The effect of rate design on power distribution reliability considering adoption of distributed energy resources

Electricity rates are a main driver for adoption of Distributed Energy Resources (DERs) by private consumers. In turn, DERs are a major component of the reliability of energy access in the long run. Defining reliability indices in a paradigm where energy is generated both behind and in front of the meter is part of an ongoing discussion about the future role of utilities and system operators with many regulatory implications. This paper contributes to that discussion by analyzing the effect of rate design on the long term reliability indices of power distribution. A methodology to quantify this effect is proposed and a case study involving photovoltaic (PV) and storage technology adoption in California is presented. Several numerical simulations illustrate how electricity rates affect the grid reliability by altering dispatch and adoption of the DERs. We further document that the impact of rate design on reliability can be very different from the perspective of the utility versus that of the consumers. Our model affirms the positive connection between investments in DERs and the grid reliability and provides an additional tool to policy-makers for improving the reliability of the grid in the long term.