Policies and Incentives for Promoting Distributed Solar Generation: Impact on Electric Power Infrastructure

Abstract

Distributed solar generation (DSG) has grown in popularity in the last decades and is attracting a growing number of adopters. With the continuously decreasing cost of photovoltaic (PV) cells and battery storage technologies, DSG systems are often cost-effective, in addition to being reliable and sustainable. DSG can offer many benefits to the electric power infrastructure by improving the resilience of the electric grid against power disruptions; improving sustainability using renewable solar energy; and reducing carbon emissions. Accordingly, several federal and local policy incentives are available to motivate DSG adoption. However, the growing penetration of DSG represents a shift from central decision-making by independent system operators (ISOs) to distributed generation expansion decisions by consumers, which creates uncertainty in estimating future demand and market trends. If not planned well, this problem may be exacerbated by policy incentives. As such, the goal of this paper is to investigate the effect of policy incentives on the adoption of DSG, and the electric power infrastructure and market. This was achieved by developing a system of systems (SoS) framework that can simulate electric power networks affected by incentivized adoption of DSG. A case study using real data and a modified IEEE six-bus system was used to test the model under different conditions of rebates or tax credits and loans with reduced interest. The results show that incentives at one location can have widely varying effects on other locations on the grid. In many cases, introducing incentives may discourage DSG adoption in other locations due to the decreasing prices caused by lower demand from the grid. In other cases, incentives may have the opposite effect, as electricity prices increase and encourage adoption of DSG. The outcomes of this paper support the need for careful consideration of the effect of DSG incentives to fully capitalize on their capabilities and improve the electric power infrastructure.