PC-DC Office of the People's Counsel f>.DVOCAC'f I EDUCATION I PROTECTION
VIA ELECTRONIC FILING
Ms. Brinda Westbrook-Sedgwick Commjssion Secretary Public Service Commission
of the District of Columbia 1325 G Street N.W. Suite 800 Washington, D.C. 20005
* * *
Sandra Mattavous-Frye, Esq. People's Counsel
Ju ly 24, 2017
Re: Formal Case No. 1130, In the Matter of the Investigation into Modernizing the Energy Delivery Structure for Increased Sustainability
Dear Ms. Westbrook-Sedgwick:
Enclosed please find the "Reply Comments of the Office of the People's Counsel for the District of Columbia Regarding Pepco's Comments on the Office of the People's Counsel's Value of Solar Study."
If there are any questions concerning this matter, please contact me at (202) 727-3071.
Sine rel~ i fd4
~ ·"'-'--...... urton, ~q.
Assistant People's Counsel
cc: Parties of record
D.C. Office of the People's Counsel 1133 151h Street N.W. Suite 500 Washington, DC 20005-2710
(202) 727-3071 I TIY/TDD (202) 727-2876 I Fax (202) 727-1014 I [email protected]
BEFORE THE PUBLIC SERVICE COMMISSION
OF THE DISTRICT OF COLUMBIA
In the Matter of the Investigation Into Modernizing the Energy Delivery System for Increased Sustainability
Formal Case No. 1130
REPLY COMMENTS OF THE OFFICE OF THE PEOPLE'S COUNSEL FOR THE DISTRICT OF COLUMBIA IN RESPONSE TO COMMISSION ORDER NO. 18812
I. INTRODUCTION
Pursuant to the Public Service Commission of the District of Columbia's ("PSC" or
"Commission") Order issued on June 2, 2017 in the above-captioned proceeding, 1 the Office of
the People's Counsel for the District of Columbia ("OPC" or "Office"), the statutory
representative of District of Columbia utility ratepayers and consumers, 2 hereby respectfully
submits the Reply Comments of the Office of the People's Counsel for the District of Columbia in
Response to Commission Order No. 18812 ("Reply Comments") in this proceeding.
II. PROCEDURALBACKGROUND
On June 21, 2017, the Commission issued Order No. 18812, wherein it granted Potomac
Electric Power Company's ("Pepco") motion to initiate a formal comment period on OPC' s
Distributed Solar in the District of Columbia Report ("Value of Solar Report"). Comments were
due July 12, 2017 and reply comments are due July 24, 2017. DC Solar United Neighborhoods
("DC SUN") filed its Initial Comments on July 11, 20173 and Pepco filed its Initial Comments
on July 12, 2017.4 Through this pleading, OPC is submitting its Reply Comments.
1 Formal Case No. 1130, Jn the Matter of the Investigation into Modemizing the Energy Delive1y System for
Increased Sustainability ("Formal Case No. 1130"), Order No. 18812, rel. June 21, 2017 ("Order No. 18812").
2 D.C. Code § 34-804 (Lexis 2017).
3 Formal Case No. 1130, Comments of DC Solar United Neighborhoods on Office of the People's Counsel Value of Solar Study, filed July 11, 2017.
III. SUMMARY OF REPLY COMMENTS
OPC appreciates the comments filed by parties on OPC's Value of Solar Report and
welcomes the opportunity to specifically respond to Pepco's comments that provide another
perspective on the topic of distributed solar in the District of Columbia ("DC" or "District"). As
OPC's Reply Comments indicate, there are several areas where OPC concurs with Pepco's
comments and other areas where OPC disagrees or concludes Pepco's comments and the
analysis therein could benefit from clarification and/or further explanation. OPC's Reply
Comments highlight that the Value of Solar Report can contribute significantly to the
stakeholder discussions and Commission deliberations in this proceeding.
OPC is pleased to acknowledge that Pepco has made substantial improvements in its
interconnection process, and applauds Pepco' s performance improvements in this area.
However, OPC notes stakeholders should continue to monitor perfonnance in this area in order
to ensure that it does not again become a barrier as the volume of applications grows. OPC
acknowledges that Pepco has expanded and enhanced its outreach and education efforts and
looks forward to continuing to work with Pepco and other stakeholders in this area. With respect
to the value of solar, OPC notes that Pepco is correct to observe that the value of solar will vary
by location and customer, and it is reasonable for Pepco to explore these variations and
encourage even more aggressive solar deployments for the customers whose usage profile and/or
location suggest the value is greatest. OPC recommends that the determination of the highest-
value locations be conducted in an open and transparent manner, with data made available to
stakeholders. OPC agrees with Pepco that future updates of the Value of Solar Report should use
4 Formal Case No. 1130, Comments of Potomac Electric Power Company on the Office of the People's
Counsel Report on Distributed Solar in the District of Columbia ("Pepco's Comments"), filed July 12, 2017.
2
the most recent values for marginal losses and welcomes additional discussion regarding the
choice of discount rate which Pepco believes may be too low.
On other issues OPC disagrees for various reasons. For example, with respect to the
adjustments Pepco made to OPC's estimated value of the avoided generation capacity, OPC
notes that the value of solar analysis should be periodically updated to include the most recent
values. However, it is inappropriate to update only one component of the value of solar without
updating every other value stream. OPC also has concerns with Pepco's suggested range of
capacity values and notes, for example, that Pepco's removal of the first three years of capacity
value is one-sided. OPC rejects Pepco's criticisms of the distribution value of solar as being
unfounded , agrees with Pepco that resources should be evaluated on whether they reduce total
costs to the system (or society), rather than based on an evaluation of only a subset of costs or
benefits. However, OPC does not agree that price suppression effects should be excluded from
the estimated benefits provided by distributed solar. OPC notes regarding hedge value that
while it is difficult to assign a specific value to hedging activities, this is not a reason to exclude
the value that hedging provides as Pepco recommends. Pepco believes avoided RPS compliance
costs should not be included in the value of solar calculation, however, OPC notes that Pepco
seemed to conflate two distinct categories of environmental costs (the avoidance of
environmental externalities and the avoidance of costs associated with environmental
compliance) and explains their differences.
3
IV. REPLY COMMENTS
A. Pepco's Interconnection Process
Pepco claims that "OPC' s use of 2014 data to assess Pepco' s interconnection process
provides a dated view of Pepco's interconnection process,"5 and that "Pepco's interconnection
process has been streamlined and improved since 2014 and continues to evolve to meet the needs
of distributed generation in the District of Columbia."6
OPC agrees that Pepco has made substantial improvements in its interconnection process,
and this may be one of the reasons why solar is growing so rapidly now in the District. OPC
commends Pepco's performance improvements in this area. However, OPC notes continued
monitoring of performance in this area is critical, in order to ensure that it does not again become
a barrier as the volume of applications grows.
B. Pepco's Education, Outreach, and Training Program
Pepco states that it "agrees that education, outreach, and training are critical, which is
why in 2015 Pepco rolled out a customer and contractor education campaign to improve
customer understanding of and satisfaction with the net energy metering and small generation
interconnection processes." 7 Pepco lists several activities that it has undertaken.
5
6
7
o Pepco developed and provided to interconnection customers, contractors, and installers printed educational material.
o Pepco has issued bill inserts to all District of Columbia customers focused on helpful resources and tools customers can use to plan for a solar generating system.
o Pepco substantially revised its NEM-related web pages.
Pepco•s Comments at 4.
Id. at 3.
Id. at?.
4
o In 2015, the Company began hosting live webcasts educating customers and contractors on the application process.
o Pepco also held face-to-face meetings with solar contractors with high numbers of applications returned as incomplete to educate them on the application process.
o On September 15, 2016; Pepco filed its Behind-the-Meter Solar Generation Promotion Communications Plan ("Communications Plan") for the District of Columbia in accordance with Merger Commitment No. 125. Pepco incorporated feedback from Solar Stakeholder Collaborative sessions into its Communications Plan.
o In 2017 Pepco created the Solar and Distributed Energy Resources Advisory Council. The Solar and Distributed Energy Resources Advisory Council met for the first time at the end of March and will meet again in September with the primary objective of discussing solar and other distiibuted energy resources ("DER") topics relevant to Pepco, the utility industry generally, and to Pepco's Distiict of Columbia customers. 8
OPC recognizes that Pepco has taken significant steps over the past two years to improve
its education and outreach. OPC is pleased that Pepco has taken these initial steps. OPC
remains convinced that consumer education is central to the successful deployment of solar
resources. OPC submits active stakeholder participation is essential and looks forward to
continuing to work with Pepco and other stakeholders in this area.
C. Locational Conditions and Installation Designs
Pepco claims that "Additional information, discussion and data beyond what is presented
in the OPC Solar Report are needed," such as "how the VOS vaiies by customer, location,
configuration, and technology (e.g., coupling with batteries or use of smart inverters), and how
that value may change over time as market and system conditions change."9
OPC observes that many utility costs vary by customer, due to location, service
requirements and specific consumption profile, among other variables. The value of solar is no
8 Id. at pp. 7-10.
9 Id. at 13.
5
different. Just as utilities make investment and cost recovery decisions based on aggregate costs,
the value of solar study estimates an aggregate value.
Pepco is correct to observe that the value of solar will vary by location and customer, and
to that end, it is reasonable for Pepco to explore these variations and encourage even more
aggressive solar deployments for the customers whose usage profile and/or location suggest the
value is greatest. OPC recommends that the determination of the highest-value locations be
conducted in an open and transparent manner, with data made available to stakeholders. Such
data should include circuit-level system data such as the available capacity on each circuit, the
peak load hours, and load forecasts. Such data could be collected in the instant proceeding, or in
a separate docket for distribution system planning or non-wires alternatives.
D. Value of Solar Estimates
1. A voided Generation Capacity
A voided generation capacity was estimated based on forecasted PEPCO Zone market
clearing prices for capacity in PJM' s Reliability Pricing Model ("RPM") auctions. Pepco states
that it "agrees with the OPC Solar Report's use of visible market prices and market price
forecasts to facilitate the development of the estimated value of any avoided generation
capacity." 10 However, Pepco states that it has concerns with the estimated value of avoided
generation capacity (described below) 11 and provides an alternative range of $0/MWh to
$8/MWh for the estimated value of avoided generation capacity. 12
10 Id. at 18.
11 Id.
12 Id. at 20.
6
Pepco's first concern is that "Solar resources alone cannot sell capacity into the
Reliability Pricing Model ("RPM") auctions without assuming excessive performance risks, so
that basis for valuing avoided generation capacity costs is questionable," 13 and the RPM auction
"comes with an obligation to perform during all hours of a year when called upon. Because of
the seasonal and intermittent nature of the output of solar resources, these resources may be
unable to perform during those hours. Consequently, distributed solar resources generally cannot
be relied upon to provide the same societal value for capacity as that received by capacity bid
into the PJM RPM auctions."14
Pepco acknowledges that behind-the-meter "solar resources can reduce the RPM capacity
obligation, which, in tum, reduces capacity costs over time." 15 However, Pepco states that
"Since RPM auctions are for capacity obligations three years ahead, however, this reduction
would not be effective immediately. As a result, for the purposes of these comments, Pepco has
made an adjustment to the OPC Solar Report's estimated value of the avoided generation
capacity to remove the first three years of value because reductions in capacity procured by PJM
due to behind-the-meter solar may not yet be realized. This adjustment reduces the estimated
value of avoided generation capacity from $16/MWh to $13/MWh."16
Regarding updated RPM results, Pepco notes that "since the time that the OPC Solar
Repo1t was issued, the results of the PJM Base Residual Auction for the 2020-2021 planning
year have been released, and the market clearing price for the PEPCO Zone is approximately
13 Id. at 18-19.
14 Id. at 19-20.
15 Id. at 19.
16 Id.
7
$86/MW-day. This value is roughly half of the approximate $150/MW-day value that forms the
basis for the OPC Solar Report's estimates for 2021 and beyond. Consequently, Pepco has made
a second adjustment to the OPC Solar Report's estimated value of avoided generation capacity,
applying the current $86/MW-day capacity price for 2021 and beyond. This adjustment further
reduces the estimated value of avoided generation capacity to $8/MWh for the purposes of the
OPC Solar Report." 17
As an initial matter, OPC notes that the value of solar is the aggregation of many
individual value streams, each of which can fluctuate over time for a variety of reasons. For this
reason, the analysis should be periodically updated to include the most recent values. However,
it is totally inappropriate to update only one component of the value of solar without updating
every other value stream. While it is true that a capacity auction post-report coming in at a lower
price suggests that the capacity component of the value of solar may be lower, to simply update
one cost category and not consider updating all cost categories amounts to che1Ty-picking.
In addition, OPC has the following concerns with Pepco's suggested range of capacity
values: Pepco's characterization of solar's ability to participate in the wholesale capacity market
is not accurate. Solar resources can, and do, participate in the RPM, even under the relatively
new Capacity Performance (CP) mechanism. In fact, PJM facilitates aggregation of seasonal
resources to support their participation in the market. Resources that tend to operate on a
seasonal basis are allowed to aggregate across locational deliverability areas. More importantly,
intermittent resources are allowed to offer in as seasonal CP resources. Thus solar resources
could offer in for the summer capacity period only (May through October). PJM clears annual
17 Id.
8
and seasonal offers independentl y to ensure that sufficient capacity of summer and winter
resources are procured. 18
While solar resources are allowed to offer in to the RPM as seasonal resources, the
vast majority of solar resources cLmently participate as annual resources. PJM reports that 125
MW of solar resources cleared in the 2020/2021 auction (330 MW of nameplate capacity) .19 Of
these, 119 MW cleared as the Annual Capacity Performance Product and 6 MW cleared as the
summer seasonal Capacity Performance product.20
Pepco is correct that solar can also impact the capacity market as a behind-the-meter
resource, and that there is a delay in when behind-the-meter reductions will be realized.
However, Pepco 's removal of the first three years of capacity value is one-sided. If Pepco
removes the first three years, it should add three years at the end of the study period, since
Pepco's capacity requirement is determined using historical load data. Thus while the load
reduction of a new solar generator may not immediately be incorporated into Pepco's load
forecast for capacity requirements, the converse is also true. In other words, if a solar generator
ceases to operate, this will also not immediately be factored into Pepco's load forecast for
capacity requirements.
Market prices fluctuate signifi cantly from year to year, and thus it is unreasonable to base
a forecast for the study period using onl y one year of data. For this reason, Synapse used a 10-
year average to develop a forecast of capacity market prices for 2020/2021 and later.
18 PJM, Seasonal Resources a11d Aggregatio11 i11 RPM. April 7. 20 17, available at:
http://www.pjm.com/-/media/commi ttees-groups/subcomm i ttees/drs/20 170407 /20 l 70407-item-04a-i nterm ittentresou rces-in-rpm-train in g.ashx.
19 PJM applies a capacity factor of 38% to these resources, meaning that the 125 MW of cleared solar capacity translates to approximately 330 MW of nameplate solar capacity that is expected to be available in the 2020/2021 Deli very Year.
20 PJM, 2020/202 1 RPM Base Residual Auction Results. available at http: //www.pjm.com/-/media/marke ts
ops/rom/rpm-auction-in fo/2020-202 l -base-residual-auction-report.ashx.
9
Incorporating the most recent capacity market results changes Synapse's forecast very little, due
to the averaging over a IO-year period. Applying the capacity auction forecast using the most
recent auction results changes Synapse's forecasted capacity price downward by 6.8 percent.
2. A voided Distribution Capacity
Pepco states, "It is inappropriate at this time to assign a positive default value for avoided
delivery system costs due to distributed solar resources." 21 Pepco gives several reasons:
"First, the actual value is location-specific and could be a cost or a benefit. For example,
depending upon load conditions and trends, additional infrastructure may not otherwise be
needed and, hence, may not be avoided by distributed solar resources. Furthermore, depending
upon the locational conditions, additional distribution system costs may need to be incurred to
maintain system reliability once the distributed solar resource is installed."22
Pepco comments that OPC's Solar Report assumes that Pepco "can depend upon the
incremental solar resources to produce sufficient amounts of electricity to change its decisions
about how much delivery system capacity is needed. But, solar generation can be interrupted
when cloud cover or other factors reduce or eliminate the output that a distributed solar resource
provides. Whether or not these resources reduce peak load, and thereby provide the benefit
assumed by the OPC Solar Report, depends on the coincidence of the resources with the time of
peak load on a particular distribution system component." 23
Additionally, Pepco states that load reductions do not reduce costs associated with past
investments. "Assigning a positive value for avoided system investments that actually are
21
22
23
Id. at 22.
Id.
Id.
10
'sunk' and crediting customers that own distributed solar resources for this assumed value
imposes that cost instead on other customers." 2-1
As a preliminary matter, OPC notes that the Value of Solar Report clearl y states that the
"value of solar study is designed to analyze the impacts of a small amount of additional solar
installed in the near-term, rather than large quantities of the resource installed many years in the
future. Thus the results in this study should not be assumed to still hold for s ignifi cant increases
in PY deployment, or for many years into the fu ture."25
All of Pepco's criticisms regarding the distribution value of solar are unfo unded, as these
were addressed by the Value of Solar Report's methodology, as explained below.
OPC agrees that the actual value is location-specific and could be either a cost or a
benefit. However, at the time of writing, Pepco 's restricted circuit map26 showed no restricted
circuits in the District, indicating that it would be unlikely that a small quantity of additional
solar in the District would result in a cost to upgrade the distribution system in the near-term.
Further, in response to OPC Data Request 4-8 , Pepco stated that " the customer pays all costs for
requested upgrade for purposes of interconnection if a system modification is necessary and the
Company has not incuffed any costs to upgrade the system to date solely for the purpose of
connecting an individual PY customer. "27
24 Id. at 23.
25 Value of Solar Report at 13. 11 6.
26 Avai lable at http://www.pepco.com/community-commitment/renewable-energy/green-power
connection/restricted-circui t-map/ 27
Formal Case No. 1050. / 11 the Mauer of the l11ves1igatio11 of !111ple111e111a1io11 of /11terco1111ectio11 Standards i11 1he Districl of Columbia ("Formal Case No. I 050"), Potomac Electric Power Company Response to OPC Data Request 4-8. filed November 15, 2016.
11
Conversely, Pepco's filing in Formal Case No. 1139 contained a distribution construction
forecast of $185 million related to load growth, as shown in the table below.28 If additional
distributed solar resources reduce peak load growth, it is reasonable to expect that load-related
distribution expenditures will decrease as well.
Pepco DC 2016 - 2020 Capital Budget & Forecast (Dollars in Millions)
Distribution Bud2et Forecast Construction 2016 2017 2018 2019 2020 Total Reliability
$92.8 $96.4 $129.8 $158.5 $163.3 $640.8 Pro2rams Emergency
$22.0 $18.4 $14.4 $15.7 $15.5 $86.0 Restoration Load $41.5 $43.5 $45.2 $34.7 $19.9 $184.8
Customer Driven $77.1 $68.7 $57.9 $54.8 $59.4 $317.9
Subtotal $233.4 $227.0 $247.3 $263.7 $258.10 $1,229.5
DC PLUG $7.0 $29.8 $85.8 $68.4 $100.3 $291.3
TOTAL $240.4 $256.8 $333.1 $332.l $358.4 $1,520.8
OPC concurs with Pepco's statement that the ability of solar resources to defer
distribution system investments "depends on the coincidence of the resources with the time of
peak load on a particular distribution system component."29 As stated in the Value of Solar
Report, "Because solar PV may not be generating at full nameplate capacity during times of peak
load, the capacity value of solar must be reduced to the solar capacity contribution value-the
amount of expected power being generated during times of peak load. "30
In order to most accurately estimate the coincidence of additional solar resources with
peak demand, circuit-level load data and circuit-level forecasts of distributed generation are
required. Absent this data, it is reasonable to take an overall estimate of the coincidence of solar
28 Formal Case No. 1139, In the Matter of the Application of Potomac Electric Power Company for Authority to Increase Existing Retail Rates and Charges for Electric Distribution Service ("Formal Case No. 1139"), Direct Testimony and Exhibits of Potomac Electric Power Company Witness Verner (Part I) at 10, filed June 30, 2016.
29 Pepco Comments at 22.
30 Value of Solar Report at 124.
12
generation with Pepco's system. To do so, the Value of Solar Report reduced the solar capacity
from nameplate to its solar capacity contribution value using the value established by PJM, 38
percent. 31 The Value of Solar Report acknowledges that this capacity value is an overall system
average, and will vary by circuit: "Although some circuits peak later in the day and will not
receive as much distribution system cost avoidance, other circuits peak closer to noontime and
will receive more distribution cost avoidance than the solar capacity contribution value allows.
Therefore, the results should only be used for high level cost-benefit analysis and not be applied
on a feeder level." 32
If more accurate estimates are desired for future analyses, OPC recommends that Pepco
report circuit-level peak load data (peak hours, percent available capacity, etc.) and circuit-level
solar adoption forecasts.
OPC agrees that load reductions do not reduce costs associated with past investments,
and thus did not assign a value of avoided distribution capacity based on historical investments.
Instead, for all cost and benefit categories, the Value of Solar Report used future costs that were
marginal and avoidable. As the Report states, "Non-coincident area peak distributional marginal
costs were taken from Pepco DC' s marginal cost of service study. These costs were based on
forecasted marginal primary distribution and secondary distribution capacity costs for the 2015-
2019 timeframe, expressed in $/kW." 33
31
32
33
Id. at 125.
Id.
Id. at 124.
13
3. Price Suppression
Pepco states that "Resources should be evaluated on the basis of whether they lead to an
overall system cost reduction accounting for all stakeholders, not just a reduction in a subset of
the costs or the cost to a subset of stakeholders. "34 Further, Pepco asserts that it is not
appropriate to credit distributed solar "beyond their true value to society" in hopes that the
additional generation will result in excess supply in the market, lowe1ing prices. Pepco claims
that doing so would be inefficient, since "less expensive resources would be replaced by more
expensive resources. If less expensive resources are replaced by more expensive resources, the
overall system cost, when factoring in all costs, would result in an increased cost to society, not a
cost reduction."35
OPC agrees that resources should be evaluated on whether they reduce total costs to the
system (or society), rather than based on an evaluation of only a subset of costs or benefits.
However, OPC does not agree that price suppression effects should be excluded from the
estimated benefits provided by distributed solar for two reasons:
First, solar is an inframarginal resource in the wholesale markets, and thus can reduce the
market clearing price. This reduction in the market clearing price is then extended over the
entire quantity of energy or capacity purchased, generating significant savings for customers.
Such savings are an artifact of the market construct, but nevertheless result in real savings to
customers.
Second, the purpose of a value of solar study is to determine the total value that the
resource contributes to the grid or to society, rather than evaluate whether the cost of procming a
resource outweighs the benefits. The results of a value of solar study can be used in a cost-
34
35
Pepco Comments at 25.
Id.
14
effectiveness analysis in which the value that distributed solar provides to the grid (or society) is
compared to the cost of procuring distributed solar resources. Cost-effectiveness results are
typically presented in terms of a benefit-cost ratio and a net present value. These results can then
be used to make policy decisions, such as the appropriate compensation rate for distributed solar.
4. Hedge Value
Pepco asserts that it "is inappropriate to include this 'Hedge Value' in the VOS estimate"
because "the OPC Solar Report has not provided evidence of cost volatility reduction due to
distributed solar resource adoption. "36 Pepco claims that "such adoption could result in greater
cost volatility due to its uncertain effects on the transmission and distribution system, its
intermittent nature, and other factors." 37 In addition to questioning the use of hedge value, the
Pepco comments also specifically question a value of 10 percent.
OPC recognizes _that although risk valuation and mitigation is prevalent throughout utility
processes, it can be difficult to assign a specific value to hedging activities. However, this is not
a reason to exclude the value that hedging provides, for the reasons discussed below.
It is quite common for financial risks associated with an uncertain future to be mitigated
with hedging. Indeed, financial hedges are common in across the utility sector, ranging from
long term purchases of natural gas on a futures market to Washington DC-specific SREC annuity
programs. Therefore, the inclusion of a financial hedge in the Value of Solar Report is both
36 Pepco Comments at 27.
37 Id.
15
consistent with industry practices associated with mitigating risk and with other value of solar
studies.38
The hedge calculations apply to both potential costs associated with solar, as well as
avoided costs. To the extent that solar imposes greater cost risk on the system, that cost is
grossed up by the hedge premium in the analysis.
Synapse used a 10 percent hedge value because it was similar to several other risk
premium multipliers for demand-side resources, including Vermont, Oregon, the New England
Avoided Energy Supply Cost studies, and value of solar studies conducted in New Jersey and
Pennsylvania. The risk factors that Synapse analyzed are shown in the table below.39
38 See, for example: Contreras, J.L. et al, Photovoltaics Value Analysis, 2008. Navigant Consulting for the
National Renewable Energy Laboratory; Perez, R. et al, The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania, 2012. Clean Power Research for the Mid-Atlantic Solar Energy Industries Association and the Pennsylvania Solar Energy Industries Association; Non-is, B. et al, The Value of Distributed Solar Electric Generation to San Antonio, 2013. Clean Power Research for DOE Sunshot Initiative; Xcel Energy, Inc., Costs and Benefits of Distributed Solar Generation on the Public Service Company of Colorado System, 2013. Xcel Energy for Excel Energy; Stanton, E. et al, Net Metering in Mississippi, 2014. Synapse Energy Economics for The Public Service Commission of Mississippi.
39 Elizabeth A. Stanton et al., "Net Metering in Mississippi Costs, Benefits, and Policy Considerations"
(Synapse Energy Economics, prepared for the Public Service Commission of Mississippi, September 19, 2014), 54, http://www.synapse-energy.com/sites/default/files/Net%20Metering%20in%20Mississippi.pdf.
16
Vermont
Oregon
Adder to the cost of supply alternatives when compared to demand-side management Cost adjustment factor to cost of avoided electricity supply in efficiency screening; represents ri sk mi tigation but also environmental benefi ts and job creation
2009 Wholesale risk premium applied to wholesale energy and capacity prices 20 13 (non-Vermont) Wholesale risk premium applied to wholesale energy and capacity prices 20 13 (Vermont) Wholesale risk premium applied to wholesale energy and capacity prices
~~~11tm1mmc-· OWN portfolio
DWC portfolio
Sixth Power Plan
Insurance premium for Demand-Side-Management-Wind-Natural Gas portfolio Insurance premium for Demand-Side-Management-Wind-Coal portfolio
No disti nct value, risk index relative to other resources
10%
10%
8- 10% 9% 11.1 %
3.5%
2.5%
~~~~~~~~~~~~~
20 13 1RP - 10%
CPR NJ/PA Fuel price hedge values as percentage of value of solar - 10% NREL Natural gas hedge value as percentage of avoided costs 0- 12%
Source: Stanton, et al. "Net Metering in Mississippi Costs, Benefits, and Policy Considerations." (2014}
5. Social Cost of Carbon
Pepco states that it "accepts the inclusion of a social cost of carbon estimate with the
caveat that any compensation for the avoided social cost of carbon should be extended to all
DER and clean energy generating resources." .io OPC agrees that the avoided soc ial cost of
carbon should be applied to all clean energy resources. However, this report only evaluates
solar, so such di scussion was not necessary in this report. The value of solar arrived at in the
report should not be reduced due to this factor.
6. A voided RPS Compliance
Pepco states that inclusion of avoided RPS compliance costs is not appropriate for two
reasons:
-10 Pepco Comments at 27.
17
First, the environmental benefits to society already have been captured in other categories of the VOS estimate, most notably in the social cost of carbon component. As a result, inclusion of the avoided RPS compliance cost would constitute double-counting. Second, instead of relating to the societal benefits of solar resources, the avoided RPS compliance cost estimate relates to the possibility that, given the existing RPS structure and the existing net metering treatment of behind-the-meter solar, less total financial support would be provided to other renewable generation resources if distributed solar resources were further developed in the District of Columbia. The OPC Solar Rep011 proposes that the reduction in financial support for other renewable resources be treated as a positive value in the value of solar estimate. However, this would not be a societal benefit and should not be included in the value of solar estimate.
Pepco Comments at 28. Pepco conflates the avoidance of environmental externalities
with the avoidance of costs associated with environmental compliance. These are two distinct
categories, and the inclusion of both does not represent double-counting. Under current policy,
energy suppliers in the District must procure a certain amount of renewable energy certificates
(RECs) to be in compliance with the District's RPS policy. These costs are then passed on to
customers through the cost of electricity. Because distributed solar reduces the number of RECs
that must be purchased, the cost of complying with the District's RPS policy is reduced,
providing a monetary benefit to customers.
In contrast, environmental externalities are approximated by the social cost of carbon. As
defined in the report, the social cost of carbon "is an estimate of the damages caused globally due
to increased carbon dioxide emissions and climate change. It is intended to reflect the resulting
damages to agricultural productivity, human health, property, and ecosystems."41 These costs
are not avoided compliance costs, rather they are an estimate of avoided damages due to climate
change.
Pepco correctly notes that a reduction in the cost of complying with RPS requirements
will result in less financial support for other renewable resources. However, distributed solar
41 Value of Solar Report at 149.
18
may enable electricity suppliers to comply with the RPS at a lower cost, thereby benefitting
customers.
7. Avoided System Losses
The value of solar study assumed a 4.5% value for marginal transmission losses, based on
a 2007 gene1ic average on-peak loss percentage across PJM of 3%, multiplied by an estimated
1.5 factor to convert average system losses to marginal losses. Pepco notes that "recent
locational marginal price data indicates that the applicable marginal loss percentage for the
PEPCO Zone is roughly 2%. As a result, Pepco supports applying this more up-to-date and
location-specific marginal loss percentage to the avoided energy component of the value of solar
estimate."42 OPC agrees that future updates of the Value of Solar study should use the most
recent values for marginal losses.
8. Other
Pepco notes that societal value of distributed solar is $194/MWh, but the final chart
shows a total value of $189/MWh. Pepco argues that since there is no explanation for the
missing $5/MWh, it should not be included.43
Pepco is conect that the sum of values on the final chart showing the levelized societal
value of solar (Fig. 32) are inconsistent with the total societal value of solar of $194.40 (2015$)44
This discrepancy is the result of an enor in producing the charts shown in Figures 31 and 32, not
with the calculations or methodology. In fact, the Risk component as calculated is $14.69
42
43
44
Pepco Comments at 29.
Id.
Value of Solar Report at 153.
19
(2015$), not $7.95 (2015$) as shown in the two charts. Please note that the apparent $7 delta
differs from Pepco 's observed $5 delta due to rounding.
9. Discount Rate
Pepco states that the discount rate used may be too low, and should be stud ied in any
further efforts to characterize the value of di stributed solar resources .-+5
OPC welcomes additional discussion regarding the choice of discount rate. OPC notes
that the National Standard Practice Manual (released in 2017 by the National Efficiency
Screening Project) may prove helpful in this discussion.-+6 Chapter 9 of the National Standard
Practice Manual discusses the choice of discount rates in depth . While the manual was
developed to assess the cost-effectiveness of energy efficiency resources, the concepts in it can
also be applied to other distributed energy resources.
Pepco Comments at 30.
46 National Efficiency Screening Project, ·'National Standard Practice Manual for Assessing Cost
Effectiveness of Energy Efficiency Resources,"' May 18, 20 17, https://nationaleffic iencyscreening.org/wpcontent/uploads/201 7 /05/NSPM May-201 7 final.pd f.
20
V. CONCLUSION
WHEREFORE, for the foregoing reasons, OPC requests the Commission accept OPC's
Value for Solar Report as valuable support in its deliberations on local solar initiatives in this
proceeding.
Dated: July 24, 2017
andra Mattavous-Frye, Esq. People's Counsel D.C. Bar No. 375833
Karen R. Sistrunk, Esq. Deputy People's Counsel D.C. Bar No. 390153
Laurence C. Daniels, Esq. Director of Litigation D.C. Bar No. 471025
Travis R. Smith, Sr., Esq. Trial Supervisor D.C. Bar No. 481129
Barbara L. Bmion, Esq. Assistant People's Counsel D.C. Bar No. 430524
21
CERTIFICATE OF SERVICE
Formal Case No. 1130, In the Matter of the Investigation into Modernizing the Energy Delivery Structure for Increased Sustainability
I hereby certify that on thi s 241h day of Jul y, 2017 a copy of the "Reply Comments of the
Office of the People' s Counsel for the District of Columbia Regarding Pepco' s Comments on the Office of the People' s Counsel' s Value of Solar Study" was served on the following parties of record by hand delivery, first class mail, postage prepaid, or, electronic mail :
Christopher Lipscombe, Esq. General Counsel Public Service Commission of the District of Columbia 1325 G Street NW, Suite 800 Washjngton, DC 20005 cl [email protected]
Brian R. Caldwell , Esq. Assistant Attorney General DC Office of the Attorney General 441 Fourth Street, N.W. Suite 650-S Washington, DC 20001 Bri an.caldwell @dc.gov
Peter Meier . Esq. Vice President, Legal Services Potomac Electric Power Company 701 Ninth Street NW Suite 1100, 10th Floor Washington, DC 20068 [email protected]
Randy E. Hayman, Esq. General Counsel District of Columbia Water and Sewer Authority 5000 Overlook A venue, S.W. 20032 Washington, DC 20032 [email protected]
Cathy Thurston-Seignious, Esq. Washington Gas Light Company 101 Constitution Avenue, NW Suite 300 Washington, DC 20080 Cthurston-seign [email protected]
John S. Tobey, Esq. U.S. General Services Adrninj stration 1800 F Street, NW Room 2012B Washington, DC 20405 [email protected]
Barbara Burton, Esq. Assistant People' s Counsel