The Truthy Value of Solar

The folks at
ICF International, who make a lot of their money consulting for utilities, have now weighed in on the Value of Solar discussion with a new paper, auspiciously entitled “The True Value of Solar.” I have read the paper a couple of times now. I have mixed, mostly dubious thoughts.

I am pleased that another utility consulting firm has joined the discussion. In far too many jurisdictions, utilities and their witnesses are advocating positions without any analysis whatsoever. A couple of the witnesses in the recent WE Energies rate case exemplified that approach.

I am under no illusions that the ICF paper is founded on a goal of objectively quantifying the value of solar to the utility and its ratepayers. The report appears intended to offer comfort to utilities that oppose solar market growth by putting them on notice that if they are actually forced to engage in a value of solar analysis, there are ways to make sure the value does not get very big. I support my assessment by noting several troublesome aspects of the report, beyond the tell-tale use of the word “true” in the title of the report. Might I suggest that the term “truthy” would have been more accurate (but definitely not in the rare usage).

1. the quality of seeming to be true according to one’s intuition, opinion, or perception without regard to logic, factual evidence, or the like
the growing trend of truthiness as opposed to truth
2. Rare. truthfulness or faithfulness

The ICF paper performs no “scientific method” approaches. Would it not have been useful if they ran their model against some of the well-documented studies publicly available today--in order to show the directionality and significance of their proposed “true value” methods? Perhaps that is not necessary to secure clients, though. My “feeling” is that this report is likely to produce a very low value of solar for several reasons--I think their potential utility clients will have the same feeling as well. (They telegraphed their punch.)

(1) There is a “straw-man” aspect to the choice of only 5 reports, drawn from the excellent RMI meta-analysis on
“Solar PV Benefit and Cost Studies,” as the basis for pretty much the entire paper. The cited studies were conducted some years ago. Given the improvements in methodology over just the past few years, it is striking that ICF chose such a small, dated set of studies as the foundation for its recommendations. The use of a “head count” analysis to tell us how many of the selected set of studies addressed a particular issue is particularly weak as an analytical foundation (Figure 2). Note that the study does not attempt to reconcile the very real differences in the reports. RMI rightly noted that efforts to draw conclusions from horizontal analysis of the studies would be a bad idea; ICF ignored that guidance.

(2) The study seems fixed on high penetrations of solar. There are no significant penetration costs until you get to high penetrations, at least according to my review of many more than five studies. The CPR PA and NJ report, I believe, assumed a 15% market penetration. Three of the reports are about AZ, where there is a higher than average solar penetration. Even the Argonne study cited in footnote 6 uses a
low penetration value of 8.8%! National penetration rate is about 0.2%. Most of the places where VOS analysis is being discussed are well below 1%.

(3) The study eschews any real evaluation of long-term impacts--sticking to an “annual” approach. This is going to be familiar to solar opponents, and is the best way to minimize solar value (or the value of any emerging technology). It ignores the very real fact that most solar PV operates with little or no maintenance for decades after installation. ICF finds no fuel price hedge value. They support no environmental value beyond compliance costs. They see no value for ancillary services. They find little or no value for T&D offsets due to the small scale and lack of feeder-specific analysis, but lots of cost for high penetration impacts (in spite of the lack of feeder-specific impacts).

(4) Grid support services. I could start and stop with one statement--“
Only a few of the VOS studies ICF examined …”Then, they cite to the Argonne study (8.8% baseline) in footnote 6. Note that in the methodology paragraph, they say that “open questions” remain as to who is responsible for monitoring and control. The implication, I think, is that if the utility does not control it or face it as a direct cost, there can be no value--another oft-repeated theme.

Some other observations:

(a) Not much argument over energy. As I have often said, the biggest fights are over the smaller numbers. Many anti-solar utilities and advocates concede energy value, but only energy value (slightly modified LMP, to be precise). This is consistent with a larger anti-solar agenda that I have seen--that rooftop distributed solar should only receive annualized short-run avoided energy value.

(b) The capacity value discussion seems like a long walk to “confirm” a fairly standard feeling among utilities - “We are long on capacity these days, how can rooftop solar really offer capacity value?” ICF adds the argument that the studies find long-run capacity value are out of sync with today’s low marginal capacity values. They close with “utilities should develop
annual capacity values to be included in the VOS calculations.” (emphasis added) Of course, I argue that the long-run levelized value should be used.

(c) The T&D discussion is a “perfect as enemy of the good argument” - we concede the value but it needs to be measured feeder by feeder. (Passive voice used here with intention--who is gonna do it? Begs the question that few utilities have reported that they keep such granular data--at least not the ones that I have asked.) Note again the apparent use of an LA example for integration costs that assumes a 30% penetration (if I read that right).

(d) The social values argument is pretty lame and probably won’t serve utility consulting customers well. A quick walk through most utility rate cases will find lots of spending on load retention, economic development, etc. If ICF is arguing that economic development and job-creation arguments must now be stripped from all utility spending in rates, I think they will find much larger piles of pork to trim.

(e) The security argument is pretty flimsy--again “only 1 in 5” of the old studies we selected to support our arguments ...   Plus, regulators have this issue high on their agendas. We need utilities and their consultants to advance a more principled and rigorous discussion of security issues, not a sweeping under the rug when it appears that a technology we don’t like might actually help.

Bottom line, I think ICF will continue to get utility work, especially from the utilities who don’t want their customers to install solar. But if regulators are asking them to account for value of solar, they might not be well-served by such a transparent effort at undervaluing solar - no matter how
truthy the conclusions feel.