SOLAR VALUATION & COST/BENEFIT ANALYSES

Transcription

1 SOLAR VALUATION & COST/BENEFIT ANALYSES Workshop for Utah Municipal Utilities Presented by: Jim Lazar and John Shenot Regulatory Assistance Project May 11, 2017

2 ROOFTOP SOLAR WORKSHOPS FOR UTAH MUNICIPAL UTILITIES Grid Impacts of Distributed Solar Solar Valuation & Cost/Benefit Analyses Rate Design & Solar APRIL 13 TODAY JUNE xx 2

3 OVERVIEW OF TODAY S WORKSHOP Group discussion/icebreaker Reasons for doing a solar valuation or costbenefit analysis Overview of key decisions for any solar valuation study Detailed look at valuation issues and examples 3

4 GROUP DISCUSSION/ICEBREAKER Where does your power come from today? Where do you expect it to come from years from now? How much active control does your utility have over its power supply? 4

5 GROUP DISCUSSION/ICEBREAKER Has anyone in the room today participated in a solar valuation study or cost-benefit analysis for your utility, or for Utah in general? If you had to guess, do you think a distributed solar system installed by one of your customers today would put upward or downward pressure on retail rates over the next 20 years? What questions do you hope to answer today? 5

6 REASONS FOR DOING A SOLAR VALUATION OR COST-BENEFIT ANALYSIS (CBA) 6

7 A VARIETY OF POTENTIAL REASONS Develop a Value of Solar (VOS) tariff Assess the fairness of an existing Net Energy Metering (NEM) tariff Determine appropriate credit for a NEM tariff or a community solar program Provide data for resource planning or procurement decisions Identify locations where PV has highest value Evaluate cost-effectiveness of incentive programs 7

8 EXAMPLES 8

9 CAN YOU JUST USE SOMEONE ELSE S STUDY RESULTS? Wide variation in methodologies and assumptions Actual costs and benefits of any PV installation depend on variables that are unique for each utility Thus the values determined in any other study and the conclusions reached may be inaccurate and misleading If you simply can t do your own study: find one for a similar utility, using a methodology you like 9

10 RMI SURVEY OF MULTIPLE STUDIES (2013): VALUE RANGED FROM $ $0.30/KWH Average Residential Rate 10

11 EXAMPLE: AVOIDED ENERGY BENEFIT IN STUDIES REVIEWED BY RMI Why Values Differ Between Studies: Market structures Characterization of marginal generating resources Fuel price forecasts Variable O&M costs Carbon prices Time horizon Source: Rocky Mountain Institute, A Review of Solar PV Benefit & Cost Studies,

12 EXAMPLE: CAPACITY VALUE OF PV DECREASES AS PENETRATION INCREASES Source: LBNL (2012) 12

13 OVERVIEW OF KEY DECISIONS FOR ANY SOLAR VALUATION STUDY 13

14 CHOOSING AN EVALUATION PERSPECTIVE OR COST TEST Perspective (~Cost Test) PV Customer Other Consumers Utility Societal Key Question Answered Will program participants costs decrease? Will utility rates decrease? Will utility costs decrease? Will total costs to society decrease? Summary of the Approach Includes the costs and benefits that are experienced by the customer who directly benefits from a PV installation. Useful in program or incentive design to improve participation. Includes the costs and benefits that affect utility rates, including program administrator costs and benefits and lost revenues. Useful in program design to avoid or minimize cost transfers. Includes the costs and benefits that are experienced by the utility. Identifies impacts on utility revenue requirements. Includes the costs and benefits experienced by all members of society. Most comprehensive comparison but also hardest to quantify. 14

15 EXAMPLES OF STUDIES USING DIFFERENT EVALUATION PERSPECTIVES Perspective (~Cost Test) PV Customer Other Consumers Utility Societal Multiple Perspectives Select Examples Normally only considered in combination with other perspectives RW Beck 2009 Arizona Public Service SAIC 2013 Arizona Public Service LBNL 2012 California CPR 2012 Austin Energy Xcel Energy 2013 Public Service Co. of Colorado Normally only considered in combination with other perspectives E California 4 perspectives CPR 2012 Pennsylvania and New Jersey 3 perspectives 15

16 DECIDING WHICH CATEGORIES OF VALUE WILL BE CONSIDERED Source: Rocky Mountain Institute, A Review of Solar PV Benefit & Cost Studies,

17 CATEGORIES OF VALUE DEPEND ON EVALUATION PERSPECTIVE 17

18 ADOPTING METHODOLOGIES FOR ESTIMATING COSTS/BENEFITS IN EACH CATEGORY 18

19 EXAMPLE: AVOIDED ENERGY BENEFIT Source: Rocky Mountain Institute, A Review of Solar PV Benefit & Cost Studies,

20 DETAILED LOOK AT VALUATION ISSUES AND EXAMPLES 20

21 OVERVIEW OF NET METERING AND VALUE OF SOLAR RATEMAKING Value of Solar Analysis Can be narrow (short-run) or broad in scope Net-Metering: Considered an infant-industry subsidy by many Alternatives to Net Metering 21

22 TWO VIEWS OF SOLAR VALUATION Traditional Utility View DG customer uses the grid and should pay for it Solar Advocate View Value of distributed resource is greater than the retail rate 22

23 RANGE OF SOLAR VALUATION STUDIES Narrow studies Short-run cost savings from solar additions Long-Run studies Generation capacity and energy value Broad Utility Sector Studies Generation, transmission, distribution, and other utility system values. Extensive Societal Studies Utility system and societal benefits 23

24 CATEGORIES OF COSTS CONSIDERED Type* Variable Capital Externalities Societal Narrow X Long-Run X X Broad Utility X X x* Extensive X X X X * Most utility studies consider only a subset of externalities, those that affect the utility sector. 24

25 SOME COSTS TREATED VERY DIFFERENTLY Production Capital Costs Transmission Capital Costs Distribution Capacity Credit Marginal or Average Line Losses Current or Future Environmental Costs Fuel Cost and Fuel Supply Risk Macroeconomic Effects 25

26 NARROW STUDIES Consider short-run marginal cost avoidance only Fuel and purchased power Line losses Out of pocket environmental compliance Some look only at power supply 26

27 EXAMPLE NARROW STUDY: NV ENERGY 2015 Utility has adequate capacity Fuel savings are primary short-run benefit Commission ordered 8-year phase-down of NEM pricing Modified rate design for existing solar: Higher fixed charge Lower variable charge Update: Existing customers to be grandfathered 27

28 BROAD UTILITY SECTOR STUDIES Nevada (E3) Mississippi (Synapse) Maine (Clean Power Research) Austin (Austin Energy) Minnesota (State Energy Office) 28

29 LONG RUN STUDIES: E3 FOR NEVADA COSTS AND BENEFITS VERY CLOSE 29

30 NET METERING IN MISSISSIPPI Synapse Energy Economics prepared the analysis for the Mississippi Public Service Commission, Docket No AD-2 Released September 19,

31 MISSISSIPPI VOS: 25-YEAR LEVELIZED AVOIDED COSTS Source: Synapse Energy Economics 31

32 MISSISSIPPI VOS: 2014 AND 2016 Energy 2014: Avoided costs dominated by oil CTs in early years 2016: Fuel forecasts likely lower than 2014, two fewer years of oil-fired CTs Generation Capacity 2014: Linear increase from $6 kw-yr to net CONE over 25 years 2016: MISO South Zones 8-10 cleared at $1.09 kw-yr Source: Synapse Energy Economics 32

33 MISSISSIPPI VOS: 2014 AND 2016 Transmission & Distribution Capacity System Losses 2014: In-house estimation of $33 kw-yr transmission + $55 kw-yr distribution, adjusted for capacity credit 2016: Still no MS utility-specific studies to my knowledge 2014: weighted average system losses using Entergy- and MS Power-specific data and national average for rest-of-state 2016: Using 2014 marginal line losses bumps benefit from $9 MWh to $16/MWh. Still no MS utility-specific PV-temporal utility-specific studies to my knowledge Source: Synapse Energy Economics 33

34 MISSISSIPPI VOS: 2014 AND 2016 Environmental Compliance Avoided Risk 2014: CO 2 price only Synapse Mid case ($15/ton in 2020, increasing linearly to $60/ton in 2040). SOx and NOx allowances embedded in avoided energy benefits. Dec 2014: MS PSC, citing Energy Ventures Analysis, stated residential bills to go up 35%, industrial rates 69% due to CPP. 1 Other predictions nowhere near as dire. 2014: 10% adder to all five other benefit categories 2016: A more finely tuned analysis perhaps more appropriate Source: Synapse Energy Economics 34

35 MISSISSIPPI VOS: NEM IMPACT ON RATES $250 Levelized Costs vs. Levelized Benefits (2013 $/MWh) $200 $150 $100 $50 Administrative Costs Risk Environmental Compliance System Losses T&D Capacity Energy Lost Revenue $0 Utility Costs + Lost Revenue All Low Mid Case All High Benefits, Combined Scenarios Source: Synapse Energy Economics 35

36 BROAD: E3 NEVADA VS. SYNAPSE MISSISSIPPI Included in E3: Generation Transmission Distribution Losses Avoided RPS Not Included in E3: Solar admin costs Market price effects Price risk Grid support services Outage costs Non-energy benefits 36

37 BROAD UTILITY SECTOR STUDIES Average US Residential 37

38 EXPANSIVE SOCIETAL STUDIES Consider values in addition to those in the utility revenue requirement Environmental benefit including future carbon costs Local economic development Value of energy independence Often show significant value generated for public even with full net-metering. 38

39 AIR CONDITIONING BENEFITS 39

40 CROSSBORDER ENERGY / COLORADO 40

41 EXPANSIVE STUDY: COLORADO Benefit/(Cost) Low Gas Base Gas High Gas $/MWh $/MWh $/MWh Avoided Energy Costs Fuel Hedge Value Avoided Emissions Avoided Generation Capacity Avoided Distribution Avoided Transmission Avoided Line Losses (Solar Integration Costs) (0.50) (1.80) (4.40) +10% for Societal Benefits Total Net Benefits/(Costs)

42 AN IMPORTANT DIFFERENCE: HIGH-COST VS. LOW-COST UTILITIES Many utilities have low rates due to embedded lowcost resources. The marginal costs may be similar to those for higher cost utilities. 42

43 QUESTIONS? 43

44 ISSUES FOR UTAH Utility impacts, Utah Impacts, WECC Impacts or Global Impacts Short-run vs. Long-run impacts Control area services Retirement of California share of IPP 44

45 GEOGRAPHIC PERSPECTIVE Utah centrally located in WECC Extensive interconnections to all subregions 45

46 SHORT-RUN VS. LONG-RUN Solar is a year resource. Existing power supply resources will retire. How are other new resource additions evaluated? Source: secondsunsolar 46

47 ACCOUNTING FOR CONTROL AREA SERVICES Utah has MANY utilities, but only one control area. How many VOS services are provided by RMP, and what costs are avoidable to muni utilities? 47

48 RETIREMENT (ABANDONMENT?) OF CALIFORNIA INTERESTS IN IPP All IPA members are UAMPS members. NOT all UAMPS members are IPA participants 48

49 QUESTIONS? 49

50 KEY TAKEAWAYS ON SOLAR VALUATION The answer you get depends on the question you ask. Short-run or long-run? Utility direct effects only? Utility direct and future utility effects? All societal effects? High PV saturation utilities are different Low-cost utilities: >NEM may be needed Valuation of T&D, risk avoidance and environmental costs are important. 50

51 USEFUL RESOURCES Pace Law School: Value of Solar Center of Excellence Solar Energy Industries Association (SEIA): Compilation of Solar Cost- Benefit Studies 51

52 ROOFTOP SOLAR WORKSHOPS FOR UTAH MUNICIPAL UTILITIES Grid Impacts of Distributed Solar Solar Valuation & Cost/Benefit Analyses Rate Design & Solar JUNE xx 52

53 THE SOLAR MARKET PATHWAYS PROJECT IS SUPPORTED BY: The information, data, or work presented herein was funded in part by the Office of Energy Efficiency and Renewable Energy (EERE), U.S. Department of Energy, under Award Number DE-EE

54 AWARDEES OF 54