Regulation & Public Policy
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Introduction
Regulators and policymakers play important roles when it comes to DPV programs. Regulators govern the utility industry by setting standards (e.g. interconnection), determining revenues, calculating tariffs to recover costs, overseeing planning, and other conducting other activities that are intimately connected to DPV deployment. Policymakers, in turn, have multiple public policy tools available to target DPV barriers to adoption and enable market growth. In some cases, policymakers and regulators may have overlapping roles when it comes to DPV (see figure 1 below).
Figure 1: Role of Policymaker and Regulator for DPV
Example Interventions
- Design a DPV compensation mechanism that clearly defines the value of self-consumed (if applicable) and exported DPV generation and takes into account the perspective of both the customer and the utility. Include a trigger, cap or some other mechanism in order to create the opportunity to re-evaluate a compensation mechanism which will allow policymakers to determine if any adjustments are warranted as the DPV market matures, costs decline, or analysis of DPV value streams become more detailed. If DPV compensation mechanisms change, apply the new policy to new customers and allow existing customers to comply with the original policy on which they based their DPV investment decision.
- Design and implement a clear interconnection process, standards, and codes that dictate how DPV systems can be connected safely, reliably, and expediently to the grid.
- Identify any market gaps (e.g. financing, skilled workforce, consumer awareness) that may need to be filled with a specific public policy intervention to jumpstart a DPV market.
- Create additional, appropriate financial incentives for DPV as needed. Include a trigger, cap or other opportunity to re-evaluate incentives and polices which will allow policymakers to determine if any adjustments are warranted as the DPV market matures and costs decline.
- Consider the legalization of enabling policies such as virtual net metering or business models such as community solar and third-party leasing that can expand customer access to DPV by reducing both financing and site selection barriers.
- Evaluate alternative rate structures that both fairly compensate DPV customers for the value of their generation but also appropriately charge for grid services being used. Examples include time-of-use tariffs, minimum bills, and demand charges.
- Identify and address solar soft costs (i.e. non-hardware costs) that may be creating barriers to DPV deployment, including but not limited to, permitting, customer acquisition, inspection, interconnection, financing, and installation labor (e.g. installer licensing and certification).
Reading List and Case Studies
Quantifying Rooftop Solar Benefits: a State-Level Value of Solar Analysis for India
National Renewable Energy Laboratory, January 2021
Analyses that quantify the costs and benefits associated with rooftop solar (RTS) adoption and operation can inform decision-makers in the development and evaluation of RTS policies. One such analysis is a Value of Solar (VOS) study, which quantifies select costs and benefits surrounding RTS based on the electricity system context. These studies can drive changes to existing policies towards fairer, more cost-reflective RTS compensation or alternatively can provide confidence for the decision-maker to stay the course and largely maintain existing policies. This report provides a value of solar analysis for two states in India: Gujarat and Jharkhand, and provides details related to the methodology and key findings.
Distributed Solar Utility Tariff and Revenue Impact Analysis: A Guidebook for Internal Practitioners
National Renewable Energy Laboratory, November 2020
This guidebook can be used to inform important decisions regarding DPV compensation, tariff design, and regulatory cost allocations, among other aspects. It is focused exclusively on customer-sited DPV systems and adopts a primarily cost-based (as opposed to an equally valid value-based) perspective to understanding DPV financial impacts. The approach for calculating net revenue losses can be applied in nearly any utility jurisdiction, regardless of institutional arrangements, business models, or regulatory paradigms.
An Overview of Behind-the-Meter Solar-Plus-Storage Program Design: With Considerations for India
National Renewable Energy Laboratory, June 2020
This report offers an overarching framework for Indian policymakers, regulators, and other stakeholders to consider as they begin to contemplate the desired role of DPV-plus-storage in the Indian power system, as well as the potential suite of policies, programs, and regulations that might enable its deployment. The approaching program design for DPV-plus-storage systems include:
- Develop and Prioritize Regulatory Objectives
- Design Compensation Mechanism
- Design Metering and Technical Configuration Requirements
- Design Interconnection Process
- Consider Local Permitting Issues
National Renewable Energy Laboratory, March 2020
Behind-the-meter energy storage systems paired with distributed photovoltaic (DPV)—with the capability to act as both generation and load—represent a unique and disruptive power sector technology capable of providing a range of important services to customers, utilities, and the broader power system. This report is intended to offer key regulatory considerations for facilitating DPV-plus-storage programs for retail customers; relevant cases from U.S. states are provided as examples of how novel regulatory issues related to behind-the-meter energy storage systems paired with DPV are being addressed in practice.
Installed Capacity Caps for Distributed Photovoltaics and their Impacts on Compensation Mechanisms
National Renewable Energy Laboratory and USAID, 2019
As jurisdictions around the world initiate or revise distributed photovoltaic (DPV) policies and regulations amid changing market conditions, they may benefit from understanding the interaction of compensation mechanisms and installed capacity caps—two important aspects of DPV program design. This brief discusses common practices, design options, and lessons learned pertaining to these two topics. It includes examples largely derived from the experience of U.S. jurisdictions.
Distributed Photovoltaic Economic and Technical Impact Analysis in the Philippines
National Renewable Energy Laboratory and USAID, 2019
In collaboration with the Philippines Department of Energy (DOE), the United States Agency for International Development (USAID), through USAID Clean Power Asia, has partnered with the U.S. National Renewable Energy Laboratory (NREL) and Lawrence Berkeley National Laboratory (LBNL) to conduct a study to evaluate the economic and technical implications of DPV deployment in the Philippines.
Distributed Photovoltaic Economic and Technical Impact Analysis in the Philippines (Webinar)
National Renewable Energy Laboratory, USAID Clean Power Asia, and Lawrence Berkeley National Laboratory, October 2019
In this webinar, panelists discuss the economic and utility revenue impacts of distributed photovoltaic deployment (DPV) in the Philippines. Content is based on a study conducted by USAID Clean Power Asia, the National Renewable Energy Laboratory, and Lawrence Berkeley National Laboratory in partnership with the Philippines Department of Energy. The study evaluates and analyzes the economic and technical implications of (DPV) deployment in the Philippines.
Building Blocks for Distributed PV Deployment, Part 2: Interconnection and Public Policy
National Renewable Energy Laboratory and USAID, 2018
This webinar, the second in a two part series, covers the key 'building blocks' of establishing a distributed PV program, which include:
- Creating interconnection processes, standards, and codes; and
- Providing public policy support as needed.
Building Blocks for Distributed PV Deployment, Part 1: Goals, Definitions and Compensation
National Renewable Energy Laboratory and USAID, 2018
This webinar, the first in a two-part series, covers the key 'building blocks' of establishing a distributed PV program, which include:
- Setting a distributed PV vision, goals, and roles and responsibilities;
- Defining distributed generation; and
- Establishing a compensation mechanism.
Informing Mexico’s Distributed Generation Policy with System Advisor Model (SAM) Analysis. English (PDF). Español (PDF).
National Renewable Energy Laboratory and USAID, 2018
The Government of Mexico understands that distributed generation can contribute to meeting its greenhouse gas emissions reduction and clean energy targets. This report summarizes how analysis using NREL’s System Advisory Model (SAM) informed the government of Mexico’s distributed generation public policymaking process. Each case study within the report highlights important contextual background, the analysis process, results, and impacts.
Grid-Connected Distributed Generation: Compensation Mechanism Basics
National Renewable Energy Laboratory, 2017
DG owners can be compensated in different ways for the electricity their systems generate. This short report defines compensation mechanisms for grid-connected, behind-the-meter DG systems as instruments that comprise three core elements: (1) metering & billing arrangements, (2) sell rate design, and (3) retail rate design. This report explores metering & billing arrangements (net energy metering (NEM); buy all, sell all; and net billing), with some limited discussion of sell rate design.
USAID Clean Power Asia, National Renewable Energy Laboratory, Lawrence Berkeley National Laboratory, 2017
Utilities worldwide are concerned about the financial impact of increasing DPV adoption among their retail customers. This report analyzes the impact of DPV deployment on distribution utility revenues and retail electricity tariffs in Thailand. It provides policymakers, utilities, and other energy practitioners a real-world example of how DPV affects certain stakeholders.
Xcel Energy, January 2017
This document provides guidance for the interconnection of electric storage to operate in parallel with the utility and a customer's renewable generation. The energy storage is connected between the utility's Delivery Meter and Production Meter in a net metering (NEM) arrangement.
Xcel Energy, January 2017
This document provides guidance for the interconnection of electric storage to operate in parallel with the utility and a customer's renewable generation. The energy storage is connected to the renewable generation's side of the Production Meter in a net metering (NEM) arrangement.
Distributed Generation to Support Development-Focused Climate Action
National Renewable Energy Laboratory and USAID, 2016
DG can play a role in sustainable, low-emission, climate-resilient development worldwide. This report identifies the benefits of DG deployment in development scenarios through energy access, greenhouse gas emission mitigation, and climate resilience as well as specific actions that may enhance or increase the likelihood of climate and development benefits. Additionally, several brief case-studies of DG deployment in developing communities are included.
Historical and Current U.S. Strategies for Boosting Distributed Generation
National Renewable Energy Laboratory, the China National Renewable Energy Center, and the Danish Energy Agency, 2015
This report, written to inform energy planning in China, showcases regulatory support, policies, and financing innovations that have enabled DPV deployment and market growth in the U.S.
Compensation for Distributed Solar: A Survey of Options to Preserve Stakeholder Value
National Renewable Energy Laboratory, 2015
New DG compensation mechanisms—such as value of solar and distributed locational marginal pricing—can offer additional value to generators while dampening the volatility of high DG penetration on the grid. Various pricing options, and policy options for protecting revenue adequacy for utilities are assessed in this report to provide readers with a variety of novel options to better compensate all stakeholders.
Value of Solar: Program Design and Implementation Considerations
National Renewable Energy Laboratory, 2015
Value of solar is an emerging concept that provides a mechanism for utilities to compensate customers who generate their own electricity through DPV, based upon the cost-benefits to the power system. This report discusses program design options for Value of Solar tariff offerings and the impact of this type of tariff on future deployment of DPV. It also includes case studies from two jurisdictions in the United States (Austin, Texas and the state of Minnesota) that have adopted Value of Solar mechanisms.
A Valuation-Based Framework for Considering Distributed Generation Photovoltaic Tariff Design
National Renewable Energy Laboratory and the Lawrence Berkeley National Laboratory, 2015
Value of solar methods for compensating DG rely on cost-benefit analysis to determine tariff options. This brief report analyzes different objectives behind DGPV programs, finding that various objectives require different methodological perspectives when conducting a cost-benefit analysis and ultimately creating a tariff.
Jamaica National Net-Billing Pilot Program Evaluation
National Renewable Energy Laboratory and USAID, 2015
Because of Jamaica’s high retail electricity prices, significant opportunity exists for DPV as an economic alternative. This paper reviews the effectiveness of Jamaica’s net billing pilot program, and identifies remaining challenges including a complex interconnection process, contractual ambiguity, and stakeholder equity concerns. The report provides several specific recommendations like shortening interconnection timelines, reducing caps on individual systems, and moving beyond a pilot phase. Many of these recommendations are applicable to other countries, particularly those with similarly high electricity rates.
Designing Distributed Generation in Mexico
21st Century Power Partnership, 2015
Recent market liberalization and energy sector reform in Mexico is pushing forward a wave of new potential for DG. This report explores how DG can fulfill many of Mexico’s energy goals. It presents specific policy options to better integrate DG as a cost-effective source of energy generation. Although specifically tailored to Mexico, many of the report’s recommendations can be applied in developing contexts.
Minnesota Value of Solar: Methodology
Minnesota Department of Commerce, 2014
The U.S. state of Minnesota has enacted legislation allowing investor-owned utilities to use a value of solar tariff as an alternative to net metering for DPV. This document details the methodology participating utilities will use to calculate the value of solar tariff to account for several values of DPV (including energy and its delivery, generation and transmission capacity, transmission and distribution losses, and environmental value). The methodology includes detailed example calculations for each step.
National Renewable Energy Laboratory, 2014
Estimating the benefits and costs of DPV helps power system stakeholders evaluate appropriate regulatory measures and compensation programs for DPV. To inform these decisions, this report describes current and potential future methods, data, and tools to estimate the benefits and costs of DPV from the utility or electricity-generation system perspective. Although the report is explicitly written in the context of informing estimation of DPV costs and benefits to the United States electricity system, it provides insights relevant to power systems around the world.
Regulatory Considerations Associated with the Expanded Adoption of Distributed Solar
National Renewable Energy Laboratory, 2013
As adoption of DG increases, demand for utility provided power decreases. This report assesses the impacts this decreased demand is likely to have on utility recovery of fixed costs, rate structures, and emphasizes best practices for DG regulation.
National Renewable Energy Laboratory, 2012
Incentive programs credit DPV generators for their production and, in several U.S. states, have been successful at creating demand for DPV to meet targets. This report examines various incentive structures and recommends best practices. Some incentive structures are found to be contextually more applicable than others, and tools to align incentives with changing market conditions are discussed. Because ratepayers are usually funding incentives, methods to protect ratepayers and ensure cost-effectiveness are also discussed. Utilities looking for ways to incentivize DPV to meet targets or obligations can find value in this report.
Distributed Generation Regulation Library
21st Century Power Partnership
The 21st Century Power Partnership supports global power sector transformation. The Partnership has developed a curated, annotated resource library that provides reports, academic literature, case studies, and good practices to support DG regulation in a variety of power system contexts. The library is organized around several topical areas: ratemaking, understanding impacts, interconnection, alternative business and regulatory models, planning, and case studies.
Distributed Solar Utility Tariff and Revenue Impact Analysis: A Guidebook for International Practitioners