A new Berkeley Lab report, “Electricity Bill Savings from Residential Photovoltaic Systems: Sensitivities to Changes in Future Electricity Market Conditions” explores long-term uncertainties in the utility bill savings that customers receive from photovoltaic (PV) systems. Specifically, the report evaluates how changes to wholesale electricity market conditions may impact retail electricity prices and rate structures, and how those changes may in turn affect the bill savings that customers with PV receive under net metering and other kinds of compensation mechanisms.
The analysis relies on a production cost and capacity expansion model to project hourly wholesale electricity market prices under a range of potential electricity market scenarios, using California as a case study. The scenarios include various levels of renewable and solar energy deployment, high and low natural gas prices, the possible introduction of carbon pricing, and greater or lesser reliance on utility-scale storage and demand response. Based on the wholesale electricity market prices generated by the model, we then develop three residential retail rate structures (flat volumetric rates, time-of-use, and real-time pricing) for each electricity market scenario, using standard retail rate design principles. Finally, we estimate the utility bill savings from PV for 226 California residential customers, for each scenario and retail rate structure, under both net metering and an alternative PV compensation mechanism.
While some of the findings are specific to the particular assumptions and setting used in the research, they demonstrate that uncertainties in future electricity market conditions, retail rate structures, and the availability of net metering can interact to greatly impact the future value of bill savings from residential PV. In particular, the principal findings of the analysis include: • The utility bill savings from residential PV increase with higher levels of renewables on the grid, if compensated via a flat rate with net metering.
• Under all other rate options and compensation mechanisms evaluated in this report, however, the bill savings from residential PV decline with increasing solar penetration levels on the grid.
• Among the three retail rate structures considered, the time-of-use rate provides the greatest bill savings value under electricity market scenarios with relatively low solar penetration levels on the grid, while the flat rate provides the greatest bill savings under high solar penetration scenarios.
• With high solar penetration levels on the grid, the bill savings from residential PV increase with greater deployment of grid storage, demand response, or concentrated solar power with storage.
• Across all of the electricity market scenarios considered, the bill savings are significantly eroded if, instead of net metering, generation from behind-the-meter PV exported to the grid is compensated at hourly wholesale prices.
• Inclining block pricing (a fourth retail rate structure, included only peripherally within our analysis) can lead to variations in the value of bill savings across customers that are even more significant than the variations associated with the electricity market scenarios, retail rate structures, and compensation mechanisms considered elsewhere within the analysis.
Presentation slides that summarize key findings can be found at: http://emp.lbl.gov/sites/all/files/lbnl-6017e-ppt.pdf