Solar Rate Design in a Post-Net Metering World

Solar Rate Design in a Post-Net Metering World

AB 920 Net Surplus Compensation: Proposal of the Solar Alliance and the Vote Solar Initiative Tom Beach Crossborder Energy July 9, 2010 AB 920 Net Surplus Compensation Rate Other customers must be unaffected by the rate. P.U. Code Section 2827[h][4][A] Use Commission-approved long-run avoided costs. Recognize that behind-the-meter DG resources avoid line losses and T&D costs, similar to EE resources. Rate should be simple to understand and easy to administer. Using a rate that is fixed for the life of a NEM customers system provides a hedge against volatile fossil fuel prices.

Proposed Net Surplus Compensation Rate (NSCR): NSCR = MPR x TOD Factor + Avoided Line Losses + Avoided T&D Based on AB 1969 rate for surplus sales, extended to DG. Avoided Cost Components of the NSCR MPR: 20-year MPR For the year the NEM customer begins operation. Use 2008 MPR for existing NEM customers. Fixed for the life of the NEM customers system. TOD: RPS / MPR TOD factors Calculate a utility-average TOD factor based on a representative PV profile from NRELs PVWATTS model. Avoided line losses: from the adopted E3 avoided cost model for EE

Hourly values weighted by the PV profile Avoided T&D: also from E3 AC model for EE Hourly values weighted by the PV profile MPR is a Measure of Long-run Avoided Costs for Energy and Capacity in California MPR is the levelized, all-in cost of a new CCGT CCGTs are the IOUs avoided resource. Cost of the brown power resource that the IOUs would build or buy but for RPS generation. Pricing benchmark for RPS costs. Other CPUC-approved uses of the MPR as a measure of long-run avoided costs

Long-run avoided costs for EE (D. 05-04-024 et al.). Renewable FIT (AB 1969, D. 07-07-027). 10-year firm QF price for large CHP (D. 07-09-040). FIT price for small CHP (AB 1613, D. 09-12-048). Calculation of the TOD Factor Calculation of Avoided Line Losses Calculation of Avoided T&D Costs Results: Proposed NSCR using 2008 MPR

Applies to NEM customers on-line before December 17, 2009. 2009 AB 920 NSCR based on the 2008 MPR: AB 920 Price Component PG&E SCE SDG&E 2008 MPR (20-year, 2009 start) cents/kWh 11.1 11.1 11.1

TOD Factor 1.24 1.32 1.12 Avoided Line Losses cents/kWh 1.15 1.22 1.02 Avoided T&D cents/kWh

1.87 1.39 4.03 Total AB 920 Rate cents/kWh 16.8 17.3 17.6 Results: Proposed NSCR using 2009 MPR

Applies to NEM customers on-line after December 17, 2009. 2010 AB 920 NSCR based on the 2009 MPR: AB 920 Price Component PG&E SCE SDG&E 2008 MPR (20-year, 2009 start) cents/kWh 9.67 9.67

9.67 TOD Factor 1.26 1.32 1.12 Avoided Line Losses cents/kWh 1.02 1.07 0.89

Avoided T&D cents/kWh 1.90 1.43 4.13 Total AB 920 Rate cents/kWh 15.1 15.3 15.9 Other Pricing Methods Considered MRTU DA Prices or SRAC

PV systems are long-term renewable resources. MRTU DA or SRAC prices are appropriate for fossil resources making daily or monthly dispatch decisions. Energy-only markets; PV provides capacity. No recognition of avoided losses or T&D costs from DG resources. No hedge against volatile fossil fuel prices. Use of REC market prices for renewable attributes. Willing to consider once the REC market develops. Eligibility and Administrative Issues Solar Alliance / Vote Solar agree with PG&E on the following issues: Pay the NSCR to NEM customers with surplus kWh but no excess bill credits. Customers choice of a check or a rollover bill credit. No WREGIS registration or CEC certification needed to count

kWh for RPS. Include NSCR in existing NEM tariff. $1 threshold for a check. FERC order removes the need for QF certification. Affidavit on REC ownership for systems > 100 kW. System Sizing Issue No need for new system sizing rules. CSI rules already limit incentives to the system capacity needed to serve the historical on-site load. AB 920 compensation encourages right-sizing: Optimize use of roof space and inverter capacity. Minimize installation costs per kW. Additional RPS-eligible generation at an avoided cost price well below the cost of utility-owned PV. Price proposed is unlikely to result in a substantial

increase in net surplus generation. Implementation Potential for customer confusion Customers with excess bill credits but no surplus kWh may not understand why they do not receive a check. Customer need to understand that they are selling RECs, to avoid duplicative sales. Need simple, clear communications and information. Permanent NSCR can be adopted now. Review program in 2013 after two years experience.

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