Value of the grid to DG customers

Posted by: Metering.com

October 2, 2013

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Lisa Wood,
Executive Director,
IEE
 

Washington, DC, U.S.A. — (METERING.COM) — October 2, 2013 – Contrary to the claim that the distributed generation (DG) customer derives no benefit from being connected to the host utility’s distribution system, the DG customer that is connected 24/7 utilizes grid services on a continuous, ongoing basis, according to a new paper from the IEE.

The point is to recognize the value of these grid services and to develop a methodology for the DG customer to pay for using them.

The paper, Value of the Grid to DG Customers by Lisa Wood, IEE’s executive director and vice president of The Edison Foundation, and Robert Borlick of Borlick Associates, adopts the premise that DG customers should pay their fair share of the cost of the grid, because pushing any of this cost onto non-DG customers raises serious economic efficiency and fairness issues. (The extent to which this can occur may be seen in the net metering draft cost effectiveness evaluation released last week by the California Public Utilities Commission.)

The utility’s cost of providing grid services consists of at least four components, the paper points out – the fixed costs associated with transmission, distribution, and generation capacity, and the costs of ancillary and balancing services. Typically these can account for about 55 percent of the monthly bill.

After reviewing – and rejecting – revenue decoupling as a solution, the paper presents three approaches to net metering that are currently under examination in the U.S.:

  • Redesign retail tariffs such that they are more cost reflective (including adoption of one or more demand charges) – as being introduced by Arizona Public Service
  • Charge DG customers for their gross consumption under their current retail tariff and separately compensate them for their gross (i.e. total on-site) generation – as implemented by Austin Energy
  • Impose transmission and distribution (T&D) “standby” charges on DG customers – as has been introduced by Dominion Energy.

“The truth is that a DG customer continues to rely upon grid services 24×7. Most of today’s net metering tariffs ignore the value of grid services provided to DG customers,” said Wood. “Now that we’ve jump-started DG in the U.S., it is time to move to net metering 2.0 and end the cost shifting.”

To this end updating of net metering policies should be done now, the paper concludes.

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