IEEE Power & Energy Magazine - May/June 2020 - 82

Even if obvious, the importance of the
specifics of any particular rate design
in assessing the potential impacts on
DER deployment cannot be overstated.
This includes details such as the timing
and peak-to-off-peak pricing differential under time-based rates, the choice
between intermittent versus continuous
incentives to increase midday load, the
use of coincident versus noncoincident
demand charges, the specific price paid
for grid exports under net billing rates,
and whether or not EV-specific rates are
submetered versus applied on a wholehouse basis. Details such as these dictate not only the magnitude but, in some
cases, also the directionality of the financial effects for certain DERs.
Second, flexible DERs generally be--
nefit more under emerging rate design
trends. DERs exist along a continuum of
flexibility, ranging from
those with largely uncontrolled load shapes
[energy efficiency (EE)
and PVs] to those with
some level of discretion
in how they are operated (EVs and certain
other forms of electrification) to fully dispatchable resources (storage
and certain forms of DR
and electrification). Most
emerging rate reforms
tend to support a greater
deployment of flexible
DERs (e.g., storage and DR), while often
constraining the adoption of less flexible
resources (e.g., PVs and EE). This outcome is driven by the general movement
toward rate structures with greater temporal granularity, which naturally tends
to encourage price-responsive resources.
Third, emerging rate designs generally encourage load building (during
specific times of the day). Although only
one of the five rate design trends noted
in this article is explicitly intended as a
tool for load building (see the "The Development of Rates and Programs to
Promote Midday Load Building" section), most of the other rate design trends
also incentivize load building, whether

in the form of EVs, other types of electrification, or energy storage (which increases net electricity consumption due
to round-trip losses and ancillary loads).
The incentives for load building are often concentrated during particular times
of the day; depending on their design,
three-part rates may encourage load
building across a fairly broad range of
hours. In contrast, the emerging rate designs discussed in this article generally
tend to constrain the growth of DERs
that reduce the consumption of gridsupplied electricity (EE and, especially,
PVs). This outcome is driven partly by
the general movement toward greater
levels of attribute unbundling and temporal granularity that better reflect
marginal costs. Load building is also a
natural response on the part of electric
utilities to slowing sales growth and
ongoing concerns about
revenue erosion from
EE and PVs. Electrification is also a strategy that
some state policy makers and regulators have
endorsed for addressing their greenhouse gas
abatement goals.
In addition to DER
deployment, these rate
reforms have broad implications: for utilities,
in terms of their operations, planning, and financial health; for customers, in terms of distributional bill
impacts within and across customer
classes and their opportunities to manage energy costs; and for society more
broadly, in terms of the economic and
environmental impacts associated with
the provision of energy services. Accordingly, regulators engaged in retail
rate reform efforts will need to weigh
these impacts against each other, while
balancing other considerations and
stakeholder perspectives as they establish utility rate structures.

The incentives
for load
building
are often
concentrated
during
particular times
of the day.

ieee power & energy magazine

Acknowledgments
This work was supported by the U.S.
Department of Energy Solar Energy

Technologies Office under Lawrence
Berkeley National Laboratory contract
DE-AC02-05CH11231. The U.S. Government retains, and the publisher, by
accepting the article for publication,
acknowledges that the U.S. Government retains a nonexclusive, paid-up,
irrevocable, worldwide license to publish or reproduce the published form of
this manuscript, or allows others to do
so, for U.S. Government purposes.

For Further Reading
N. Da rghouth, G. Ba r b o s e, and A.
Mills, "Implications of rate design for
the customer-economics of behind-themeter storage," Berkeley Lab Rep., CA,
2019. [Online]. Available: https://emp
.lbl.gov/publications/implications-rate
-design-customer
D. Glick, M. Lehrman, and O. Smith,
"Rate design for the distribution edge:
Electricity pricing for a distributed resource future," Rocky Mountain Inst.,
Boulder, CO, 2014. [Online]. Available:
https://rmi.org/insight/rate-design-for-the
-distribution-edge-electricity-pricing
-for-a-distributed-resource-future/
R. Hledik, "Rediscovering residential demand charges," Electricity
J., vol. 27, no. 7, pp. 82-96, 2014. doi:
10.1016/j.tej.2014.07.003.
A. Satchwell, P. Cappers, and G.
Barbose, "Current developments in retail rate design: Implications for solar
and other distributed energy resources," B e r k el ey Lab Rep., CA, 2019.
[Online]. Available: https://emp.lbl
.gov/publications/current-developments
-retail-rate
A. Satchwell and P. Cappers, "Evolving grid services, products, and market opportunities for regulated electric utilities," Berkeley Lab Rep., CA,
2018. [Online]. Available: https://emp
.lbl.gov/publications/evolving-grid
-services-products-and
T. Stanton, "Review of state net energy metering and successor rate designs," National Regulatory Res. Inst.,
Washington, D.C., 2019. [Online]. Available: https://www.naruc.org/nrri/nrri
-library/research-papers/electricity/
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