Value of Solar (VOS) Tariff

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Minnesota now has net metering based on the average retail rate, but MN is moving towards an alternative VOS tariff for investor owned utilities applying to grid tied systems. The analysis indicates that the rate payable to owners of grid tied system likely will increase substantially over the current net metering rate. A final rule is expected to be published in the next few months.

In a nutshell, an approved VOS tariff will "take into account the following values of distributed PV: energy and its delivery; generation capacity; transmission capacity; transmission and distribution line losses; and environmental value. The legislation also mandated a method of implementation, whereby solar customers will be billed for their gross electricity consumption under their applicable tariff, and will receive a VOS credit for their gross solar electricity production."

"While NEM [net metering] effectively values PV-generated electricity at the customer retail rate, a VOS tariff seeks to quantify the value of distributed PV electricity. If the VOS is set correctly, it will account for the real value of the PV-generated electricity, and the utility and its ratepayers would be indifferent to whether the electricity is supplied from customer-owned PV or from comparable conventional means. Thus, a VOS tariff eliminates the NEM cross-subsidization concerns. Furthermore, a well-constructed VOS tariff could provide market signals for the adoption of technologies that significantly enhance the value of electricity from PV, such as advanced inverters that can assist the grid with voltage regulation."

It will be very interesting to see how this finally plays out. Participants in the VOS process have involved a wide spectrum of interests, from large utilities to ratepayers, and including a variety of interest organizations. Minnesota is the first state to move in this direction.

For more info see: https://mn.gov/commerce/energy/topics/resources/energy-legislation-initiatives/value-of-solar-tariff-methodology%20.jsp

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