disallowances based on ex ante hourly estimates, it will cause customer confusion and frustration. Under Method 2, actual kWh of generation will be closer to the modeled output over a monthly interval, because over a longer period of time, the mismatch between modeled and actual production is more likely to balance out. In response to the IOU rate arbitrage concerns associated with Method 2, the Commission already determined in D.14-05-033 that metering is not required for NEM paired systems and that an estimation methodology would be sufficient while the Commission’s priority of ensuring NEM integrity “balancing with a cost-effective solution.” IREC posits that if rate arbitrage were a serious concern, metering would have been required for all systems and the Commission would not have asked parties to comment on the proposed possible estimation methodologies. We agree with IREC’s assertion and do not believe arbitrage is a concern that favors Method 1 over Method 2. By design, the proposed estimation methodologies offer trade-offs as stated in the November 2014 ACR. While arbitrage is a theoretical concern under both methods, the Commission agrees with IREC that battery charging from off-peak grid energy for later dispatch back into the grid is theoretically possible under Method 2, but would be uneconomical based on current battery costs, current differentials in TOU period pricing, and round trip efficiency losses of 10-20%. That said, the Commission also recognizes that rate arbitrage using grid power may be a greater concern as costs for storage decline, storage technologies improve, and TOU periods change. ORA recommends that we require the IOUs to monitor small storage adoption rates in their monthly NEM transition reporting
disallowances based on ex ante hourly estimates, it will cause customer confusion and frustration. Under Method 2, actual kWh of generation will be closer to the modeled output over a monthly interval, because over a longer period of time, the mismatch between modeled and actual production is more likely to balance out. In response to the IOU rate arbitrage concerns associated with Method 2, the Commission already determined in D.14-05-033 that metering is not required for NEM paired systems and that an estimation methodology would be sufficient while “balancing the Commission’s priority of ensuring NEM integrity with a cost-effective solution.” IREC posits that if rate arbitrage were a serious concern, metering would have been required for all systems and the Commission would not have asked parties to comment on the proposed possible estimation methodologies. We agree with IREC’s assertion and do not believe arbitrage is a concern that favors Method 1 over Method 2. By design, the proposed estimation methodologies offer trade-offs as stated in the November 2014 ACR. While arbitrage is a theoretical concern under both methods, the Commission agrees with IREC that battery charging from off-peak grid energy for later dispatch back into the grid is theoretically possible under Method 2, but would be uneconomical based on current battery costs, current differentials in TOU period pricing, and round trip efficiency losses of 10-20%. That said, the Commission also recognizes that rate arbitrage using grid power may be a greater concern as costs for storage decline, storage technologies improve, and TOU periods change. ORA recommends that we require the IOUs to monitor small storage adoption rates in their monthly NEM transition reporting
161480050.docx