Rethinking Standby & Fixed Cost Charges: Regulatory & Rate Design Pathways to Deeper Solar PV Cost Reductions

As part of the U.S. Department of Energy’s SunShot Solar Outreach Partnership, the NC Clean Energy Technology Center (formerly the NC Solar Center) and Meister Consultants Group have released Rethinking Standby and Fixed Cost Charges: Regulatory and Rate Design Pathways to Deeper Solar Cost Reductions, a report outlining a series of approaches that utilities and their regulators can adopt that provide a “softer path” to rate design and further reduction in solar PV cost.

While solar PV’s impact on utilities has been a hot topic for the past year, little attention has been paid to the potentially damaging risks posed by these solar PV-specific rate designs (often informally referred to as solar “fees” or “taxes”) upon non-hardware “soft” cost reductions. In fact, applying these rate designs to solar PV customers could actually lead to a situation in which these charges make it more difficult for solar PV to reach the point at which it would need no incentives whatsoever. The report discusses and recommends an integrated utility cost recovery approach that does not impose disproportionate burdens on solar PV and SunShot Initiative soft costs reduction efforts.

This integrated approach includes:

  • Revenue decoupling, which allows utilities to ensure recovery of their costs, meet investors’ expectations, and encourage customers to save energy;
  • A “minimum monthly contribution”, which allows utility to recover a critical degree of revenue from customers who are zero net energy users (often referred to as “prosumers”); and
  • Mandatory time-differentiated (also known as time-of-use) pricing, which provides both solar and non-solar customers with transparent utility cost information (and minimizes a significant cost shift benefitting non-solar customers)

The report also recommends other emerging “win-win” approaches for utilities and solar PV, including value of solar tariffs (VOSTs), encouraging beneficial siting of solar PV and community shared solar.

View the Executive Summary of the document here

View a brief Status Report on Standby and/or Fixed Cost Charges as well as other charges associated with Net Energy Metering here

View the Full Report here