1. VALUING DISTRIBUTED ENERGY RESOURCES Presented by: Burcin Unel, Ph.D., Institute for Policy Integrity Ferit Ucar, Ph.D., Environmental Defense Fund

2. O VERVIEW Guiding Principle: Prices that Reflect Costs Valuing DER through Cost-Reflective Prices Valuing Environmental Benefits and Costs of DER Alternatives – Design of Credits

3. G UIDING P RINCIPLE : P RICES THAT R EFLECT C OSTS Same principles for participating and non-participating customers A technology-neutral framework Unbundled Time- and location- specific Value of on-site DG production netted against consumption

4. V ALUING DER THROUGH C OST -R EFLECTIVE P RICES Bulk System Costs Energy Transmission Losses Generation Capacity Ancillary Services Distribution System Costs Distribution Capacity Distribution Losses

5. V ALUING E NVIRONMENTAL B ENEFITS AND C OSTS OF DER “LMP + D + E” Framework Quantifying Avoided Emissions Clean DER Emitting DG Need to meter total on-site generation Statistical sampling for clean DG Metering of gross generation for emitting DG Valuing Avoided Emissions

6. D ESIGN OF CREDITS Depends on underlying price structure Needs to be set to reflect avoided costs Location-specific and time-specific

7. R EFERENCES Matt Christiansen and Elizabeth B. Stein, The Rise of DG: Options for Addressing the Environmental Consequences of Increased Distributed Generation, NYU S CHOOL OF L AW G UARINI C ENTER AND EDF, (February 2016), available at http://guarinicenter.org/wp- content/uploads/2016/02/DG-Policy-Br-Rough-Draft-vFINAL.pdf.http://guarinicenter.org/wp- content/uploads/2016/02/DG-Policy-Br-Rough-Draft-vFINAL.pdf Richard L. Revesz and Burcin Unel, Managing the Future of the Electricity Grid: Distributed Generation and Net Metering, forthcoming at H ARVARD E NVIRONMENTAL L AW R EVIEW, Vol. 41, No. 1, 2017, available at http://policyintegrity.org/publications/detail/managing-future-electricity-grid. http://policyintegrity.org/publications/detail/managing-future-electricity-grid Nick Martin, Carbon-Tuning New York’s Electricity System: Uncovering New Opportunities for CO2 Emissions Reductions. Pace University School of Law, Pace Energy and Climate Center, 2015, available at http://energy.pace.edu/publications/carbon- tuning-new-yorks-electricity-system.http://energy.pace.edu/publications/carbon- tuning-new-yorks-electricity-system

8. C ONTACT I NFORMATION Burcin Unel, Ph.D. Senior Economist Institute for Policy Integrity burcin.unel@nyu.edu 212-992-6285 Ferit Ucar, Ph.D. Senior Clean Energy Economist Environmental Defense Fund fucar@edf.org 212-616-1302