As the U.S. electric power industry unbundles, the industry and its regulators grapple with two big questions concerning the degree to which distribution services should be unbundled. First, what...
Photovoltaics: A Dispatchable Peak-Shaving Option
fairly representative of utilities that will not experience capacity constraints in the near future. t
John Byrne is director, Young-Doo Wang is associate director, and Steven Letendre is a research associate at the University of Delaware's Center for Energy and Environmental Policy. Ralph Nigro, formerly of Delmarva Power & Light, currently works with a consulting firm, the Applied Energy Group. The research used in this article was partially supported by the National Renewable Energy Laboratory under subcontract XR-2-11248-1. The authors would like to thank William Wallace (NREL) and Howard Wenger (Pacific Energy Group) for their criticisms and comments, and to acknowledge Steven Hegedus (Institute of Energy Conversion) and Chandrasekhar Govindarajalu, Kyunghee Ham and In-Whan Jung (Center for Energy and Environmental Policy) for their technical assistance.PV-DSM Versus Batteries OnlyAn alternative to PV-DSM that can provide dispatchable peak shaving capacity is a battery-only system, which would use offpeak base-load generating units to charge a bank of batteries. The stored energy (minus round-trip losses) would then be available for peak-load dispatch. An NPV analysis showed that for a low demand-charge scenario ($100/Kw-year demand charge and 3.0 cent/Kwh energy rate) the battery-only system was more economical; for an intermediate demand-charge scenario ($160/Kw-year demand charge and 3.5 cent/Kwh energy rate) the PV-DSM system was slightly more economical; and for the high demand-charge scenario ($200/Kw-year demand charge and 6.0 cent/Kwh energy rate), the PV-DSM system would be preferred. The intermediate demand-charge scenario is representative of most summer-peaking utilities in the United States.
There are economic and other advantages of a PV-DSM system that go beyond direct benefit-cost comparisons. For example, compared to a battery-only system, a dispatchable PV system avoids the risk of higher fuel costs. Because it is a zero-emission technology, it also avoids the costs associated with future air-quality regulations. And, because the PV array, as well as its battery unit, supply energy at the time of dispatch, the size of the battery bank its considerably smaller than for the battery-only option, thereby reducing maintenance requirements.
* The benefit-cost ratio reported here includes tax benefits. Utilities and regulators commonly use a Total Resource Cost (TRC) test to evaluate the benefits and costs of DSM. This test excludes tax credits and subtracts tax deductions (e.g., for depreciation) from capital costs. If the TRC approach is used, the benefit-cost ratio decreases from 66 to 48 percent ($45,690 in NPV benefits versus $95,690 in NPV net costs). Since unregulated businesses often treat tax savings and credits as benefits in benefit-cost analyses of capital-intensive investments, we believe 66 percent is the more useful value for comparison purposes. Some analysis have called for a revision of the TRC calculation in the case of customer-sited renewable energy technology so that tax savings can be recognized as benefits (see Howard Wenger, Tom Hoff and Richard Perez. "Photovoltaics as a Demand-Side Management Option: Benefits of a Utility-Customer Partnership". Presented at the World Energy Engineering Congress, Atlanta, Georgia, October 1992).
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