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Innovative Solar Business Models Project: Project Overview

RMI’s Role to Help Find Solutions

To ensure sustained growth toward a distributed energy future, it is critical to demonstrate and optimize its value proposition to utilities, customers and regulators alike. To do so, RMI is partnering with the DOE SunShot Initiative, whose goal to enable large-scale deployment of solar energy technologies without subsidies, to investigate innovative business model approaches that align the interests of utilities, technology providers, regulators and customers.

Our Focus

To date, solar business models have stopped short of fully unlocking the value of distributed solar PV by primarily targeting cost reductions in the manufacturing, construction, and financing steps in the value chain. While these cost reductions remain critical, focusing only on low-cost deployment onto the grid without taking into account optimal integration into the grid ignores key drivers of value in the electricity system. Targeting value drivers–location, timing, reliability, flexibility, predictability and controllability–create new opportunities to optimize the delivered value of solar to support the grid and deliver new energy services to customers and utilities alike.

For example, complementing solar PV with combinations of real-time data and predictive modeling, demand response, advanced inverters, or distributed storage can leverage PV’s value from simply an energy resource to provide additional service applications ranging from asset management to ancillary services. Further value can be created and captured by strategically deploying solar to reduce grid congestion and achieve the greatest savings in electricity generation, transmission or distribution investments.

A growing body of work, including demonstration projects and analyses supported by the Department of Energy (DOE), is providing empirically tested data that demonstrate the technical viability of optimally integrating distributed PV to support the grid and provide energy service to customers. However, the ultimate viability of a growing distributed solar PV market will be won or lost on the demonstrable economic net value to key stakeholders, especially utilities.

Key Project Objectives

  • Strategically partner with selected utilities and/or technology partners to assess the costs and values created by distributed solar PV from the perspectives of customers, utilities, and society
  • Identify sources of value and necessary conditions under which that value could be optimized (considering major value drivers: timing, location, reliability, flexibility, predictability, controllability) such as pairing with demand response, smart inverters, and distributed storage.
  • Identify technical and business structures that can unlock value under different regulatory and business environments
  • Understand and evaluate regulatory implications in order to communicate barriers and opportunities to regulators
  • Disseminate lessons learned and best practices created through pilots with the intent of replication and scaling

 Major Project Phases and Timeline

Phase 1

The first phase includes conducting an initial assessment of the existing value proposition of distributed solar PV under existing electricity utility system operations and business models. This initial assessment serves as a foundational platform for later model development, identifying and suggesting pathways toward new business models incorporating distributed solar and other distributed energy resources that can maximize value creation for utilities and customers.

As part of this work, RMI is developing an alpha version of the Electricity Distribution Grid Evaluator (EDGE) model, a MATLAB-based simulation tool designed to better assess the distributed resource value proposition, starting with solar PV. In addition to providing the analysis to serve in the development of solar business model offers for the ISBM project, the model is intended to fill key electricity industry gaps by providing clearer insights to regulators, utilities, customers, and developers about the system-level technical and economic effects of increasing solar PV at the distribution level. 

Phase 2
The second phase focuses on investigating opportunities to optimize and capture the value of solar PV and better align the interests among key stakeholders through selected utility partnerships. As part of this phase, RMI is evaluating current best practices in the solar value chain for increasing value, including approaches for reducing system costs as well as increasing production benefits. RMI is also exploring approaches to enhance existing models and enable companies and organizations in the value chain to leverage core competencies.

Within utility partnerships, the project team is investigating approaches that provide value to multiple stakeholders, including the utility, solar companies, and customers, and can be replicated and scaled. As part of the partnerships, key tasks include:

  • Evaluate necessary conditions under which value could be harnessed through distributed solar PV
  • Identify technical and business structures that could unlock value under different regulatory and utility business environments
  • Craft recommendations for moving forward, emphasizing opportunities for collaboration, and possibly implementing proposed structures

Phase 3
In the last phase of project work, starting Summer 2014, the project team will publish recommendations that document lessons learned from investigated models, including unique ownership approaches, which could enable utility support of distributed solar adoption.
This synthesis of key findings will include an evaluation of identified barriers and solutions, an assessment of potential scalability of investigated options, and stakeholder feedback provided within focus sessions and additional interviews.

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