Value of Solar Methodology
In the US, there is currently no uniform approach to establishing a value for the electricity produced by distributed energy systems. Agreements between customers and their utilities vary from state to state and utility territory to utility territory based on state law, utility commission rules, and utility disposition. As utilities look to address dramatic increases in customer adoption of distributed energy resources like solar PV and their own interests in deploying renewable generation facilities, the implementation of valuation methodology can help define costs and benefits.
The methodology, known as Value of Solar Methodology, takes into consideration the unique nature of solar PV generation in which systems produce electricity on peak, produce power at the location of use, do not require continuous fuel purchases, and have significant security and environmental advantages over fossil fuels. These characteristics generally increase the value of solar electricity as they allow utilities to avoid the costs of fuel, plant O&M, generation, reserve capacity, transmission, and distribution in their centralized assets.
Value of Solar Methodology represents an opportunity for states and utilities across the country to begin to assess the benefits of distributed generation and better plan for energy investments that provide maximum benefits to society.
Valuation studies can help utilities, regulators, and policy makers to:
- Evaluate Existing Net Metering Programs
- Design Community Shared Solar Tariffs
- Value Exported Solar Energy
- Determine Qualifying Facilities Rates
- Evaluate Real Time Pricing with AMI
- Advance Value of Solar Tariffs
To help advance dialogue around the appropriate value of distributed solar resources in Wisconsin, Iowa, and Michigan, the Midwest Renewable Energy Association (MREA) contracted with Clean Power Research to develop recommendations for solar valuation.
VALUATION METHODOLOGY RECOMMENDATIONS
Click on a state below to view the valuation methodology recommendations developed by Clean Power Research.
CLEAN POWER RESEARCH
Clean Power Research holds a unique position in the solar valuation field, having developed the first value of solar tariff offered in North America. Austin Energy approved use of the value-based pricing presented in a 2011 study conducted by Clean Power Research, and offered it as a new form of compensation to its solar customers. Clean Power Research had performed an earlier valuation study for Austin Energy in 2006.
In 2014, Clean Power Research worked with utilities and stakeholders in Minnesota to develop the first detailed, public methodology to be used by utilities in setting rates. This methodology, guided by state legislative requirements, was approved by the Minnesota Public Utilities Commission for utilities seeking a value-based compensation tied to the costs and benefits of distributed solar generation. It is the only such Commission-approved methodology in North America.
In April 2015, Clean Power Research published a comprehensive market-based value of solar study that was commissioned by the Maine Public Utilities Commission. This study was also a stakeholder-driven process, and included a wide set of scenarios and assumptions for the purpose of informing public policy. It included three detailed studies for three utility regions.
Clean Power Research has performed a number of related studies, including net metering cost/benefit studies and solar fleet shape modeling for Duke Energy, We Energies, Portland General Electric, USD/San Diego Gas and Electric, Solar San Antonio, and NYSERDA/ConEdison. Clean Power Research has also worked with solar industry organizations, such as the Solar Electric Power Association (SEPA) and the Solar Energy Industries Association (SEIA), to evaluate other value-based compensation schemes, such as annual versus levelized VOS, long-term inflation-adjusted VOS, value of export energy, and others.
For more information on Value of Solar, see:
- Value of Solar Center of Excellence – VOSCOE includes a comprehensive reference database of documents related to the value of solar
- A Review of Solar PV Benefit and Cost Studies – Rocky Mountain Institute
- A Regulator’s Guidebook: Calculating the Benefits and Costs of Distributed Solar Generation – Interstate Renewable Energy Council
- Minnesota’s Value of Solar – Institute for Local Self-Reliance
- Minnesota Value of Solar Methodology – MN Dept. of Commerce
- Disruptive Challenges: Financial Implication and Strategic Responses to Changing Retail Electric Business – Edison Electric Institute