Bridging the Retail-Wholesale Divide In Electricity Markets: The Economics of Distributed Energy Resources
Abstract
Increasing penetration of distributed energy resources (DERs) impacts electric grid
operations and utility revenue requirements. Existing retail rate tariffs for commercial
customers do not align with utilities’ wholesale market purchases of energy, ancillary
services, and capacity guarantees, nor do they efficiently convey resource scarcity
to customers to alter their consumption and DER deployment decisions. This report
seeks to understand the effects that real time pricing has on electricity costs and
incentives for DER deployment for small commercial building owners. Our analysis uses
historical load data from multiple commercial building types throughout New Jersey
to (i) evaluate the relationship between locational marginal prices (LMPs) and consumptive
patterns, and (ii) explore the potential benefit of new electrical rate structures
with increased granularity in the temporal and geographic dimensions. This assessment
of potential savings for customers and utilities can be used to inform future rate
design. Our key findings are as follows: (1) retail rates based on LMPs can benefit
both distribution utilities and their customers; (2) any new rate introduced must
be optional, as varying load attributes at specific sites result in very different
experiences under these rates (i.e., almost half of subject sites are worse off);
(3) utilities can reduce risk by implementing a retail rate with a real-time price
signal.
Type
Master's projectSubject
Electricity MarketsDistributed Energy Resources
Electricity Rate Design
Real Time Pricing
Locational Marginal Prices
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https://hdl.handle.net/10161/9686Citation
Avent, Clayton; Chow, Dan; Lloyd, Matt; Seidenfeld, Josh; & Tomovich, Urosh (2015). Bridging the Retail-Wholesale Divide In Electricity Markets: The Economics of Distributed
Energy Resources. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/9686.Collections
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