Improvements in technology, low natural gas prices, and more flexible and positive attitudes in government and utilities are making distributed generation more viable. With more distributed generation, notably combined heat and power, comes an increase in the importance of standby rates, the cost of services utilities provide when customer generation is not operating or is insufficient to meet full load. Yet many standby rates are designed with overly conservative assumptions on system reliability, which create barriers to widespread adoption of CHP resources. Public service commissions should review standby rates in their jurisdictions to ensure that these rates actually match utility costs with the services customers use, and do not otherwise disincentivize CHP. In a RAP webinar based on the study “Standby Rates for Combined Heat and Power Systems,” co-authors Jim Selecky and Ali Al-Jabir of Brubaker & Associates, Inc., examine the efficacy of standby tariffs for CHP applications in five states, underscore sound applications of regulatory principles, and recommend steps to improve rate design with the goal of encouraging deployment of cost-effective CHP resources. Getting standby rates right—sending the right price signals and charging CHP customers for the grid services they actually receive—will unlock private investment in these cleaner, more efficient resources and reinforce the emergence of customers as a power system resource by enhancing their flexibility.
Standby Rates for Combined Heat and Power Systems: Economic Analysis and Recommendations for Five States
April 9, 2014
- Jim Selecky ,
- Ali Al-Jabir