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Assessing the financial impacts of distributed energy on load serving entities

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  • Wang, Zeyu
  • Negash, Ahlmahz
  • Kirschen, Daniel

Abstract

This article analyzes the financial impact of distributed energy resources (DERs) owned and operated by commercial customers on the load serving entities (LSEs). DERs reduce the customers' electricity bills and hence the revenues collected by their LSE. However, changes in customer demand profiles can potentially reduce the aggregated system demand profile, and therefore, reduce the LSE's costs in wholesale markets. Analysis of these financial impacts indicates that the LSE's lost revenue ultimately outweighs its reduced expenses. This is largely due to a significant reduction in revenue from demand charges. Dispatchable DERs, including energy storages and demand response, result in more financial losses for LSEs than photovoltaics. The financial losses LSEs face indicate that redesigning commercial customer tariffs is necessary in order for LSEs to accommodate customer owned DERs properly. Several suggestions on modifying commercial tariffs are presented.

Suggested Citation

  • Wang, Zeyu & Negash, Ahlmahz & Kirschen, Daniel, 2015. "Assessing the financial impacts of distributed energy on load serving entities," Energy Policy, Elsevier, vol. 86(C), pages 380-392.
    • Handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:380-392
    DOI: 10.1016/j.enpol.2015.06.036
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    2. Nikolaidis, Alexandros I. & Charalambous, Charalambos A., 2017. "Hidden financial implications of the net energy metering practice in an isolated power system: Critical review and policy insights," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 706-717.

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