The Impact of Electric Utility Rate Structures on Renewable Energy Carrie Trant and Wyatt Kroemer

Electricity Distribution More Than Meets the Eye

Electricity Distribution https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery The Grid U.S. Energy Information Administration 1

Purchasing Electricity: Utility Companies Here in Troy: National Grid Sell electricity to customers Where do utilities get the electricity? Power plants they own Purchasing from other utilities, power marketers, independent producers, and/or a wholesale market (organized by a regional organization) Who owns them? They can be a municipal not-for profit, member-owned cooperative, or stockholder-owned for-profit There isn’t a federal standard metering policy: rates and policies are on a local basis https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery U.S. Energy Information Administration 1

A Little History Early in the 20th century, there were more than 4,000 isolated utilities in the US! After WWII, demand for electricity grew and utilities began to connect with one another Could build larger, jointly owned power plants  economic savings Now, there are three main Interconnections: https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery U.S. Energy Information Administration 1

The Grid Global Energy Network Institute 2 http://www.geni.org/globalenergy/library/national_energy_grid/united-states-of-america/americannationalelectricitygrid.shtml Global Energy Network Institute 2

Legacy of Centralized Utilities From then until now, most power has been produced in a centralized manner by large power plants But, particularly with the advent of solar, the tables are turning as power can be produced locally – on each home’s rooftop – and this is changing the dynamic https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery U.S. Energy Information Administration 1

Consumers versus Utility Companies? Consumers who install solar panels want to save money Utility companies worry that consumers with solar panels get too much credit for the electricity they produce, without paying their fair share to maintain the grid infrastructure and other delivery costs http://www.govtech.com/fs/perspectives/Electric-Utilities-Must-Create-Equitable-Rate-Structures-to-Fit-a-21st-Century-Grid.html Graves 3

Distributed Energy Resources (DERs) On site, decentralized energy production that is still tied to the larger grid: home solar panels fall under this umbrella term Annual installed global DER capacity is expected to grow from 109.9 GW (2015) to 335.8 GW (2024), involving a $1.9 trillion investment Will continue to see a rise in decentralized power generation https://www.navigantresearch.com/research/distributed-energy-resources-global-forecast Navigant Research 4

NY Prize and NY REV NY Prize: focus on communities, connect users through DERs to give more secure and reliable (e.g. in severe storms) energy – local, renewable electricity generation and distribution/storage NY REV (Renewing the Energy Vision): proposals/grants to test new ways to deliver and charge for energy, goal to be cheaper and more consumer friendly (pilot in Clifton Park to charge like a cell company, based on your historical energy usage) https://www.nyserda.ny.gov/All-Programs/Programs/NY-Prize/Resources-for-applicants/Microgrids-101 http://blog.timesunion.com/business/ny-funding-900000-toward-local-micro-grid-studies/67651/

Alternate Rate Structures Can they better enable renewables? While being cost beneficial to consumers? Utility rates significantly impact how quickly consumers have a return on their solar investment Some options: Decouple rates from utility company profits: discourage utilities from focusing on how to sell more electricity, allow them to encourage conservation of energy Time-of-use rates: imbue supply/demand to encourage consumers to reduce use during peak hours/generate their own energy, help balance the load (reduce peaker plants) Demand charges: charge based on the maximum electrical demand reached I a period of time, also to encourage smoothing out demand http://www.seia.org/policy/distributed-solar/utility-rate-structure Solar Energy Industries Association 5

Project Goals To investigate which existing electric utility rate structures in the United States do the most to incentivize installing home solar and which do the most to discourage it Building on (1), to propose a rate structure that could improve the incentivizing of home solar To illustrate the differences between the rate structures discussed, demonstrate how 3-5 different rate structures would affect an average consumer’s bill for with and without home solar installations To disseminate what we’ve learned to educate our peers and the community about how rate structures can be a way to make renewables more economically viable

Existing Rate Structure 1: Upstate New York 1,2 Charges Electric SC1 Non Heat National Grid Electric SC1C Non Heat Delivery Services Basic Service: fixed service charge $17 $30 Delivery 4.76 ¢/kWh 3.14 ¢/kWh Incremental State Assessment: NYS encouragement to conserve utility energy 0.062 ¢/kWh 0.039 ¢/kWh System Benefit Charge: support public policy programs for efficiency 0.79 ¢/kWh Legacy Transition Charge: cost/benefit of long-term electricity supply contracts 0.35 ¢/kWh Revenue Decoupling Mechanism: reconcile delivery service revenue to target -0.25 ¢/kWh Transmission Rev Adjustment: reconcile transmission service revenue to target -0.33 ¢/kWh Tariff Surcharge: collected because NYS taxes National Grid’s revenue 3.09% Sales Tax 3.0% Electricity Supply Electricity Supply (Supplier: National Grid) 3.59 ¢/kWh Off Peak/Season: 4.73 ¢/kWh On Peak: 3.93 ¢/kWh Shoulder: 2.95 ¢/kWh Merchant Function 0.19 ¢/kWh Electricity Supply Reconciliation Mechanism: reconcile supply revenues to cost of electricity purchased 0.43 ¢/kWh Tariff Surcharge 1.01% https://www9.nationalgridus.com/niagaramohawk/home/rates/4_standard.asp http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7B8EF93BC4-01AB-4677-85A7-4D4C4D964E59%7D National Grid 6

Other states to look at California and New York are progressive in trying to promote renewable distributed energy, Ohio is trying to do something similar to REV Florida utilities own power plants (power generation) so resist rate structures that help renewables, distributed energy generation

Discussions with people in the field Contacts at municipal utilities, large investor-owned utilities (private), and a Public Utility Commission in California, Iowa, Colorado, and Washington, some in NYS Sample questions: How are rates and rate structures changing for Utility? What does Utility want, and why? How is Utility influencing Government (and vice-versa) to transition to DERs/renewables?

Sources U.S. Energy Information Administration. How electricity is delivered to consumers. https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery Global Energy Network Institute. United States transmission grid. http://www.geni.org/globalenergy/library/national_energy_grid/united-states-of- america/americannationalelectricitygrid.shtml Graves, Bob. Electric Utilities Must Create Equitable Rate Structures to Fit a 21st-Century Grid. Government Technology. 23 Aug. 2016. http://www.govtech.com/fs/perspectives/Electric-Utilities- Must-Create-Equitable-Rate-Structures-to-Fit-a-21st-Century-Grid.html Navigant Research. Distributed Energy Resources Global Forecast.2015. https://www.navigantresearch.com/research/distributed-energy-resources-global-forecast Solar Energy Industries Association. Utility Rate Structure. http://www.seia.org/policy/distributed- solar/utility-rate-structure National Grid. Standard Service (SC-1) https://www9.nationalgridus.com/niagaramohawk/home/rates/4_standard.asp