Distributed Generation Cost Analysis

Distributed Generation Cost Analysis

Evaluating cost of distributed power generation, alternative energy and renewable energy sources

Lower costs, customer demand, environmental benefits and regulations are driving utilities and their customers to add distributed generation and renewable energy sources to systems. Our innovative, analytics-based method determines load shapes for distributed generation customers and joins a powerful set of tools used to assess the impacts of distributed generation on utility systems. Black & Veatch’s analytics tool evaluates the costs utilities face to accommodate distributed power generation -- solar PV, microgrids and combined heat & power (CHP) -- for the purpose of setting rates. Using our cost tool, utilities can determine interval-based load curves for rate setting to distributed generation customers and can avoid the need for expensive load research studies.

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A market leader in the analysis and design of distributed generation systems, Black & Veatch can work with clients to accurately evaluate the utility ratemaking impacts of adding distributed power generation to the grid. By gathering information from various sources, the tool also can inform design standards for electric distribution systems that have a significant amount of distribution generation installed and improve a system’s ability to manage the unique aspects distributed generation presents.  

The tool comes amid rising regulatory moves in states such as New York and California that will encourage increased deployment of distributed generation to reduce emissions and provide customers new options for renewable energy sources. It provides an accurate and efficient way to evaluate the fundamental cost impacts that should be considered when setting rates for customers that own distributed generation. The analytics may be readily prepared for submission to regulators involved in rate proceedings and can also assist utilities and regulators in evaluating how distribution system design standards could evolve to address the impacts that distributed generation resources may place on utility systems.

The tool will be used extensively to provide utility regulators, market participants and other interested parties with the empirical data to objectively and thoroughly evaluate and consider the operational and pricing impacts of distributed generation on electric utility systems.

Features and Benefits of our Distributed Generation Load Shape Profile Model

Identifies inherent fixed cost subsidiesEstablishes clear evidence of existing fixed cost cross-subsidies and system bypass and quantifies level of subsidy
Customizable to utilityProvides results specific to your utility
Easily linkable to company cost of service studyResults easily converted into industry standard cost of service impacts
Widely used in recent high-profile solar pricing regulated proceedingsModel has been tested in regulatory settings – four base rate cases and three generic proceedings since 2016
Inputs to model are sourced from common industry data pointsData inputs are factual and known and no complicated data retrieval steps are necessary; no new load research is necessary
Employs Black & Veatch’s proprietary utility pricing model and energy production modelingModel meets our high standards for accuracy, quality and robustness
Uses an Excel-based software platformModel easily adaptable and linkable to other utility models

Distributed Generation Rate Design - Regulatory Qualifications

Proceeding ReferenceJurisdictionDescription of Work
Base Rate CaseArizona Corporation CommissionDeveloped proposal and cost analytics exposing current net metering cross subsidies on system; proposed changes to net metering tariff, including adoption of three-part rate. Expert testimony provided in Phase I.
Generic Proceeding – Distributed Energy ResourcesArizona Corporation CommissionProvided expert testimony with supporting complex cost analytics and theory to establish utility position regarding value of solar production in this rule-making proceeding.
Base CaseArizona Corporation CommissionDeveloped proposal and cost analytics exposing current net metering cross subsidies on system; proposed changes to net metering tariff, including adoption of three-part rate. Expert testimony provided in Phase I.
Base Rate CaseNew Hampshire Public Utilities CommissionDeveloped proposal and cost analytics highlighting net metering cross subsidies; proposed changes to net metering tariff. Expert testimony provided.
Generic Proceeding – Distributed Energy ResourcesNew Hampshire Public Utilities CommissionDeveloped analytics and theoretical foundation for proposed changes to net metering in state. Expert testimony provided. Filed expert testimony.
Maximum Residential Customer Charge – Rule-makingPublic Utilities Regulatory Authority of ConnecticutUsed Black & Veatch’s Distributed Generation Load ShapeProfile model to identify and quantify level of residential intra-class cross subsidies resulting from current net metering tariff. Filed expert testimony.
Generic Proceeding - Cost of Service StudyPublic Utilities Regulatory Authority of ConnecticutDeveloped series of cost analytics for solar PV and provided testimony establishing existence of cross subsidies in current statewide net metering policies. Filed expert testimony.
Base RateGuam Public Utilities CommissionProposed changes to a net metering tariff to serve new installations on island. Work conducted as a compliance requirement from the authority’s 2013 base rate case (11-09). Prepared report filed with the commission in August 2016.

Distributed Generation Drives Change in Electric Industry

Distributed energy resources continue to drive change within the electric industry as both energy consumers and electric service providers are diversifying how electricity is generated and delivered. Spawned by the public embrace of clean energy, falling prices and regulatory subsidies, there is increased deployment of solar PV, battery energy storage and microgrids.

This movement is requiring utilities to transform traditional centralized networks into flexible, distributed and integrated power networks that are starting to evolve from demonstration mode to more solid, longer-term investments that play an important part in how they develop a new utility business model.

As many of these efforts move forward, organizations are working through complexities to achieve the best economics for distributed energy and microgrid customers while at the same time seeking to maximize benefit from the existing grid investments.

According to the 2017 Strategic Directions: Electric Industry Report, solar PV, wind turbine generation and combined cycle gas-fired generation were listed as the top forms of generation to be added by electric providers.

Which of the following types of incremental electrical generation, greater than 50 MW, will you likely add to your system within the next five years?

analyzing distributed generation resources


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