IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v86y2015icp380-392.html
   My bibliography  Save this article

Assessing the financial impacts of distributed energy on load serving entities

Author

Listed:
  • Wang, Zeyu
  • Negash, Ahlmahz
  • Kirschen, Daniel

Abstract

This article analyzes the financial impact of distributed energy resources (DERs) owned and operated by commercial customers on the load serving entities (LSEs). DERs reduce the customers' electricity bills and hence the revenues collected by their LSE. However, changes in customer demand profiles can potentially reduce the aggregated system demand profile, and therefore, reduce the LSE's costs in wholesale markets. Analysis of these financial impacts indicates that the LSE's lost revenue ultimately outweighs its reduced expenses. This is largely due to a significant reduction in revenue from demand charges. Dispatchable DERs, including energy storages and demand response, result in more financial losses for LSEs than photovoltaics. The financial losses LSEs face indicate that redesigning commercial customer tariffs is necessary in order for LSEs to accommodate customer owned DERs properly. Several suggestions on modifying commercial tariffs are presented.

Suggested Citation

  • Wang, Zeyu & Negash, Ahlmahz & Kirschen, Daniel, 2015. "Assessing the financial impacts of distributed energy on load serving entities," Energy Policy, Elsevier, vol. 86(C), pages 380-392.
  • Handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:380-392
    DOI: 10.1016/j.enpol.2015.06.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030142151530001X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.enpol.2015.06.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Darghouth, Naïm R. & Barbose, Galen & Wiser, Ryan, 2011. "The impact of rate design and net metering on the bill savings from distributed PV for residential customers in California," Energy Policy, Elsevier, vol. 39(9), pages 5243-5253, September.
    2. Dimitris Bertsimas & Melvyn Sim, 2004. "The Price of Robustness," Operations Research, INFORMS, vol. 52(1), pages 35-53, February.
    3. Glassmire, John & Komor, Paul & Lilienthal, Peter, 2012. "Electricity demand savings from distributed solar photovoltaics," Energy Policy, Elsevier, vol. 51(C), pages 323-331.
    4. Hulisi Ö?üt & Asunur Cezar & Merve Guven, 2014. "Market Share Analysis of Mobile Operators in Turkey," Proceedings of International Academic Conferences 0200930, International Institute of Social and Economic Sciences.
    5. Darghouth, Naïm R. & Barbose, Galen & Wiser, Ryan H., 2014. "Customer-economics of residential photovoltaic systems (Part 1): The impact of high renewable energy penetrations on electricity bill savings with net metering," Energy Policy, Elsevier, vol. 67(C), pages 290-300.
    6. Nottrott, A. & Kleissl, J. & Washom, B., 2013. "Energy dispatch schedule optimization and cost benefit analysis for grid-connected, photovoltaic-battery storage systems," Renewable Energy, Elsevier, vol. 55(C), pages 230-240.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Theo, Wai Lip & Lim, Jeng Shiun & Ho, Wai Shin & Hashim, Haslenda & Lee, Chew Tin, 2017. "Review of distributed generation (DG) system planning and optimisation techniques: Comparison of numerical and mathematical modelling methods," Renewable and Sustainable Energy Reviews, Elsevier, vol. 67(C), pages 531-573.
    2. Nikolaidis, Alexandros I. & Charalambous, Charalambos A., 2017. "Hidden financial implications of the net energy metering practice in an isolated power system: Critical review and policy insights," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 706-717.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Darghouth, Naïm R. & Wiser, Ryan H. & Barbose, Galen & Mills, Andrew D., 2016. "Net metering and market feedback loops: Exploring the impact of retail rate design on distributed PV deployment," Applied Energy, Elsevier, vol. 162(C), pages 713-722.
    2. Castaneda, Monica & Jimenez, Maritza & Zapata, Sebastian & Franco, Carlos J. & Dyner, Isaac, 2017. "Myths and facts of the utility death spiral," Energy Policy, Elsevier, vol. 110(C), pages 105-116.
    3. To, Thanh & Heleno, Miguel & Valenzuela, Alan, 2022. "Risk-constrained multi-period investment model for Distributed Energy Resources considering technology costs and regulatory uncertainties," Applied Energy, Elsevier, vol. 319(C).
    4. Nge, Chee Lim & Ranaweera, Iromi U. & Midtgård, Ole-Morten & Norum, Lars, 2019. "A real-time energy management system for smart grid integrated photovoltaic generation with battery storage," Renewable Energy, Elsevier, vol. 130(C), pages 774-785.
    5. Park, Alex & Lappas, Petros, 2017. "Evaluating demand charge reduction for commercial-scale solar PV coupled with battery storage," Renewable Energy, Elsevier, vol. 108(C), pages 523-532.
    6. L. (Lisa B.) Ryan & Sarah La Monaca & Linda Mastrandrea & Petr Spodniak, 2018. "Harnessing Electricity Retail Tariffs to Support Climate Change Policy," Working Papers 201822, School of Economics, University College Dublin.
    7. Georgios C. Christoforidis & Ioannis P. Panapakidis & Theofilos A. Papadopoulos & Grigoris K. Papagiannis & Ioannis Koumparou & Maria Hadjipanayi & George E. Georghiou, 2016. "A Model for the Assessment of Different Net-Metering Policies," Energies, MDPI, vol. 9(4), pages 1-24, April.
    8. Sheikhhoseini, Mousa & Rashidinejad, Masoud & Ameri, Mehran & Abdollahi, Amir, 2018. "Economic analysis of support policies for residential photovoltaic systems in Iran," Energy, Elsevier, vol. 165(PA), pages 853-866.
    9. Brown, David & Sappington, David, 2014. "On the Optimal Design of Distributed Generation Policies: Is Net Metering Ever Optimal?," Working Papers 2014-12, University of Alberta, Department of Economics.
    10. Darghouth, Naïm R. & Wiser, Ryan H. & Barbose, Galen, 2016. "Customer economics of residential photovoltaic systems: Sensitivities to changes in wholesale market design and rate structures," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 1459-1469.
    11. David P. Brown & David E. M. Sappington, 2017. "Optimal policies to promote efficient distributed generation of electricity," Journal of Regulatory Economics, Springer, vol. 52(2), pages 159-188, October.
    12. Fikru, Mahelet G., 2019. "Estimated electricity bill savings for residential solar photovoltaic system owners: Are they accurate enough?," Applied Energy, Elsevier, vol. 253(C), pages 1-1.
    13. Dufo-López, Rodolfo & Bernal-Agustín, José L., 2015. "A comparative assessment of net metering and net billing policies. Study cases for Spain," Energy, Elsevier, vol. 84(C), pages 684-694.
    14. Heleno, Miguel & Sehloff, David & Coelho, Antonio & Valenzuela, Alan, 2020. "Probabilistic impact of electricity tariffs on distribution grids considering adoption of solar and storage technologies," Applied Energy, Elsevier, vol. 279(C).
    15. David P. Brown & David E.M. Sappington, 2017. "Designing Compensation for Distributed Solar Generation: Is Net Metering Ever Optimal?," The Energy Journal, , vol. 38(3), pages 1-32, May.
    16. Ratnam, Elizabeth L. & Weller, Steven R. & Kellett, Christopher M., 2015. "An optimization-based approach to scheduling residential battery storage with solar PV: Assessing customer benefit," Renewable Energy, Elsevier, vol. 75(C), pages 123-134.
    17. Oliva H., Sebastian & MacGill, Iain & Passey, Rob, 2016. "Assessing the short-term revenue impacts of residential PV systems on electricity customers, retailers and network service providers," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 1494-1505.
    18. Kubli, Merla, 2018. "Squaring the sunny circle? On balancing distributive justice of power grid costs and incentives for solar prosumers," Energy Policy, Elsevier, vol. 114(C), pages 173-188.
    19. Jianwen Ren & Yingqiang Xu & Shiyuan Wang, 2018. "A Distributed Robust Dispatch Approach for Interconnected Systems with a High Proportion of Wind Power Penetration," Energies, MDPI, vol. 11(4), pages 1-18, April.
    20. Li, Xingchen & Xu, Guangcheng & Wu, Jie & Xu, Chengzhen & Zhu, Qingyuan, 2024. "Evaluation of bank efficiency by considering the uncertainty of nonperforming loans," Omega, Elsevier, vol. 126(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:380-392. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.