In the past, growth of renewable energy has largely been fueled by tax credits and net metering. However, the economic benefits of these programs have been enjoyed by a small minority of consumers who have the physical assets and funds to build small scale solar or wind systems. Often, the additional infrastructure required to support these DERs are an economic burden the ultimately shared among the rest of the utility rate payers.
As the political will to support DER with tax subsidies and other incentives continues to wane, the pressure from consumers and PUCs for utilities to continue to expand their renewable energy portfolios will not. As a result, utilities are going to have to determine the net impact, cost, and value that specific DER infrastructure contributes to grid operations and services that include everything from voltage control to price arbitrage. A number of state PUCs are already demanding that utilities perform DER valuation studies that will be used to determine the value to the consumer and ultimately the rate cases to support DER investment.
DER valuation is not a simple process. They require the adoption of new methodologies for system planning that have yet to become industry accepted practices, and are contrary to decades of rate based revenue recovery models for capital investments. Utilities will need to develop highly granular temporal and spatial models that forecast load and generation at the circuit level and compare these forecasts to near-term and long-term asset constraints. They will also need a new approach to system planning and revenue recovery that will involve the detailed analysis of service point level net load (load minus DER) and revenue, vs. long-term system investment requirements and forecasted revenues.