Valuing Distributed Generation
Small renewable energy generation systems located at the point of use capture the benefits of renewable energy while reducing utility costs. One study identified 19 key values of distributed generation, including values associated with energy generation, available capacity, transmission and distribution cost deferrals, reduction in system losses, reactive power, improved system resiliency, increased reliability, electricity price protection, and pollutant and greenhouse gas emission reductions. (Reference)
Examples of distributed renewable generation include rooftop solar water heaters and solar electric systems, small wind energy generating systems, and ground-source heat pumping systems. Most distributed generation systems produce enough energy to meet a portion of a home’s or business’ energy needs, reducing the amount of electricity purchased from the utility. Such reductions are equivalent to reductions in consumption derived from efficiency or conservation measures. Some technologies at times produce more than enough energy to meet a home’s or business’ energy needs, and during those periods export electricity to the grid. Capacity, exported energy and other key values provided by distributed generation should earn the generation owner compensation at a fair value. If efficient, transparent markets are unavailable or impractical to enable distributed generation owners to be compensated for the value they create, then that value should be made available.
Strategies for Valuing Distributed Generation
- Incentive programs. Policies and programs supporting adoption of distributed renewable generation, including the efficiency programs offered by Texas electric utilities, should recognize and account for the total value of distributed renewable energy delivered to the utility and its ratepayers.
- Interconnection policies. Policy makers should encourage adoptions of consistent interconnection requirements and processes by all Texas electric utilities.
- Net metering. All customers with distributed renewable generation should have the opportunity to earn a fair price for energy outflows without having to switch retail electric providers or renegotiate the terms of existing retail energy purchase contracts.
(Updated Jan 26, 2016)
Other useful references:
Distributed Generation Ratemaking resources from 21st Century Power Partnership
Locational Benefits of Distributed Generation from the Clean Coalition
Plano Solar Advocate (LH)