RMI Report Analyzes the Value of Distributed Solar PV

The Rocky Mountain Institute (RMI) recently published a report, “A Review of Solar PV Benefit and Cost Studies,” which analyzes 15 studies on how to accurately value distributed solar PV (DPV). These studies, all produced within the last eight years, were conducted by utilities, national laboratories, and solar advocacy groups. RMI’s report aims to reveal “what is known and unknown about the categorization, methodological best practices, and gaps around the benefits and costs of DPV.” Understanding the value of DPV, and recognizing its opportunities and challenges ahead, will be crucial for designing an effective pricing structure that will align stakeholder goals, minimize energy system costs, and maximize energy system value.

The studies analyzed in RMI’s report differed from one another in terms of granularity in their analysis and the level of solar energy penetration in the power sector. While none of the studies comprehensively evaluated the benefits and costs of DPV, many of their metrics for determining DPV’s value fit into similar, broad categories. RMI gathered these metrics and categorized them based on: energy, capacity (including generation, transmission, and distribution), grid support services, financial risk, security risk, environmental impact, and social impact. All but two of the studies report net benefits from DPV, with most of the benefits due to avoided energy costs. These values (ranging from -14.57¢/kWh to 33.93¢/kWh) varied based on the stakeholders involved, local context, input assumptions, and study methodologies. Major gaps still exist in the valuation of distribution capacity, grid support services, and a handful of non-monetized categories such as security, environmental impact, and social impact.

As the U.S.’s electricity grid evolves into a deregulated system, the addition of distributed energy resources (DER) increases customer choice and involvement in the energy production process. DER enables energy generation to occur closer to the end user, which allows for it to be used more efficiently or at different times and reduces stress on the transmission system. For solar power specifically, cheaper equipment, supportive policies, and new finance approaches have led to the addition of 2 GW of solar PV in 2012 across the U.S., half of which were customer-sited, net-metered projects. As this growth trend in DER extends into the future, we will need to answer some crucial questions about its evolving role in the electricity system, especially its impact on load balancing and system reliability. Although a comprehensive, accurate methodology for valuing DPV is yet to exist, the conclusions from RMI’s report are encouraging: a variety of sources consistently point to distributed generation as a net benefit to energy customers and the economy.

Featured image courtesy of First Solar, Inc.