© OECD/IEA 2014

PV reaching socket parity Policy implications for distributed generation

Cédric Philibert, Simon Müller, Hoël WiesnerRenewable Energy Division

“Self-consumption business models”

EPIA & PVPS Workshop – 22 September 2014, Amsterdam

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Socket parity emerging as potential deployment driver for distributed PV

Economic attractiveness from offsetting electricity bill requires self-using most of the PV electricity Currently limits potential, in particular for households

Reaching socket parity is a driver for private actors But PV may still have significant impact on total system costs, in

particular depending on allocation of fixed network costs

0

200

400

600

800

1 000

1 200

2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013

Australia France Germany Italy Korea Mexico Netherlands United Kingdom

USD/

MWh

LCOE

Variable

Portion of

Residential

Rate

© OECD/IEA 2014

Possible self-consumption (SC) varies

Source: ETP 2014, EDF

Match of PV supply and power demand for a residential/commercial customer in France

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

kW

Day of peak injection (Residential)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

kW

Day of peak production (Residential)

Consumption PV Injection-Withdrawal

-100.0-80.0-60.0-40.0-20.00.0

20.040.060.080.0

100.0120.0

kW

Week of high production (Office building)

-0.5

0.0

0.5

1.0

1.5

2.0

2.5kW

Day of peak injection (Residential)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

kW

Day of peak production (Residential)

Consumption PV Injection-Withdrawal

-100.0-80.0-60.0-40.0-20.00.0

20.040.060.080.0

100.0120.0

kW

Week of high production (Office building) Self-consumption higher for:

Some office and commerce buildings with high daily consumption, and relatively small systems on multi-storey dwellings

Self-consumption potentiallyincreased with DSI, storage

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Distributed PV at grid-parity: 3 options

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Self-use and self-sufficiency

0 500 1 000 1 500 2 000 2 500 3 000 3 500

Consumption

Generation

Consumption

Generation

3 kW

Residen

tial

.13

kW R

esiden

tial

0 100 000 200 000 300 000 400 000 500 000 600 000

Consumption

Generation

120

kW C

ommercia

l

Annual kWh

Consumption from the grid Generation surplus Prosumed

94% self-use

29% self-sufficiency

100% self-use

4% self-sufficiency

37% self-use

35% self-sufficiency

Comparison of self-use and self-sufficiency shares by system size and customer

© OECD/IEA 2014

Grid cost concerns T&D costs 30-50% of retail costs, but only 0-15% recovered through fixed

payments for efficiency/equity reasons

Self-consumers pay less but still benefit from the grid; cross-subsidy!

Self-consumption may call for some network tariff changesPreferably toward some time-based grid pricing structure, e.g. California bill adopted in September 2013: small fixed fee introduced, and time-of-use pricing forthcoming

Integration concerns Self-consumption and surplus in-feed may increase imbalance of supplier

without prosumers paying for this

Depending on correlation with system demand:

Serving residual demand more/less costly to meet per kWh than average

Excess generation more/less valuable than average

Tariff-design for injections should reflect value of electricity

Concerns: grid costs and integration

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Socket-parity economically relevant, but based on private costs

Attractiveness varies with possible share of self consumption (SC)

Remuneration of excess power (EP) can be important for economics

Reaching socket-parity is not indicator of the point when net avoided system costs (system value of PV) exceeds LCOE

This might happen before or after

Consumer tariffs reflecting value of electricity in time and location critical for efficiency of self-consumption and net-metering

Skewed tariffs can lead to artificially high/low levels of self-consumption

Buy-all – sell-all is equivalent to a classical FiT

Only difference: based on system value, not costs+x

Separate network-tariffs based on load-profile of prosumer may be needed Existing frameworks can be adjusted, result is higher fixed charge but variable charge for

fixed cost recovery retained for efficiency reasons

Conclusions

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Buy-all sell-all and the value of solar

VOS: a credit associated to all generation

A complex methodology elaborated by the departmentof commerce of the State of Minnesota for the PUC

A theoretical example

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Minnesota: a lively debate

Other values

should be

taken in

account:

voltage control,

market price

reduction, etc.

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The value of PV may evolve over time

Compared values of variable PV and on-demand STE in California

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California: the « duck » chart

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Example: California and teaching ducks to fly

© OECD/IEA 2014 12Source: The Regulatory Assistance Project

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* SOURCE: Trade and Invest, Germany. Model calculation for rooftop systems, based on 802 kWh/kWp (Frankfurt/Main), 100% financing, 6% interest rate, 20 year term, 2% p.a. O&M costs. Sources: FiTs: BMU 2013; System Prices: BSW 2013; Model Calculation: Deutsche Bank 2010; Electricity Prices 2007-2013: Eurostat 2013.

Prognosis

0,70

0,90

1,10

1,30

1,50

1,70

1,90

2,10

2,30

2,50

2,70

2,90

3,10

3,30

3,50

3,70

3,90

4,10

4,30

4,50

4,70

4,90

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

0,45

0,50

0,55

2007 2008 2009 2010 2011 2014 2015 2016 2017 20182012 2013

EUR/kWh

Electricity price for households [2.5-5 MWh/a] Electricity costs for PV + BatteryElectricity costs for PV

PV+battery socket parity might be aroundthe corner in Germany

© OECD/IEA 2014

Forgone tax revenue concerns Less energy sold, less taxes raised

Taxation of self-consumption problematic

Evaluate taxation framework, avoid double taxationE.g. charging VAT on systems and on excess electricity

Forgone renewable energy surcharge concerns Tariffs often contain surcharge for RE

A RE surcharge on RE self-consumption?

Contributing to learning investment that has lead to socket-parity

Forgone cross-subsidy concerns Customers with highest prices have biggest incentive

May be due to cross-subsidies to other consumer groups

Anticipate impact on overall revenues

Concerns: taxes, surcharges, subsidies

© OECD/IEA 2014 14