Value of Solar Tariff

Transcription

1 Value of Solar Tariff Will it work in Washington State? Ahlmahz Negash EE 500E Seminar

2 Net Energy Metering This is a stable and highly successful policy We need to maintain net metering, not fix it -Anne Smart, TASC Executive Director

3 Why is this an issue? 1Rocky Mountain Institute, Rate Design for the Distribution Edge, August Edison Electric Institute, Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business, Jan 2013

4 Why is this an issue? Poor Retail Rate Design Volumetric, not cost reflective Poor DER Pricing Mechanisms Incentive-based, not value-based Todays rates are an increasing reflection of yesterday s grid 1Rocky Mountain Institute, Rate Design for the Distribution Edge, August Edison Electric Institute, Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business, Jan 2013

5 Legislation to Eliminate or Alter NEM NC Clean Energy Technology Center, Rethinking Standby Charges and Fixed Cost Charges: Regulatory and Rate Design Pathways to Deeper Solar PV Cost Reductions, August 2014

6 Value of Solar (I) The right price mechanism for a forward-looking technology is not backwardlooking costs -Karl Rabago, Former Texas Regulator and Utility Executive

7 Value of Solar Tariffs (VOST) Lifetime economic value of solar to the utility Buy All Sell All Clean Power Research Austin Energy 2012 Minnesota

8 Value of Solar Tariffs Design Process Identify Value Components Quantify Economic Value Calculate VOST

9 Step 1: Identify Value Components Energy Benefits Capacity Benefits Ancillary Benefits Externalities Avoided fuel cost Avoided variable plant O & M costs Generation Capacity Reserve Capacity Voltage Regulation Environmental Benefits: * Reduced RPS Need * REC Sales * Reduced Carbon * Other Benefits Avoided energy loss Energy hedge value Transmission & Distribution Capacity Fixed O & M Plant Costs Other Benefits Societal Benefits * Local Economy * Stimulates technology * Other benefits Straightforward Complex

10 Step 2: Quantify Economic Value Calculate 25-year levelized cost of each value component Process: Estimate marginal solar production for 25 year period Estimate discounted utility costs for each value component Value-based price is the discounted cost divided by the discounted production VOS component = PVLife 1 year=0 Discounted Utility Costs year PVLife 1 DiscountedPVProduction year year=0

11 Example: Value of Avoided Fuel Costs VOS fuel = year=0 24 BurnerFuelPrice year SolarWeighedHeatRate year PVProduction year RiskFreeDiscountFactor year 24 year=0 PVProduction year RiskFreeDiscountFactor year Where, RiskFreeDiscountFactor year = r year PVProduction year = PVFleetShape hour 1 p year hour=1 SolarWeighedHeatRate year = hour= HeatRate hour PVFleetShape hour h year hour=1 PVFleetShape hour BurnerFuelPrice year = NGPrice year + FuelPriceOverhead 1 + g year, year = 0 11 NGPrice g year, year = 12 24

12 Results 1: Value of Avoided Fuel Costs Year Guaranteed Fuel Prices Burnertip Fuel Price Solar Weighed Heat Rate Utility Price Prices Costs Disc Costs Discount pu PV Factor VOS Production Utility VOS (risk free) Utility VOS $/MMBtu $/MMBtu (Btu/kWh) $/kwh $/kwh (kwh) ($) ($) ($) ($) 2014 $393 $ $003 $ $3561 $ $3561 $ $413 $ $004 $ $3709 $ $3708 $ $428 $ $004 $ $3808 $ $3784 $ $440 $ $004 $ $3891 $ $3821 $ $455 $ $004 $ $3997 $ $3861 $ $877 $ $007 $ $6881 $ $3736 $ $901 $ $008 $ $7024 $ $3665 $ $924 $ $008 $ $7171 $ $3598 $ $949 $ $008 $ $7321 $ $3534 $ $974 $ $008 $ $7474 $ $3475 $2291 Validation: Present Value $99154 $99154

13 Step 3: VOST Calculation numcomponents VOST = VOS i LoadMatchFactor i 1 + LossSavingsFactor i Where, LoadMatchFactor i = i PLR withoutlosses ELCC withoutlosses for dist capacity component for other capacity components 1 for energy dependent components LossSavingsFactor i = LossSavings PLR LossSavings ELCC LossSavings Energy for dist capacity component for other capacity components for energy dependent components

14 Load Match Factors (Winter Peaking Region) Effective Load Carrying Capacity (ELCC) Peak Load Reduction (PLR) ELCC = PLR = 0

15 Value of Solar Tariff Will this method work for Washington State? $0096

16 Value of Solar Tariff Will this method work for Washington State? Winter peaking No capacity value! Marginal fuel is NG and Hydro Energy value is incorrect! Env Value is incorrect! $0096

17 Marginal Fuel Assumption 50% NG & 50% Hydro Levelized Value ($/kwh) Levelized Value of Solar (Marginal Fuel: 50% NG) AvoidedFuel AvoidedOMFixed AvoidedOMVariable AvoidedGenCap AvoidedResCap AvoidedTransCap AvoidedDistCap AvoidedEnviron $0073

18 Marginal Fuel Assumption 50% NG & 50% Hydro Levelized Value ($/kwh) Levelized Value ($/kwh) Levelized Value of Solar (Marginal Fuel: 50% NG) AvoidedFuel AvoidedOMFixed AvoidedOMVariable AvoidedGenCap AvoidedResCap AvoidedTransCap AvoidedDistCap AvoidedEnviron 20% NG & 80% Hydro Levelized Value of Solar (Marginal Fuel: 20% NG) AvoidedFuel AvoidedOMFixed AvoidedOMVariable AvoidedGenCap AvoidedResCap AvoidedTransCap AvoidedDistCap AvoidedEnviron $0073 $0059

19 Value of Solar (II) A modified VOST methodology, more suited for the PNW

20 Modified VOST Energy value = Mid-C Forecast Load Match = Capacity Factor Env Value = Reduced RPS Needs + REC Sales REC=$1/REC Levelized Value ($/kwh) Levelized Value of Solar ($1 REC) AvoidedEnergy EnergyHedgeValue AvoidedLineLosses AvoidedGenCap AvoidedTransCap AvoidedDistCap ReducedRPSNeeded RECSales $0065

21 One more time Energy value = Market Price Load Match = Capacity Factor Env Value = Reduced RPS Needs + REC Sales REC=$50/REC $0122

22 Value of Solar (III) Weighted Retail Rate

23 Weighted Retail Rate Combines benefits of NEM and VOST Not a levelized value Requires disaggregated retail rates

24 Disaggregated Rate Design Energy $/kwh $/kwh Energy Utility Demand $/kw $/kw or $/kwh Demand Retail Costs Customer $/cust $/cust Customer Rate Ext $/X $/kwh Ext

25 Weighted Retail Rate VOST = R ρ eng w eng + R ρ dem w dem + R ρ cust w cust + envx w eng = 1 SolarHours 1 TotalHours s=1 SolarHours MarketPrice s TotalHours MarketPrice t, t=1 ρ eng = EnergyCosts TotalCosts w dem = 1 TotalHours t=1 TotalHours PVFleetShape t, ρ eng = DemandCosts TotalCosts w cust = 0 ρ cust = CustomerCosts TotalCosts

26 Results: Weights and Cost Proportions R ($/kwh) v ($/kwh) ρ eng (%) ρ dem (%) ρ cust (%) w eng (%) w dem (%) w cust (%) VOS ($/kwh) $0089 $ $0060 $0089 $ $0069 $0089 $ $0046 $0089 $ $0075

27 Methodology Comparison Value Component Complexity Cost Shifting Risk Under- Value Risk VOST (I) High Low High Low* VOST (II) Med Low High Low* VOST (III) Low Low Med Med NEM Very Low High Low High Over-Value Risk

28 Conclusion Washington State VOST: Policy Implications

29 Policy Implications Solar Policy Policy rewards supply Policy creates demand Incentive-Based NEM Tax Credits Production Credits Standard-Based RPS (Solar) REC/SREC ACP Rate Value of Solar EPA SCC Value of Solar Tariff VOS determines rate

30 VOST: A good idea? Yes 1 VOST is fair and just compensation method for everyone 2 VOST is more economically sound and efficient than current net metering policies 3 VOST can optimize solar penetration and location without arbitrary caps No 1 Without strong solar policies, the value of solar is low in Washington 2 A VOST is not likely to be high enough to drive local solar economy 3 Uncertainty in future policies can place financial risk on utilities and/or undervalue solar

31 Summary Many factors influence VOST calculations Economic assumptions Regional characteristics Federal and state RE/solar policies A successful Washington State VOST would: require monetizing additional externalities be very policy dependent address the need to restructure rates

32 Thank you!