Recent federal decisions allow new options for state DG policy

The Interstate Renewable Energy Council, Inc. (IREC) has released a concept paper that considers states’ ability to expand options for distributed generation (DG) technologies. Due to the rapidly growing appetite for solar and other forms of renewable and alternative energy in the U.S., developers, utilities and policymakers are seeking new approaches that could appropriately value the locational benefits of DG. The 1978 federal Public Utilities Policy Regulatory Act (PURPA) may provide a solution that supports greater DG development close to load, where DG value is highest.

This paper, Unlocking DG Value: A PURPA-based approach to promoting DG growth, explores benefits that can be quantified and incorporated into the development of PURPA-based avoided cost rates. “This approach may allow states the flexibility to accurately reflect many of the positive contributions of distributed generation,” said Jane Weissman, president and CEO of IREC. “IREC has been a thought leader on clean energy and policy development for more than 30 years.”

A comprehensive PURPA-based approach to DG policy design would incorporate many as-yet-unquantified benefits of exports to the distribution system, including line-loss avoidance; the ability to make smaller capacity additions that more closely follow incremental load changes; the deferral or avoidance of utility capital expenditures; and the environmental benefits of displacing fossil-based resources.

This paper describes several recent Federal Energy Regulatory Commission (FERC) decisions that have provided the needed justification to value the benefits of DG facilities and it discusses the advantages and disadvantages of such an approach. The paper concludes that several considerations may need to be addressed before PURPA could become a viable option for promoting DG growth in many states.

“This paper essentially explores the possibility for state policymakers to re-evaluate and revitalize PURPA as another option for the policy toolkit,” said Kevin Fox, lead author of the paper.  “While there may still be hurdles to deploying this policy option in a manner that would support widespread DG growth, recent movement in this direction is promising.”