Expanded Discussion on Value of Solar


Dear Friends, Visitors/Viewers/Readers, (Please click on red links below)

Capturing The Sun (Credit: sunisthefuture-Susan Sun Nunamaker). This design may also be found at www.sunisthefuture.com

After posting the interview with Karl R. Rabago regarding The Value of Solar, some of the viewers’ /readers’/visitors’ questions made me realize that I needed to summarize the two articles I have linked to in the post in more details.   I apologize, because Mr. Karl R. Rabago did such a fantastic job in presenting the topic of The Value of Solar, I did not want to detract any attention from the interview. But, as long as we do have visitors/viewers who would like to be reading synopsis on the topic in addition to viewing the video, I’d be happy to oblige. I also found out that Youtube seems to be having some storage issue with regard to the video interview with Mr. Karl R. Rabago momentarily. Please be patient and Youtube is working on the issue at the moment. So be sure to check back at the post of Jan. 1, 2014 for the interview with Karl R. Rabago for the video interview later. In The ‘Value Of Solar’ Rate: Designing An Improved Residential Solar Tariff , authored by Karl R. Rabago,  Net metering is a law derived from PURPA (Public Utility Regulatory Policies Act) passed in 1978 such that the original struggle for net metering was the fight to remove the screw, therefore allowing the meter to spin backward so customers could get credit or self-generate (being allowed to make their own electricity through solar energy or generator system) and receive a fair price (otherwise known as the avoided cost) from the utility company for the excess energy being fed back into the grid. This straight forward (use of a single meter with no separate calculation) policy was adopted in 43 states. Although elegantly simple, net metering has its limitations: the assigned retail value for local solar energy is not necessarily reflective of the true value of solar. For example:

  1. There is no distinction between energy due to consumption vs. energy that is excess to consumption during the netting period.
  2. There is no provision for ensuring that the utility recovers the full cost of serving the solar customer.
  3. Much reduced payment for excess generation at the “avoided cost” tends to incentivize solar customers to size solar systems at their baseline energy demand, therefore not fully optimizing the potential in generating valuable excess on-peak or near-peak energy for the network, leaving the utility still having to procure energy for other customers at a higher-than-average cost.
  4. The tiered rate structure of net metering: the more energy a customer uses, the more value that customer receives for solar generation. The traditional net metering coupling solar energy value to the level of a customer’s energy consumption, even in the absence of tiered structure, has the effect of discouraging energy efficiency and encouraging on-peak consumption. When a unit of energy offset by solar generation is worth much more to a customer than a unit of excess generation, the economic signal to the customers is out of sync with other policy and economic objectives.

The Austin Energy of Texas has taken on the task of redesigning the net metering structure. The resulting new Value of Solar residential solar rate is splendid! It has two basic components:

  1. The annually updated value of solar calculation is essentially the price at which the utility is neutral to the solar energy
  2. The value of solar ensures that the utility recovers its full cost of serving the solar customer before any credit for solar generation is applied.

These two components result in a residential solar rate that is more fair to the solar customer, the utility,  and other utility customers.  This also decouples solar energy compensation from both consumption and incentives while being administratively simple. Austin Energy developed a Value of Solar calculation, generating a 30-year levelized value of solar in cents per kilowatt-hour, based on five components:

  1. energy
  2. capacity
  3. transmission capacity
  4. transmission and distribution losses
  5. environmental value

Energy and capacity value make up the bulk of the value and are heavily influenced by natural gas prices. Environmental value is derived from the price premium for Austin Energy’s GreenChoice renewable energy product offering. End result, the Value of Solar rate is about three cents higher than the average residential energy rate. The goal of the calculation is to estimate the total value of a unit of solar energy generated in the distribution grid, or near the point of consumption. That is, the utility would have to buy some energy, including some capacity value such that it would have to be transmitted, with losses, over a delivery system, and pay transmission costs and system charges, and finally with some kind of renewable energy credit or certificate. The calculation if rather conservative for it does not include externality values related to local economic benefits, local environmental benefits or other valuable attributes of distributed solar. Such levelized value needs to be re-evaluated annually so to adjust up-to-date  utility costs and prevent overpayments when system prices fall, not to mention the changing fuel factor. This new Value of Solar rate is expected to reduce the simple payback period for customers, provides stronger incentive for customers to use energy efficiently, and leads to more  on-peak energy available to the utility. Of course, annual recalculations would ensure that both customer and utility are treated fairly as the market costs change. Furthermore, the netting methodology ensures that utility would recover its cost of serving the customer and eliminates the argument that other customers subsidize solar. Austin Energy’s Value of Solar rate was implemented on Oct. 1, 2012 and had already earned recognition and interest from utilities and solar experts. For example, SEPA (Solar Electric Power Association) has recognized Austin Energy as Public Power Utility of the year in 2012 and IREC (Interstate Renewable Energy Council) has given one of its annual Innovation Awards to Austin Energy in September of 2012. It would be great if the Value of Solar will also be applied in other states and regions. With publicly available data, Value of Solar may have expanded use such as in commercial solar rates and in other states and regions. Ultimately, this would translate into a collaborative relationship between the utility and consumers, leading to a more stable grid for all consumers while increasing the longevity of the utility. We look forward to further spreading of use of Value of Solar for it is that final link to the fair and effective way for our world to transition into a sustainable future quickly. Please also get into the habit of checking at these sites below for more on solar energy topics: www.sunisthefuture.net








gathered, written, and posted by sunisthefuture-Susan Sun Nunamaker

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