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Distributed Generation

Many Northwest residents have demonstrated their support for clean energy. In the Department of Energy’s latest rankings, the customers of Portland General Electric and PacifiCorp took first and second place for the number of utility customers participating in green power programs, and Puget Sound Energy was not far behind in fifth place.  However, since it is not possible from a technical or logistical perspective for utilities to add an entirely new set of power lines just to carry the electrons generated from renewable facilities, the power that arrives at our homes or businesses is not necessarily generated by renewable energy resources.  Instead, it is offset by the same amount of renewable power. 

However, a confluence of factors including rapidly falling solar prices, more supportive policies, new approaches to finance, and the emergence of new entrepreneurial businesses, has now made it possible for customers to own or lease distributed generation resources located on their own property. This has led to a host of new challenges and opportunities.  One of the most significant immediate questions is how to determine the actual resource value of distributed generation options.  Since over 2 Gigawatts (gW) of solar PV were added to the nation’s generation mix last year, and about half of that came from customer-sited, net metered projects, most of the attention for now is focused on the resource valuation of this renewable resource.  Over time, attention may turn to the resource value of other distributed generation resource options such as combined-heat and power, anabolic digesters, or micro-wind turbines as they become more popular. 

So far, the initial resource valuation studies that attempt to determine the benefits and costs of distributed solar PV vary widely due to differences in study assumptions, parameters, and methodologies. In fact, some utility-sponsored studies have concluded that the net value of distributed solar PV is over five times lower than solar-industry sponsored studies.  Much of the debate deals with questions of distribution value, grid support services value, and financial, security, environmental, and social values. Valuations will (and should) vary by utility, but there is a growing consensus that a there needs to be a standardized valuation methodology.  

A standardized methodology will help utilities, their customers, regulators, and the public determine whether it makes more sense to promote or discourage more distributed generation resources.  Fortunately for us, the Oregon legislature has directed the Oregon Public Utilities Commission to establish a solar resource value methodology for Oregon. Most of the key stakeholders are participating in this effort, and a proposed methodology will be released during our class.  This gives us a “ring-side seat” to observe the creation of an important energy policy decision.  

We may also want to track the policy dynamics of other closely related issues.  They include:

  • The pros and cons of net-metering tariffs, standard offer contracts, and the recently established “value of solar” tariff (VOST) as the most appropriate way for utilities to meet their  “purchase obligation” to provide service for its customers who want to install distributed generation resources;
  • Efforts by a coalition of parties to install 250,000 solar roofs in Oregon by 2025;
  • A new report by the Regulatory Assistance Project recommending specific regulatory options and tariffs for distributed generation resources;
  • Efforts led by Oregonians for Renewable Energy to remove unnecessary barriers to the formation of community renewable energy projects and to recommend feed-in tariffs as an implementation strategy;
  • Efforts by local utilities to build their own utility-scale solar projects. They would allow customers the option of purchasing shares of these solar project as an alternative to installing smaller solar arrays on the customer side of the meter.

We will invite experts who are deeply involved in this issue to help us understand the issues and their consequences.