In almost every math class I ever took, the teacher always stressed the importance of defining the variables of the problem. “Without knowing what your variables are, how do you know what problem to solve?” This would be an important lesson for the current trend to value the net impact of distributed solar generation in the U.S.
With the exponential growth we’ve seen in the market, the price of solar is dropping, leading to a significantly larger percentage of solar generating capacity on the grid. As a result there are numerous discussions and regulatory proceedings happening around the country to determine the value that distributed solar brings to the table and whether current policies and regulations could benefit from an update. These discussions are taking place through cost/benefit studies of net energy metering (NEM) and through the development of value of solar tariffs (VOST). Check out this map I created to show recent state and utility activities around the country to consider the value of distributed solar.
While the ultimate value of distributed solar may vary from place to place, the basic properties of solar generation and distribution grids are largely consistent everywhere. However, the assorted studies and calculations used by utilities and states have varied substantially in their approach in determining which assumptions and variables are appropriate to consider. This is where some perspective and standardization could really come in handy.
Last week, IREC published A Regulator’s Guidebook: Calculating the Benefits and Costs of Distributed Solar Generation, authored by Jason Keyes and Karl R. Rábago. It provides a compendium of lessons learned from 16 different cost/benefit studies and proposes a comprehensive standardized valuation methodology for regulators to consider when taking on this effort. The guidebook provides helpful questions for regulators to ask, data needed from utilities, recommended approaches for determining the assumptions of a study and recommended costs and benefits to consider.
This report provides a rational basis for each of its recommendations. As the authors point out, for example, it’s not logical to ignore societal benefits in a cost/benefit calculation when the original policy decisions were based, at least in part, on the value of those same benefits. Moreover, because distributed solar installations are predictable, they should be included in utility forecasts of capacity needs and credited with a capacity value. For a quick view of other benefits the authors believe should be considered, and the recommendations in this report, there is a very succinct mini-guidebook at the end of the report starting on page 43.
If we’re trying to solve a renewable energy problem, it’s important to include all the variables or we won’t be solving the right problem. This guidebook can help by giving us the tools and understanding we need to understand the challenge – and get the right answer.
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