Utilities typically think solar is a cost to them because solar customers aren’t paying as much as traditional customers are for grid maintenance. Solar customers think it should be seen as a benefit to utilities because they’re using less of the grid’s power and even feeding energy into the grid in some cases. So who’s right?
One way states have tried to answer that question is by finding a resource value of solar, or RVOS.
What is RVOS?
The resource value of solar, or RVOS, is a number value that can help states determine the net cost or benefit of solar on a utility-by-utility basis. They can use that number to see if the net metering policies in place accurately reflect the value of solar they’ve found, or create a new value of solar tariff. During the RVOS process, industry stakeholders choose different parameters like generation capacity, transmission and distribution capacity and administration to create a mathematical equation into which utilities plug different numbers. Out of the equation come the numbers that equal the value of solar for a given state’s investor-owned utilities, which are governed by the state’s public utilities commission (RVOS processes can be initiated by municipal utilities as well, like in the case of Austin Energy). But what states choose to do with those new values varies widely.
“What is the value of solar? It’s going to either be three cents, or it’s going to be 12 cents. And the difference is absolutely incredibly important to everything,” said OSEIA president Jon Miller. He’s been in in the solar industry for 15 years and became the executive director of OSEIA in September 2017.
Oregon just completed Phase 1 of the RVOS process, where it defined the parameters of the RVOS equation. In the next step, the state’s IOUs plug their unique numbers into the equation and then present their findings back to the PUC and stakeholders.
“We don’t expect utilities to necessarily get it perfect straight off of the bat, and I don’t think they do either,” said Michael O’Brien, research director at Renewable Northwest, a clean energy nonprofit organization based in Oregon that has been a part of Oregon’s RVOS process since the start.
Miller said until an RVOS methodology is chosen, valuing solar is more like a shouting match, full of subjective thoughts but no objective processes for valuing it. Usually the entity with the most lawyers wins the battle of valuing solar. Setting an RVOS can change that.
“This number pops out, so we don’t have arguments anymore,” Miller said.
He thinks all 50 states should define an RVOS.
“It shouldn’t be set by rhetoric and opinion. It should be set by an agreed-upon calculation just like it’s done in the 14 or 15 states,” Miller said.
What was the origin of Oregon’s RVOS?
Several years ago, Renewable Northwest was working to change the net metering capacity limits in the state to allow for more solar, O’Brien said.
Utilities were concerned that net-metering customers would be receiving cross subsidization—charging higher prices to one group of consumers to subsidize lower prices for another group—so together with solar advocates in the state thay decided the best way to determine if cross subsidizing was happening was by starting an RVOS process.
The original intent of Oregon’s RVOS process was not to come up with a value-of-solar tariff. The only explicit intent came out of SB1547—a bill that said the compensation for people to participate in community solar should reflect the RVOS findings.
“That’s the only explicit one, but there will be workshops to try and think about how it might or may not be applied,” O’Brien said.
Erica McConnell, an attorney for the Interstate Renewable Energy Council, said Minnesota is the only other state that has gone through a VOS methodology proceeding and came out with a tariff. In that state, IOUs can apply to the PUC for a VOS tariff as an alternative to net metering, but O’Brien said he didn’t think any utilities have taken them up on it yet.
Austin Energy, a municipal utility in Texas, also has a VOS tariff and underlying methodology.
Though VOS tariffs are few, many states have done RVOS studies of some kind, as Miller mentioned. And going through the process doesn’t guarantee that the numbers generated will be turned into a tariff or other consumer credit. It’s all about the intent of the particular PUC.
“So while these states haven’t necessarily undertaken a ‘(R)VOS proceeding’ like Oregon or Minnesota, their studies have necessarily relied on underlying methodologies looking at similar benefit/cost/valuation considerations,” McConnell said.
In those other states, the VOS studies have been used generally as analytical or policy tools rather than to inform VOS tariff development. They can “demonstrate whether or not distributed solar presents a net cost or net benefit, and inform whether or not changes to policies like net metering may be appropriate,” McConnell said.
“I’m not aware of anyone then taking that next step that Minnesota, for example, has taken to say, ‘OK, we’re going to use our value of solar methodology to come up with tariffs and then we’re going to implement that in our community solar garden program,’” McConnell said.
How can you reach a fair number for all stakeholders?
The RVOS process is usually launched by the PUC authorities in the state. The PUC then assembles a group of stakeholders to determine the skeleton of the equation.
In Oregon, the stakeholders at the table included representatives from the three IOUs, Renewable Northwest, the Oregon Citizen’s Utility Board, the Oregon Department of Energy, the Alliance for Solar Choice, Industrial Customers of Northwest Utilities, the PUC commissioners themselves and their staff, and the engineering consulting firm E3, hired by the PUC. E3 collected all the input from the stakeholders and submitted a report to the PUCs.
Miller said it’s crucial the solar industry is fully engaged in the process, or fewer criteria may be included in the equation and the value of solar will be less.
“The solar industry has to be there,” Miller said. “The utilities don’t represent our interests and they don’t accurately represent what we believe should be included in those calculations.”
It’s imperative all stakeholders have equal input in the process.
“The utilities are experts in the PUC realm,” Miller said. “They are extremely good with all their lawyers to be effective in that space. And we don’t have those kinds of resources.”
O’Brien said what can potentially be a divisive process was quite collaborative thanks to good leadership from the PUC staff.
“I think the commission staff in Oregon did a really good job of just making sure that the language that we were using wasn’t inhibiting constructive conversation,” O’Brien said. The group found that when they talked about costs and benefits, they often disagreed. But when they just talked about the RVOS elements without attaching positives or negatives to them, they agreed.
The group looked at the elements from four different points of view: participating customers, non-participating customers, the utility and society.
“If everyone’s conscious of who’s holding what lens and who’s looking through it, then again it becomes easier to just discuss things,” O’Brien said.
For example, they discussed whether the element of solar bringing local jobs should be included in the methodology. They came to the agreement that it was more of a societal benefit than one that directly affects the utility regulation.
Is RVOS the best solution for valuing solar in the U.S.? McConnell said it’s a hard question to answer, and a lot of states are struggling with it. Starting an RVOS process is difficult and time-intensive. And officials can’t exactly import the methodologies from other states, because the parameters can be vastly different.
But if a state has the time and resources to go through an RVOS proceeding, it can potentially find the most accurate and substantiated value at which to compensate consumers for solar energy. Whether that number is used in the abstract to inform state policy decisions or explicitly in a VOS tariff, it’s one step closer to a more equitable conversation about solar for all sides.