 500+ solar stakeholders +90% of installed solar capacity Membership
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 Shareholder Impact Impact on non-solar ratepayer (Post-rate case) = + Impact redistributed to ratepayers Total Annual Incentive • 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 Impacted For more information, see SEPA’s “Ratemaking, Solar Value and Solar Net Energy Metering – a Primer” (July 2013)
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 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 202-559-2025 jhamm@solarelectricpower.org Eran Mahrer EVP, Strategy & Research 202-552-4411 emahrer@solarelectricpower.org
