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							                            Two Net-Metered Photovoltaics Valuation Studies

The following are summaries of studies from New York State and Austin, TX performed by Clean Power
Research, LLC to determine the value of net-metered photovoltaic (PV) systems to local utilities. These
studies counter the argument, often put forth by utilities, that non-net-metered ratepayers subsidize
net-metered ones. Both studies show that net-metered customers who are compensated for the
output of their net-metered PV systems at a rate equal to the local utility’s average retail rate for
residential customers using 1,000 kWh per month, minus any fixed customer charges, are receiving less
value than such output is worth to their utilities in avoided costs for energy, capacity, deferred
transmission & distribution system upgrades, etc. In other words, when it comes to who is subsidizing
whom, these studies show that it is customers hosting net-metered PV systems who are subsidizing non-
net-metered customers…and not the other way around.

   1. Richard Perez & Thomas E. Hoff, Clean Power Research, Energy and Capacity Valuation of
      Photovoltaic Power Generation in New York, March, 2008, available at
      http://www.asrc.cestm.albany.edu/perez/publications/Utility%20Peak%20Shaving%20and%20C
      apacity%20Credit/Papers%20on%20PV%20Load%20Matching%20and%20Economic%20Evaluati
      on/Energy%20Capacity%20Valuation-08.pdf, accessed September 2, 2010. This study looked at
      the energy and capacity value to New York state utilities of distributed PV. It was commissioned
      by the Solar Alliance and the New York Solar Energy Industries Association and relied solely on
      information about energy and capacity values that was in the public domain. As a result, it
      could not assess the value to utilities of revenue streams that required access to data that such
      utilities typically don’t routinely publish. Nevertheless, the authors found that, in the Long
      Island region, for example, the value to the local utility of energy and capacity from a customer-
      sited PV system was 15.4¢/kWh, which was more than three-quarters of the net metered-
      residential customer retail rate of 20.0¢/kWh at the time†. Perez and Hoff concluded that, given
      access to information from utilities that would be required to quantify the value to such utilities
      from attendant energy loss savings, T&D system benefits, the environmental compliance value,
      and fuel risk mitigation benefits unique to PV, those additional benefits would result in
      additional cost-savings to a utility and thus increase the value of such systems from the utility’s
      perspective. They also wrote:

           Thus, the answer to the question, “What is the value of PV,” from the utility perspective is likely to be
           that New York’s utilities will have a net benefit from the net-metered deployment of PV in their
           service territories. (Op. cit., Page 11, emphasis in the original.)

       † The report does not make clear whether “the net metered-residential customer retail rate of
       20.0¢/kWh” is the credit per kWh that a typical net-metered residential customer on Long Island
       consuming 1,000 kWh per month would have received in 2008 for the output of a PV system
       producing 1,000 kWh per month, or whether the 20.0¢/kWh rate reported should be
       discounted to account for the fact that residential customers typically don’t receive net-
       metering credit for fixed customer charges. If, for example, the local utility used as an example
       in this study had a fixed customer charge of $10.00 per month that such utility does not include
       in its net-metering credit (a common utility practice that’s arguably reasonable), the net-
       metering credit offered by such a utility to a 1,000 kWh per month customer whose PV system
       produced, on average, 1,000 kWh per month would be only 19.0¢/kWh. The important point in
       the context of interpreting the conclusions of the Perez and Hoff study is that the value to New
       York utilities per kWh of only the energy and capacity benefits from the output of a customer-


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       sited PV system may be even closer to the value per kWh of the net-metering credits that such
       utilities are likely to offer than a casual reading of the study might suggest...and that’s before
       quantifying the benefits other than energy and capacity that such utilities receive from the
       output of customer-sited net-metered PV systems.

   2. Thomas Hoff et al., The Value of Distributed Photovoltaics to Austin Energy and the City of
      Austin,            March             17,            2006,             available             at
      http://www.austinenergy.com/about%20us/newsroom/reports/PV-ValueReport.pdf, accessed
      September 3, 2010. This study concluded that the output of a customer-sited, single-axis
      tracking PV system was worth 10.9¢/kWh to the utility. The average price per kWh for a
      residential customer using 1,000 kWh per month during Austin Energy’s Fiscal Year immediately
      preceding publication of the study (October 1, 2004-September 30, 2005) was 8.6¢/kWh
      (personal email, Austin Energy employee Leslie Sopko to Mitch King, September 2, 2010, 5:08
      PM, Subject: Customer Request). The credit that such a net-metered residential customer
      would receive for the output of a net-metered system producing, on average, 1,000 kWh per
      month, after adjustment for the basic customer charge (which is typically not included in net-
      metering credits), is 8.0¢/kWh, meaning that other ratepayers would benefit from Austin
      Energy’s net-metered PV customers at a rate of 2.9¢/kWh for each kWh produced by such a
      customer’s net-metered system, or $29 per month for a PV system producing, on average, 1,000
      kWh/month.

Prepared by:
Michel A. (Mitch) King
President
Old Mill Power Company
2530 Wyngate Road
Charlottesville, VA 22901-8927
Office: 1-434-979-WATT(9288)
Email: mitchking@oldmillpower.com




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