Valuing Distributed Energy Resources

Abstract

Due to their small scale, it is often difficult for Distributed Energy Resources (DERs) to compete with large centralized resources when their value is based purely on the cost of energy and capacity. In order for the true value of DERs to be realized, it is important that these resources be applied and compensated for a wide range of services beyond energy and capacity requirements, specifically, local requirements such as voltage profile improvement, reactive power support and congestion relief to name a few. This value creation process is crucial to the maximum realization of DER potential and fair, competitive compensation for small or distributed resources. The goal of this work is to first quantify the benefit of DERs to a wide range of interested entities. We then propose value-based pricing methodologies to determine how these resources should be compensated as well as “fair cost allocation methods” (allocation proportional to benefits) to allocate the cost of compensating resources that increase costs as well as benefits. This valuation methodology considers network models, distributed renewable energy resource models, market models as well as policy impact models. Finally, this work also provides contributions to methodologies that quantify the economic value of societal and environmental benefits of DERs through energy policy.