The Impact of Retail Rate Structures on the Economics of Commercial Photovoltaic Systems in California

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To achieve a sizable and self-sustaining market for grid-connected, customer-sited photovoltaic (PV) systems, solar will likely need to be competitive with retail electricity rates. In this report, we examine the impact of retail rate design on the economic value of commercial PV systems in California. Using 15-minute interval building load and PV production data from 24 actual commercial PV installations, we compare the value of the bill savings across 20 commercial-customer retail rates currently offered in the state. We find that the specifics of the rate structure, combined with the characteristics of the customer's underlying load and the size of the PV system, can have a substantial impact on the customer-economics of commercial PV systems. Key conclusions for policymakers that emerge from our analysis are as follows: Rate design is fundamental to the economics of commercial PV, TOU-based energy-focused rates can provide substantial value to many PV customers, Offering commercial customers a variety of rate options would be of value to PV, Eliminating net metering can significantly degrade the economics of PV systems that serve a large percentage of building load, Commercial PV systems can sometimes greatly reduce demand charges, The value of demand charge reductions declines with PV system size, The ability of PV to offset demand charges is highly customer-specific, The type of demand charge can impact the ability of PV to offer savings, The type and design of energy-charges has an important impact on PV value, Differences in temporal PV production profiles have a relatively modest impact on PV value. In summary, our findings suggest that choices made by utility regulators in establishing or revising retail rates can have a profound impact on the future viability of customer-sited commercial PV markets.

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