Last month, the Maryland Public Service Commission (PSC) released a study it commissioned that examines how solar should be valued on the electric grid. Concurrently, it opened Public Conference 48 to examine the issue. The report is an important step forward in Maryland’s public conversation on the value of solar and other distributed energy resources. Unfortunately, it contains flaws that severely impact the results and its usefulness as a policy-making resource.
What is “value of solar”?
A “value of solar” study is one that attempts to quantify the monetary value of distributed solar on the electricity grid by breaking it down into various categories. This includes the cost of generation, how much the utility avoids paying in fuel costs in the future, the reduction in distribution costs, transmission charges, infrastructure investment savings, environmental benefits, etc. These studies have been done in numerous states at the request of public service commissions, state legislatures and other bodies. While the construction and methodologies of these studies vary, most have found the value of distributed solar to the electricity grid to be higher than standard energy offerings in the area studied.
Flaws in this study
Recently, Earthjustice and the Pace Energy and Climate Center reviewed the study and submitted comments to the Commission on behalf of MD SUN, Chesapeake Climate Action Network, Fuel Fund of Maryland, and Institute for Energy and Environmental Research. The comments note the study looked broadly at the issue by including to review solar’s impact on job creation and pollution reduction. These areas tend not to be part of the standard categories for calculating the costs and benefits of utility provided energy. Despite this, there are several points of concern with the study.
- Solar facility lifespan assumed to be 20 years. Standard lifespan assumptions for solar are 25 years. Leaving five years off the asset’s life in analysis distorts its long-term value to the electricity system.
- Avoiding transmission costs is valued at zero. Distributed solar, by providing energy to loads near it, reduces the need for electricity transmitted from afar. Intuitively this must have a value but the report does not include it.
- Avoiding new distribution capacity is valued at zero. As in #3 above, energy provided to loads in or near a solar home or business reduces the usage of, and wear on, electric distribution equipment. This must have a value but the report does not include it.
Want to investigate more?
Check out all of the filings made by interested parties on the Public Service Commission’s website.
What happens next?
The study was requested by the Maryland legislature last year. The Commission is required to report back to the legislature on the study and public comments by the end of March 2017. A similar study will soon be commissioned by the PSC for the investor-owned utilities (Pepco, Delmarva, BGE, & Potomac Edison) as part of Public Conference 44 on grid reform. The results of both studies could be used to determine new pilot rate structures for solar homeowners and ultimately more widespread