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Impact of residential PV adoption on Retail Electricity Rates

Cai, Desmond W. H. and Adlakha, Sachin and Low, Steven H. and De Martini, Paul and Chandy, K. Mani (2013) Impact of residential PV adoption on Retail Electricity Rates. Energy Policy, 62 . pp. 830-843. ISSN 0301-4215. doi:10.1016/j.enpol.2013.07.009.

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The price of electricity supplied from home rooftop photo voltaic (PV) solar cells has fallen below the retail price of grid electricity in some areas. A number of residential households have an economic incentive to install rooftop PV systems and reduce their purchases of electricity from the grid. A significant portion of the costs incurred by utility companies are fixed costs which must be recovered even as consumption falls. Electricity rates must increase in order for utility companies to recover fixed costs from shrinking sales bases. Increasing rates will, in turn, result in even more economic incentives for customers to adopt rooftop PV. In this paper, we model this feedback between PV adoption and electricity rates and study its impact on future PV penetration and net-metering costs. We find that the most important parameter that determines whether this feedback has an effect is the fraction of customers who adopt PV in any year based solely on the money saved by doing so in that year, independent of the uncertainties of future years. These uncertainties include possible changes in rate structures such as the introduction of connection charges, the possibility of PV prices dropping significantly in the future, possible changes in tax incentives, and confidence in the reliability and maintainability of PV.

Item Type:Article
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URLURL TypeDescription
Cai, Desmond W. H.0000-0001-9207-1890
Low, Steven H.0000-0001-6476-3048
Additional Information:© 2013 Elsevier Ltd. Received 27 November 2012. Accepted 2 July 2013. Available online 3 August 2013. We thank Prof. Adam Wierman, Prof. John Ledyard, and Dr. Julian Bunn of Caltech, Leonardo Von Prellwitz of Cisco, Jeff Gooding, Robert Sherick, Russell Garwac, Andre Ramirez, Sunil Shah, Lynda Ziegler, Paula Campbell, Gregg Ander, Carlos Haiad, Juan Menedex, Scott Mitchell, and Devin Rauss of SCE, Lena Hansen of Rocky Mountain Institute (RMI), Tom McDaniel, Jack Peurach, and Carl Lenox of SunPower, Hung-po Chao of NEISO, George Lee, and Neil Fromer of Caltech for helpful comments and input. This work was supported by NSF NetSE Grant CNS 0911041, ARPA-E Grant DE-AR0000226, Southern California Edison, National Science Council of Taiwan, R.O.C, Grant NSC 101-3113-P-008-001, Resnick Institute, and Okawa Foundation.
Group:Resnick Sustainability Institute
Funding AgencyGrant Number
NSF NetSECNS-0911041
Southern California EdisonUNSPECIFIED
National Science Council (Taipei)NSC 101-3113-P-008-001
Resnick Sustainability InstituteUNSPECIFIED
Okawa FoundationUNSPECIFIED
Subject Keywords: PV adoption; Distributed energy adoption; Electricity rate spiral
Record Number:CaltechAUTHORS:20131213-111904382
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Official Citation:Desmond W.H. Cai, Sachin Adlakha, Steven H. Low, Paul De Martini, K. Mani Chandy, Impact of residential PV adoption on Retail Electricity Rates, Energy Policy, Volume 62, November 2013, Pages 830-843, ISSN 0301-4215, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:42998
Deposited By: Ruth Sustaita
Deposited On:13 Dec 2013 21:06
Last Modified:10 Nov 2021 16:31

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