Calculating the Many Benefits of Distributed Generation

"Renewable distributed generation (“DG”) has benefits to society that cannot be measured on utility balance sheets." That is the bottom line of an extensive white paper submitted by the Sierra Club to the California Public Utilities Commission (CPUC), the regulatory body that is currently deciding whether rooftop solar will continue to expand in California or be buried by monopolistic utility companies seeking to continue a destructive status quo.

The CPUC will decide by the end of the year how much the energy generated by a rooftop solar installation is worth under net-metering, and it has solicited proposals from stakeholders regarding how to determine this value.  If you live or work in a home with solar panels on the roof, or if you have purchased shares in a community solar project because you don't own the roof over your head, the utility companies currently credit you at the retail rate of electricity for every kilowatt-hour (kWh) that your solar panels generate.  Environmental groups and the solar industry want to keep a fair credit under whatever net-metering tariff CPUC lays out at the end of the year.

But utility companies are lobbying the CPUC to reduce this credit drastically and to add outrageous fees onto the bill of any customer that installs their own solar panels.  If utility companies convince CPUC to add enough fees and reduce the credit rooftop solar installations receive for energy they generate, they could succeed in making rooftop solar less economical and thus ensure that customers remain dependent on a centralized grid that involves entangling our open spaces in transmission lines and bulldozing the desert.

Solar panels are added to a parking lot where they provide shade to vehicles and generate clean energy, rather than displacing intact desert wildlands.
Adding up the Benefits
To many of us who value clean air and intact wildlands, there would be no need to ponder whether rooftop solar should continue to expand; many desert conservation activists would argue for more aggressive policies and incentives to unleash the untapped potential in our cities to install solar panels.  But the CPUC's deliberation regarding the value of rooftop solar has been carried out on an uneven negotiating table, where powerful utility companies have dismissed the benefits of DG as "illusory."  Most of the debate regarding rooftop solar's value focuses on benefits to the grid, and being able to reduce the need for costly new transmission lines and central station power plants.  But the Sierra Club white paper also brings other benefits into focus.

The Sierra Club's submission fights back against the utility industry, arguing that CPUC should consider the many benefits of rooftop solar that utility companies and CPUC have previously dismissed or underestimated when calculating the future net-metering credit, including avoided land use, avoided carbon emissions, avoided particulate matter pollution, benefits to the local economy, and avoided water use.  The Sierra Club recommended specific values for each of these benefits to be incorporated into CPUC's overall calculation; if they are accepted it is likely that the new net-metering credit will encourage continued expansion of rooftop solar to the chagrin of rich utility companies.

Societal Cost of Carbon Emissions and Particulate Pollution
The Sierra Club white paper argues that the current CPUC proceedings likely underestimate the benefit of avoided carbon emissions and particulate matter pollution.  The white paper cites the immense impacts of climate change induced by continued carbon emissions on California society and economy, including the receding Sierra snowpack, drought, wildfires and sea level rise.  As climate change worsens, so too will these impacts.  The paper also takes a harder look at the actual costs to society of continued particulate matter and nitrous oxide emissions from fossil fuel plants in the state, and recommends a higher benefit be ascribed to rooftop solar based on the potential to displace these harmful emissions.

Avoided Land Use
The white paper also challenges an earlier CPUC decision to ignore avoided land use when calculating the benefit of rooftop solar.  The Sierra Club white paper notes that every kWh of electricity generated by rooftop solar saves at least $.002 in costs to society.  I know what you're thinking - that seems like a low-ball amount.  This value does not reflect avoided destruction of wildlands, but rather the avoided conversion of agricultural land.  Probably to challenge utility company claims that avoided land use benefits are "illusory," the Sierra Club derived this $.002/kWh benefit from studies on the value of farm or ranch land that would otherwise be used for utility-scale solar if the rooftop solar sector does not continue to expand.

As you might imagine, the desert wildlands in the Ivanpah Valley or near the Soda Mountains are priceless, and in my mind avoiding the destruction of intact habitat would justify quite a bit more than a $.002 per kilowatt hour bump in the value of rooftop solar generation.  But as we have seen before in Sacramento and decision-making halls, protecting wildlands and wildlife generally does not gain much traction in policy deliberations unless you can make some sort of economic argument.  Ultimately, the conservation of open space and wildlife is why our entire grid should be overhauled to prioritize energy efficiency and distributed generation. 

That said, the amount put on the table by the Sierra Club will at least keep the avoided land use benefit on the table as CPUC calculates a final net-metering benefit.  And in the scheme of the net-metering debate, a  $.002 per kWh benefit is not insignificant since it will further erode the utility company attempts to kill rooftop solar.  For future rooftop solar installations, every dollar counts as individuals and businesses consider whether it is worth it to go solar.  Let's take a typical 5 kilowatt residential solar system in Southern California as an example.  A system that size could generate up to 9,260 kWh per year, depending on location and weather.  The Sierra Club white paper is suggesting this system is providing society with the annual benefit of about $18.52 per year for avoided agricultural land loss (not including the many other benefits of DG), and that this value should be reflected in the final CPUC rooftop solar value determination. 

Local Economy
Advocates for rooftop solar have long pointed out that distributed generation invests directly in our communities, rather than allowing utility and energy companies to amass capital and wealth among select shareholders far away.  Rooftop solar jobs also stay in our communities, rather than the limited jobs created by remote central station power plants.

To capture this benefit, the white paper proposes a $.030 per kWh benefit be included in the calculation. That means that the 5 kW rooftop solar system I mentioned as an example would bring $277 of value each year to local society (assuming the value of that local investment is spread out over the lifetime of the system) that should be accounted for when considering whether we expand rooftop solar or submit to the utility companies' preferred centralized, destructive model of generating energy at distant power plants.


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