Solar Rate Design and Bill Impacts

Net energy metering tariffs have accomplished policy-makers’ objective of stimulating rooftop solar installations. This success has led to the need by many states to find a new model that does not result in higher electricity costs for neighbors that do not install solar panels. This “conversation” usually takes place in a hearing room and involves diversity of stakeholders, including the state’s utilities, developers, environmental advocates, ratepayer advocates, and customers – both with and without solar energy systems.

Concentric Energy Advisors (“Concentric”) recently completed an engagement for a municipal utility that was interested in looking at similar issues, but without the constraints imposed by a formal hearing filled with stakeholders looking for an advantage. Our client was looking for the right answer for all of its customers, without the earnings pressures often faced by investor-owned utilities. They were ahead of the curve as solar penetrations are lower than for many other utilities. In addition, although they are required by statute to offer net energy metering, the size of solar facilities is restricted. This utility was eager to support solar to the degree it is desired by customers. However, it wanted to fully understand the impacts of potential solar programs and policies on the utility’s financial health, on customers who have or might adopt solar, as well as on non-solar customers.

Our analysis was data-driven, validating the utility’s current solar penetration by rate class and then identifying typical solar customer types and typical solar facility characteristics. We performed a load research study and used the results to design rates for several alternative proposals including time-of-use rates, customer charges, demand charges for residential and small commercial and industrial customers, and various “value of solar” tariffs. As a final step we estimated bill impacts for each alternative on distinct groups of customers.

Certain results were informative:
– The value of solar (as calculated by Concentric’s market modeling partner, GE Energy) was less than might have been expected, in part because the system design contributed to minimal avoided transmission and distribution costs.
– Solar customers in rate classes for which the majority of costs are recovered through demand and fixed charges would benefit from changes to net metering or an alternative compensation mechanism, given their minimal volumetric charges.
– Deploying more innovative rate design must consider investments in advanced metering and other related technology, both on the utility and customer sides of the meter.

Through this engagement Concentric upgraded its rate design models, methodologies, and expertise in issues related to solar and other DERs. Based on these tools, Concentric is primed to provide similar support to other utilities or other entities in the solar/ DER space.

 

If you would like more information on solar rate design and bill impacts, please contact Ben Davis at 508.263.6231 or bdavis@ceadvisors.com.

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