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Getting More Granular: How Value of Location and Time May Change Compensation for Distributed Energy Resources

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The Fourth Installment in SEIA's New Opportunities for Solar Through Grid Modernization Series. For the full series, click here

Built during the last century, the United States electric grid was primarily designed to transport electricity from large central station power plants to end-use customers. But with rapid growth of distributed energy resources (DER) resulting from falling costs and technological advances, customers are increasingly taking charge of their own energy. These resources offer the promise of a more innovative, economic, and cleaner electric grid.

DER, such as solar power, will play an important role providing power and grid services where they are needed most. To reach this goal, however, distribution grid planning must evolve to allow more transparency into system needs, enable more robust data exchange between utilities and DER providers, and include DER as a standard component of utility load forecasts.

This paper, the fourth in SEIA's series on grid modernization, focuses on the ways in which the location of a DER can provide various grid benefits and may lead to changes in DER compensation. As with the rest of the papers in this series, the experiences of two leading states, California and New York, are examined. These two states are in the process of conducting extensive work examining new locational values and location-based tariffs and can serve as models for other states that are considering similar policies.

About This Whitepaper Series

This series of SEIA policy briefs takes an in-depth look at state-level efforts to modernize the electric utility grid. Built during the last century, the United States electric grid was primarily designed to transport electricity from central station power plants to end-use customers. But with rapid growth of distributed energy resources such as solar, customers are increasingly taking charge of their own energy. Today’s electric grid must allow distributed energy technologies to flourish and provide reliable, low-cost power for consumers. Distributed energy resources, like solar, can also provide power where it is needed most and help avoid investments that a utility would otherwise need to make.

This series explores the elements of electric grid modernization, compares the ways in which two leading states are tackling these issues, and discusses how these efforts are creating new opportunities for solar power. Grid modernization efforts in states present significant risks and opportunities for solar. These efforts will determine how much new solar and other distributed energy resources can interconnect to the grid, identify areas where solar can provide grid services in lieu of utility investments, and in some states, will shape the future of net energy metering.

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