The Value Challenge: Benefits and Costs of Solar

Oct. 4, 2014 by Sherry Stout

The benefits and costs of distributed generation photovoltaics (DGPV) has become a trending topic among solar renewable energy professionals and policymakers. Currently, several jurisdictions are trying to develop a method for valuing solar while other locations are trying to determine the fairness of net energy metering (NEM) policies based on the benefits and costs of solar. Almost everyone agrees that this is not an easy question.

NREL has been analyzing this question in search of fact-based answers. Whether providing technical assistance to energy offices, writing reports, and developing case studies, the research teams at NREL have found that there is not a “one size fits all” solution to this problem. Every jurisdiction is unique. Therefore, our analysts have focused on finding methodologies that jurisdictions can use to determine how to calculate benefits and costs of DGPV in their own unique contexts.

To this end, NREL recently released a report titled, "Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic Generation to the U.S. Electric Grid," by distributed generation experts Paul Denholm and Robert Margolis The report aims to inform regulatory decisions by providing information to utilities, policymakers, and other stakeholders to help them maximize benefits and minimize costs of DGPV. The authors are careful to note that their effort does not estimate the actual value of DGPV or recommend a particular approach for calculating this value.

The technical report is broken down into seven categories of benefits and costs. Valuation options are presented within each category. These methodologies are arranged by complexity, allowing the decision maker to choose methods that best fit their needs, resources, and capabilities. This approach speaks to the complexity of the valuation question, recognizing that a single tool or method will not be able to fully capture the interactions among generators, distribution and transmission systems, and regional grid systems.

The question of how to value solar benefits and costs is likely to grow and evolve as more and more solar is added to the grid. NREL's Solar Technical Assistance Team is available to inform policymakers and other stakeholders as they make difficult choices about how best value solar in their contexts. For assistance on the benefits and costs of distributed solar, please contact the Solar Technical Assistance Team at