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Open Access Publications from the University of California

The impact of retail rate structures on the economics of commercial photovoltaic systems in California


This article examines the impact of retail electricity rate design on the economic value of grid-connected photovoltaic (PV) systems, focusing on commercial customers in California. Using 15-min interval building load and PV production data from a sample of 24 actual commercial PV installations, we compare the value of the bill savings across 20 commercial-customer retail electricity rates currently offered in the state. Across all combinations of customers and rates, we find that the annual bill savings from PV, per kWh generated, ranges from $0.05 to $0.24/kWh. This sizable range in rate-reduction value reflects differences in rate structures, revenue requirements, the size of the PV system relative to building load, and customer load shape. The most significant rate design issue for the value of commercial PV is found to be the percentage of total utility bills recovered through demand charges, though a variety of other factors are also found to be of importance. The value of net metering is found to be substantial, but only when energy from commercial PV systems represents a sizable portion of annual customer load. Though the analysis presented here is specific to California, our general results demonstrate the fundamental importance of retail rate design for the customer-economics of grid-connected, customer-sited PV.

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