Three Essays on the Electricity Market, Distributed Generation, and Retail Tariff Designs
Creators: Guo, Yiang
Publisher: name: University of Alberta Library
Year: 2024

<p>The integration of distributed energy resources (DERs) such as solar panels and batteries is crucial for the modernization and sustainability of the electricity grid. These technologies can significantly enhance grid resilience and flexibility by diversifying energy sources and reducing reliance on fossil fuels. The rapid expansion of solar and battery technologies in the past decade, driven by falling costs and supportive policies, underscores their potential to transform the electricity system. Understanding how to integrate these DERs into the electricity grid is of great importance. This thesis aims to explore the barriers to solar and battery integration and investigate how economic mechanisms, such as retail rate designs, can address these challenges and facilitate a smoother transition to a more sustainable energy system.</p>

<p>The first chapter of this thesis investigates whether real-time pricing (RTP) and carbon taxes can reduce carbon emissions associated with battery systems. Behind-the-meter (BTM) or customer-sited battery systems can perform energy arbitrage based on the retail rate they face. Under typical time-of-use pricing, batteries will generally increase emissions because the price signal they face does not strongly correlate with the emissions signal in the jurisdictions we consider. By incorporating RTP and carbon taxes into the retail tariff structure, we show that batteries can effectively reduce carbon emissions, as the emissions avoided through battery discharge can exceed the emissions incurred from charging and energy losses. However, RTP and carbon taxes will also decrease the private financial value of a solar-plus-storage system, leading to lower investment levels.</p>

<p>The second chapter of this thesis examines how transmission congestion affects locational marginal emissions factors (MEFs) and locational environmental values of solar and batteries. MEFs measure the increase in carbon emissions if electricity demand increases by 1 MWh. We use a regime-switching model to estimate the MEFs with or without congestion and use the congestion-weighted MEFs to calculate the environmental value of solar and batteries. We find that the emissions reductions from a rooftop solar panel located in a renewable-rich region are substantially reduced when congestion occurs frequently. In contrast, a battery can utilize variations in MEFs with and without congestion, leading to higher emissions reduction potentials.</p>

<p>The third chapter of this thesis investigates whether retail electricity customers will adjust their maximum demand in response to changes in the level of maximum demand charges (MDCs), which charge customers based on their maximum demand rather than kWh usage. MDCs have been proposed by several utilities as a way to recover fixed costs when more customers are self-generating electricity using rooftop solar rather than purchasing power from the utilities. The proponents of MDCs claim that these charges can motivate customers to reduce peak demand and, therefore, reduce utility expenditures on grid upgrades. Our study finds that a change in the level of MDCs can have a statistically significant and modest effect on the peak demand for medium-large consumers, such as a medium-sized grocery store.</p>

<p>There are several policy implications of this thesis. First, new retail tariff designs are essential to integrate rooftop solar and batteries into the electricity market. For example, RTP and carbon taxes can be used to reduce storage-induced carbon emissions and alleviate distortions in prevailing rate structures. Second, the environmental values of solar and batteries have substantial locational variations, and policies that facilitate these technologies should account for locational environmental value. Third, MDCs can be used to reduce the maximum demand for the electrical system, but more evidence is needed to understand their overall effectiveness, especially for large customers.</p>