RMI: New Insights Into the Real Value of Distributed Solar
For once and for all—what is distributed photovoltaic power really worth?
Herman K. Trabish
The report A Review of Solar PV Benefit and Cost Studies
from the Rocky Mountain Institute (RMI) is an analysis of fifteen
studies on the value of distributed photovoltaic solar. Some of the
studies were commissioned by utilities, some by solar advocacy groups,
and some came from independent government or non-government researchers.
“We are on the cusp of needing a new methodology for how to integrate
distributed energy resources into our planning,” explained RMI Senior
Consultant Virginia Lacy. She and co-author/RMI principal Lena Hansen
set out to assess “the knowns and unknowns” about categories and best
practices that define the value of distributed energy resources, and
especially of distributed PV, as well as the variables that contribute
to the tensions between distributed generators and utilities.
“As we move into a world of customer-sited electricity, led strongly by distributed PV,
it is critical to better understand the benefits and costs,” Lacy said,
“to enable effective tradeoffs between distributed and centralized
For solar advocates, utility leaders and regulators, Lacy said, “The
biggest takeaway is that there are important gaps in the approach for
identifying, quantifying, and assessing the benefits and costs of distributed PV.”
The even-handed analysis makes clear how much agreement there is on
distributed PV’s energy value. But it also reveals how little agreement
there is on distributed PV’s capacity value, which is its ability to
offset the need for investments in wires or generation.
“You keep hearing that even with distributed PV, the utility needs to recover fixed costs,”
Lacy said. “It is less challenging to attribute an avoided cost, or an
energy value, to distributed PV because we have 30 years of experience.”
A resource’s avoided cost was part of the PURPA evaluation procedure
introduced in 1978, she said.
“To calculate a capacity value
and conclude that solar can displace transmission or distribution and
lead to a lower cost system overall,” Lacy explained, “utilities need to
know solar will be producing power when the system needs it.”
One of the significant differences in the studies Lacy and Hansen
analyzed from the utility industry and the solar industry, Lacy said, is
their respective conclusions about whether distributed PV can offset
transmission and distribution system investments.
Solar is only beginning to reach grid penetration levels at which
conclusions can be substantive on this issue, Lacy said. Typically,
studies have shown that distributed PV could eventually defer these
needs, but new infrastructure would remain a necessity for at least ten
years, and even then, there would only be enough distributed PV
megawatts for planners to defer perhaps 15 percent of projected
In recent years, distributed PV has grown enormously, but it is still
“a novelty” to regulators and utility planners, Lacy said.
Source: Rocky Mountain Institute
have to see the distribution system as delivering generation the same
way they now see the transmission system as delivering it, Lacy said.
“Otherwise, we will hit a point where there is overinvestment in
unneeded infrastructure and we will run into operational issues because
we are still essentially blind to everything beyond the substation.”
“We don’t get to choose whether or not we change,” Lacy said. “It is
happening. The market is speaking. And that’s a great thing. We have an
opportunity to provide more customer choice and utilities can be a part of that.”
It is also important for planners at state and federal commissions
“to recognize and understand the benefits and costs of distributed PV,”
Lacy said. ““Regulators are there to make sure the utility can pursue
that opportunity when it is in the best interest of ratepayers or the
public they serve."
Utilities and regulators have traditionally thought in terms of
building supply to meet demand, Lacy said. “Supply could be ramped and
demand had to be met. Demand was the source of variability and
With distributed generation, and especially with distributed PV, that
situation is reversed. “These things completely change the paradigm,”
Lacy acknowledged. And it is happening really fast for a system which
for a century has been based on central generation, she added.
“There are real challenges in doing the technical evaluation of solar
and other generation on the customer side of the meter that planners
need,” Lacy said. “But we have sent a man to the moon. This is not a
game-stopper. We are going to have to employ new methods that will lead
to more informed decisions.”