Maximizing public welfare for the net-metering scheme using prosumer charges – vertically integrated utility case

Abstract

Recent cost development of Photovoltaic system has pushed for increasing penetration of distributed roof-top application. This increased penetration has been supported by different policy schemes. This paper proposes an approach to quantify the impact of the net-metering scheme in addition to a new implementation strategy of net-metering that balances public welfare, utility cost recovery and renewable energy targets. It uses the GAMS and MATLAB software in modelling all actors including consumers, prosumers and the utility itself. It further proposes a mechanism to increase the public welfare in the electricity sector to accommodate solar PV investments driven by net-metering scheme. The proposed public welfare-based approach takes into consideration maintaining a balance between maximizing the solar PV investments while guaranteeing cost recovery of vertically integrated utilities. A model is developed to investigate the performance of prosumer charges in maintaining the required balance. Results show that assigning prosumer charges using the proposed model will have minimum impact on tariff hikes. In addition, the modelling results confirms the similarity of the performance of both implementation of prosumer charges either based on generated energy or contracted capacity and their superior performance compared to the one based on observed capacity. It further recommends increasing the efficiency of the prosumer charges on two levels. The first is to differentiate it based on location as to integrate the network benefits namely reducing losses at the distribution level. The second is to complement it with a monetized certificate of origin that values the environmental value of the net-metered PV energy.