A Review of Value of Solar Studies In Theory and In Practice
This brief summarizes a collection of state- and utility-commissioned value-of-solar (VoS) studies and related literature, with a focus on who commissioned the study, which value and cost categories were discussed and/or quantified, and the methods used. Our objective is to compile information on prior VoS studies to inform state regulators and other stakeholders that may pursue related studies or integrate findings into rate design. The brief is organized into three parts: 1) an introduction to distributed solar photovoltaic (DPV) compensation; 2) a review of theoretical research on VoS; and 3) a review of VoS studies. The vast majority of VoS studies have served an informational role of quantifying the net benefits of PV. Three studies were commissioned in states or utility service territories that subsequently implemented VoS tariffs in California, New York, and Austin, Texas. When applied as a tariff, VoS aims to compensate PV output as efficiently as possible by doing so at rates that reflect the marginal benefits and costs of PV through value and cost categories that may vary temporally and/or geographically. This could lead to higher compensation in locations and times where more PV output is more valuable and consequently drive adoption in those locations to provide more societal benefits. Value and cost factors can be broadly grouped into five categories: generation, transmission, distribution, other utility, and other social categories. Those conducting VoS studies must weigh various tradeoffs when deciding which categories to include and quantify. Tradeoffs include prioritizing values based on their magnitude of value or cost impact, as well as taking into account the feasibility of data collection and accurate quantification. Values of higher magnitude and estimation feasibility are quantified in the majority of studies, including the earliest of studies conducted in the 2000s and 2010s. Additionally, some values of higher magnitude but low feasibility in the earliest of studies have become quantifiable in recent years. There are some values with low average system-wide levels but very high magnitude in specific locations or hours. The value magnitude in some cases can be tied to DPV penetration with low value in areas with little congestion and/or low penetration and vice versa. In these cases, values that are easier to quantify are often incorporated, while those that are more difficult are often addressed via a placeholder value. The placeholder value is paired with a discussion around data needs and methods to improve future estimates, as well as a conversation about when these value categories may increase in magnitude and necessitate more rigorous quantification. This brief summarizes findings from two meta-analyses of VoS studies that took place between 2005 and 2018, as well as findings from four additional studies published from 2018 to 2023. Table ES-1 summarizes the various value and cost categories included in each respective study and whether they were quantified, discussed, or omitted. Values such as avoided energy, capacity, transmission capacity, line losses, and avoided environmental costs are quantified in every study. Some categories were deemed harder to quantify and less impactful at the time of the study, so they were discussed but not quantified (e.g., ancillary services). Other categories, including many at the distribution level, were very locationally and/or temporally specific and dependent on high DPV penetration. These were sometimes quantified and at other times discussed. Notably, when it came to utility costs, integration costs were discussed in all cases, though they were deemed to have a small impact. Other utility costs were omitted for the most part; however, the utility-commissioned study (by NorthWestern Energy in Montana) included both lost utility revenue and programmatic/administrative cost categories. While there are some similarities across studies, each had fairly unique methods that are detailed in the body of this brief.