Electricity Rate Design for Integrating Distributed Resources Into Energy Systems

Abstract

As part of an effort to decarbonize all sectors of the economy, the U.S. electric power grid will undergo many changes over a multi-decade energy transition. On the supply side, large quantities of stochastic renewable energy generation, alongside sources of clean firm generation and fast-acting balancing resources, figure to replace carbon-emitting thermal generators. On the demand side, widespread demand electrification will seek to replace end-use loads that consume fossil fuels. To reliably and economically connect new supply and demand, transmission- and distribution-level infrastructure will need to be expanded and enhanced. Involved with all of this, electricity tariffs, which recover electric utilities' costs from consumers, will play an important role in the energy transition. With the new generation resources and infrastructure that need to be built, electricity tariffs will be the responsible interface for recovering the necessary operational and capital costs. Additionally, electricity tariffs have the ability to pass prices that can influence how consumers invest in and operate distributed resources, which could help balance supply and demand and limit further infrastructure investments. With the role that electricity tariffs are poised to play in the energy transition, it is imperative to have proper tools available that can help understand the impacts of electricity tariffs. Furthermore, using those tools to provide decision makers with timely policy- and regulatory-relevant insights are critical to ensuring that electricity tariffs and associated policies are functioning as intended. As such, this dissertation works to advance both the model development and analysis of electricity tariffs and their impacts on consumers' distributed resources. This dissertation introduces an open-source software tool that helps explore the impacts of different value streams, including electricity tariffs, on distributed resource investments and operations. Uniquely, this tool allows users to model multiple different types of electricity tariffs, an opportune capability at a time when new tariff designs are increasingly designed and proposed. Using the open-source software tool, this dissertation also includes two analyses aimed at examining established and proposed electricity tariffs and policies. The first analysis looks into discriminatory technology-specific electricity tariffs implemented in California, finding that a combination of programmatic and structural restrictions limit the value that can be earned by the broader class of flexible distributed resources. The second analysis explores the complementarity of solar and storage resources in the presence of contemporary electricity rates and policies, and reveals deeper insights to the design of electricity rates and asset subsidies.