DG Cost-Benefit Test Adopted by State Regulators

By Published On: August 21, 2009

The California Public Utilities Commission August 20 approved a cost-effectiveness test for small distributed solar, wind, and other alternative power projects to promote renewable generation that avoids high voltage lines by being located near where the juice is used. “It is a robust tool to evaluate the various programs supporting distributed generation,” said CPUC president Mike Peevey. The programs include ones providing subsidies to owners of projects up to 5 MW under the California Solar Initiative and Self Generation Incentive Program. The former provides up to $2.6 billion through 2016, and the latter $83 million a year. Commissioner John Bohn took issue with the parameters for measuring “market transformation” costs and benefits. He warned they will produce “speculative numbers” that will produce “wildly disparate results,” creating a “dangerous large gap.” The parameters were set to measure costs and benefits such as avoiding building power plants and using inefficient ones, net metering, emission impacts, and tax benefits. The distributed generation methodology mirrors much of the cost-benefit test applied to energy efficiency programs. It also looks at the affect on ratepayers, system owners, the transmission system, and the environment and society (Circuit, June 26, 2009). The cost effectiveness methodology also applies to cogeneration--combined heat and power plants. Peevey acknowledged that measuring market transformation results will be challenging and that refinement of the test will be considered. A cost-benefit test is “not the only measure of a program’s success,” notes the decision, which adds, it provides “essential input when deciding to continue, modify or cancel a program.”

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