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=='''Value of Solar: Program Design and Implementation Considerations'''==
=='''Value of Solar: Program Design and Implementation Considerations'''==
[[ Taylor M, McLaren J, Cory K, Davidovich T, Sterling J, Makhyoun M. Value of Solar: Program Design and Implementation Considerations. Golden, CO: National Renewable Energy Laboratory. Accessed October. 2015 Mar 1;15:2015.]]
[[ Value of Solar: Program Design and Implementation Considerations. Golden, CO: National Renewable Energy Laboratory. Accessed October. 2015 Mar 1;15:2015.]]
This paper basically investigates and discusses various methods through which a VOS policy can be designed. Various design consideration can be evaluated. However, first one must consider the type of market where the program is to be implemented.
This paper basically investigates and discusses various methods through which a VOS policy can be designed. Various design consideration can be evaluated. However, first one must consider the type of market where the program is to be implemented.

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The market value and cost of solar photo-voltaic electricity production.

Borenstein S. The market value and cost of solar photo voltaic electricity production. Center for the Study of Energy Markets. 2008 Jan 14.

  • Valuation of Solar
  1. Value greatly depends on time of production, location of installation, and the direction in which the panel is facing.
  2. Production peaks disproportionately with the peak demand.
  • Advantages of solar
  1. Distributed PV installation does not require transmission and distribution infrastructure.
  2. Lack of transmission and distribution system reduces the losses that occur.
  3. As PV is a distributed system, it provides security to the entire network in the sense that the whole system won’t be affected if the PV system is targeted or fails.
  4. No emissions of greenhouse gases and other pollutants.
  • Reasons for Misvalue of PV
  1. Intermittency in supply
  2. A feeling that the transmission and distribution system would be required in the future and hence there is no saving in terms of cost in the real sense.
  3. Planning studies cannot be performed as there is no guarantee of how much solar power would be produced.
  4. If the output of PV changes then the second to second stability of the system changes rapidly.
  • Time Varying Production of solar PV
  1. PV production varies with season, latitude and direction of tilt of panels.
  2. There are two approaches to conceptualize the time varying production
    1. With a detailed and wide sample of data.
    2. Simulation data from TRNSYS (Transient System Simulation Program)
  • Real time prices for valuing the power from solar PV
  1. This can be done through two approaches
    1. Actual price from the market where it is used.
      1. Advantage
        1. The data would be credible as it is obtained from an actual market
      2. Disadvantage
        1. There could be regulation of prices, that is a price cap could be fixed.
        2. If there is excess production at peak demand period, the price would be relatively less as compared to if produced over time.
    2. Simulated data from a competitive market
      1. Here the model can be designed to decide the cap and hence there would be no regulation on the prices.
      2. This model is based on the import/demand supply as the production varies.
      3. It includes baseload cost+peakcost+mid-merit cost.
  • Correlation between prices and PV production
  1. PV production depends on weather.
  2. Demand depends on weather.
  3. Hence production depends on demand.
  4. However, this correlation could be misleading as weather condition may vary for the same system.
  • Time varying solar power
  1. The author calculates the results using 5 different price series, one is actual hourly spot price in the region, second is hourly spot price with the adjustment for low price caps, third is assumed demand and supply with some elasticity -0.025, fourth is with elasticity of -0.1 and fifth is when some capacity costs are recovered through non energy payments in whole sale market.
  2. The assumption of marginal cost never exceeding the highest cost of generation , shortfall being paid to generators, the revenue being recovered as uniform fee on KWh sold, is made.
  3. In comparison to the real time wholesale price , the simulated prices produce much larger differentials. In his simulations most of the generation costs are recovered through energy prices and not through capacity payments.
  4. He has concluded that value of electricity delivered from on site solar PV and its undervaluation depend on the direction of its orientation.
  5. Resource adequacy regulations assure that the system always has excess production capacity and consistent with this approach revenues for capacity payments to generators are collected from retail customers in a time invariant way, then wholesale prices will indicate that power at peak times is not much more valuable than off peak.
  • Effect of location on solar PV
  1. Solar PV brings reduced investment in transmission and distribution infrastructure.
  2. Solar PVs are usually installed in areas where T&D is constrained.
  3. State incentives are given to customers for installing PVs that are not in the service territories and no greater incentive is offered to the customers in the service area who install PVs.
  4. A carefully planned location based incentive would reduce transmission congestion and need for transmission infrastructure.
  5. PV is not abundant in most valued locations.
  • Economics of solar PV
  1. Two related issues in a cost analysis are the lifetime of the panels and the appropriate discount rate for evaluation of the project.
  2. The large cost that a owner would face for a PV installation would be replacing inverter.
  3. PV cell production declines eventually with the range of 1% of the original capacity per year.
  4. The soiling effect dirties the panel and it absorbs less solar radiation, hence less electricity.
  5. The net present cost of PV installation is more than the net present benefits of electricity it will produce.

Minnesota's Value of Solar

Minnesota's value of solar-can a norther state's new policy defuse distributed generation battles

  • What is Value of solar?

It is a concept of utilities paying fair and transparent price for solar energy produces by a domestic entity. The utilities in the US are pretty much doing that but not fairly. They are paying for the electricity that is being produced by the solar but not for the amount of pollution that is going down by not using the conventional source, the transmission and distribution capacity that is being avoided, the health issues that are declining, the operation and maintenance cost and many other aspects. The estimation of all these costs for 1 unit of electricity that is being supplied back to the grid by a producer is called the value of solar.

  • Why value of solar?

It is a fair and transparent way of deciding on the cost of solar. It is the answer to both the utilities and customers problems. This will compensate the solar producers well and also bring a long term stability. The concept utilities comply to is net metering, which blocks the actual value of solar as it is based on retail price. Net metering will force consumers to go beyond their actual solar capacity and also increase the consumption of energy.

  • What is net metering?

It is an arrangement where a customer receives full credit for whatever power they deliver to the grid.

  • Why net metering or NEM not fair?

The customer who zero out or null out their electricity bill, do not pay their fair share for the transmission and distribution infrastructure that they are using and hence other customers end up paying this.

Comparative assessment of net metering and feed in tariff schemes for residential PV systems

Poullikkas A. A comparative assessment of net metering and feed in tariff schemes for residential PV systems. Sustainable Energy Technologies and Assessments. 2013 Sep 30;3:1-8.

  • Feed-in-Tariff

Feed-in-tariff (FIT) scheme provide a guaranteed price to the solar producer. The utility is under obligation to purchase the electricity from the producers.

  • Net Metering

Net metering scheme employs a mechanism where producers are paid for the solar production based on whether electricity is being taken from the grid or it is being supplied to the grid. Time of the day net metering is based on the variation in rates during the day, month and season. Market rate net metering employs a rate which is some function of the market rate of electricity.

  • Myths about Net metering

Revenue of the utility decreases. It represents a subsidy from one group of customers to another. It burdens the smaller utilities.

  • Conclusion

Study in Cyprus for a typical rooftop PV system concluded that net metering performs better than the feed-in-tariff under certain conditions and especially when the electricity bill is taken into account.

Treatment of Solar Generation in Electric Utility Resource Planning

[Sterling J, McLaren J, Taylor M, Cory K. Treatment of Solar Generation in Electric Utility Resource Planning. National Renewable Energy Laboratory (NREL), Tech. Rep. 2013 Oct 1.]

  • Integrated Resource Planning (IRP)

It is a planning process done by utilities where a comprehensive study is conducted. The supply and demand evaluations are done and whether the energy requirements, peak demand and reserve capacity are met are also evaluated. The utilities usually do these studies for the long term future, generally for a period of 20 years. Renewable energy sources are also being included in these studies as some utilities feel that the more diversified the sources, the more economical it is from the financial point of view. However, the methods the various utilities use to conduct these studies vary widely. The resource planning for a long term is basically done in the flowing detailed manner

• Evaluate State Policies and Mandates

• Review Existing Generation Fleet

• Forecast Load

• Plan Capacity Expansion

• Production Cost Modeling

• Select Portfolio

  • Benefits and Challenges of Solar to include it in resource planning studies

Benefits •Meet renewable standard requirements

•Fuel diversification

•Cost stability

•Geographic dispersal benefits and modularity

•Partial correlation with peak demand

•Mitigation of environmental compliance risks

•Avoid line losses

Challenges •Variable and uncertain output

•Ramping issues


•Lack of current capacity need

•Reduced capacity benefit over time with increasing solar penetration

  • Renewable Portfolio Standards (RPS)

Some states have a policy that they have to buy certain part of their total electricity sales from renewable sources.

  • Inclusion of Solar into IRP

This requires credible data for the following • Solar Profiles

• Solar Costs

• Solar Capacity value- The capacity value assigned to solar PV varies greatly from utility to utility. Some utility do not assign any capacity value to solar while others assign a value depending upon the type of PV system being used. • Additional considerations- These include Solar Integration Cost Customer sided generation- Whether DPV is to be considered as a net load or a source • Procurement Plan

  • Solar benefits according to Utilities

• Meeting renewable standards required

• Fuel Diversification

• Cost Stability

• Wide range of PV and its dispersal ability

• Partial correlation with peak demand

• Reduce environmental risks

• Avoided line losses

  • Challenges according to Utilities

• Variable and uncertainty in output

• High ramp up and ramp down rates

• Economics

• Lack of current capacity need- Due to RPS requirements by state, utilities are increasing capacity even though there is a load decrease

• Net Metering concerns

• Reduced value as the solar penetration increases

  • Utility Identified Analysis Needs

• Credible PV price and performance data

• Analysis of how to incorporate geographically diversified resources into modeling

• Analysis of the potential relationship between energy storage and PV

• Easier ways to predict impacts of increased PV penetration

• Better risk/uncertainty analysis methods

• Improved commercial production cost models

• Translate distribution system impacts to long-term plans

• Clarity about when to include distributed generation in supply modeling

Designing Austin Energy's solar tariff using a distributed PV value calculator

[Designing Austin Energy's solar tariff using a distributed PV value calculator]

  • Consequences of Net Metering

Solar customers size their solar systems according to their base load as they feel that the excess generation given back to the grid is being paid for at a low rate. Or the solar customers tend to use more energy because they feel that it is free consumption and if they were to give back to the grid they would only be paid at a low rate.

Austin Energy designed a new ‘Value of Solar’ rate. It is still avoided cost calculation at heart but compensates the solar customers at a more competitive price. The calculation tool values the following components :

• Loss savings- Calculated on an hourly basis. Takes into account the benefits provided by distributed sources of energy by producing energy at the same location where required.

• Energy savings-This is the PV output plus the loss savings times the marginal energy price

• Generation capacity savings-It is the effective load carrying capacity of PV times the cost of capacity

• Fuel price hedge value- It is the amount that would be incurred to eliminate the fuel price uncertainty

• Transmission and Distribution capacity savings =(T & D upgrade cost/ load growth) X term X T& D Factor

• Environmental benefits = PV output X Renewable Energy Credit price

The energy and generation capacity costs are reflected when a study of the relation between PV output and nodal prices is done.

After concluding that the average nodal price does not accurately represent the actual value of solar, a new value of solar termed as 'solar premium' was calculated which gave accurate credit to the customers for solar power generation, which was found to be higher than if the same amount of generated power was credited at the marginal electricity price of the area.

Austin Energy came up with the following residential rebate policy on the basis of some assumptions. This rebate was formulated to provide a temporary boost to adoption of solar power.

  • Rebate amount= PV rating (kWdc-stc) X Inverter Efficiency X Rebate level

This new value of solar approach is much more detailed and it gives fair incentives to the solar customers.

A REGULATOR'S GUIDEBOOK: Calculating the Benefits and Cost of Distributed Solar Generation

A Regulator's Guidebook: Calculating the benefits and cost of distributed solar generation

Calculating utility avoided cost

  • Avoided energy benefits
  1. Identifying the displaced marginal generation, which is the cost saved in avoiding the operation and maintenance of a simple cycle combustion turbine or combined cycle gas turbine for providing electricity. This unit would be produced by customer's solar generator.
  2. Value of avoided generation for the life period of a solar generation could be calculated by developing
    1. an hourly market price shape for each month.
    2. a forecast of annual average market prices in the future. This can be done by projecting the cost of marginal generation unit, O&M cost for it and degradation of heat rate. (Heat rate is the measure of efficiency by which a unit creates electricity by running fuel for heat to power a turbine)
  • Calculating system losses
  1. Solar generation when near the load avoids losses with delivering power over long distances. The excess produced by solar would be exported to the grid or to the neighboring customers, there by avoiding losses in the electricity that would have come from the central unit.
  2. On an average line losses are in the range of 7% and higher and "lost and unaccounted for energy" loss, these two may be avoided by solar generation.
  3. Because the losses are not uniform, calculating it on a marginal basis would be more accurate. It says about the correlation of solar PV to heavy loading periods (congestion and transformer thermal conditions increase losses).
  • Calculating generation capacity.
  1. Capacity value exists when a utility can rely on a generating unit to meet its peak demand there by avoiding purchasing of electricity to meet the peak load.
  2. The intermittency problem is solved by
    1. Recognizing a capacity value for intermittent resource and call it effective load carrying capability. This is a statistical method that provides reliable data to project the capacity of intermittent resources.(effective load carrying capability of a generating unit is load increase that system can carry while maintaining designated reliability criteria)
    2. EELC is very data extensive, so a simpler method like projection from utility's load duration curve, by looking at top 50 load hours.
  3. The valuation of incremental capacity is small when compared to the utility where one unit of combined cycle gas turbine can add 500MW at once. One solution to this is a mix of short run and long run avoided capacity costs are applied to renewable generators based on the fact that no additional capacity would be required until a year called resource balance year. It is the utilities job to predict load growth and involve the solar generations in the system.
  4. The best approach would be to determine the capacity credit by looking at the capital and O&M cost of the marginal generator. This resulting value is capacity credit i.e. a credit for the utility capacity avoided by solar generation.
  5. Once effective load carrying capability is determined for a solar generation for a given utility, the calculation of generation capacity becomes easy. The capacity credit is the capital cost of the displaced unit times the effective capacity provided by PV.
  • Calculating transmission and distribution capacity.
  1. Solar generation is usually located at the site of load and helps reduce the congestion and wear&tear of transmission and distribution resources.
  2. To determine the ability of solar generation to defer T&D capacity conditions, we must have the current information on the system planning activities and periodically update this information. Also the investment trends must be extended to match the expected life of solar generation.
  3. With all this data in hand the T&D saving can be determined in two steps:
    1. First perform the economic screening of the areas to determine the cost of expansion and load growth rates for each area.
    2. Second would be to perform the technical load matching for most promising locations.
  4. By looking at the load profile for a year, peak days at the circuit and substation level can be isolated and capacity credit can be calculated. Reducing peak loads would sure avoid investments on overloading transformers, substations etc.
  5. Deferring an upgrade saves utility expenditures and atleast to some extent debt financed.
  6. Ideally the utilities will collect location specific data that support individual assessment of solar generation. In the absence of such data, system wide estimation of T&D deferral value is done.
  7. System wide deferral can be calculated by allocators to assign capacity value of specific hours in the year and then allocates estimates of marginal T&D costs to hours. T&D allocators are based on local loads and T&D cost would be allocated to the hours with the highest load. This approach lacks the potential to capture exact and location specific deferral potential but it does approximate some value without requiring extensive project planning cost and load data for specific feeders, circuits and substations.
  • Calculating grid ancillary services.
  1. Ancillary services in the grid usually include VAR support and voltage ride through.
  2. A solar generation would have inverters to change DC to AC with output at a specified voltage and without reactive power.The functionality of inverters are to disconnect in the event of circuit voltage above or below limits, a voltage dip from the utility can cause thousands of inverters disconnecting the solar generations.
  • Calculating financial services: fuel price.
  1. solar generation reduces the reliance on fuel sources that are at a risk of shortage and price volatility. It is also a fence against regulation of green house gases which greatly impact fuel prices.
  2. The risk of fuel price volatility is usually borne by customers as utilities are not doing enough to mitigate this risk. Reducing this risk has a value to utility customers even if utilities do nothing about it.
  3. For performing this calculation for each year that solar generation isolates the risk premium and helps avoid purchases that involve the risk premium.
  4. The risk premium of natural gas is the difference between major fuel price uncertainty and the one without any uncertainty.
  • Calculating financial service: market price response.
  1. Solar generations reduce the demand in peak hours, when price of electricity is highest.It also reduces over all load on the system and the amount of energy and capacity purchased.
  2. The expenditure on energy and capacity is the current price of power times the current load at any given point in time. The amount of load affects the price of the power, a drop in load would mean reduced market price which could be the result of a distributed solar generation.
  3. The total value of market price reductions can be calculated by summing up all the savings made over all periods of time during which solar was operated.
  • Calculating security services: reliability and resiliency.
  1. This value is difficult to quantify. It depends on a lot of assumptions made on risk of extended blackouts, cost to strengthen the grid, ability of solar to strengthen the grid.
  2. In a place crucial place like hospital in contingency situations, a traditional backup generator can be supported with a solar instead of relying entirely on traditional generation and fuel supply.
  3. Solar can be counted as a way of providing high reliability to vulnerable customers there by reducing the reliability costs of utility.
  • Calculating environmental services.
  1. Utility avoided compliance cost:
    1. The cost of complying to the environmental requirements is a real operating expense and can be considered as avoided cost of generation.
    2. Utilities with renewable portfolio standards avoid compliance cost due to solar generations.
    3. Quantification of social benefits is difficult. For example if a utility avoids production of 20MWh of conventionally produced electricity with solar then it also avoid paying for the emission clean up. But even if it produces that 20MWh conventionally the emissions would have got past the required emission controls. Not emitting this pollution is a significant benefit for the environment and society.
  2. Airborne emissions other than carbon and health benefits:
    1. The public health impacts of fossil fuel geeration have been well documented. Air pollution increases severity of asthama attacks and other respiratory illness. Also the crops and forest lands get destroyed due to these emissions.
    2. Solar reduces fossil fuel generation from plants that emit high pollution during startup.
    3. To capture the benefits of solar emissions of carbon and other matter based on green energy pricing programs cost can be done.
  3. Avoided water pollution and conservation benefits:
    1. Utilities consume a tremendous amount of water each year and will be increasing. With solar this risk can be avoided , safe and affordable supplies can be assured to the customers of utility.
  • Calculating social services: economic development.
  1. Solar industry can create number of jobs and generate revenue locally. Growing demand of rooftop solar panels and supplies creates tax revenue at the state and local levels.
  2. Assumptions about construction of solar PV that it involves higher local jobs than a construction of CCGT plant and then net local benefit of solar on the economy can be calculated.

Solar Valuation and the Modern Utility's Expansion into Distributed Generation

Blackburn G, Magee C, Rai V. Solar valuation and the modern utility's expansion into distributed generation. The Electricity Journal. 2014 Feb 28;27(1):18-32.

This paper discusses why the net metering scheme is unfair to the utilities as well as to the non-solar customers. Net metering cause cross subsidization, that is it imposes a higher cost on certain customers to reduce the cost of electricity of other customers. Here it is the non-solar customers that end up paying more. The irony is that most of the solar customers adopt DPV because they have a higher demand, and ultimately they end up paying lesser as compared to someone who has a lower demand. From the utility perspective, the recovery of fixed costs from the net metering scheme is not possible. The solar customers are being paid at the retail rate for the electricity that they generate. The PV penetration levels are also very important as a high penetration market would require some upgradation or building of the transmission and distribution infrastructure to supply the excess power to the grid. So how can the capital for such an investment be recovered from? Another aspect is most of the protection infrastructure has not been designed for bi direction flow of current. So again if high PV penetration levels exists, it could induce more expense rather than benefits. So the paper basically looks for an alternative approach to the unfair net metering approach. The paper does a survey to study the evolving relationship between NEM and solar valuation. The survey seeks to understand a given utility's

  1. service territory and its consumer base
  2. observed financial impact associated with residential solar generation
  3. methods for recovering fixed costs

The following relationships were explored:

• Utility perception of distributed solar's financial impact on the following aspects of the organization's infrastructure and operations

• Voltage variability—the cost versus savings impact on grid voltage

• Generation capacity—the cost versus savings impact on generation capacity to the system

• Line loss—the cost versus savings impact on system energy losses

• Wholesale energy purchases—the cost versus savings impact on wholesale energy purchases

• Transmission and distribution (T&D) capacity—the cost versus savings impact on capital investments to the T&D system

The survey shows the most of the utilities feel that they are attributing a higher value to solar that what is needed. Also the PV penetration levels greatly influence the value of solar. There is great uncertainty about the success of the solar valuation techniques currently being employed. More cost and benefit analysis needs to be done by utilities to evaluate the true value of solar just as they do for conventional sources. There is a long way to go in reaching a consensus on the actual value of solar and it is quite possible that the VOS tariff policy as implemented in Austin is the way to go.

Value of Solar: Program Design and Implementation Considerations

[Value of Solar: Program Design and Implementation Considerations. Golden, CO: National Renewable Energy Laboratory. Accessed October. 2015 Mar 1;15:2015.]

This paper basically investigates and discusses various methods through which a VOS policy can be designed. Various design consideration can be evaluated. However, first one must consider the type of market where the program is to be implemented.

  • What is levelized cost of electricity (LCOE)?

It is defined as the project’s total cost of operation divided by the energy generated. LCOE= total life cycle cost/ total lifetime energy production

So there can be three types of markets depending on the LCOE and VOS values

• Price support market ( LCOE > VOS)

• Transitional market (LCOE=VOS)

• Price competitive market (LCOE < VOS) An analysis shown by NREL shows that without state and federal incentives for solar programs, all the states in USA fall in the price support market category.

The paper also discusses the case studies in Austin where a VOS policy has been implemented and the Minnesota VOS, where the policy has not yet been adopted by any utility. The one key difference between the two is that in Austin, the VOS rate will be reviewed annually while in Minnesota the VOS rate would be fixed for a period of 25 years. But the VOS rates would be reviewed annually for the new customers.

The paper also talks about possible changes and improvements that could be considered while adopting a VOS policy. VOS Program Design Considerations These can be broadly divided into the following

• Balancing design decisions: Setting objectives, understanding the design and stakeholders interest and placing the program needs in the context of what can be a rapidly changing market

• Installation details: Covering the installation rules for participants

• Rate and Contract treatment: Establish how VOS would be implemented over a long term project

• Price Supports: Considering an additional incentive on top of the VOS rate

• Administrative Issues: Thinking through the internal utility program operations and accounting

  • VOS features

The VOS rate is determined by

• Identifying the categories in which solar provides both benefit and cost to the utility and society

• Calculation value of each category (could be negative or positive)

• Combining the above components into a single rate

Here the paper presents two hypothetical examples of utilities for each of the above points and does a thorough analysis of how the VOS design would change depending on the utility. The paper basically presents provides a framework for a VOS design for the customers, stake holders, utilities and interested parties.

Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic Generation to the U.S. Electric Utility System

Denholm P, Margolis R, Palmintier B, Barrows C, Ibanez E, Bird L, Zuboy J. Methods for Analyzing the Benefits and Costs of Distrubuted Photovoltaic Generation to the US Electric Utility System. National Renewable Energy Laboratory; 2014 Sep 1.

This report examines the methods to estimate the value of DGPV. The report classifies the sources of DGPV benefits and costs into the following categories

  • Energy- The report proposes 5 approaches given below to calculate the avoided energy cost

[1] Simple avoided generator—assumes PV displaces a typical “marginal” generator, such as a combined-cycle gas turbine (CCGT) with a fixed heat rate

[2] Weighted avoided generator—assumes PV displaces a blended mix of typical “marginal” generators, such as a CCGT and combustion turbines (CTs)

[3] Market price—uses system historic locational marginal prices (LMPs) or system marginal energy prices (system lambdas) and PV synchronized to the same year

[4] Simple dispatch—estimates system dispatch using generator production cost data

[5] Production simulation—simulates marginal costs/generators with PV synchronized to the same year.

  • Environment- This mainly deals with the cost of avoided emissions that may occur depending on the generating source
  • T & D losses- This basically depends on the location of the DGPV. Again some of the proposed methods are

[1] Average combined loss rate—assumes PV avoids an average combined loss rate for both T&D

[2] Marginal combined loss rate—modifies an average loss rate with a non-linear curve-fit representing marginal loss rates as a function of time

[3] Locational marginal loss rates—computes marginal loss rates at various locations in the system using curve-fits and measured data

[4] Loss rate using power flow models—runs detailed time series power flow models for both T&D.

  • Generator capacity-Estimating the generation capacity value of DGPV requires calculating the actual fraction of a DGPV system’s capacity that could reliably be used to offset conventional capacity and also applying an adjustment factor to account for T&D losses. The report discusses the following four methods for estimating generation capacity value:

1. Capacity factor approximation using net load—examines PV output during periods of highest net demand

2. Capacity factor approximation using loss of load probability (LOLP)—examines PV output during periods of highest LOLP

3. Effective load-carrying capacity (ELCC) approximation (Garver’s Method)—calculates an approximate ELCC using LOLPs in each period

4. Full ELCC—performs full ELCC calculation using iterative LOLPs in each period.

  • T & D capacity- DGPV can affect both the congestion and the reliability of the system. The report covers the following three methods for estimating transmission capacity value:

1. Congestion cost relief—uses LMP differences to capture the value of relieving transmission constraints

2. Scenario-based modeling transmission impacts of DGPV—simulates system operation with and without combinations of DGPV and planned transmission in a PCM

3. Co-optimization of transmission expansion and non-transmission alternative simulation—uses a transmission expansion planning tool to co-optimize transmission and generation expansion and a dedicated power flow model to evaluate proposed build-out plans.

The report describes the following six methods for estimating distribution capacity value:

1. PV capacity limited to current hosting capacity—assumes DGPV does not impact distribution capacity investments at small penetrations, consistent with current hosting capacity analyses that require no changes to the existing grid

2. Average deferred investment for peak reduction—estimates amount of capital investment deferred by DGPV reduction of peak load based on average distribution investment costs

3. Marginal analysis based on curve-fits—estimates capital value and costs based on nonlinear curve-fits; requires results from one of the more complex approaches below

4. Least-cost adaptation for higher PV penetration—compares a fixed set of design options for each feeder and PV scenario

5. Deferred expansion value—estimates value based on the ability of DGPV to reduce net load growth and defer upgrade investments

6. Automated distribution scenario planning (ADSP)—optimizes distribution expansion using detailed power flow and reliability models as sub-models to compute operations costs

  • Ancillary services- These services are required to maintain the reliability of the grid. It mainly includes voltage control and operating reserves. Three methods are discussed to estimate theses services

1. Assume no impact—assumes PV penetration is too small to have a quantifiable impact

2. Simple cost-based methods—estimates change in ancillary service requirements and applies cost estimates or market prices for corresponding services

3. Detailed cost-benefit analysis—performs system simulations with added solar and calculates the impact of added reserves requirements; considers the impact of DGPV providing ancillary services

  • Other factors- These mainly deal with the fuel price uncertainty and also reduction in energy prices when DGPV is connected to grid

The report provides a possible framework to work with to calculate each of the parameters. The figure gives a very precise idea to utilities ,stakeholders and parties involved on how to develop a framework that would quite accurately determine the value of solar.

Possible flow of an integrated DGPV study.jpg

The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania

Perez R, Norris BL, Hoff TE. The value of distributed solar electric generation to New Jersey and Pennsylvania. Clean Power Research. Prepared for the Mid-Atlantic and Pennsylvania Solar Energy Industries Associations. 2012 Nov.

In this report the VOS analysis is done at seven locations, four in Pennsylvania and three in New Jersey. These locations were chosen because they differ in generation mix and this would be reflected in the different environmental costs. Also they differ in the solar radiation levels. Each location was studies for four types of PV configurations which are as follows

• South-30 (fixed)

• Horizontal (fixed)

• West-30 (fixed)

• 1-Axis (tracking at 30-degree tilt)

This provided a difference in the solar production levels and hence were reflected in the capacity avoided cost and also the energy costs avoided. The detailed calculations as to how the numbers were obtained is also explained in this paper. Some of the key takeaways and conclusions were as follows

[1] Total Value :This value varied from 256/ MWh to 318/MWh

[2] Energy Value: This mainly consists of the fuel cost savings and the operation and maintenance cost saving when a PV system is used in place of a conventional power plant (Typically a combined cycle gas turbine )

[3] Strategic Value: This is mainly the security value that a DPV system brings as it is not concentrated at one place. It also includes the Long term value that it brings to the society at large

[4] Market Price reduction: The highest values were obtained in locations where there was a very good match between the Location Marginal Price (LMP) curve and the PV output curve

[5] Environmental Value: This too varied depending on the types of generation the PV was to be replaced with

[6] T & D capacity Value: The values were fairly low as the study only takes into consideration the infrastructure capital that would be deferred for a future time and not immediate investment that would be saved

[7] Fuel Price Hedge: This value essentially determines the future avoided purchases of fuel. So the value greatly depends on the studies utilities or integrated resource planning

[8] Generation capacity Value: As there is a moderate match between the PV output and the load, this value is typically taken between 28-45% of the rated PV output

[9] Economic Development Value: PV generation provides local jobs at higher rates than conventional generation

[10] Solar Penetration Cost: As the solar market penetration increases, more and more infrastructure would be required to synchronize it with the grid. This is actually an estimated expense and hence it is given a negative value

Environmental impacts from the solar energy technologies

Environmental impacts from the solar energy technologies

Environmental impacts from solar energy technologies

This paper basically talks about the impacts that solar energy production potentially has, positive and negative. The positive effects of solar technology are always more propped up and talked about. There is not much discussion about its negative repercussions on the environment. This paper tries to rectify that missing component in the discussion around solar energy. It discusses the impacts of Solar PV and Solar thermal technologies. Some of the negative impacts of using solar energy on the environment are as follows :

• Visual Impact

• Routine and accidental release of chemicals

• Land use

• Work safety and hygiene

• Effect on ecosystem

• Impact on water resources

However, all these problems can be overcome by proper site selection, design, innovation and focus on health and safety. The negative impacts of solar technologies are far lesser than that of conventional generation methods.

Impacts of High Solar Penetration in the Western Interconnection

[Lew D, Miller N, Clark K, Jordan G, Gao Z. Impact of high solar penetration in the western interconnection. Contract. 2010 Dec;303:275-3000. ]

This paper gives a very detailed study of how solar penetration levels greatly impacts the interconnected grid. As more and more solar generation is being employed, its impact on the existing infrastructure also becomes important. It also examines if it is economically feasible for the western grid to accommodate more levels of solar penetrations. Typical studies are done for 5 % and 25 % solar penetration levels. The paper shows the day daily, seasonal and annual characteristics of Concentrating solar power (CSP) and Photovoltaic Solar (PV) for the areas considered in the study. It is seen that the CSP has a profile which is closer to the load profile. One key finding is that the variable cost goes down as solar penetration reaches 25 %. This is obvious because this is the value of the fuel that is being displaced. However, the operational cost reductions tend to go up as the solar penetration levels increases. This is due to the fact that additional solar power means additional capital investment. The generation being fixed we are just adding an extra source into the system, which ultimately is being added to the cost of the solar energy.

Effect of Penetration on Capacity Value

The capacity value of solar decreases with increased penetration. This is because when an adequate system is fed with more power from a similar source, it gives diminishing returns

Key Findings

The key finding of the study is that the western grid can accommodate 25% solar penetration if the following changes could be made over time • More transmission utilization

• A more thorough unit commitment and economic dispatch of the generators

• Develop very accurate forecasting mechanisms for solar power

• Build more transmission infrastructure as the renewable energy expands

• Detailed study and commitment of adequate operating reserves

• Increase the flexibility of the existing generators

Electricity Rate Structures and the Economics of Solar PV:Could Mandatory Time-of-Use Rates Undermine California’s Solar Photovoltaic Subsidies?

Borenstein S. Electricity Rate Structures and the Economics of Solar PV: Could Mandatory Time-of-Use Rates Undermine California’s Solar Photovoltaic Subsidies?. Center for the Study of Energy Markets. 2007 Sep 17. This paper evaluates the validity of the claim that Time Of Use (TOU) tariff caused the orders for solar installations by 78 % as published in the Los Angeles Times in May 2007.

In January 2007, there was a requirement for solar customers to switch to the TOU tariff from the fixed rate tariff. The paper does a thorough study of customers from two of the biggest utilities in California, Pacific Gas and Electric (PG&E) and Sothern California Edison (SCE). The paper does a calculation of the bills the customers would get. It initially calculated the bill under the fixed tariff mechanism and then with the TOU mechanism. Then the bill is calculated taking into consideration a 2 KW solar generation. The author makes various assumptions in these calculations. One critical aspect was that the TOU scheme was not the same in the two utilities. TOU is a mechanism where the price of electricity varies according to the demand and the time of the day. The fixed rate tariff is a tiered tariff mechanism where customers under a particular total consumption will pay a fixed amount as their bill.


The study showed that the TOU tariff was in fact working more efficiently from the economic point of view for PG&E customers. The bills of these customers with and without a solar generation was lesser as compared to the fixed tariff bills. However, SCE has a somewhat complex TOU tariff mechanism. They implement two different TOU schemes, one for customers with annual consumption of 4800-7200kWh (medium sized), and the other for customers with an annual consumption of more than 7800kWh (large sized). Now here to calculate the bills under such complex tariff schemes the author makes some valid assumption. The results however, show that for SCE customers with lower consumption, the fixed tariff scheme is better. While SCE customers with higher consumption will benefit from the TOU scheme. The paper however, clearly states that this has nothing to do with the decrease in solar orders. This is only because of some weird TOU tariff scheme that SCE is employing.

The paper concludes that the claims by Los Angeles Times are unsubstantiated and there could be a variety of different economic and social factors as well as comparing of wrong sets of data sets that may have caused them to come up with such a report.

Combined Optimal Retail Rate Restructuring and Value of Solar Tariff

Negash AI, Kirschen DS. Combined optimal retail rate restructuring and value of solar tariff. InPower & Energy Society General Meeting, 2015 IEEE 2015 Jul 26 (pp. 1-5). IEEE. This paper proposes a new approach to value solar power. It discusses about the problems with net metering as the number of solar customers are increasing. It also describes the Value of Solar approach and the potential downsides it has.

Three Part Retail Rate

The author proposes a new optimized retail rate called the three part retail rate. This attempts to recover variable costs and fixed costs of generation. Here energy cost is considered variable and customer costs is fixed. Also and additional variable charge is assumed for the demand.

Weighted Retail Rate VOST

It is proposed that the value of solar be linked to the proportion of each of the utilities cost components. Each of these cost components would be weighted by a factor that represents the efficacy of the distributed solar to reduce those costs. An optional external component rate ‘v’ could be added to the weighted retail rate.

VOST = (reng X w1) + (rdmd X w2) + (rcust X w3) + v

Where, reng ,rdmd and rcust are the utility’s energy, demand and customer cost components respectively of the retail rate and w1, w2 and w3 are the PV owner’s energy, demand and customer cost weights respectively.

A case study was done on a medium sized utility using the proposed approach and the results were found to be quite efficient and accurate. The increasing penetration of solar energy will force stated into making policies which are more fair and accurate. The techniques employed in this paper may be a way to go.

Valuing Distributed Energy: Economic and Regulatory Challenges

Valuing distributed energy: economic and regulatory challenges

  • The advancements and cost reductions in solar panels, smart meters and battery storage is facilitating cost reductions and smarter infrastructure. Solar can benefit the customers and the power system is an accepted fact but at the same time there are concerns about valuation, integration and operational cost allocation and recovery.
  • Following major concerns are addressed in the paper
  1. Starting a dialogue between all the stake holders in this.
  2. Why is there a need of new valuation approach.
  3. Explain the various benefits and costs of generation.
  4. How to measure the benefits by solar generations.
  • For sure all the distributed energy resources do one thing and i.e.reduce or shift the load. This alone creates economic tensions in the system.
  • There are many kinds of distributed energy but solar has been the most significant of all because of the drop in cost by 70% over a couple of years, fall in system price by 33% over just 2 years and introduction of third party ownership or leasing.
  • Current Valuation methods of solar:
  1. Public Utilities Regulatory Policy Act 1978 [1] was the starting point of this pricing mechanism. It required utilities to purchase power from customers producing it at avoided cost. Though a lot of utilities contrived through it, but it still is useful in evaluating options for distributed energy pricing and also many new policies use PURPA's legal foundation.
  2. Proxy Unit Methodology:In this method an assumption is made that utility is avoiding a generating unit by using the solar power from customers. Then the fixed cost of this hypothetical unit becomes the avoided capacity cost and variable cost.
  3. Peaker Unit Methodology:This assumes that a customer generating by solar energy helps utility avoid paying for marginal generating unit. Here the capacity payment is based on fixed cost of the utilities least cost peaker unit and energy payments are the foretasted payments for a peaker unit over the contract period.
  4. Differential Revenue Requirement:The difference in cost for a utility with the customer producing by solar.
  5. Market Based Pricing:Customer with access to markets receive energy and capacity payments at market rates.
  6. Competitive Bidding:An open bidding process and winning bid is regarded as the utilities avoided cost.
  7. All the above methods have loop holes and following factors along with the above can be considered in the valuation process:
    1. Dispatch ability and minimum availability.
    2. Line loss and avoided transmission costs.
    3. Environmental cost adders.
    4. Long term levelized contract rates Vs varying rates.
    5. Resource Differentiation.
  • Location will surely determine the value of energy displaced, capacity and reserve requirements, factors used to determine congestion, loss in the T&D and externalitites to be included in the pricing mechanism.
  • Short term transactions Vs long term contracts.A long term contract would help in addition of solar PVs over time when compared to short term pricing mechanism.
  • Uncertainty and Variability, A solar array paired with storage can reduce the variability and provide value for both customer and utility.
  • Pecuniary Vs non-pecuniary costs and benefits, Pecuniary elements are those that have direct cost benefit to someone who is party to the electricity transaction and non pecuniary are the benefits that are outside the transactions.
  • Building up a valuation model:
  1. Choosing right energy value:

Market value of solar power: Is photovoltaics cost competitive?

Hirth L. Market value of solar power: Is photovoltaics cost-competitive?. Renewable Power Generation, IET. 2015 Jan 1;9(1):37-45.

This paper reviews the economics of solar power acting as a source in the interconnected grid.

The costs of solar power have declined very steeply in the past decade. There is a lot of discussion regarding how the economic value of solar should be calculated.

The grid parity technique, comparing generation costs to the retail price, is an often used yet flawed metric for economic assessment, as it ignores grid fees, levies, and taxes.

It also fails to account for the fact that electricity is more valuable at some points in time and at some locations than that at others.

A better yardstick than the retail price is solar power’s ‘market value’.

The paper does a detailed study on how such a market value of solar can be obtained.

A Review of Solar PV Benefit & Cost Studies

Hansen L, Lacy V, Glick D. A review of solar PV benefit & cost studies. Boulder, CO: Rocky Mountain Institute. 2013.

Solar PV pricing has become a highly debated topic recently because of the growing number of Distributed Solar PV customers. The net metering scheme has not been accepted as fair by some utilities and so all stakeholder in DPV system are looking for alternatives. The Value of Solar (VOS) method is gaining popularity and extensive studies are being done in this regard. In VOS the cost attributed to solar is a combination of various avoided cost if PV is used instead of a conventional power plant.

The VOS is evaluated based on the following costs

• Energy cost

This includes avoided energy due to fuel, operation and maintenance and heat. It also includes the avoided system losses due to the reduced generation capacity and emissions.

• Capacity (generation, transmission and distribution)

This includes the generation avoided and hence the avoided infrastructure upgrades needed.

The DPV capacity is determined through its Effective Load Carrying Capacity (ELCC) , that is the demand that a DPV can cater to when operating at full capacity.

• Grid support services

This includes the reactive power and voltage supply, frequency regulation, energy imbalance and operating reserves.

• Financial risk

This value is positive when the introduction of DPV reduces the financial risk or overall market price. There is a fuel uncertainty value, which is the future uncertainty in fuel cost called the fuel price hedge. There is reduced demand because of lesser dependence on central generation.

• Security risk

There is lesser congestion in transmission and distribution. Only some area is affected when there is an outage of a PV plant. Back service can be kept available during outages.

• Environmental cost

This value is positive when it results in reduction of environmental or health impacts. It also includes a Renewable Portfolio Standard Cost, which is the cost saved through not using some other renewable source.

• Social costs

It results in increase in employment opportunities and accelerates economic development. There is a broad consensus as far as the energy cost avoided is concerned among the stakeholders. There is also some agreement on the capacity value of DPV. The key differences are in evaluating the values of security risk, financial risk, environment, society and grid support.

Why does VOS evaluations differ?

This is predominantly due to the fact that every utility would adopt a different approach to determine each of the components. For example, some may include capacity value in energy price and some may not.

This report hence gives us a framework on how each component of the VOS can be calculated.

An Evaluation of Solar Valuation Methods Used in Utility Planning and Procurement Processes

Mills AD. An evaluation of solar valuation methods used in utility planning and procurement processes. InAmerican Solar Energy Society (ASES) Annual Meeting, Baltimore, MD, April 16-20, 2013 2014 Apr 21.

As renewable technologies mature, recognizing and evaluating their economic value will become increasingly important for justifying their expanded use. This paper reviews a recent sample of U.S. load-serving entity (LSE) planning studies and procurement processes to identify how current practices reflect the drivers of solar’s economic value.

General planning process adopted by many LSEs

  • Assessment of future needs and resources
  • Creation of feasible candidate portfolios that satisfy needs
  • Evaluation of candidate portfolio costs and impacts
  • Selection of preferred portfolio
  • Procurement of resources identified in preferred portfolio

Key take aways

  • Full evaluation of the costs & benefits of solar requires that a variety of solar options are included in diverse set of candidate portfolios
  • Design of candidate portfolios, particularly regarding the methods used to rank potential resource options, can be improved
  • Studies account for the capacity value of solar, though capacity credit estimates with increasing penetration can be improved
  • Most LSEs have the right approach and tools to evaluate the energy value of solar. Improvements remain possible, particularly in estimating solar integration costs used to adjust energy value
  • T&D benefits, or costs, related to solar are rarely included in studies
  • Few LSE planning studies can reflect the full range of potential benefits from adding thermal storage and/or natural gas augmentation to CSP plants
  • The level of detail provided in RFPs is not always sufficient for bidders to identify most valuable technology or configurations

Value of Solar PV Electricity in MENA Region

Breyer C, Gerlach A, Beckel O, Schmid J. Value of solar PV electricity in MENA region. InEnergy Conference and Exhibition (EnergyCon), 2010 IEEE International 2010 Dec 18 (pp. 558-563). IEEE. This paper talks about how solar PV can be a success in the Middle Eastern and North African (MENA) Region

There is huge dependence on oil and natural gas for electricity generation in the MENA region. This is due to the fact that there is abundant supply of oil in this region. The paper predicts that by mid 2010 the cost of solar energy would be at par with the conventional energy.

The MENA region is a very sunny area. Historic PV diffusion can be separated into four major diffusion phases: 1st powering of satellites, 2nd off-grid applications, 3rd grid-parity of on-grid roof-top systems and 4th fuel-parity of PV power plants. PV systems are already the least energy cost option for satellites and off-grid solutions in sunny regions .

Capital expenditures for PV systems are derived from the empirical experience curve for PV, which depends on the growth rate of global PV markets and hence, on time and the general energy markets The paper shows that as more and more PV energy is being installed, the cost of this energy reduced.

Excellent solar resources and constant reductions in PV LCOE steadily establish new and fast growing markets for PV systems in MENA region. Up to 25% of total electricity market in MENA region might be addressable by PV as a consequence of PV gridparity for end-users. Low end-user prices are a consequence of widely granted energy subsidies in MENA region. These public costs can be internalized within the fuel-parity concept. Highly competitive PV power plants already achieve parity to oil power plants on a total cost basis and will reach fuel-parity only a few years later. Most oil and natural gas fired power plants will be beyond fuel-parity by 2020 in MENA region

2014 Value of Solar at Austin Energy

Clean Power Research (CPR). (2013). “2014 Value of Solar at Austin Energy.” Austin Energy.

This paper is an extension of the study that Austin power initially conducted in 2012 to implement the Value of Solar tariff to its customers. Again here , the Value of solar is calculated taking into consideration the current scenario. The VOS policy in Austin is such that it will be reviewed annually and hence a study will be conducted every year to determine the new VOS rate.

VOS Components

  • Guaranteed Fuel Value-Cost of fuel to meet electric loads and T&D losses inferred from nodal price data & guaranteed future Natural Gas prices
  • Plant O&M Value-Costs associated with operations and maintenance
  • Generation Capacity Value-Capital cost of generation to meet peak load inferred from nodal price data
  • Avoided T&D Capacity Cost-Cost of money savings resulting from deferring T&D capacity additions capacity additions
  • Avoided Environmental Compliance Cost-Cost to comply with environmental regulations and policy objectives

All of the above calculations are done in a detailed manner. The rates calculated are found to be lesser than the previous year. The possible reasons for this are

  • Natural gas prices have declined
  • Assumed life is 25 rather than 30 years

ƒ*Loss savings are slightly lower

ƒ*Transmission savings results have increased

ƒ*Calculation Methodology has been refined

Photovoltaic Capacity Valuation Methods


There is a need to accurately determine the capacity value of Photovoltaic as more and more solar power is being installed. This paper presents different methods to find the capacity value of photovoltaic. There must be a consensus among the solar stake holders, the government and the research community as to which is the most appropriate method for capacity calculation of PV. Maintaining adequate generating capacity to meet electricity demand at all times is a fundamental principle for the electric utility industry. This is accomplished through a variety of means including providing/purchasing sufficient generation capacity as well as acquiring the associated ancillary services for the electricity grid.


  • Effective Load Carrying Capability (ELCC)
  • Load Duration Magnitude Capacity (LDMC)
  • Load Duration Time-based Capacity (LDTC)
  • Solar-Load-Control-Based Capacity (SLC)
  • Minimum-Buffer-Energy-Storage-based Capacity (MBESC)
  • Demand-Time Interval Matching (DTIM)
  • Time/Season Windows (TSW)
  • Capacity Factor (CF)

Three utilities Nevada Power (NP), Rochester Gas and Electric (RG&E), Portland General (PG) were selected for case studies to determine the best methods to find the capacity value.

From the study and by building general consensus three methods were identified as more preferable – Effective Load Carrying Capacity, Solar Load Control / Minimum Buffer Energy Storage (combined as one due to similarities), and Demand Time Interval Matching.

Spain’s Solar Market Crash Offers a Cautionary Tale About Feed-In Tariffs

Voosen, P. (2009). “Spain’s Solar Market Crash Offers a Cautionary Tale About Feed-In Tariffs.” New York Times.

This article briefly describes how wrong policy making can crash a market. Policies must always be implemented keeping the long time future in mind. Planning keeping only the near future in mind can lead to disaster as it happened in Spain's solar market.

The Spanish government adopted an aggressive policy by setting high renewable requirements and decided to give high subsidies to customers cooperating. This was keeping in mind that the south western part of Spain was a very good place for solar investments. the huge subsidies lead to a lot of solar panels being installed, such the the market crashed. Hence the government was forced to revise the faulty subsidy policy called the Feed in tariff, but by this time the damage had been done.The feed-in tariff established by Spain in 2007 guaranteed fixed electricity rates of up to 44 euro cents per kilowatt-hour to all new solar panel projects plugged into the electrical grid by September 2008. Also, a loophole in the tariff allowed bundles of small, ground-based projects to receive up to 575 percent of the average electricity price.

The photovoltaic market has been cutting its costs rapidly, and the Spanish tariff, with its high rates, created an artificial market, and this was the main cause of the crash. It costs more than 20,000 jobs and also the cost of panels came down due to excessive supply.

Ratemaking, Solar Value and Solar Net Energy Metering—A Primer

Cliburn, J.; Bourg, J.; Deffner, D.; Mahrer, E.; Sterling, J.; Taylor, M. (2013). “Ratemaking, Solar Value and Solar Net Energy Metering—A Primer.” Solar Electric Power Association.

This report initially goes into the details of how policy making is done in a government organization. The policy discussed here is ratemaking and to be specific the net metering policy. A lot of things must be taken into account when a ratemaking policy is developed. The primary rate-setting tools include

  • Customer Charge- The customer charge is that portion of the monthly customer bill that is “flat” and does not vary by the customer’s energy consumption or level of demand in a month. It is sometimes known as the basic charge or service fee
  • Volumetric Energy Charges- The volumetric energy charge is a rate per energy unit ($/kWh) that is designed to collect the energy-related costs incurred by a utility
  • Demand Charge and Power Factor- A demand charge collects the demand-related costs of the utility caused by the pattern of a customer’s energy usage. These costs include portions of the capacity cost of power plants, and portions of transmission, distribution and other infrastructure costs
  • Other rates and charges- Utilities may use many other rates to accomplish customer price signals and revenue recovery

The last part of the report describes the valuation of solar. The Net metering tariff mechanisism provides a good incentive to distributed generation customers.

State Clean Energy Practices: Renewable Energy Rebates

Lantz E, Doris E. State clean energy practices: renewable energy rebates. National Renewable Energy Laboratory; 2009 Mar 1.

Rebate programs have played a significant role in the emergence of distributed generation renewable energy markets and are likely to continue to play a critical role in the deployment and diffusion of renewables.

The most active and consistently successful renewable energy rebate programs often target photovoltaic (PV) technology. Historically, these programs have been a primary driver of market growth in this industry, resulting in thousands of solar power installations. The impact these rebates have on the PV markets in California, New Jersey and Colorado Oregon are also shown.

The success of prominent state rebate programs in stimulating PV installations is clear, however, it is less clear if these programs have effectively driven down PV technology costs. Some evidence shows that California’s installation costs and the balance of plant costs have declined (Wiser 2006). However, PV technology ultimately remains a niche technology out of reach for most potential consumers in the absence of continued rebates or other incentives

Physical and Economic Effects of Distributed PV Generation on California’s Distribution System

Cohen MA, Callaway DS. Physical Effects of Distributed PV Generation on California's Distribution System. arXiv preprint arXiv:1506.06643. 2015 Jun 18.

Key Findings

A comprehensive study was done and it was determined that

  • The energy value of PV is much higher than any economic effect it has on the distribution grid
  • The capacity investment deferral benefit appears to be smaller but potentially meaningful
  • Other effects were very low comparatively


  • It is justified to value PV at a higher rate than the retail rate
  • Compared to the wholesale cost of energy, PV's advantage is very small. Hence it is not justified to value PV at the full retail rate
  • More studies need to be conducted to accurately estimate the value of PV

  • The NREL on its analysis says 36% to 70% can be the ELCC for solar in various locations. Once the ELCC is chosen tge value of solar energy in avoiding the need for peak generation is simple. The cost of installing a simple cycle gas turbine is 475$ pe KW then the annual capital cost of peaking plant can be determined by multiplying this cost by capital recovery factor. These cost can then be converted inot per KW hr by dividing them by the hours of operation.
  • Developing sufficient solar to avoid peaking power plant not only avoids the cost of building the plant but also fixed and maintenance costs are avoided.
  • The cost of electricity per KWh can be determined using the heat rate or thermal efficiency of the power plant that is burning natural gas to produce electricity.

Capacity Value of Solar Power

Capacity value of solar power

  • Capacity value is used to quantify the contribution of renewable generators within generation adequacy, i.e. how much of conventional generation can be replaced by a renewable generator.
  • What is effective load carrying capability?: EELC is any additional demand that the system may support at any given point of time. It is most commonly used to measure capacity.
  • Another commonly used generation adequacy index is loss of load expectation. It is the sum over time periods of loss of load probabilities. It is calculated over a year or more.
  • The most common LOLE calculation method is hind cast where the empirical historic time series demand and renewable capacity is used in the calculation as the joint distribution of demand and available renewable capacity.
  • Calculations are based on only the peak hour of each day. To reduce the computational burden weekends are excluded. But now with the advance computing the hourly LOLP is possible.
  • All the existing methodologies fall into following categories:
  1. Load duration curve is the mean relative PV output for all loads greater than a peak load L, minus the installed PV capacity X and p is the PV penetration factor p=X/L.
  2. DTIM is simply the reduction in demand when PV is added over a given evaluation period.
  3. SLC is used to determine how much more load reduction can be possible when demand response is available by deploying PV. SLC=(X-Y)/X where Y is amount of load reduction in absence of PV .
  4. MBESC determines the minimum buffer energy storage needed to guarantee firm peak reduction rather than cumulative demand response requirements.
  5. TSW is the mean output over selected peak demand periods to estimate the capacity value of renewable generators. This method is also called ERCOT method. Here there is no way of capturing the grid penetration levels and loads outside selected time window.

Avoidable Transmission Cost is a Substantial Benefit of Solar PV

Avoidable transmission cost is a substantial benefit of solar pv

  • This paper discusses how San Diego's proposed construction of 500KV transmission line known as sunrise project can be avoided.
  • Solar Pv can defer the need for any additional large scale transmission. Deferral period by Borenstein's analysis is 25 years.
  • The first step in calculating the avoided cost would be to estimate how much transmission capacity is displaced.
  • Considering all the losses due to conversion from AC to DC a 10KW DC system would produce no more than 8.4KW AC which is Borenstein's estimation.
  • The transmission cost can increase when low capacity factor generation such as wind and solar requires new lines .
  • Solar PV is sufficiently large scale that can avoid expensive incremental transmission because it can be located at the load center.