Distributed Generation and the Minnesota Value of Solar Tariff

• Date: 01 August 2018

48 ELR 10726 ENVIRONMENTAL LAW REPORTER 8-2018

ment of cogeneration and small power production facilities

in order to reduce demand for fossil fuels and to increase

the ecient use of energy.1 Section 210(a) directed the

Federal Energy Regulatory Commission (FERC) to pro-

mulgate “such rules as it determines necessa ry to encour-

age cogeneration and small power production.” e U.S.

Supreme Court upheld a FERC rule that requires the pur-

chase rate to be “just and reasonable to the electric con-

sumers of the electric utility and in t he public interest” and

that it not discriminate against qualify ing facilities (QFs).2

e Court indicated that this framework supporting small

energy generators might not directly provide any rate sav-

ings to electric utility consumers. It was more important

to provide an incentive for small power producers and the

broader benet of decreased reliance on scarce fossil f uels

and more ecient use of energy. e Court ruled that “just

and reasonable” language in section 210(b) did not require

the rate to be set “at the lowest possible reasonable rate

consistent with the maintenance of adequate service in the

public interest,” concluding rather that Congress did not

intend to impose traditional ratemaking concepts on sales

by QFs to utilities.

In addition to established federal policy support for

distributed renewable energy, state pol icies like renewable

portfolio standards and dramatic price reductions have led

to a real-time expansion of renewable energy across the

United States. is evolution of the electricity markets

demands accommodation to dispersed renewable energy

generators. Our energy system is rapidly evolving into a

very dierent model than the legac y central station power

plant sending power one way to customers across long dis-

tance w ires. Rene wable energy deployment a nd generation

has grown rapidly and represents 25-50% of electricity

generation in many states and regions for certain periods

of time. While much of those capacity additions are from

large utility-scale projects, renewable energy production is

more geographically dispersed and variable than conven-

1. 16 U.S.C. §824 (a).

2. Am. Paper Inst. v. Am. Elec. PowerServ. Corp., 461 U.S. 402 (1983).

COMMENT

Distributed Generation and the

Minnesota Value of Solar Tariff

by Ellen Anderson

Ellen Anderson is the Executive Director of the Energy Transition Lab at the University of Minnesota.

Previously, she served in the Minnesota Senate and chaired the Minnesota Public Utilities Commission.

The Article, Managing the Future of the Electricity

Grid: Distributed Generation and Net Metering, by

Prof. Richard L. Revesz a nd Dr. Burcin Unel, is a

thorough and timely analysis of the regulatory challenges

of valuing distributed energy generation. eir proposal for

an “Avoided Cost Plus Social Benet” valuation protocol for

clean distributed energy is a va luable addition to the knowl-

edge base, and the authors’ longer-term solution of compre-

hensive energy reform is a well-thought-out alternative.

e Article establishes t hat distributed generation (DG)

provides a suite of benets to the grid and to our broader

societal goals, and it should be compensated for those ben-

ets, and that DG can a lso lead to additional costs to the

grid and can raise t he potential of cost-shifting. We appre-

ciate the approach to try to balance these factors.

e Article’s internal debate examines whether a nd how

to accurately and fairly compensate or charge d istributed

generation (DG) producers, other non-DG customers, and

utility shareholders for costs and benets of the DG sys-

tems. is is an importa nt question, but our comments are

based on a more focused set of assertions. First, pa rticularly

in markets with minimal DG, the policy reasons to incent

DG are stronger, and the cost shifting question seems pre-

mature. Second, approaches such as the Minnesota Value

of Solar Tari (VOST) are designed to nullif y cost-shifting

concerns and may serve as usef ul models.

Two underlying assumptions, consistent with Revesz

and Unel’s analysis, are important to set the stage for the

internal debate in the Article. ey a re:

(1) Federal policies generally support the concept that

more renewable, distribute d generation i s benecia l

and in the public interest.

(2) Changes to our electricity resource mix demand

that grid operators and utilities integrate vari-

able renewable resources produced by many dis-

persed generators.

On point one, the Public Utilities Regulatory Policy Act

(PURPA) includes a clear statement to encourage develop-

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