Distributed Renewable Energy Operating Impacts and Valuation Study

Executive Summary
In contrast to allowing the market to drive value, the Study also examined how APS might target
discrete locations where to deploy – or encourage – solar DE placement. This Target scenario
was based on the High Penetration Case, but assumed that APS could strategically deploy solar
DE. Additionally, a sensitivity case was developed to the High Penetration Case which assumed
all commercial photovoltaic (PV) deployments would utilize single-axis tracking PV technology
in lieu of flat plate PV technology. This sensitivity was intended to reflect the theoretical upside
or maximum value solar DE could deliver. As indicated above, the Study was developed to
analyze value for discrete scenarios, which included three discrete target years – 2010, 2015 and
2025.
Study Results
Value Calculation
The Study assessed the following methods to derive economic value from solar DE deployment:
• Quantify the savings from avoided or reduced energy usage costs due to solar DE
deployment, based primarily on reduced fuel and purchased costs.
• Quantify the savings from reduced capital investment costs resulting from solar DE
deployment, including the deferral of capital expenditures for distribution, transmission
and generation facilities
• Estimate the present value of these future energy and capital investment savings due to
solar DE deployment.
• Consider the impacts of various qualitative factors that will impact solar DE deployment.
The Study approach to assessing value separated capacity and energy savings. Capacity savings
represent value in terms of either deferral or avoided investment costs by the utility, while energy
savings represent both immediate and ongoing cumulative benefits associated with the reduction
in the energy requirements of the utility.
The methodology utilized for the Study is consistent with the revenue requirement approach for
capital investment economic evaluations developed by the Electric Power Research Institute
(EPRI), which is widely accepted in the utility industry. The methodology recognizes all
elements of a utility’s cost to provide service, including energy components (fuel, purchased
power, and operating and maintenance [O&M] expenses and taxes) and capacity components
(capital investment depreciation, interest expense and net income or return requirements).
The value calculations measure the reduced energy and capacity costs that APS will not incur if
solar DE is successfully deployed. The energy components and operational cost savings result
from reduced fuel, purchased power, and reduced line related losses associated with reduced
production requirements on the APS system due to solar DE deployment. Additional reductions
in fixed O&M requirements for APS were quantified and included as annual cost savings. These
values were used to estimate annual energy savings and cost reductions for the total entire APS
system.
The capacity savings associated with solar DE deployment required a more complicated
evaluation framework to calculate estimated savings for target years of the Study. The Study
identified reduction or deferral in total capacity investments in distribution, transmission, and
Distributed Renewable Energy Operating Impacts & Valuation Study
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