Brattle Principal Ryan Hledik co-authored a report that examines pricing issues related to the business relationship between electric distribution utilities and the owners of distributed energy resources (DERs). The report “Distribution System Pricing with Distributed Energy Resources,” is co-authored by Jim Lazar, a senior advisor at The Regulatory Assistance Project, and is the fourth report in Berkeley Lab’s Future Electric Utility Regulation series. The report was funded by the National Electricity Delivery Division of the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability.

The authors first identify the distribution system services today and possible changes with growing levels of grid-integrated appliances, rooftop solar systems with smart inverters and other DERs. The report then outlines four options for pricing distribution services in the future, such as rates tailored for each type of service; rates tailored to each type of customer; a buy and sell arrangement, where DER customers pay for their use of the distribution grid and get paid separately for services they provide; and a competitive solicitation for buying grid services from DER customers. These options were examined based on multiple evaluation criteria, which included economic efficiency, equity and fairness, customer satisfaction, utility revenue stability, customer price, and bill stability.

Additionally, the authors provide two perspectives on the pricing models. Mr. Hledik presents considerations from the perspective of the distribution utility, while Mr. Lazar presents issues from the perspective of consumers. The authors reach consensus on the overall framework by which DERs should be evaluated and the options available for pricing distribution services, and develop contrasting views on the advantages and disadvantages of each of the individual pricing models. The authors conclude the report with recommendations for exploring ideas presented through field pilot testing and analysis.

The report is available for download below.

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Distribution System Pricing with Distributed Energy Resources