Practical Lessons and Innovations in Cost Allocation for Distributed Energy Resource Interconnection

The traditional “initial cost-causer pays” cost allocation model requires utility customers interconnecting generation or storage technologies to pay the full cost for any necessary upgrades to utility distribution systems. Under this model, future interconnecting customers may not pay for use of the upgraded equipment despite utilities commonly selecting oversized infrastructure compared to immediate needs to provide operational flexibility or to accommodate future load or other interconnections. Further, failure to consider distribution upgrades needed for projected new customer resources and load growth in the locale means the individual interconnecting customer may pay for grid infrastructure that could be more efficiently scaled for future needs — and less costly on a per customer basis.

This report describes drivers for updating the initial cost-causer pays model and documents new cost allocation and cost-sharing strategies that can facilitate simple, fast, and affordable DER interconnection. The report details a menu of framework options for implementing cost allocation strategies informed from leading state approaches to support adoption of improved approaches for DER interconnection cost allocation.

Report forthcoming.