Technological changes in the electric utility industry bring tremendous opportunities and can also create significant challenges. Rooftop solar photovoltaic (PV) systems and smart appliances and control systems that communicate with the grid can improve system reliability, enable a cleaner and more diverse power system, and create the potential for lower total costs. At the same time, these new resources must be integrated thoughtfully in order to maintain system reliability, provide an equitable sharing of system costs, and avoid unbalanced impacts on different groups of customers, including those who install distributed energy resources (DERs).
In this report, the fourth in the Future of Electric Utility Regulation (FEUR) series from Lawrence Berkeley National Laboratory, authors Ryan Hledik of Brattle Group and Jim Lazar of Regulatory Assistance Project examine pricing issues related to the business relationship between electric distribution utilities and the owners of DERs. They use specific resources as examples— including grid-integrated water heaters, ice storage air conditioners, PV systems with smart inverters, backup generators, and battery and inverter-based storage systems—to evaluate a variety of different pricing models for their economic efficiency, fairness to all customers, customer satisfaction, ability to generate stable utility revenue, and effect on bill stability. The report also provides recommendations for exploring ideas presented through field pilot testing and rigorous analysis. Carefully designed pilot programs and adequately funded evaluation efforts are needed to ascertain which approaches meet the needs of all participants.