Introduction of distributed energy resources disscussion of pricing proposalThe Energy Landscape is evolving together with society. Only a decade ago, fossil fuels and traditional generation were ruling the market, and huge investments in large plants were made all over the world. Now, the generation mix in all countries is moving towards an increase of the renewable energy portfolio. Countries are seeking to declare themselves carbon-neutral, and expensive generation assets such as Combined Cycle Plants are heavy burdens for their owners.
In the beginning of 2000s, environmental concerns were behind this trend. But now, with more mature technologies, there are also pure economical drivers. It is widely said that renewable energies are reaching grid parity, the turning point where they get more attractive than conventional technologies in terms of cost.
The fact that renewable energy can be connected near where it is consumed (the loads), at the distribution level, and can be done in small, decentralized installations completely changes the game. We are moving from a traditional centralized generation, transmission and distribution scenario to a distributed and decentralized approach where anybody can be a producer: Distributed Generation, Grid Edge or Grid 2.0, with implications at technical, business and regulation levels.
Specifically, pricing strategies have to evolve. The electricity business has been based so far on the assumption that the flow of power is always one-way, from generation into the networks and eventually reaching the customers. However, Distributed Generation implies that the energy can flow in both directions. Therefore, a new tariff system must be carried out considering all costs and benefits associated.
In order to adapt to this paradigm shift, some institutions are developing initiatives, with the lead of the US Public Administrations, addressing all these aspects in innovative ways, and of course including new pricing schemas. Although New York and California have made the more visible efforts, Texan utility ERCOT´s proposal provides a very feasible pricing strategy based on their already existing infrastructure of nodes where traditional generation is priced.
Adapting the market and the pricing structure to the Grid Edge can bring benefits also for the utilities and the society: mechanisms for avoiding or delaying infrastructures are now available.
The first part of this paper (Grid Parity) deals with energy costs, overlooking to the current situation of different technologies, focusing on renewable sources. LCOE benchmarking is used to discuss the achievement of Grid Parity.
The second part (New Paradigms in Distribution) develops the concept of Grid Edge, its opportunities and challenges, and presents some of the most interesting initiatives impulsed by the US Agencies.
The third part (Energy Billing in the Grid Edge: Beyond Net Metering) focus on how the updated pricing strategies in Grid Edge should look like, and uses the case of ERCOT to display advantages, drawbacks and weak points.
The last part (Future Research: more sophisticated pricing schemas) points out some unresolved issues and how other initiatives can tackle them, as a means to open new ways for research.