When Does Storage Complement Solar? Investment and Cost Recovery under Advanced Net Metering

Abstract

We examine the joint PV and storage operational and investment decisions of a prosumer under net energy metering (NEM) and peak/off-peak tariffs. Legacy NEM compensates net exports at the retail rate over a netting period, typically under time-invariant pricing. To better reflect system costs, tariff features are being reconsidered, with many U.S. states adopting time-varying prices and export compensation below the retail price. We formulate the prosumer decision problem as a cost minimization problem with charge/discharge, PV investment, and storage investment decisions. We analytically derive the optimal decisions based on the tariff's membership in one of six regions that partition the tariff space. Using these solutions, we examine the relationship between PV and storage, identifying when they are complements or substitutes. Furthermore, we identify the relationship between private DER incentives and the distribution utility's (DU's) net cost of serving the prosumer. For both storage and PV, when investment costs are greater than the costs of serving the customer, there is no tariff where investment in PV and storage decrease non-adopter bills. Under the same conditions, complementarity between PV and storage decreases DU cost recovery for a given tariff. In a Massachusetts-based case study, we validate our theoretical findings by connecting tariff design features to DER interaction, the DU's net cost, and DER adoption in a stochastic, multi-prosumer, and multi-period setting.