Regulatory Considerations Associated with the Expanded Adoption of Distributed Solar
Increased adoption of distributed solar photovoltaics (PV), and other forms of distributed generation, have the potential to affect utility-customer interactions, system costs recovery, and utility revenue streams. If a greater number of electricity customers choose to self-generate, demand for system power will decrease and utility fixed costs will have to be recovered over fewer kilowatt hours of sales. As such, regulators will need to determine the value and cost of additional distributed PV and determine the appropriate allocation of the costs and benefits among consumers. The potential for new business models to emerge also has implications for regulation and rate structures that ensure equitable solutions for all electricity grid users. This report examines regulatory tools and rate designs for addressing emerging issues with the expanded adoption of distributed PV and evaluates the potential effectiveness and viability of these options going forward. It offers the groundwork needed in order for regulators to explore mechanisms and ensure that utilities can collect sufficient revenues to provide reliable electric service, cover fixed costs, and balance cost equity among ratepayers—while creating a value proposition for customers to adopt distributed PV.