Renewable Energy Tariffs for Large Utility Customers: An Emerging Option to Encourage Greater Solar PV Development
By: Autumn Proudlove and Jim Kennerly, NC Clean Energy Technology Center
Utility customers that are the highest energy users are in a powerful position to expand markets for renewable energy technologies and reduce their emissions by obtaining their power from renewable sources of energy. Renewable energy tariffs, a new program and rate option being offered by some utilities to large customers, are quickly attracting attention in the renewable energy world as a way to do this. These tariffs allow a high energy usage customer to pay a slight premium in order to obtain all or a portion of their electricity from renewable sources.
While the cost of renewable energy, and particularly solar PV, is rapidly declining, in many places it is still higher than utilities’ cost for purchasing wholesale energy. By having customers pay a premium for the renewable energy they request under the tariff, utilities can ensure that there is no impact on non-participating customers’ rates. Renewable energy tariff programs are currently seen in ten states and are under consideration in several others.
In our report, Solar PV Deployment Through Renewable Energy Tariffs: An Option for Key Account Customers (hyperlink this title to the report), the NC Clean Energy Technology Center and the Solar Electric Power Association (SEPA) examine the potential benefits to solar PV technology, customers, utilities, and the public that can be achieved through renewable energy tariffs. We also lay out some key considerations and emerging practices for renewable energy tariff design that allow these benefits to be realized. These key considerations include:
• Location and Siting of Generation
Locally-sited generation is sometimes a draw for large customers to participate in renewable energy tariffs. Siting of generation is also important to utilities in order to maximize grid benefits. This is particularly relevant for solar PV, as it tends to be located at the distribution or sub-transmission level.
• Pricing Approaches: Eliminating Rate Impacts, Benefiting from Solar PV Cost Declines
Renewable energy tariffs are generally designed to minimize or eliminate any rate impact on non-participating customers by charging a premium for renewable energy. However, it is possible to design a program where future premiums are reduced are eliminated as a result of PV cost declines. Reducing premiums in this way would still ensure no rate impact on non-participating customers.
• Flexibility, Customer Input, and Education
Allowing for contract flexibility and customer input adds to the appeal of renewable energy tariffs. Furthermore, educating customers about the different types of renewable energy and allowing customers to choose what type of renewable resource they would like to get their power from may encourage more participants to request that their power comes from solar.
Keeping these considerations in mind, renewable energy tariffs have the potential to drive utility-scale solar PV development while providing a host of benefits to utilities and customers alike.