The Value of Distributed Photovoltaics to Austin Energy and the City of Austin

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1 The Value of Distributed Photovoltaics to Austin Energy and the City of Austin Electric Utility Commission Resource Management Commission June 26, 2006 Dr. Thomas E. Hoff 1

2 Clean Power Research Team Members Dr. Richard Perez Michael Kuhn Gerry Braun Benjamin Norris 2

3 Original Objectives Quantify the comprehensive value of distributed PV to AE in 2006 Document evaluation methodologies to assist AE in performing the analysis as conditions change and applying it to other technologies 3

4 Additional Objective Quantify the comprehensive value of distributed PV to AE in 2006 Document evaluation methodologies to assist AE in performing the analysis as conditions change and applying it to other technologies Produce a consensus/compromise-based estimate of the value of distributed PV to AE in

5 Results Depend on Evaluation framework Values to quantify Methodologies Assumptions & Data 5

6 SOCIETAL Total Resource Cost (TRC) Industry Government Participant (PAC) Rate Impact Measure (RIM) Particpant All Ratepayers Utility Industry State/Local Gov. Federal Gov. Investment Equipment - + Installation - + Sales Tax - + O&M Cost - + Financing - + Electric Utility Bill + - Incentives Incentive Payments + - Program Administration Tax Effects Tax Credits Depreciation Loan Interest Write-Off O&M Costs Utility Bill Savings Tax on Tax Credits - + Utility Cost Savings Energy + Capacity + T&D System + Losses + Technology Synergies + + Environmental Emissions + Water + Health + RECs/Green Tags + + Job Creation Reliability Blackout Prevention Emergency Utility Dispatch + + Catastrophe Recovery Backup Power Risk Factors Manage Load Uncertainty + Wholesale Price Hedge Retail Price Hedge Retail Price Cap National Energy Security

7 Benefits to be Included Energy production w/ natural gas price hedge Generation capacity T&D capacity deferrals Reduced transformer and line losses Environment 7

8 Benefits Evaluated but Not Included Reactive power control Benefit is insignificant Disaster recovery Disaster recovery benefit is signification but requires coupling with storage; AE recommended that the benefit be removed Technology synergies (PV + load control) Three capacity value methods were implemented; AE selected mid-range value 8

9 Benefits Explicitly Excluded Blackout Prevention AE decided to exclude this benefit because battery storage is separate technology from solar Emergency Utility Dispatch AE decided to exclude this benefit because battery storage is separate technology from solar Manage Load Uncertainty Benefit applies to T&D deferral and AE personnel estimated that only a small portion of the distribution capacity expansion plans have the potential to be deferred, thus making this benefit insignificant Retail Price Cap Benefit was large in other studies (e.g., NJ), but requires broader framework 9

10 Absolute PV Value Depends on Configuration $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 PV System Value (present value - $/kw) Horizontal South 30º SW 30º West 30º West 45º 1-Axis 1-Axis 30º Energy Gen. Capacity Environment T&D Deferal Loss Savings 10

11 Per Unit PV Value is 11 per kwh $0.140 $0.120 $0.100 $0.080 $0.060 $0.040 $0.020 $0.000 PV System Value (levelized $/kwh) Horizontal South 30º SW 30º West 30º West 45º 1-Axis 1-Axis 30º Energy Gen. Capacity Environment T&D Deferal Loss Savings 11

12 Change Assumptions: PV Value = 21 per kwh Change the following assumptions: Include disaster recovery benefit Increase natural gas prices (years 6 to 30) by 30% Capture PV & load control technology synergy Escalate environment benefit 5% per year Value goes from 11 per kwh to 21 per kwh 12

13 Study Uses Assist in structuring an RFP Provide input into incentive design for customerowned systems Evaluate other PV applications Assist in evaluating new business opportunities (e.g., a fixed-price electricity offering) 13

14 Methodology Advances Applied method to capture natural gas price hedge benefit Demonstrated importance (and applied) marginal loss savings calculations Developed preliminary method to quantify disaster recovery benefit Developed method to convert non-firm resource (PV) into firm resource using technology synergies (PV + load control) 14

15 Study Enhancements Further investigate disaster recovery benefit Improve long-term natural gas price forecast Use PV in conjunction with load control Further evaluate T&D deferral potential Expand framework to include other benefits 15