NEM 2.0 and Successor Tariffs: Which States are Doing What?

Transcription

1 NEM 2.0 and Successor Tariffs: Which States are Doing What? NRRI Webinar March 14, 2018 Tom Stanton Principal Researcher Energy and Environment National Regulatory Research Institute

2 NEM changes are well underway NRRI, T. Stanton, and J. Barber 2

3 Seven Major Topics Included Comprehensive reviews of rate designs for customers with distributed generation. In 2017 alone: 12 states were already working on comprehensive grid-modernization rate reviews; 7 states on solar-plus-storage rate design studies; and, 3 states on TOU rates for EM customers. Changing credit rates for excess generation delivered to the utility grid (~30 states) Increasing fixed charges (decisions in 35 states, for ~100 utilities so far) Adding demand or standby charges to rates that had none (13 states) Treating customers with distributed generation as a new customer class (proposals from >20 utilities in 13 states, but only a few approved) Providing for DG owned by third-parties (26 States +DC), utilities (12 states), or both (8 states) Enabling community solar projects (18 states) NRRI, T. Stanton, and J. Barber 3

4 Major state actions tracked NRRI, T. Stanton, and J. Barber 4

5 Drivers of these changes In some jurisdictions, market interest and sales of solar photovoltaics (PV) have taken off, and solar plus storage is not far behind Net Energy Metering (NEM) caps are being reached or exceeded in several states, and that often triggers required program reviews A utility playbook was published and widely disseminated by Edison Electric Institute (Kind 2013) Pointed out fundamental rate design challenge (next slide) Focused on why DG growth requires major rate redesign A sweeping grid modernization evolution is underway, in different ways in different states. NRRI, T. Stanton, and J. Barber 5

6 Grid-Mod is multifaceted FERC, NERC, and RTO actions to include DER in transmission system planning, analysis, and operations Adding AMI & smart-grid infrastructure Reimagining utility business models Addressing distribution system planning Addressing how DER will be evaluated in IRP Addressing and analyzing non-transmission, non-wires alternatives NRRI, T. Stanton, and J. Barber 6

7 The DER ratemaking dilemma Typical Rate Design Traditional Pricing 100 Infrastructure 10% Energy Demand Customer Energy consumed 90% Energy consumed 31% Costs of Service Infrastructure 69% 0 NRRI, T. Stanton, and J. Barber 7

8 Actions in key vertically integrated states State Rate Design Review Changed credit rates Added fixed charges Added demand, standby charges Separate DG customer class Community Solar Utility owned DG Arizona , 16, 17 Georgia Hawaii Minnesota RCB, RNR 2017 NEB , 17, , , , ,17 Vermont These changes were proposed by utilities, but not accepted by regulators. 2 A January 2018 GA-PSC order expanding Georgia Power s program has been appealed. NRRI, T. Stanton, and J. Barber 8

9 State Actions in key restructured states Rate design review Changed credit rates Added fixed charges District of Columbia Added demand, standby charges Separate DG customer class Community Solar Illinois Yes 2016 New Hampshire Yes New York Yes 2017 Texas , 2015, Utility owned DG 1 More changes will be considered following a value of DER study 2 These changes were proposed by utilities, but not accepted by regulators. 2015, , 16 NRRI, T. Stanton, and J. Barber 9

10 Appendix 1: More details on the 7 action types and 10 states studied

11 Summary of actions 1. Comprehensive reviews Value-of-solar studies: 37 states & DC, since 2015 States that already adopted NEM 2.0 or successor tariffs: Arizona, California, Hawaii, Indiana, Maine, Nevada, New Hampshire, New York, Utah, Vermont Big ideas Rates vary by time and possibly also by location All customers will make a fair share contribution towards necessary grid services Even bigger ideas: Utility business model reviews and other Grid-Mod aspects NRRI, T. Stanton, and J. Barber 11

12 A tide of value studies NRRI, T. Stanton, and J. Barber 12

13 Cost/benefit allocation challenge Assigning costs based on the principle of cost causation Assigning benefits symmetrically Not all benefits can be readily monetized, in current FERC- or state-regulated rates Tradition of non-discriminatory rates Some benefits accrue to only one or a few customers NRRI, T. Stanton, and J. Barber 13

14 Summary of action 2. Changed feed-in credit rates 2017 actions proposed in 31 states plus DC Utilities are proposing many different options for providing credits at prices lower than retail NEM Are states converging on NEB as a solution? There are two widely-used approaches for identifying appropriate credits: avoided cost and value-based Does solar plus storage need its own different rate? Is there a cost-plus option that makes sense and would work to support sensible market development? How do NEM successor rate design options integrate with time-differentiated rates? NRRI, T. Stanton, and J. Barber 14

15 Summary of action 3. Changed Fixed Charges 2014 to the present: Roughly 125 utilities in 41 states proposed fixed charge increases. Roughly 100 cases have been decided Proposed fixed charges ranged from just over $5/month to just under $50/month Utilities requested fixed charge increases: as low as roughly a dollar or two per month (n=25); three to six dollars per month (n=40); six to ten dollars per month (n=25); and, more than $10 per month (n=10) NRRI, T. Stanton, and J. Barber 15

16 Summary of regulatory outcomes 3. Changed Fixed Charges Regulators rejected 25 requests, 6 of those as a result of partial or full settlements, and utilities withdrew 2 others; In a bit more than half of the ~100 cases, regulators approved partial increases. Of the partial increases approved, monthly fixed charges: increased by less than $1 for 15 decisions; ranged from $1 to less than $2 for 15 others; ranged from $2.00 to $3.50 for 16 utilities; and, raised the previous fixed charges by $5 or more for four utilities; and, In about a dozen cases, utility requested fixed charge increases were approved in full. NRRI, T. Stanton, and J. Barber 16

17 Fixed-charge proposals are widespread NRRI, T. Stanton, and J. Barber 17

18 Utilities and PSC s on fixed charges: Meeting in the middle? NRRI, T. Stanton, and J. Barber 18

19 Findings about fixed charges This is a Goldilocks decision for policy makers: What monthly fixed charge is too big, too small, or just right? Does PUC policy favor incrementalism in rate changes? Do utilities ask for more and settle for less? How do markets respond? NRRI, T. Stanton, and J. Barber 19

20 Summary of action 4. Added demand or standby charges Actions started in 2015, southwest and sunbelt Measure demand for each fraction of system? Punitive charges for going solar? Standby theory for variable-output generation? NRRI, T. Stanton, and J. Barber 20

21 2016: Added charges spreading NRRI, T. Stanton, and J. Barber 21

22 2017: Is the action slowing? NRRI, T. Stanton, and J. Barber 22

23 More ideas about demand charges proposed charges ranging from: $1.00 to $14.50 monthly per kw peak demand $3 to $6 monthly per kw peak installed system $2 to $21 monthly per solar or DG customer Are pre-existing demand charges just and reasonable? Should demand charges be granulated (coincident versus non-coincident; G, T, and D)? NRRI, T. Stanton, and J. Barber 23

24 Summary of action 5. Create new DG customer class Idaho, Iowa, Montana thinking about it Some state legislatures have ok d it in concept, allowing utilities to ask for it and commissions to approve it, but no action to date Massachusetts, Texas, Utah utilities proposed combined DG user fee plus demand charges Fees based on DG system capacity proposed in Arizona NRRI, T. Stanton, and J. Barber 24

25 Summary of action 6. Community solar What is community solar (a.k.a., shared solar, solar gardens)? Voluntary, opt-in programs Multiple participating consumers get power and/or financial benefits Distributed scale up to small utility scale Rate treatment can be virtual or remote NEM, NEB, or VOS Includes special access for low and moderate income participants? Best practices maximize community solar value, by targeting location, location, location NRRI, T. Stanton, and J. Barber 25

26 2017 community solar status NRRI, T. Stanton, and J. Barber 26

27 Community solar should not: Be a green pricing model with participant value based only on warm green feelings Lack a meaningful effort to maximize VOS Base compensation on a known wrong value (e.g. annual average energy-only charge) Lack ongoing adjustments to correct, over time, for any initial faulty assumptions [I]nadequate regulatory oversight could lead to unintended consequences, including the possibilities of monopoly rents, reduced benefits for all concerned, and higher costs for participating customers (Stanton and Kline, 2016). NRRI, T. Stanton, and J. Barber 27

28 Coming next? Community solar plus storage? Community solar plus any and all DER? Crowd-investing via on-bill financing? NRRI, T. Stanton, and J. Barber 28

29 Summary of action 7. Third-party or utility-owned DG 8 states with new actions since 2015 Third-party Utility-owned Legal issue: What, specifically, triggers regulation as a public utility ( light-handed or not)? May a customer or a developer own? Lease? Enter into a PPA? May a developer use a single PV system to serve more than one customer at retail? Who may offer utility bill credits? NRRI, T. Stanton, and J. Barber 29

30 Can 3 rd Parties enter into retail PPAs? NRRI, T. Stanton, and J. Barber 30

31 10 states reviewed in more detail NRRI, T. Stanton, and J. Barber 31

32 Actions in Vertically Integrated States Moving away from traditional NEM, but at different speeds and in some different directions NRRI, T. Stanton, and J. Barber 32

33 Arizona A 2016 value-of-solar hearing set methods for calculating export rates for DG. Export rates will stay level for 10 years from the time of interconnection, then vary annually. NEM Successor Policy: Optional TOU or demand-based rate for new APS DG customers (August 2017), with time-varying rates for all non-dg and new customers after 1 May Previous DG customers grandfathered in full-retail NEM for 20 years from date of interconnection with APS. New DG customers will be eligible for 4 different rate designs, some including grid-access fees. Bill offsets will vary based on customer usage patterns, and DG system size, orientation, and production fixed-charge increases for residential customers of three utilities: APS to $13, TEP to $13.00, and UniSource to $15/month. NRRI, T. Stanton, and J. Barber 33

34 Georgia Request for a value-of-solar proceeding in Legalized third-party ownership in Approved a renewable cost benefit (RCB) methodology in 2016, for utility-scale systems. Expanded the RCB methodology to include BTM systems, up to 250 kw, effective August Approved a motion for Georgia Power to construct and rate-base up to 3 MW of customer-subscribed solar net energy billing (NEB) in 2016, and added 5 MW more in NRRI, T. Stanton, and J. Barber 34

35 Hawaii NEM successor tariffs approved in 2015, with grandfathering of pre-existing NEM customers. New DG tariff choices: Grid-supply NEB with credits based on avoided cost, with capacity caps on grid-supply (reached in 2016); or, Self-supply, with no credit for grid exports. Phase II started December 2016, addressing several technical and market issues. Docket No Revisions to NEM-replacement tariffs: Smart-export option for solar plus storage; and, Controllable grid supply option requests for fixed-charge increases and increased minimum bills are pending. Community solar: 2015 legislation with final rules issued in December Allows utility ownership if 50% LMI participation. NRRI, T. Stanton, and J. Barber 35

36 Minnesota (Part 1) 2013 legislation called for determining the value-of-solar, including: energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value. MN-PUC approved the VOS methodology in April Regulated utilities could apply for commission approval to use the VOS as an alternative to net metering. That has not happened, but could in the future: The MN legislature has established the VOS as the alternative for regulated utilities if, at some time in the future, they decide not to net meter. Multiple utilities have asked for fixed-charge increases. In 2017, the Minnesota legislature removed MN-PUC oversight of fixed charges for cooperative and municipal electric utilities. NRRI, T. Stanton, and J. Barber 36

37 Minnesota (Part 2) 2013 community solar gardens law passed. Xcel Energy s program was approved by MN-PUC in 2014, and amended in By the end of 2015, Xcel had applications for over 1,500 solar gardens, representing over 1,400 MW in total capacity. By March 1, 2018, Xcel had 80 CSG projects (295 MW) already in commercial operation and active applications for an additional 295 projects (498 MW); 194 projects (381 MW) are already in the design & construction phase. An MN-PUC Order directed that, starting in 2017, all Xcel CSG applications filed after 2016 are to be compensated at the VOS rate, which is presently very close to the residential retail rate. Starting with 2018 filings, VOS is slated to include location-specific avoideddistribution capacity values. The Commission determined that more information is needed to determine those values, and directed the Department of Commerce to lead a stakeholder process on this, over the coming months. NRRI, T. Stanton, and J. Barber 37

38 Vermont A 2014 law increased utility NEM program caps from 4 to 15% of peak capacity, and directed regulators to develop an NEM replacement tariff. Revised NEM 2.0 rules took effect in July 2017: No cap on total NEM program capacity; 500 kw cap on individual systems; Virtual NEM allowed. 10-year grandfathering period for NEM systems that predated NEM 2.0; Credits are based on a weighted-average statewide residential retail rate of $0.1491/kWh (or, the applicable retail rate applies if it is lower); Incentive payments, which are subject to biennial PUC review, include: Siting on preferred sites (e.g. on roofs, brownfields, landfills, or parking lots), which earns a bonus credit of $0.01/kWh for 10 years; and, Customers selling their RECs to the utility earn credits of $o.o3/kwh for 10-years, or customers can retain their RECs but their credit payment will be permanently reduced by $0.03/kWh. NRRI, T. Stanton, and J. Barber 38

39 Actions in Restructured States Four of the five jurisdictions have started comprehensive grid-mod proceedings NRRI, T. Stanton, and J. Barber 39

40 District of Columbia June 2015 Modernizing the Distribution Energy Delivery System for Increased Sustainability (MEDSIS) Grid-Mod Docket. Staff report January New rules effective January 2018, include definitions of: customer generator; battery; back up generation; energy storage; microgrid; and, smart inverter. Value of solar study delivered by DC Office of People s Council in May PSC order is pending. Commission policy is to move residential distribution rates away from volumetric (kwh) rates, toward rates based more on customer and demand charges. NRRI, T. Stanton, and J. Barber 40

41 Illinois (Part 1) December 2016 Law provides: 50% of RPS solar carve-out will come from DG, community solar (virtual net metering), and solar brownfield redevelopment projects Illinois Solar for All program includes incentives for: community solar serving LMI customers; on-site projects for non-profits and public facilities; and, low-income DG. Incentives to customer. Illinois Power Agency procures RE and allocates RECs for all state regulated utilities, and a competitive bid process for low-income community solar. A plan under the 2016 law, filed late 2017, now awaits ICC approval. One municipal utility board (Springfield) approved a partial fixed charge increase in March 2017 NRRI, T. Stanton, and J. Barber 41

42 Illinois (Part 2): NextGrid March 2017 resolution comprehensive GridMod docket (NextGrid) includes: (1) new-tech deployment and grid integration, (2) electricity markets, (3) customer and community participation, (4) regulatory, environmental, and policy issues, (5) metering, communications, and data, (6) reliability, resiliency, and cyber security, and (7) ratemaking Solar-value study; final due in mid-2019 NRRI, T. Stanton, and J. Barber 42

43 New Hampshire (Part 1) June 2017 NH-PUC NEM 2.0 Order: Monthly netting for systems 100 kw or smaller, with credits equal to energy charge plus transmission service plus 25% of the distribution charge, and grandfathering through DER valuation study started in Docket DE , with a PUC-staff status report filed December Pilot programs started by the June 2017 Order include: TOU pilot for both DG and non-dg customers; Real-time pricing pilot for one municipal utility; and, Non-wires alternatives pilot for stressed locations on utility distribution systems. NRRI, T. Stanton, and J. Barber 43

44 New Hampshire (Part 2) January 2016 Order approves third-party PPAs & leasing without regulation as public utilities or competitive electric power suppliers. (Vivant solar). Two utilities fixed charge increases approved in full in 2016, based on settlement agreements. A utility s request for a residential demand charge deferred until the DER valuation docket is complete. A law passed in 2017 will enable LMI community solar projects, details forthcoming in Docket % of LMI support will come from dedicated Renewable Energy Funds. Comprehensive grid-mod effort is underway. NRRI, T. Stanton, and J. Barber 44

45 New York (Part 1) Reforming the Energy Vision (REV) is a comprehensive grid-modernization proceeding, continuing from 2014 through the present. A collaborative process is now underway to consider new rate design structures for mass market customers (residential and small commercial). Those new rates are slated to take effect January 1, Six NY utilities requested fixed-charge increases in 2014 and 2015, but all were denied by the Commission. National Grid has utility rooftop solar programs, working cooperatively with major solar company partners. National Grid committed $100 million to reach ~100,000 homes. National Grid and SunRun will co-own 200MW of rooftop solar. NRRI, T. Stanton, and J. Barber 45

46 New York (Part 2) New York PSC established community net metering in 2015 (Case 15-E-0082). Beginning March 2017, new community solar, remote net-metered, and large distributed energy projects will use the Phase I Value Stack VDER tariff, which includes credits for energy (based on LMP), capacity, environmental benefits, and demand reduction. In December 2017, New York Staff published a proposal, now pending, for low-income community DG programming. As of late 2017, remote net metering and small demand or large commercial on-site solar generation now receives competition via the Phase I Value Stack. In February 2018, the Commission increased the project size cap from 2MW to 5MW in Case 15-E-0571 Phase One Project Cap Size and Other Findings Order. NRRI, T. Stanton, and J. Barber 46

47 Texas Multiple Texas utilities requested and received at least partial fixed-charge increases in , and a couple more 2017 requests are pending. Southwestern Electric Power Company proposed and Texas PUC approved: adding an $8/month administrative fee to DG customers; and, changing the distributed renewable generation tariff to compensate excess generation at avoided cost rather than retail. In a settlement approved December 2017 in Texas PUC Docket No , El Paso Electric is implementing new DG rate choices including minimum monthly bills, a time-of-use rate with slightly lower minimum bills, or an experimental demand charge rate. NRRI, T. Stanton, and J. Barber 47

48 What comes next? More varieties of time-varying rates Transactive energy overlay rate at wholesale (for load and demand response aggregation) Maximizing the value of neighborhood and community scale projects, offering an attractive ROI for participating customer/investors Transactive energy at retail (with set-it-and-forget-it convenience) NRRI, T. Stanton, and J. Barber 48

49 Movement towards TOU rates NRRI, T. Stanton, and J. Barber 49

50 Missing pieces: blanks to fill in Economic input/output analysis of utilities and their service territories: What are the full impacts of the changes underway? Are there trends by state based on: Percentages of customers adopting DG or rate of DG market growth? Vertically integrated versus restructured states? What are the best rate design innovations? NRRI, T. Stanton, and J. Barber 50

51 Appendix 2: Background on rate design

52 Generalized utility perception Source: RMI elab, 2013, A Review of Solar PV Benefit & Cost Studies, 2nd Edition NRRI, T. Stanton, and J. Barber 52

53 Generalized solar industry perception Source: RMI elab, 2013, A Review of Solar PV Benefit & Cost Studies, 2nd Edition NRRI, T. Stanton, and J. Barber 53

54 Review: Bonbright Principles, 1961 Rates should be: fair, cost-based, symmetrical towards costs and benefits simple, understandable, clear, easy to understand, interpret, and administer, acceptable to customers stable, to both utility and customer (gradual, incremental) efficient discourage wasteful use Rates should: meet the utility s revenue requirement avoid discrimination, among similarly situated customers reflect non-priced externalities Sources: Regulatory Assistance Project, 2014, and Scott J. Rubin, 2015 NRRI, T. Stanton, and J. Barber 54

55 Fixed charge basic theory Original theory: The customer charge covered only the service line, meter, share of transformer, and grounding wire: a monthly charge to cover those costs over about five years. Inherent tensions: Source: Tacoma Power Co. In the very long-run, nearly all costs are variable. In the very short-run, nearly all non-fuel and non-variable-operating costs are fixed. NRRI, T. Stanton, and J. Barber 55

56 Rogers basic diffusion theory NRRI, T. Stanton, and J. Barber 56

57 S-Curve Trends for US Consumer Products NRRI, T. Stanton, and J. Barber 57

58 Is the time to mature market shrinking? NRRI, T. Stanton, and J. Barber 58

59 Load reduction, defection? Total installed DG capacity is already approximately 20% of all central station capacity. (quoting Bob Stojanovic, ABB Director of Microgrids, North America, 22 Sep 2016) Customers can defect some portion of loads, specific loads, specific circuits, or entire loads. Do all new loads need to interconnect, or will some be entirely, permanently off-grid? What are the alternatives? How will the estimated 1-3 billion people who at present have no or inadequate access to electricity be served? NRRI, T. Stanton, and J. Barber 59

60 A hypothetical energy ladder Source: Stanton and Nordman, 2017, ICER Chronicle, Edition 7. NRRI, T. Stanton, and J. Barber 60

61 Appendix 3: Background on comprehensive rate reviews

62 Cost/Value Methodologies Traditional IRP versus L or D IRP Transmission and NTA analysis Generic, system-wide averages Locational, time-based averages Locational, real-time actuals Standard benefit-cost tests and possible updates NRRI, T. Stanton, and J. Barber 62

63 Locational values can clinch benefits costs One study shows a 60:1 ratio across one utility s service territory (Callaway et al. 2015) Multiple utilities are already deploying geo-targeted non-transmission alternatives, costing 1/10 as much to build (Stanton, NRRI 15-02) Important customer-side benefits can inspire customers to cost-share (Stanton, NRRI 12-15) Customer-investors have some affinity for local projects and public purpose projects NRRI, T. Stanton, and J. Barber 63

64 Standard Benefit-Cost Testing Name of Benefit-Cost Test Benefits & Costs Included Benefits Program Administrator (Utility) Cost Test Participant Cost Test Ratepayer Impact Measure Test Total Resource Cost Test Societal Cost Test Avoided primary fuel supply Avoided secondary fuel supply Primary bill savings (retail) Secondary bill savings (retail) Other resource savings Environmental benefits Other non-energy benefits Rarely In theory Costs Program administration Measure costs Program financial incentives Customer contributions Utility lost revenues Source: California Public Utilities Commission, See also: National Efficiency Screening Project, 2017, National Standard Practice Manual. NRRI, T. Stanton, and J. Barber 64

65 Generic benefit/cost categories In Small is Profitable (2002), Lovins and RMI identify over 200 sources of financial value associated with making electric power resources the appropriate size and locating them where they are needed. NRRI, T. Stanton, and J. Barber 65

66 Is average solar benefit > retail rate? Source: RMI 2015, Review of Solar PV NRRI, T. Stanton, and J. Barber Benefit/Cost Studies, 2 nd Ed. 66

67 EPRI s Integrated Approach Source: EPRI White Paper No (see also No and No ) NRRI, T. Stanton, and J. Barber 67

68 Appendix 4: Resources and references

69 NRRI reports, from Stanton and Kline, 2016, Ecology of Community Solar Gardening:, NRRI Barua, Costello, Kline, Phelan, Stanton, 2016, Future Drivers and Trends Affecting Energy Development in Ontario: Lessons Learned from the U.S. (Mowat Energy Research Report #137). Stanton, 2015, Distributed Energy Resources: Status Report on Evaluating Proposals and Practices for Electric Utility Rate Design, NRRI Stanton, 2012, Are Smart Microgrids in Your Future? Exploring Challenges and Opportunities for State Public Utility Regulators, NRRI Stanton, 2012, Consultant Report for Maine PUC Docket : Smart Grid Coordinator, NRRI Stanton, 2015, Distributed Energy Resources: Status Report on Evaluating Proposals and Practices for Electric Utility Rate Design, NRRI Stanton, 2015, Getting the Signals Straight: Modeling, Planning, and Implementing Non-Transmission Alternatives, NRRI NRRI, T. Stanton, and J. Barber 69

70 Other important references Argonne National Lab, 2017, Energy Zones Mapping Tool. Clean Coalition, 2016, Community Microgrids, Patterson, 1999, Transforming Electricity: The Coming Generation of Change. ISBN: Kind, Peter. (2013). Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business. Report for Edison Electric Institute, Jan Lovins and Rocky Mountain Institute, 2002, Small is Profitable. Smart Electric Power Alliance, 2016, Beyond the Meter reports and Planning the Distributed Energy Future, MIT Energy Institute, 2017, MITEI Utility of the Future Reports. National Standard Practice Manual, 2017, National Efficiency Screening Project. SEPA, 2017, 51st State Ideas: Role of the Utility Summary of Submissions. Smart Electric Power Alliance. NRRI, T. Stanton, and J. Barber 70