A Residential & Commercial Solar Installation Company Solar Repair & Maintenance

A simple look at key factors to evaluate the solar energy system contribution.


After over a century of experience in modeling the financial and societal impact of large, centralized power generating systems, utilities still differ in their approach to valuing generators and associated hardware to supply power to each home or business.

The challenge in modeling and estimating value for distributed energy resources (DER) and especially distributed photovoltaic (DPV) comes from two areas. It is complicated to look at the output of distributed resources in exactly the same way as a centralized power unit. And the impact of distributed generation on the grid and distribution network is different. This first post in a series about the value of solar and DER in general is a primer to explain terms and how to view the market.

What is Distributed Generation?

In order to establish a value contribution for most homeowners and small businesses, what we define as distributed generation is best limited to small, self-contained energy sources located near the final point of energy consumption. In this way the output is very different from a centralized power unit. To the existing network of generators and supply systems (wires), DER looks the same as demand. When a home or business is generating power, the system only sees either a reduction in demand or flat demand depending on all other local conditions. The main distributed generation sources are as follows:

Solar PV – Any solar energy system installed for the use of a single home or business, or for the participation of a few homes or businesses (community solar) will be considered as DPV. Larger systems referred to as utility scale have much in common, but also some differences. We will address those in separate posts.

Small-scale wind – The largest portion of power generated from wind in the U.S. is at the utility scale. But some homeowners, farms, and even businesses benefit from one or a few turbines where conditions are suitable. Because these systems produce power at different times and with different variation than solar energy systems, they are usually treated separately. Here, when we refer DER we are mostly considering Solar PV and Small-scale wind.

To a much lesser degree there may be other energy sources that contribute to the onsite production of electricity.

Combined heat & power (CHP) – Some businesses that have existing fuel sources or already use heat in their processes may also benefit from installing a local CHP unit.

Others (i.e., fuel cells) – In a few cases hydrogen/methane or biomass sourced generation may be employed near the point of use. This is a very small fraction now and is predicted to grow slowly. So most of our attention is focused on solar energy systems and to a lesser degree wind.

What has value?

We first take a look at the areas where most agree that DER/DPV have impact. Some of the more important value factors or categories that are most common in anaylsis and calculations is below:

Avoided Generation – This is an energy measure. The greater the level of DER/DPV the less existing plants must operate and less fuel must be burned for coal and natural gas systems. Nuclear plants do not cycle up and down readily, and are rarely a part of the avoided costs calculations. These plants most often operate steadily at near capacity, and are therefore called baseload generators. Most regions supplied by nuclear power use that output to cover a portion of demand 24 hours, every day. Other generators including DER/DPV cover the amount that fluctuates.

Capacity Value – related to the avoided generation, but this calculation includes the timing. To a utility, capacity has added value if it can be counted on at the time of need – that is, it is “available” to meet demand. In some regions there is little distinction made between avoided generation and capacity. In others there is additional value given to generation that helps meet increased demands, or peaks. Typically, this means the cost, and hence value of power during a peak period is higher. For DPV, the Capacity Value is generally assigned to the collective output of a distribution region. A single home doesn’t impact it much, but as more homeowners adopt solar, the value eventually rises. In a region where summer days may be long and hot, for example prompting a large increase in air conditioning demand, DPV may have a Capacity Value of 25% or 35%. This means that to the utility, they can count on upwards of 35% of the DPV output on any given day to cover the demand in the region.

Effective Load Carrying Capability (ELCC) – This is a measure closely related to Capacity Value and to some utilities it may be the same. Basically, it is a measure of the amount of additional load that can be met with the same level of reliability after adding DPV to a network. It is added here simply because future posts will refer to both.

Avoided Transmission & Distribution CostsTransmission and distribution of power (T&D) is often managed separately from the generation of electricity. Different agencies or authorities, usually referred to as grid operators, are responsible for the reliable supply of electricity. They coordinate with multiple utilities and municipal authorities to ensure demand is met without interruption. The closest analogy may be to view grid operators (or Regional Transmission Operators – RTO) as managing railroad tracks while different railroad companies move products. In Ohio and Pennsylvania that would be PJM. For electricity, the RTO governs the flow, as well as forecasting the near and future demands. And they therefore have a significant role in the maintenance and capacity of the T&D networks. Strategically located DER/DPV can relieve T&D capacity constraints by providing power close to demand and potentially deferring investments. Anything that impacts the need for more or improved T&D capacity is a cost.

Avoided Transmission & Distribution Losses – T&D of electricity is similar to moving water through a pipe. The more water you want to push through one pipe, the more pressure you need. And the longer the distance the water flows, the more pressure you need to cover losses. Likewise, T&D losses are due to energy dissipated in the equipment used for transmission. From wires to substations and components such as transformers, the more electricity that is conveyed, the greater the losses mostly through heat. In most calculations, a loss of 10% is pretty common. Looking in the reverse, that means that to supply a home with the same 1,000 kWh supplied by a roof mounted solar energy system requires a distant power plant to produce at least 1,100 kWh, if not more. This is not only important for efficiency. Think about how those costs may be recovered.

Valuing DER/DPV

As we move on to more in depth stories about valuing solar, here are some of the benefits we cover. You can use your imagination now or research as you like to understand more about how your current or planned investment impacts the power network. Not only might you be saving money, but in some ways you may be helping your neighbors, community, and utility besides the environmental benefits.

Defer investing in new plants. This is mostly related to capacity. It is possible that DER/DPV can help delay or eliminate investments in upgrading or replacement due to aging, also.

Reduce costs associated with T&D. A direct result of meeting some portion of local demand with DER/DPV is the reduced need to generate and transmit that power from a great distance. As noted above, the more that must be transmitted, or pushed through the wire, the more losses occur.

Generation capacity value is likely to change significantly as more DPV, and more renewable and distributed resources of all kinds are added to the system. If we look only at wind and solar as DER sources, solar peaks during the middle of the day and wind usually peaks as the day cools and into the evening. So, it is easy to imagine there are beneficial mixes of these two sources to provide more capacity and ELCC throughout a 24-hour period. Even varying the orientation of DPV can improve these measures within a region. See the diagram and the way that mixing south-facing and west-facing solar energy systems can help broaden the contribution to covering peak load.


Interested in learning more about YellowLite’s renewable energy solutions? Reach out to us today to learn more. 



Start Saving on Electricity Bills

Contact YellowLite today & receive your free solar estimate!