The Impact of Electric Utility
Rate Structures on
Renewable Energy
Carrie Trant and Wyatt Kroemer
Electricity Distribution
More Than Meets the Eye
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Electricity Distribution
The Grid
U.S. Energy Information Administration 1
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Purchasing Electricity: Utility Companies
• Here in Troy: National Grid
◦ Sell electricity to customers
• Where do utilities get the electricity?
◦ Power plants they own
◦ Purchasing from other utilities, power marketers,
independent producers, and/or a wholesale market
(organized by a regional organization)
• Who owns them?
◦ They can be a municipal not-for profit, member-owned
cooperative, or stockholder-owned for-profit
◦ There isn’t a federal standard metering policy: rates and
policies are on a local basis
U.S. Energy Information Administration 1
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A Little History
• Early in the 20th century, there were more than
4,000 isolated utilities in the US!
• After WWII, demand for electricity grew and utilities
began to connect with one another
◦ Could build larger, jointly
owned power plants 
economic savings
• Now, there are three main
Interconnections:
U.S. Energy Information Administration 1
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The Grid
Global Energy Network Institute 2
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Legacy of Centralized Utilities
• From then until now, most power has been produced
in a centralized manner by large power plants
• But, particularly with the advent of solar, the tables are
turning as power can be produced locally – on each
home’s rooftop – and this is changing the dynamic
U.S. Energy Information Administration 1
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Consumers versus Utility Companies?
• Consumers who install solar panels want to save
money
• Utility companies worry that consumers with solar
panels get too much credit for the electricity they
produce, without paying their fair share to maintain
the grid infrastructure and other delivery costs
Graves 3
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Distributed Energy Resources (DERs)
• On site, decentralized energy production that is still
tied to the larger grid: home solar panels fall under
this umbrella term
• Annual installed global DER capacity is expected to
grow from 109.9 GW (2015) to 335.8 GW (2024),
involving a $1.9 trillion investment
◦ Will continue to see a rise in decentralized power
generation
Navigant Research
4
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NY Prize and NY REV
• NY Prize: focus on communities, connect users through
DERs to give more secure and reliable (e.g. in severe
storms) energy – local, renewable electricity generation
and distribution/storage
• NY REV (Renewing the Energy Vision): proposals/grants
to test new ways to deliver and charge for energy, goal to
be cheaper and more consumer friendly (pilot in Clifton
Park to charge like a cell company, based on your
historical energy usage)
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Alternate Rate Structures
• Can they better enable renewables?
◦ While being cost beneficial to consumers?
- Utility rates significantly impact how quickly consumers have a return on
their solar investment
• Some options:
◦ Decouple rates from utility company profits: discourage utilities from
focusing on how to sell more electricity, allow them to encourage
conservation of energy
◦ Time-of-use rates: imbue supply/demand to encourage consumers
to reduce use during peak hours/generate their own energy, help
balance the load (reduce peaker plants)
◦ Demand charges: charge based on the maximum electrical demand
reached I a period of time, also to encourage smoothing out demand
Solar Energy Industries Association 5
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Project Goals
1.
2.
3.
4.
To investigate which existing electric utility rate structures
in the United States do the most to incentivize installing
home solar and which do the most to discourage it
Building on (1), to propose a rate structure that could
improve the incentivizing of home solar
To illustrate the differences between the rate structures
discussed, demonstrate how 3-5 different rate structures
would affect an average consumer’s bill for with and
without home solar installations
To disseminate what we’ve learned to educate our peers
and the community about how rate structures can be a
way to make renewables more economically viable
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Existing Rate Structure 1: Upstate New York 1,2
Electricity Supply
Delivery Services
Charges
Basic Service: fixed service charge
Delivery
Incremental State Assessment: NYS encouragement to conserve utility energy
System Benefit Charge: support public policy programs for efficiency
Legacy Transition Charge: cost/benefit of long-term electricity supply contracts
Revenue Decoupling Mechanism: reconcile delivery service revenue to target
Transmission Rev Adjustment: reconcile transmission service revenue to target
Tariff Surcharge: collected because NYS taxes National Grid’s revenue
Sales Tax
Electricity Supply (Supplier: National Grid)
Merchant Function
Electricity Supply Reconciliation Mechanism: reconcile supply revenues to
Electric SC1 Non Heat
Electric SC1C Non Heat
National Grid
National Grid
$17
$30
4.76 ¢/kWh
3.14 ¢/kWh
0.062 ¢/kWh
0.039 ¢/kWh
0.79 ¢/kWh
0.35 ¢/kWh
-0.25 ¢/kWh
-0.33 ¢/kWh
3.09%
3.0%
3.59 ¢/kWh
Off Peak/Season: 4.73 ¢/kWh
On Peak: 3.93 ¢/kWh
Shoulder: 2.95 ¢/kWh
0.19 ¢/kWh
0.43 ¢/kWh
cost of electricity purchased
Tariff Surcharge
Sales Tax
National Grid 6
1.01%
3.0%
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Other states to look at
• California and New York are progressive in trying to
promote renewable distributed energy, Ohio is
trying to do something similar to REV
• Florida utilities own power plants (power
generation) so resist rate structures that help
renewables, distributed energy generation
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Discussions with people in the field
• Contacts at municipal utilities, large investor-owned
utilities (private), and a Public Utility Commission in
California, Iowa, Colorado, and Washington, some in NYS
• Sample questions:
◦ How are rates and rate structures changing for Utility? What
does Utility want, and why?
◦ How is Utility influencing Government (and vice-versa) to
transition to DERs/renewables?
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Sources
1. U.S. Energy Information Administration. How electricity is delivered to consumers.
https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery
2. Global Energy Network Institute. United States transmission grid.
http://www.geni.org/globalenergy/library/national_energy_grid/united-states-ofamerica/americannationalelectricitygrid.shtml
3. Graves, Bob. Electric Utilities Must Create Equitable Rate Structures to Fit a 21st-Century Grid.
Government Technology. 23 Aug. 2016. http://www.govtech.com/fs/perspectives/Electric-UtilitiesMust-Create-Equitable-Rate-Structures-to-Fit-a-21st-Century-Grid.html
4. Navigant Research. Distributed Energy Resources Global Forecast.2015.
https://www.navigantresearch.com/research/distributed-energy-resources-global-forecast
5. Solar Energy Industries Association. Utility Rate Structure. http://www.seia.org/policy/distributedsolar/utility-rate-structure
6. National Grid. Standard Service (SC-1)
https://www9.nationalgridus.com/niagaramohawk/home/rates/4_standard.asp
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