The DER Revenue Morass: What are justifiable revenue assumptions to include in your DER financial pro forma model?
A diverse array of potential revenue stream components comprises a Distributed Energy Resource’s (DER’s) value stack. The value stack components and their magnitude vary by state, incentive program, utility, and rate class, and for non-fixed components, they vary over time. Examples of DER revenue stream components include:
In many cases supplemental revenue is available from tradeable REC markets (if an incentive program doesn’t claim the environmental benefits – which many don’t), storage deployment, and wholesale revenue capture (e.g., capacity market participation).
The DER revenue opportunities (and complexity) increases dramatically if the DER is located behind-the-meter, where installations can provide additional value by avoiding demand charges (wire or capacity tag) and participate in demand response or other incentive programs.
SEA provides justifiable and bankable DER revenue forecasts. SEA’s typical approach is bottom-up analysis where all components (e.g., utility retail rate class specific electric generation, distribution, transmission, energy efficiency, etc.) that comprise a variable revenue stream (e.g., net metering credit) are analyzed independently and then totaled to forecast the entire revenue stream on a $/kWh basis.
Analysis of incentives based on retail rates typically includes:
Depending upon the incentive structure, DER variable revenue also includes:
New York’s value of distributed energy resources (NY-VDER) is special. In cases where our clients need a NY-VDER revenue analyses we rely on an array of New York specific expertise and tools to analyze the revenue streams including SEA’s customized forward-looking version of the NY-VDER calculator.
With dozens of clients covering most of the most active DER state markets our analysis has been used as a basis of attracting financing. Contact us when you need credible revenue projections to put forth before an internal finance committee or external financers.
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