California values distributed energy resources fairly — and ratepayers score a big win

Share

 The California Public Utilities Commission (CPUC) has agreed to factor in future avoided transmission costs when valuing distributed energy resources (DERs), marking a big win for California ratepayers.

According to the Clean Coalition, transmission infrastructure, which has to be built to service maximum load, accounts for the fastest growing component of electricity bills, often exceeding the cost of energy generation in California.

“This is an important first step that deals with considering future transmission costs, which appear to be in the range of 2.5 cents per kWh, but [it] still fails to consider historic transmission costs, which are reflected in transmission access charges, with an additional cost of about 3 cents per kWh,” said Craig Lewis, executive director of the Clean Coalition. “Obviously, leaving 5 cents per kWh out of the value of DERs results in a massive market distortion that steals value and market opportunity from DERs.”

Clean Coalition estimates that the value of DERs has been robbed by as much as 50% because the CPUC’s avoided cost calculators (ACCs) did not include avoided transmission costs in valuations of DERs. Importantly, DERs reduce the need for new transmission infrastructure to address load growth.

“Most ratepayers, and policymakers too, have no idea that operations and maintenance costs associated with transmission infrastructure account for about 90% of transmission costs that are heaped on ratepayers over the lifetime of that infrastructure,” said Lewis.

If energy storage is part of the DER mix, the savings gains are even better. “Standalone solar reduced peak transmission grid utilization by about 25 percent of the solar nameplate, while solar-plus-storage can reduce the peak by the full nameplate of solar. Simultaneously, solar-plus-storage can provide an unparalleled level of resilience to communities,” he said.

“We applaud the CPUC for ensuring that the ACC reflects the savings from avoided future transmission infrastructure investments,” Lewis said, noting that the Clean Coalition has been fighting for proper transmission cost allocations for the past decade.

Until now, avoided transmission valuation has been omitted in the ACCs of Southern California Edison and San Diego Gas & Electric. But before the recent CPUC decision, the ACC already included avoided future transaction costs for Pacific Gas & Electric (PG&E). The updates to the ACC will include all three investor-owned utilities and will refine the methodology used for PG&E.