V Value off Distrib buted Generat G tion S olar PV in n Connectticut M March 2015 G Grid Value of Solar PV P Distributed eneergy resourcess (DERs) like solar photovoltaic (solar PV)) systems provvide unique vaalue to the eleectric grid. Th he price of eleectricity variess throughout the t day. For ex xample, at 7 aa.m. on July 19 9, 2013, the wh holesale markeet price of ellectricity in Co onnecticut waas $49.70 per MWh; M by 5 p.m m. the price haad jumped to $$222.93 per M MWh. A solar P PV system feeeding electriccity into the grrid at 5 p.m. on July 19, 20133 would have ooffset the need d to purchase energy from aanother geenerator at that high markeet rate. In n addition to avoided a energy y costs, behind-the-meter solar s PV helps offset other ccosts associateed with the eleectric grid an nd, ultimately y, all ratepayerrs’ electricity bills. b These in nclude: avoideed capacity cossts; avoided trransmission aand diistribution costs; energy an nd capacity maarket price sup ppression effeects (also calleed demand red duction induced price efffects or “DRIP PE”); and, avoiided environm mental compliiance costs. W While not inclu uded in this an nalysis, there is lo ocational valuee associated with w solar PV and a other DER Rs if they are sttrategically lo ocated on the g grid to help avvoid the neeed for expensive infrastruccture upgradees. DERs also generate g signiificant societaal benefits. In ncluding econo omic beenefits and the avoided social costs of greeenhouse gas emissions and d other polluttants such as S SO2 would furrther en nhance the vaalue propositio on of solar PV. Those comp ponents are noot included in the figure bellow (note: in a recent an nalysis in Maine, including the net sociall cost of carbon n, SO2, and NO Ox added 9.6 cents to the overall value of solar). Beelow are the results of Acad dia Center’s asssessment of th he value of a ssolar PV system CT m installed neear Hartford, C (aassuming a 1 kW k marginal unit). u The metthodology beh hind each com mponent is avaailable at: www w.acadiacenteer.org. Grid Va alue of Solar PV in Connecticut – 25-yyear Levelizeed Cost (2014 4$) 30.00 Avoided NOx Compliance e Costs Avoided CO2 Compliance e Costs DRIPE - Capacity 25.00 DRIPE - Energy Avoided Distribution Costts cents per kWh (2014$) Avoided Transmission Co osts 20.00 Avoided Capacity Costs Avoided Energy Costs 15.00 10.00 5.00 0.00 35 3 degrees 20 degrees 35 degrees d South Facing --- Fixed 20 de egrees 5 degrrees West Facing -- Fixed 2-axis traccking Notte: Where approprriate, avoided rese erve capacity costss, transmission andd distribution lossses,  and a wholesale risk p premium or price hedge are included in the calculatioons. 6 extt. 001 accadiacenter.org ● admin@acadiiacenter.org ● 617.742.0054 Bo oston, MA ● Hartford, CT ● New w York, NY ● Providence, RI ● Rockport, R ME ● Ottawa, ON, Can nada 2 Th his assessmen nt considers siix different solar PV system m orientations:: 1) south-facin ng (azimuth o of 180 degrees) with a 35 deegree tilt; 2) so outh-facing with w a 20 degreee tilt; 3) west-facing (azimu uth of 270 degrees) with a 355 degree tilt; 4 4) westfaacing with a 20 0 degree tilt; 5) 5 west-facing with a 5 degreee tilt; and, 6) a 2-axis tracking system. A As shown in th he figure ab bove, the orien ntation of a sy ystem will deliiver different values. v For exxample, the vaalue of the avo oided energy co omponent in south-facing s systems s is larg ger since overaall output is m maximized; wh hereas, capaciity-related com mponents arre larger in sysstems that aree facing the su un during periods of greaterr demand (i.e., west-facing ssystems that p produce m more energy in n the afternoon n) because theese systems deeliver greater output duringg peak hours. P Policy Ram mificationss for Conne ecticut One of the key findings f of thiis analysis is that t a “flat” sysstem of compeensation – succh as net meteering – distortts the m market for solaar PV by inadequately valuin ng west-facing g systems relaative to south-facing ones. A As shown in th he table beelow, the totall value per yeaar of a 5 kW so outh-facing syystem versus a 5 kW west-faacing system w would be simillar – $1,306 an nd $1,359, resp pectively – butt under net metering the weest-facing systtem would recceive almost 220% less comp pensation th han a south-faacing system. Grid Valu ue of Solar, Annual A Outpu ut and Total A Annual Valuee by System Type So outh-facing @ 35 ̊ South-facing S @ 20 ̊ West-facing @ 35 ̊ West-facing g @ 20 ̊ West-facing @5̊ 2-axxis tracking U Unit Value of Solar S ((cents/kWh) 20.4 20.8 26.0 24.6 22.2 21.5 5 T Total Annual Output O ((kWh) 6,403 6,227 5,225 5,388 5,491 8,08 86 T Total Annual Value V ($) $1,306 $1,295 $1,359 $1,325 $1,219 9 $1,73 39 Th he differencess in value for production p fro om south-facin ng and west-ffacing systemss also have im mplications forr the ap ppropriate dessign of the ressidential solar incentives cu urrently offereed by the Conn necticut Green n Bank. Incen ntives sh hould be desig gned to maxim mize the valuee that the solarr PV resource provides to bo oth system ow wners and all rratepayers raather than sim mply kWh thro oughput. Thiss helps ensure that incentives are fair and d optimize grid d support. Th hese solar PV production vaalues also need to be factoreed into any poolicymaking aand rate design n for new solaar in nitiatives – forr instance, forr any new com mmunity solar projects or forr any new tariiffs designed ffor solar PV. O One way th his might work k is a bi-directtional rate stru ucture where a solar PV own ner pays retaiil rates for all p power importeed from th he grid and recceives the “vallue of solar” fo or all power ex xported to thee grid (less disttribution charrges based on volume or deemand at systtem peak). Th his would help remedy the concern that soolar PV ownerrs might be un nfairly shifting g grid co osts onto otheer grid users. See S Acadia Center’s UtilityV Vision for add itional rate deesign recomm mendations. Lo ocational valu ues have not been considereed in this stud dy, but are imp portant for maaximizing the savings in disstribution co osts that solar PV can bring for all electricc ratepayers. Price P signals ffrom the electtric distributio on companies are neeeded so that customer-siteed solar PV an nd other DER can c be targeted d to areas of th he grid wheree infrastructurre im mprovements might be needed in the neaar future. Thee load reductioons that DERs can bring to tthese high loaad areas caan defer or avo oid the need fo or new infrasttructure spend ding that wou uld be paid for by all ratepayyers. F or more i nformatio on: Biill Dornbos, Seenior Attorney y & Director, Connecticut C Office, O wdornbbos@acadiaceenter.org, 860 0-246-7121 x20 02 Jaamie Howland d, Director, Cliimate and Eneergy Analysis Center, C jhowlaand@acadiaccenter.org, 860 0-246-7121 x20 01 Leeslie Malone, Senior Analysst, Energy and d Climate, lmaalone@acadiaacenter.org, 40 01-276-0600 accadiacenter.org Bo oston, MA ● ● admin@acadiiacenter.org Hartford, CT ● New w York, NY ● ● 617.742.0054 6 extt. 001 Providence, RI ● Rockport, R ME ● Ottawa, ON, Can nada