THE VALUE OF SOLAR

Austin Energy’s Value of Solar Tariff: Could It Work Anywhere Else? Austin’s solar policy framework may just be too weird to duplicate.

Anne Lappe, March 8, 2013 (Greentech Media)

“Last fall, Austin Energy become the first utility in the U.S. to offer a ‘Value of Solar Tariff’ (VOST) to its residential electricity customers…[It is] an alternative to net metering, the bill credit mechanism that has driven most customer adoption of solar in the U.S…[U]tilities elsewhere…are looking to ditch net metering and jump on the VOST bandwagon…Here’s how the Austin VOST works: …[A] residential customer…is automatically signed up…[and pays] a monthly energy bill based on how many kilowatt-hours of electricity [are consumed and credited for every kilowatt-hour generated. That credit is subtracted…[from the] monthly electricity bill…

“…[T]he VOST rate is set up to more fairly reward solar system operators for the energy they produce…[It] is calculated using a value of solar algorithm…updated annually…[that accounts for]…Avoided fuel costs…Avoided capital cost of installing new power generation…Avoided transmission and distribution expenses…Line loss savings…Fuel price hedge value…[and] Environmental benefits…[Solar advocates in Austin say that they hope to add to the list of benefits, perhaps including a value for the economic development benefits of building inherently local energy infrastructure. These are] the same value elements that are examined when looking at the cost and benefit balance under net metering for residential and commercial customers…[F]rom 2006 through 2011, the calculated value of solar fluctuated from 10.3 cents per kWh to 16.4 cents per kWh for a fixed system. In October 2012, when the VOST was actually implemented, the value was set at 12.8 cents per kWh…”

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“…[T]here are a few issues unique to Austin Energy, and Austin, which make it unlikely that a VOST would look the same if it were replicated by utilities elsewhere…[especially in the Value of Energy, Environmental Benefits, and Fuel Price Hedge Value calculations]...In a utility service area where leasing is allowed, and is the preferred option for customers, a VOST becomes more complicated…In Austin…the City Council acts as the regulatory backstop to VOST decisions. A Public Utility Commission’s (PUC) main mission…is to keep costs low for ratepayers. City councils have much wider missions, which includes protecting the public welfare…

“One of net metering’s strongest virtues is its simplicity…VOSTs [should] initially be introduced as an option, not a replacement for NEM. Retain NEM for on-site generation, and develop a VOST as a voluntary alternative option for customers…See how it works before ditching the thing that does. Unless you are dealing with a solar champion like Austin Energy, the one-to-one retail net-metering credit keeps the conversation simple and fair for consumers, and limits the opportunities…to undervalue distributed solar.”

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