Solar-Plus-Storage Rates

Adrienne SorensenSeptember 27, 201811920

Solar-Plus-Storage Rates

As the United States increases it’s dependence on clean energy, growing pains come with the package. Policymakers are searching and addressing these issues. Autumn Proudlove, NCCETC senior manager of policy research and the report’s lead author. She says, "a number of states are considering whether solar-plus-storage is eligible for NEM or how it should be compensated," Proudlove said.


"They are also asking how these technologies fit together and how policies and rate structures can coordinate them.Two policy actions that are engaged are rate designs that could work against solar-only yet focus on more innovative use of solar-plus-storage, time-of-use (TOU) rates, and three-part rates with demand charges.

TOU Rates

TOU rates urge higher per-kWh charges for periods when demand is higher. This change consumption away from higher demand periods through a cost signal instrument. This alerts customers to know they can save money by applying electricity during off-peak hours.


TOU rates guides storage and EVs, but only help solar if the peak demand period where they’re implemented aligns with solar production, Proudlove said. California is set to implement default TOU rates in 2019. The state’s investor-owned utilities changed their peak charge periods to later evening. Southern California Edison’s peak period is now 4pm to 9pm.  


"It creates a small incentive to face rooftop solar west, to maximize production from the setting sun, but it mainly rewards customers with solar-plus-storage systems," Proudlove said. The TOU rates and the new peak demand period are intended to decrease California’s daytime solar over-generation, she added.

Shifting Usage

Designed demand charges can also encourage customers to shift their consumption. The obstacle for this concept is in the design itself. A demand charge imposes a drastically higher per-kW charge for usage during a customer's highest 15 minutes of electricity consumption monthly.  


The top utility cost recovery is from rates that send smart price signals. Proudlove said demand charges can benefit solar-plus-storage owners under the correct circumstances. Customers with smart meter technology and successfully manage their consumption can decrease their own peak demand period consumption by using stored solar-generated electricity.

There are issues about required demand charges for residential customers. It’s not guaranteed they’ll have the smart technologies or understanding to make demand charges work with storage, Proudlove said. Regulators remain hesitant to approve them. But they’re approved pilots in New Hampshire, Colorado, and Arkansas, just to name a few. "Tariffs are one of the primary tools that regulators and policy makers have to influence how consumers adopt and operate DER," Scott Burger, a researcher with the Massachusetts Institute of Technology Energy Initiative.


"If we get tariff design right, DER will lower power system costs, decrease carbon, increase reliability, and increase customer satisfaction and engagement. "Solar's cost declines as its penetration grows, "tariffs should evolve over time," Burger said. "Moving from today's volumetric rates to more cost-reflective rates will likely naturally slow the deployment of rooftop solar."


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