Understanding Retail Rates is Essential for DER Project Investment
The Issue: Retail electricity rates are the basis of much (if not all) Distributed Energy Resource (DER) project revenue in most DER policy driven markets (i.e., DER program revenue rates).
Whether it is the full retail rates offset in Maryland or Maine, the price-to-compare rate in Illinois or Pennsylvania, or some one-off hybrid in New Mexico, DER developers are hooking their wagon to incentive programs with variable credit rates that are based on the interconnecting utility’s retail rates. It goes to reason that reliable forecasts reflecting DER program revenue rates are key to understanding project viability in those many markets where DER rates are a derivative of retail rates (e.g., price-to-compare rates).
The map below shows the basis of the variable portion of DER revenue for states with major DER incentive programs.
DER program revenue rates (just like utility retail rates) can, and do, vary by state, utility within a state, rate class within a utility, season/month, time-of-day, usage/production block, wholesale zone, county and DER incentive program variant… and change over time as their drivers evolve.
The Requirements and the Pain: Developers and investors require a good understanding of the compensation expectations; thus, they require a good understanding of variable DER program revenue rates (in $/kWh) which directly impacts DER project revenue.
Where $/kWh DER program revenue rates are based on the host utility’s retail rates, we observe:
- Even something as simple as which utility rate components (e.g., generation, distribution, transmission, etc.) make up $/kWh DER program revenue rate is often neither clear nor well publicized.
- The basis for how the $/kWh rate is set for each utility rate component is set is rarely transparent and invariably complicated.
- Many times, to understand any of this, one must wade through utility tariffs, dockets, filings, procurements, which is never easy.
A cursory sample of the variable component of recent DER $/kWh revenue rates displays an aspect of their unevenness.
The Solution: SEA has and continues to provide deep dive DER $/kWh variable revenue rate analysis and forecasts as requested as we have done for all but a few of the markets denoted in the map above. Our base, high and low revenue forecast curves come with a detailed slide deck thoroughly explaining the basis for the opaque and volatile DER $/kWh variable revenue rates with plenty of linked references, providing you transparent reasoning to our forecasting methods to support your decision-making confidence. And if there is something you don’t understand or need clarification on, our service includes consultation time with our DER team so you can understand our forecast, our approach, and how to best use the results.
All good things take time, as does our in-depth analysis. But in the rhythm of commercial decision making, developers and their investors often need the analysis and forecasts yesterday. To meet this need, SEA is rolling out ‘on-demand’ $/kWh DER program revenue rate analyses and forecasts, regularly updated, and available for immediate purchase ‘off the shelf’ through the SEA web site.
- New and Available Now: The first four On Demand DER analysis and forecasts include:
- Coming Soon: Next to follow will be:
- Ameren-IL Price to Compare
- ComEd-IL Price to Compare
- Wait for it (but not long): Soon to follow, we’re developing forecasts for:
- Maryland Community Solar Energy Generating System (CSEGS) rates
- New Jersey Community Solar Bill Credit rates
- Pennsylvania Net Metering rates
“When we need revenue forecasts of our portfolio of Community Solar / virtual net metering solar projects for financing and internal planning purposes, we know we can trust SEA to provide detailed, defensible, high-quality analysis and forecasts. Their expertise offers the best value for our money for bankable forecasts necessary for financing. Not only does SEA provide exceptional service, but they are also quick to respond to follow-up questions, and I always gain new insights from our discussions. Working with SEA has helped us realize the full financial potential of our projects.” -VP at regional solar developer/owner/operator
Visit our DER Revenue Analysis web page to explore our services and take the first step toward optimizing your DER investments.