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Working with Utilities

Utilities are critical partners in the acceleration of distributed solar generation. Explore some of the ways these complex organizations operate, and read about strategies others have employed for successful utility collaboration.

Photo by Werner Slocum, National Renewable Energy Lab

 

Background

Utilities play a crucial role in managing electric systems and ensuring the power provided is stable, reliable, reasonably priced, and safe, putting them in a unique position to help develop and implement strategies for greater solar deployment. Across the country, utilities have taken steps to integrate more renewable energy into their electricity mix. While some of these initiatives are required by state regulatory bodies, utilities have grown increasingly innovative as they respond to their customers’ growing demand for solar and clean energy.

As solar grows in popularity, unique challenges such as grid integration present new opportunities for developers, governments, and others seeking to deploy solar to collaborate with utilities.

Through Solar Market Pathways, projects worked to:

  • Develop comprehensive strategies to integrate solar into their electricity supply.
  • Create and refine utility-based community solar models.
  • Explore innovative financing solutions.
  • Partner with municipal government and nonprofit organizations to support solar deployment plans and programs.
  • Help decision-makers, solar installers, and customers understand impacts to ratepayer costs as distributed solar grows in popularity.
  • Address interconnection policies and practices.

Toolkit

These resources provide customers, third-party solar vendors, and non-utility solar program or project managers with guidance on engaging with electric utilities to accelerate solar deployment and maximize the value of solar resources. To achieve these goals, it’s crucial to understand how utilities operate, how they are regulated, what motivates them, and how distributed solar resources affect the utility. With this understanding, all parties will be better equipped to collaboratively pursue solutions that work for everyone.

How Utilities Function, How They Are Regulated, and What Motivates Them

Electric utilities play a central role in modern society, yet many people are largely unaware of how they are structured, how they are regulated, how they operate, and how they set prices for the essential services residents depend on. The Regulatory Assistance Project’s Electricity Regulation in the U.S.: A (Brief) Guide details how utilities operate, how they are regulated, and why they may be reluctant to support increased distributed solar deployment.

In order to effectively collaborate with a utility, customers and third parties need to understand how distributed solar systems affect the utility’s profit. The impacts of distributed solar can differ between utilities, affecting their willingness and ability to collaborate. This depends on whether the utility is a for-profit investor-owned utility or a nonprofit municipal, public power, or cooperative utility; whether the utility owns generation assets; and the status of wholesale and retail competition.

Understanding Differences in Utility Views Toward Solar explores ownership models and the presence or absence of competition, both of which affect a utility’s views on customer-owned or third party-owned solar. Lawrence Berkeley National Laboratory produced a webinar examining the question of how high levels of distributed energy resources will affect the natural monopoly characteristic of an electric distribution utility, and what this might mean for the ability of utilities to profitably attract the capital needed to maintain their networks.

Resources

Tool:
Electricity Regulation in the US: A Guide (Second Edition) Electricity Regulation in the US: A Guide (Second Edition)
Author:  RAP

A detailed reference on how electric utilities function and are regulated, including broad perspectives on industry structure, regulation, ratemaking, low-income programs, and more.

Report:
A Primer on Electric Utilities, Deregulation, and Restructuring ... A Primer on Electric Utilities, Deregulation, and Restructuring of U.S. Electricity Markets
Author:  Pacific Northwest National Laboratory

This primer offers an introduction to utility restructuring and competitive electricity markets.

Report:
Disruptive Challenges: Financial Implications and Strategic Responses ... Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business
Author:  Edison Electric Institute

This report examines the potential of PV and other distributed energy resources to threaten utility finances and recommends an immediate focus on revising utility tariff structures.

Report:
Treatment of Solar Generation in Electric Utility Resource P... Treatment of Solar Generation in Electric Utility Resource Planning
Author:  NREL

This report focuses on how various utilities approach long-range resource planning, and how solar technologies are considered in the resource planning process.

Report:
Understanding Differences in Utility Views Toward Solar Understanding Differences in Utility Views Toward Solar
Author:  RAP

This document explores how the utility’s ownership model and the presence/absence of competition affects its views on customer-owned or third party-owned solar.

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Webinar:
Distributed Energy Resources, Industry ... Distributed Energy Resources, Industry Structure and Regulatory Responses
Author:  Lawrence Berkley National Laboratory

This webinar examines the question of what high levels of DERs will do to the natural monopoly characteristic of an electric distribution utility.

Tool:
Electricity Regulation in the U.S.: A (Brief) Guide Electricity Regulation in the U.S.: A (Brief) Guide
Author:  RAP

This guide provides an introduction to the structure of the U.S. utility industry and regulatory commissions, the fundamentals of rate regulation.

Rate Design and Why It’s Important

Utilities recover their costs and, in the case of investor-owned utilities, earn a return on their investments through the rates they charge for retail electricity services, making rate design issues vitally important to utilities. At the same time, rate design partially determines whether a customer can save money and earn a return on their own investment in solar power.

It is important to understand the fundamentals of electric rate designs that:

  • Apply to customers with solar energy systems.
  • How those rate designs can affect solar feasibility.
  • How certain rate designs affect utility cost recovery, profits, and future prices.
  • Which rate design principles could align the interests of customers, third parties, and utilities.

The Regulatory Assistance Project’s (RAP) webinar shares 12 principles to guide regulators as they design the next generation of distributed generation tariffs grounded in the principle of fair compensation.

Ratemaking, Solar Value and Solar Net Energy Metering—A Primer provides an introduction to state utility regulation (particularly rate-setting) and principles that are considered during the valuation of incremental resource additions, specifically distributed solar resources. It is designed to ensure stakeholders engaged in these conversations are more fully informed.

RAP planned and delivered a series of workshops for Utah’s municipal utilities focused on grid impacts of solar, solar valuation and cost/benefit analyses, and rate design issues with solar for the Wasatch Solar Project. These materials equip utilities and solar stakeholders with the tools needed to tackle the challenges and questions associated with deploying solar on the grid, including:

  • What to expect as solar systems are added to their service territories.
  • How to manage the possible effects on the grid.
  • How to evaluate the costs and benefits of solar.
  • How to design residential utility rates that are fair to customers—both with and without solar—and to the utility itself.

Resources

Report:
Impact of Rate Design Alternatives on Residential Solar Customer ... Impact of Rate Design Alternatives on Residential Solar Customer Bills: Increased Fixed Charges, Minimum Bills and Demand-Based Rates
Author:  NREL

This study examines the electricity bill implications of various residential rate alternatives for multiple locations within the United States.

Report:
The Economics of Grid Defection The Economics of Grid Defection
Author:  Rocky Mountain Institute

This RMI paper looks at the possibility and the ramifications of customers with solar systems and energy storage disengaging from the utility grid

Report:
Smart Rate Design for a Smart Future Smart Rate Design for a Smart Future
Author:  RAP

This RAP report examines rate design issues, including rates for solar customers, and offers guiding principles and recommendations to regulators and utilities

Report:
Regulatory Considerations Associated with the Expanded Adoption ... Regulatory Considerations Associated with the Expanded Adoption of Distributed Solar
Author:  RAP & NREL

This report helps regulators understand the sources of costs and benefits from increased adoption of PV, how regulatory models indicate different roles and value propositions and more.

Report:
A Decade of Decoupling for US Energy Utilities: Rate Impacts, ... A Decade of Decoupling for US Energy Utilities: Rate Impacts, Designs, and Observations
Author:  RAP

This report summarizes the design and impact of decoupling mechanisms used by 25 U.S. electric utilities.

Tool:
Straight Talk About Net Metering Straight Talk About Net Metering
Author:  Edison Electric Institute

This document from EEI offers an investor-owned utility perspective on net metering and potential alternatives.

Report:
Net Metering and Market Feedback Loops: Exploring the Impact ... Net Metering and Market Feedback Loops: Exploring the Impact of Retail Rate Design on Distributed PV Deployment
Author:  Lawrence Berkley National Laboratory

This report demonstrates the significant impact that rate design can have on PV deployment.

 
Tool:
Rate Design Guiding Principles for Solar Distributed Generat... Rate Design Guiding Principles for Solar Distributed Generation
Author:  Solar Energy Industries Association

This document from SEIA offers a solar industry perspective on rate design for distributed generation customers.

Report:
Designing Distributed Generation Tariffs Well Designing Distributed Generation Tariffs Well
Author:  RAP

This RAP report focuses on rate designs for distributed generation, explaining the two main approaches in theory and practice and offering a range of possible alternatives

   
Presentation:
Rate Design Issues with Solar Rate Design Issues with Solar
Author:  RAP

This presentation discusses rate design principles, the types of charges that commonly appear on electricity bills, and rate design options for customers with distributed solar.

 
Presentation:
Solar Valuation and Cost Benefit Analyses Solar Valuation and Cost Benefit Analyses
Author:  RAP

This presentation includes reasons for doing a solar valuation or cost-benefit analysis, and a detailed look at valuation issues and examples.

 
Presentation:
Grid Impacts of Distributed Solar Grid Impacts of Distributed Solar
Author:  RAP

This presentation discusses the grid impacts of distributed solar for utilities.

   
Report:
Ratemaking, Solar Value and Solar Net Energy Metering—A Pr... Ratemaking, Solar Value and Solar Net Energy Metering—A Primer
Author:  Ratemaking, Solar Value and Solar Net Energy Metering—A Primer

This paper introduces state utility regulation and principles that are considered during the valuation of incremental resource additions, specifically distributed solar resources.

Understanding and Maximizing the Value of Distributed Solar Power

Utilities, customers, and regulators must understand the costs and benefits associated with distributed solar in order to make informed decisions about policies, rates, and investment decisions. The costs and benefits vary based on geographic location, the level of solar deployment on the grid, and time. If the right strategies are employed, utility managers can reap many benefits from distributed solar, and utility grids can offer valuable services to distributed generation customers. The National Renewable Energy Laboratory offers methodologies for determining the value of solar in any jurisdiction.

Once the costs and benefits of distributed solar are understood, the next step is to determine how to maximize the value of a potential solar system for all parties involved. The High-Value Community Solar Program Design Guide serves as an example of one way to enhance the value of distributed solar by assisting utility solar program managers in including appropriate demand response measures in utility-driven community solar.

Resources

Tool:
So You Have Questions About…Value of Solar Tariffs So You Have Questions About…Value of Solar Tariffs
Author:  NREL

This NREL postcard offers a brief explanation of value of solar tariffs, resources, and technical assistance on a single page.

Report:
A Review of Solar PV Benefit & Costs Studies A Review of Solar PV Benefit & Costs Studies
Author:  Rocky Mountain Institute

RMI summarizes and compares the methodologies and results of more than a dozen PV cost-benefit studies.

Report:
Shining Rewards: The Value of Rooftop Solar Power for Consumers ... Shining Rewards: The Value of Rooftop Solar Power for Consumers and Society
Author:  Environment America

This report offers a rebuttal to the argument that net metering tariffs overcompensate solar customers at the expense of other ratepayers.

 
Report:
Minnesota Value of Solar: Methodology Minnesota Value of Solar: Methodology
Author:  Clean Power Research

The Minnesota Department of Commerce developed this “value of solar” methodology that Minnesota utilities can use as an alternative to net metering.

 
Report:
Maine Distributed Solar Valuation Study Maine Distributed Solar Valuation Study
Author:  Clean Power Research

The Maine Public Utilities Commission published this assessment of the value of distributed solar generation in Maine.

 
Report:
Valuation of Solar + Storage in Hawaii: Methodology Valuation of Solar + Storage in Hawaii: Methodology
Author:  IREC

This report offers a method to quantify the added economic benefits that could result from adding behind-the-meter storage to supplement solar energy generation in Hawaii.

 
Report:
The Flexible Solar Utility: Preparing for Solar’s Impacts to ... The Flexible Solar Utility: Preparing for Solar’s Impacts to Utility Planning and Operations
Author:  NREL

This report seeks to identify ways that utilities can proactively prepare for solar growth on their system while maintaining a successful utility business.

 
Report:
Bridges to New Solar Business Models: Opportunities to Increase ... Bridges to New Solar Business Models: Opportunities to Increase and Capture the Value of Distributed Solar Photovoltaics
Author:  Rocky Mountain Institute

This report investigates opportunities to optimize and demonstrate the value of distributed solar as it is integrated into the grid to utilities, customers, and solar companies alike.

Report:
Teaching the Duck to Fly (2nd Edition) Teaching the Duck to Fly (2nd Edition)
Author:  RAP

This RAP paper suggests a variety of ways to mitigate the potential negative impacts of distributed generation on the grid and maximize the value of solar

Report:
Teaching the Duck to Fly (2nd Edition) Teaching the Duck to Fly (2nd Edition)
Author:  RAP

This RAP paper suggests a variety of ways to mitigate the potential negative impacts of distributed generation on the grid and maximize the value of solar

Report:
Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic ... Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic Generation to the U.S. Electric Utility System
Author:  NREL

This report describes current and potential methods that could be used to estimate the benefits & costs of distributed PV from the utility or electricity-generation system perspective.

Report:
A Regulator’s Guidebook: Calculating the Benefits and Costs ... A Regulator’s Guidebook: Calculating the Benefits and Costs of Distributed Solar Generation
Author:  IREC

This IREC report provides analysis and recommendations for key issues in solar valuation studies.

Report:
Value of Solar: Program Design and Implementation Considerat... Value of Solar: Program Design and Implementation Considerations
Author:  NREL

This report discusses value of solar tariffs and rate design options and considers how this rate design may impact future development of distributed PV projects.

Report:
Value of the Grid to DG Customers Value of the Grid to DG Customers
Author:  IEE

With so much attention being paid to determining the value of solar generation to the grid, IEE developed this report looking at the value of the grid to solar customers.

 
Report:
Incorporating Demand Response into Community Solar Programs Incorporating Demand Response into Community Solar Programs
Author:  Community Solar Value Project

This report assists utility solar program managers in including appropriate demand response measures to enhance the value of distributed solar.

Interconnection, Permitting, and Technical Standards

The feasibility and the costs of installing a solar energy system depend on more than just utility rates. State interconnection procedures—the rules by which distributed energy resources can connect to the electricity grid—ensure the security and reliability of the electricity grid. They include the timelines, fees, technical requirements, and steps in the review process for connecting solar and other resources. These interconnection procedures are absolutely necessary, but can increase the costs of deploying solar and can even pose barriers, as can local government permitting or zoning requirements. Collaborating with utilities to satisfy and potentially improve interconnection procedures is crucial for successful solar deployment. Proactive, streamlined, best-practice interconnection and technical standards can enhance the value of solar energy systems by ensuring they work with the grid.

Resources

Report:
Advanced Inverter Functions to Support High Levels of Distributed ... Advanced Inverter Functions to Support High Levels of Distributed Solar
Author:  NREL

This short NREL publication looks at the capabilities of advanced inverters and outlines regulatory and policy considerations for their deployment.

Report:
A State-Level Comparison of Processes and Timelines for Distributed ... A State-Level Comparison of Processes and Timelines for Distributed Photovoltaic Interconnection in the United States
Author:  NREL

Results from an analysis of interconnection and deployment processes in the U.S. using data from more than 30,000 residential and small commercial PV systems installed from 2012-2014.

Report:
Residential Solar Permitting Best Practices Explained Residential Solar Permitting Best Practices Explained
Author:  IREC

A review by IREC of current residential solar permitting best practices, along with relevant resources to help communities implement them.

 
Report:
Sharing Success: Emerging Approaches to Efficient Rooftop Solar ... Sharing Success: Emerging Approaches to Efficient Rooftop Solar Permitting
Author:  IREC

In this report IREC outlines innovative strategies being implemented across the U.S. to increase the efficiency of permitting procedures for rooftop solar systems.

Report:
Simplifying the Solar Permitting Process: The Importance of ... Simplifying the Solar Permitting Process: The Importance of Consistency
Author:  IREC & The Vote Solar Initiative

IREC and The Vote Solar Initiative offer nine best practices in residential solar permitting which can offer significant efficiency benefits.

 
Report:
IEEE 1547 and 2030 Standards for Distributed Energy Resources ... IEEE 1547 and 2030 Standards for Distributed Energy Resources Interconnection and Interoperability with the Electricity Grid
Author:  NREL

A short synopsis of the history of the IEEE 1547 interconnection standards, an update on current status, and a look at the future direction of ongoing standards development activities.

 
Report:
Model Interconnection Procedures Model Interconnection Procedures
Author:  IREC

IREC identifies several important evolutions in best practices for interconnection and synthesizes them into model interconnection procedures.

Report:
Interconnection of Distributed Generation to Utility Systems: ... Interconnection of Distributed Generation to Utility Systems: Recommendations for Technical Requirements, Procedures and Agreements, and Emerging Issues
Author:  RAP

Recommendations on technical requirements, procedures, and agreements for interconnecting distributed generators in the 10-20 megawatt range.

 
Report:
Distributed Solar Interconnection: Challenges and Best Pract... Distributed Solar Interconnection: Challenges and Best Practices
Author:  SEPA

SEPA surveyed over 60 utilities in 25 states on interconnection processes, identifying both the challenges and the best practices.

Collaboration Between Customers, Third Parties, and Utilities

These varied examples of successful collaboration between utilities and non-utility solar system owners—customers or third parties—reveal the why and how behind each collaboration and the resulting benefits.

Resources

Report:
Maximizing the Value of Photovoltaic Installations on Schools ... Maximizing the Value of Photovoltaic Installations on Schools in California: Choosing the Best Electricity Rates
Author:  NREL

This report examined electricity rates available to schools served by three California utilities to identify common rate structure attributes that are favorable to PV installations.

Report:
Minimizing Overlap in PV System Approval Processes: Case Studies ... Minimizing Overlap in PV System Approval Processes: Case Studies and Analysis
Author:  IREC

The steps for obtaining each necessary approval for residential rooftop PV projects in four different markets in the U.S.

Article:
Capturing Distributed Benefits Capturing Distributed Benefits
Author:  Public Utilities Fortnightly

Case study of an IOU encouraging solar and other distributed resources to defer the need for more costly infrastructure upgrades.

Article:
In Vermont, A Forward-Thinking Utility Is Helping Customers Share ... In Vermont, A Forward-Thinking Utility Is Helping Customers Share Solar Power
Author:  Fast Company

This article offers a quick look at how one utility is partnering with its customers and third parties to accelerate PV deployment.