Distributed Generation Regulation Library
Distributed generation technologies are experiencing substantial cost declines and performance improvements, rapidly permeating markets around the world. Facilitating the orderly and efficient interconnection of such systems poses new challenges for many regulators, spanning utility business model sustainability to planning practices to ensuring efficient technical integration. Regulators can choose to let external forces determine how power systems unfold, or they can promote regulatory and finance frameworks that drive transformation toward a desired vision. In recognition of this, the 21st Century Power Partnership has curated an online library of resources on the regulation of distributed generation. The library will sample the best available written resources — from academic literature to toolkits to case study reports — organizing resources by topical focus area, and providing succinct written summaries and document web links.
Distributed Generation Resources
- Distributed Generation Ratemaking
- Understanding Impacts
- Interconnection
- Alternative Business and Regulatory Models
- Planning for Distributed Generation
- Case Studies
Distributed Generation Ratemaking
Principals, fundamentals and structures, building blocks, time-dynamic tariffs, and location-specific tariffs.
Ratemaking and tariff design is at the center of any distributed generation regulatory framework. This section intends to provide resources which review tariff design principals and fundamentals, as well as strategies for ratemaking which enable tariffs to reflect the temporally and spatially diverse value of distributed generation resources.
Compensation mechanisms reward distributed generation (DG) system owners for the electricity they self-consume and excess that is exported to the grid. This report identifies the components of a compensation mechanism and discusses the different kinds of compensation mechanisms for grid-connected, behind-the-meter DG systems.
Organization(s): National Renewable Energy Laboratory, U.S. Agency for International Development
This report provides a broad overview of distributed generation tariff design, including design principles, tariff building blocks, program costs and benefits, valuation perspectives, revenue stabilization mechanisms, and mitigation measures for lost utility investment opportunities. The report also offers a series of recommendations for regulators as they consider designing distributed generation tariffs.
Organization(s): Regulatory Assistance Project
View publicationChapter 5 titled 'Regulation and Rate Design Options for Distributed PV' explores how rate design affects the relative value of distributed photovoltaic programs to various stakeholders. It reviews principles of distributed generation rate design, as well as various tariff design options (i.e., net energy metering, feed-in tariff, value of solar) and tariff building blocks (i.e. fixed charges, demand charges, stand-by rates). It also discusses the advantages and disadvantages of various tariff design pathways.
Organization(s): National Renewable Energy Laboratory, Regulatory Assistance Project
View publicationThis report provides an overview of the short- and long-term advantages and disadvantages of "non-bypassable" fixed cost recovery charges for distributed solar photovoltaic (PV) program participants, such as fixed cost charges and standby rates. It then proposes a three-pronged regulatory pathway for ensuring fair and equitable utility cost recovery, and answers common questions associated with considering these principles of ratemaking.
Organization(s): NC Clean Energy Technology Center; Meister Consultants Group
This brief report discusses an alternative approach to recovery of utility fixed costs: minimum bills. Under this approach, PV customers with net zero consumption would still contribute to system costs without existing rate structures being significantly altered; furthermore, higher fixed charges and lower variable charges can be avoided, which may negatively impact low-income customers and incentivize increased consumption, respectively . The report also discusses the advantages and disadvantages of this novel approach.
Organization(s): Regulatory Assistance Project
This report provides an overview of various strategies that can be employed to reflect the diverse spatial value of distributed solar to various power sector stakeholders, including locational incentives and pricing schema, and targeted interconnection processes and distribution infrastructure upgrades and cost allocation. Each strategy and its advantages and disadvantages are discussed.
Organization(s): Solar Electric Power Association; Electric Power Research Institute
This report discusses approaches to rate design that allow tariffs to more effectively reflect the diverse value streams that distributed generation exhibits. A range of attribute-based, time-based, and location-based rate design approaches are explored — multiple approaches are discussed for each, with varying levels of sophistication. The report also shares practical considerations and makes recommendations to regulators as they consider these various approaches.
Organization(s): Rocky Mountain Institute
This report provides a broad overview of key considerations and principles for considering time-varying tariffs. While there is not an explicit focus on distributed generation tariff design in this report, the topics discussed are broadly applicable to all forms of rate design. The role of time-varying rates in facilitating distributed resource deployment is briefly discussed.
Organization(s): Regulatory Assistance Project
This report presents a broad overview of feed-in tariff (FIT) policies. It provides a guide to decision-makers on the drafting of feed-in tariff rules, and provides practical considerations for funding feed-in tariff programs.
Organization(s): United Nations Environment Programme
This report discusses a range of FIT design options. It provides an overview of fundamental FIT design options (e.g., fixed-price, premium-price, spot-market gap, adders) and key design considerations surrounding those options.
Organization(s): National Renewable Energy Laboratory
Understanding Impacts
Program costs and benefits, methodologies for valuating costs and benefits, assessing program financial impacts on stakeholder groups, rate and revenue impacts, and cross-subsidization impacts.
Distributed generation programs exhibit a diverse range of costs and benefits which accrue distinctly to various stakeholder groups. Just as the value streams and potential impacts of distributed generation are diverse, so are the tools and methodologies which are used to characterize them. Ex-post or ex-ante program impact characterizations can be useful in informing policy reviews and future rate design proceedings. This section intends to provide resources which review key distributed generation program impacts, and methodologies for valuating them.
USAID Clean Power Asia, National Renewable Energy Laboratory, Lawrence Berkeley National Laboratory, 2017
Utilities worldwide are concerned about the financial impact of increasing distributed solar photovoltaic (PV) adoption among their retail customers. This report analyzes the impact of distributed PV deployment on distribution utility revenues and retail electricity tariffs in Thailand. It provides policymakers, utilities, and other energy practitioners with a real-world example of how distributed PV affects certain stakeholders.
This paper offers a roadmap to regulators on the range of potential methodologies and assumptions that can be employed to calculating the value of distributed generation solar programs. It outlines practical considerations and key questions that must be addressed when conducting a benefit and cost study for distributed generation programs. It then issues a range of practical recommendations on approaches for numerically characterizing program value streams to various stakeholders.
Organization(s): Interstate Renewable Energy Council
Section 2 of this Report provides an overview of the various costs and benefits of distributed generation programs, and the "valuation perspectives" (e.g., utility, energy producing customer, ratepayer, society) where those costs and benefits accrue. It also provides an overview of stakeholder perspective value tests.
Organization(s): Regulatory Assistance Project
This report provides an expansive overview of the impacts of distributed energy resources to various stakeholders, and how those impacts can be measured and accounted for. It focuses on describing a comprehensive analysis framework to characterize impacts, and provides guidance on strategies to account for often hard-to-measure factors, such as risk or discount rate.
Organization(s): Advanced Energy Economy Institute, Synapse Energy Economics
This report analyzes the financial impact of net energy metering programs to utilities and ratepayers for two "prototype" utilities: a vertically integrated utility and a distribution-only provider. For each utility, the potential impacts are explored over a 20-year period, including analysis of utility costs, revenues, average rates, and utility shareholder earnings and return-on-equity. The report provides a qualified, analytically-grounded basis for regulators to understand the nature of net energy metering program financial impacts.
Organization(s): Lawrence Berkeley National Laboratory
This report outlines 10 strategies which can be employed to mitigate potential system-level technical impacts of high penetrations of renewable energy.
Organization(s): Regulatory Assistance Project
This report describes the various current and potential future methodologies, ranging in levels of sophistication and technical accuracy, for characterizing the various costs and benefits of distributed generation photovoltaic programs. The report focuses on the utility or power system perspective, a subset of the broader range of stakeholder perspectives that are affected by distributed generation programs.
Organization(s): National Renewable Energy Laboratory
Chapter 2 titled 'Distributed PV Growth and Potential Financial Implications' provides a broad overview of potential financial impacts of distributed photovoltaic programs. Chapter 3 titled 'Benefits and Costs of Distributed PV' reviews the costs and benefits of distributed photovoltaic programs to a range of stakeholder perspectives, and provides considerations for regulators as they evaluate these costs and benefits.
Organization(s): National Renewable Energy Laboratory, Regulatory Assistance Project
Chapter 2 titled 'Regulatory Processes for NEM Policy Review' provides an overview of the regulatory processes associated with an ex-post DG program review and impact analysis. Chapter 3 titled 'Solar Value Analyses: Generic Concepts and Terms' provides an overview of common value (costs and benefit) categories for distributed solar, and discusses the practical utility of using solar value calculations to inform future distributed generation rate design proceedings.
Organization(s): Solar Electric Power Association
Interconnection
Ensuring efficient application processes and interconnection procedures, interconnection screening criteria, inverter specifications, grid codes, opportunities with advanced inverter functionalities, and program caps.
Distributed generation programs can present new technical and administrative challenges, as large quantities of customer-generators apply for interconnection and begin exporting power to the grid. Transparent and efficient interconnection processes that ensure safety and reliability are critical to ensuring successful distributed generation programs. This section aims to provide resources which describe robust distributed generation technical requirements, balanced interconnection screening criteria, and efficient interconnection processes.
Interconnection screens exist to balance application process efficiency with technical rigor to ensure safety and reliability. This report focuses on short-, medium-, and long-term strategies for upgrading distributed solar interconnection screens, as penetrations increase and the need for higher accuracy screening metrics increases.
Organization(s): National Renewable Energy Laboratory, U.S. Department of Energy, Sandia National Laboratories, Electric Power Research Institute
This report outlines the key challenges around the technical integration of distributed generation into distribution systems. Thereafter, it comprehensively explores active distribution system management as a tool for addressing these challenges, and outlines the implications for regulation and market design.
Organization(s): Eurelectric
This report lays out a series of procedural steps for facilitating the orderly and technically sound interconnection of distributed generation resources, organized by increasing tiers of generator size. It touches on grid code recommendations, and interconnection screens, application and interconnection process points. It also provides sample agreements and forms that can be used in an interconnection process.
Organization(s): Interstate Renewable Energy Council
While this report has a focus on applications for India, Chapters 3 and 4 provide a thorough overview of both solar system perspective and grid perspective technical considerations. The report looks across Germany, the United States, and Australia (in addition to India) while reviewing key technical and grid code related specifications. It also provides an overview of advanced inverter functionalities for higher penetrations of distributed generation, as well as meter technology selection considerations and certification and testing processes.
Organization(s): Bridge to India; Prayas Energy Group
This report outlines the key components of model interconnection procedures, including screening processes to determine qualification for streamlined interconnection.
Organization(s): Regulatory Assistance Project
This recent series of presentations and webinars focuses on distributed photovoltaic interconnection practices.
Organization(s): National Renewable Energy Laboratory, Solar Electric Power Association, Electric Power Research Institute, Western Area Power Administration
Chapter 2 of this Report describes the current status, ongoing issues, and proposed solutions in the U.S. state of California for a range of inverter-related technical aspects, including : anti-islanding, low/high voltage ride-through, low/high frequency ride-through, dynamic volt/var operations, ramp rates, and others. Chapter 3 proposes provides an overview of information and communication technology (ICT) concepts and issues, and discusses potential advanced inverter ICT specifications.
Organization(s): California Smart Inverter Working Group
Chapter 2 and Chapter 4 provide useful background on considering distributed generation program caps. Chapter 2 outlines potential methods for defining program caps and describes how and why some U.S. states' caps have evolved with time. Chapter 4 provides an overview of program cap design and implementation issues.
Organization(s): National Renewable Energy Laboratory
While this report has a focus on application for India, it nevertheless provides a useful overview of best practices related to grid stability and protection requirements, equipment requirements, and testing requirements (Chapter VI). It also provides an overview of issues and best practices in application processing, contract formulation and dispute resolution (Chapter VII).
Organization(s): United States Energy Association
This report summarizes key considerations for regulators and policymakers related to advanced inverter functions as they consider the various technical challenges and opportunities associated with distributed solar programs. The report provides an overview of how advanced inverter functions can be used, and outlines key practical considerations for regulators as they update standards to enable for their utilization.
Organization(s): National Renewable Energy Laboratory
Alternative Business and Regulatory Models
Revenue decoupling, performance incentives, third party leasing, community distributed generation, virtual net-metering, utility ownership, and shared customer-utility ownership.
Distributed generation is challenging long-held regulatory and business model approaches to the power sector. This section aims to provide resources which describe alternative approaches to power sector regulation that encourage distribution generation. It also provides resources that describe emerging business models.
Chapter 4 titled 'Business Models for Distributed Generation' provides a broad overview of potential distributed generation business models and associated regulatory consideration. Customer and third-party-owned distributed solar models include: customer-owned, third-party leasing, community solar, and customer demand aggregation. Utility investment models include: utility build-own-operate / utility turnkey DG systems, utility-led community solar projects, utility partnership and investment in third-party leasing companies, value-added consulting services, and virtual power plant operator. The chapter also provides an overview of the Energy Services Utility Model concept.
Organization(s): National Renewable Energy Laboratory, Regulatory Assistance Project
With distributed generation potentially eroding utility sales, revenue decoupling approaches might be considered as a mitigation measure. This report provides a broad conceptual overview of revenue decoupling, practical considerations for application, advantages and disadvantages, and an overview of potential issues, impacts and implications associated with implementation.
Organization(s): Regulatory Assistance Project
This report provides an overview of electric utility business model challenges and opportunities, as they relate to distributed energy resources. Thereafter, it proposes three utility business models which might be better positioned to respond to the disruptive technologies permeating electricity markets, and outlines the advantages and disadvantages of these potential models.
Organization(s): Rocky Mountain Institute
This report outlines a range of tactics for regulators to consider as they shift the nature of their regulatory approaches away from traditional models to accommodate increasing penetrations of distributed generation (and other distributed energy resources) onto the grid. To that end, the report offers a series of proposals and practical considerations toward easing this transition, as shifts begin to occur.
Organization(s): Interstate Renewable Energy Council
This report serves as a guidebook for regulators as they consider formulating shared renewable energy programs, an emerging strategy to expand renewable energy access to consumers. It offers a series of guiding principles and key program design components for regulators to consider. Thereafter, it offers model rules which can be used as a starting point for formulating a shared renewable energy program.
Organization(s): Interstate Renewable Energy Council
Planning for Distributed Generation
Treatment of distributed generation in modelling exercises, resource adequacy assessments, and formulation of uptake estimates.
With distributed generation permeating power systems in a fundamentally different manner than centrally planned utility-scale systems, planning practices for power systems are now evolving. This section aims to provide resources which help regulators consider the scope and nature of this evolution.
From a bulk power system planning perspective, this report describes how utilities account for the impacts of solar generation during resource planning exercises. It then provides a range of strategies for improving the representation of solar within these integrated resource planning modeling efforts.
Organization(s): Solar Electric Power Association; National Renewable Energy Laboratory
From a distribution system planning and interconnection screening perspective, this paper discusses the range of proactive planning efforts that are being contemplated or implemented in the United States for enabling utilities to accommodate distributed generation. The paper thereafter proposed the approach of "Integrated Distribution Planning" which uses existing distribution planning tools to estimate hosting capacity of distribution circuits in response to interconnection requests.
Organization(s): Interstate Renewable Energy Council
Chapter 7 of this Report titled 'System Planning, Integration and Transparency' provides an overview of how utilities in the U.S. state of Massachusetts and elsewhere are planning for a future with increased quantities of distributed generation.
Organization(s): KEMA
Case Studies
Documentation of experiences and best practices from distributed generation programs.
Case studies in distributed generation are often useful to understand the realities and practicalities that theory cannot always provide. This section aims to provide useful experiences in distributed generation for regulators to understand and learn from.
Utilities worldwide are concerned about the financial impact of increasing distributed solar photovoltaic (PV) adoption among their retail customers. This report analyzes the impact of distributed PV deployment on distribution utility revenues and retail electricity tariffs in Thailand. It provides policymakers, utilities, and other energy practitioners with a real-world example of how distributed PV affects certain stakeholders.
Organization(s): USAID Clean Power Asia, National Renewable Energy Laboratory, Lawrence Berkeley National Laboratory
This document characterizes the process for rooftop solar interconnection in Thailand, and highlights key challenges and lessons learned from the country's rooftop solar experience.
Organization(s): GIZ
This document offers a comprehensive ex-post evaluation of the financial impact of the California net energy metering program to ratepayers. It describes the analysis framework, key data and assumptions, and model results.
Organization(s): California Public Utilities Commission; Energy and Environmental Economics
This report reviews the Kenyan net metering program, considering economic, technical, procedural, policy and other aspects. It also reviews international experiences in net metering in the United States, Denmark, Mexico, Brazil and Morocco, and outlines best practices synthesized from the review of these countries.
Organization(s): GIZ