Equity and efficiency of electricity tariff design for distributed energy resources

Madalsa Singh PhD '23
Hometown: Jaipur, India
Area of Study: Energy Resources Engineering
Intern, Office of Commissioner Martha Guzman Aceves, California Public Utilities Commission

My summer project is helping out the office of Commissioner Martha Guzman Aceves at California Public Utilities Commission as the commission revisits the net energy metering (NEM) tariff for distributed energy resources (such as rooftop solar, on-site electricity storage, etc). Previously, under Net Energy Metering (NEM2.0), if a customer generated a kWh of energy from their solar panels, they would be compensated at the retail rate of electricity that the utility charges at that hour. However, a kWh of electricity delivered by the grid also has other costs such as costs incurred in building transmission and distribution infrastructure, wildfire hardening (increasingly problematic issue in California), public service programs (CARE/FERA) which are baked into per kWh rates (volumetric rates) even though these costs don't depend on the amount of energy a customer consumes. This creates a revenue shortfall as utilities aren't able to recoup these fixed costs from customers with energy generation (adopters) and electricity rates are increased for all customers (rate-payers). 

Future electricity rates need to value energy produced correctly while at the same time not obliterate bill savings for people who adopt distributed energy resources, a crucial portion of clean energy generation in the state.

I have been helping the commission with understanding this balance between bill savings of the adopters and the cross-subsidization to the non-adopters, and how designing the future tariff and billing mechanism can strike the balance while keeping in mind different sizes of systems (based on kW installed), incomes of adopters, and climate zones within California. This work is part of the ongoing proceeding (R2008020) and my results will be instrumental in designing the future tariff. 

The internship has been an extremely rewarding experience. Simulating an accurate distributed energy resource harnessed my energy systems modeling experience, while designing a tariff rate helped me understand the economics of the utility sector and how electricity, a ubiquitous and often ignored resource, is priced. And as with any resource, there are inequities that need to be remedied with policy design. Solar adopters are richer and in less polluted areas around the state, while high electricity prices -- California has one of the highest in the country -- hurt low income households and halts progress towards electrification of transportation and buildings, which is crucial for decarbonization. It's a rewarding but daunting balancing feat to help while the commission evaluates proposals, counters to proposals, evidentiary hearings, public opinion, and academic papers (a LOT of reading that my PhD really prepared me for). I would also like to appreciate the team that I worked with -- my direct mentors, Kerry Fleisher and Maria Sotero at CPUC, who scrutinized every silly chart I made; Prof. Bruce Cain at Stanford, who answered a lot of questions; and Commissioner Guzman Aceves who gave me probably the most pointed and correct feedback each time. It's a team deeply committed to science-based and just policymaking, and I hope I was a tiny part of that process.