1. The Impact of Electric Utility Rate Structures on Renewable Energy
Carrie Trant and Wyatt Kroemer

2. Electricity Distribution
More Than Meets the Eye

3. Electricity Distribution
The Grid
U.S. Energy Information Administration 1

4. Purchasing Electricity: Utility Companies
Here in Troy: National Grid
Sell electricity to customers
Where do utilities get the electricity?
Power plants they own
Purchasing from other utilities, power marketers, independent producers, and/or a wholesale market (organized by a regional organization)
Who owns them?
They can be a municipal not-for profit, member-owned cooperative, or stockholder-owned for-profit
There isn’t a federal standard metering policy: rates and policies are on a local basis
U.S. Energy Information Administration 1

5. A Little History
Early in the 20th century, there were more than 4,000 isolated utilities in the US!
After WWII, demand for electricity grew and utilities began to connect with one another
Could build larger, jointly
owned power plants 
economic savings
Now, there are three main
Interconnections:
U.S. Energy Information Administration 1

6. The Grid Global Energy Network Institute 2
Global Energy Network Institute 2

7. Legacy of Centralized Utilities
From then until now, most power has been produced in a centralized manner by large power plants
But, particularly with the advent of solar, the tables are turning as power can be produced locally – on each home’s rooftop – and this is changing the dynamic
U.S. Energy Information Administration 1

8. Consumers versus Utility Companies?
Consumers who install solar panels want to save money
Utility companies worry that consumers with solar panels get too much credit for the electricity they produce, without paying their fair share to maintain the grid infrastructure and other delivery costs
Graves 3

9. Distributed Energy Resources (DERs)
On site, decentralized energy production that is still tied to the larger grid: home solar panels fall under this umbrella term
Annual installed global DER capacity is expected to grow from GW (2015) to GW (2024), involving a $1.9 trillion investment
Will continue to see a rise in decentralized power generation
Navigant Research 4

10. NY Prize and NY REV
NY Prize: focus on communities, connect users through DERs to give more secure and reliable (e.g. in severe storms) energy – local, renewable electricity generation and distribution/storage
NY REV (Renewing the Energy Vision): proposals/grants to test new ways to deliver and charge for energy, goal to be cheaper and more consumer friendly (pilot in Clifton Park to charge like a cell company, based on your historical energy usage)

11. Alternate Rate Structures
Can they better enable renewables?
While being cost beneficial to consumers?
Utility rates significantly impact how quickly consumers have a return on their solar investment
Some options:
Decouple rates from utility company profits: discourage utilities from focusing on how to sell more electricity, allow them to encourage conservation of energy
Time-of-use rates: imbue supply/demand to encourage consumers to reduce use during peak hours/generate their own energy, help balance the load (reduce peaker plants)
Demand charges: charge based on the maximum electrical demand reached I a period of time, also to encourage smoothing out demand
Solar Energy Industries Association 5

12. Project Goals
To investigate which existing electric utility rate structures in the United States do the most to incentivize installing home solar and which do the most to discourage it
Building on (1), to propose a rate structure that could improve the incentivizing of home solar
To illustrate the differences between the rate structures discussed, demonstrate how 3-5 different rate structures would affect an average consumer’s bill for with and without home solar installations
To disseminate what we’ve learned to educate our peers and the community about how rate structures can be a way to make renewables more economically viable

13. Existing Rate Structure 1: Upstate New York 1,2
Charges
Electric SC1 Non Heat
National Grid
Electric SC1C Non Heat
Delivery Services
Basic Service: fixed service charge
$17
$30
Delivery
4.76 ¢/kWh
3.14 ¢/kWh
Incremental State Assessment: NYS encouragement to conserve utility energy
0.062 ¢/kWh
0.039 ¢/kWh
System Benefit Charge: support public policy programs for efficiency
0.79 ¢/kWh
Legacy Transition Charge: cost/benefit of long-term electricity supply contracts
0.35 ¢/kWh
Revenue Decoupling Mechanism: reconcile delivery service revenue to target
-0.25 ¢/kWh
Transmission Rev Adjustment: reconcile transmission service revenue to target
-0.33 ¢/kWh
Tariff Surcharge: collected because NYS taxes National Grid’s revenue
3.09%
Sales Tax
3.0%
Electricity Supply
Electricity Supply (Supplier: National Grid)
3.59 ¢/kWh
Off Peak/Season: 4.73 ¢/kWh
On Peak: 3.93 ¢/kWh
Shoulder: 2.95 ¢/kWh
Merchant Function
0.19 ¢/kWh
Electricity Supply Reconciliation Mechanism: reconcile supply revenues to cost of electricity purchased
0.43 ¢/kWh
Tariff Surcharge
1.01%
National Grid 6

14. Other states to look at
California and New York are progressive in trying to promote renewable distributed energy, Ohio is trying to do something similar to REV
Florida utilities own power plants (power generation) so resist rate structures that help renewables, distributed energy generation

15. Discussions with people in the field
Contacts at municipal utilities, large investor-owned utilities (private), and a Public Utility Commission in California, Iowa, Colorado, and Washington, some in NYS
Sample questions:
How are rates and rate structures changing for Utility? What does Utility want, and why?
How is Utility influencing Government (and vice-versa) to transition to DERs/renewables?

16. Sources
U.S. Energy Information Administration. How electricity is delivered to consumers.
Global Energy Network Institute. United States transmission grid america/americannationalelectricitygrid.shtml
Graves, Bob. Electric Utilities Must Create Equitable Rate Structures to Fit a 21st-Century Grid. Government Technology. 23 Aug Must-Create-Equitable-Rate-Structures-to-Fit-a-21st-Century-Grid.html
Navigant Research. Distributed Energy Resources Global Forecast
Solar Energy Industries Association. Utility Rate Structure. solar/utility-rate-structure
National Grid. Standard Service (SC-1)