Risk-constrained multi-period investment model for Distributed Energy Resources considering technology costs and regulatory uncertainties

One of the reasons for the emerging adoption of behind-the-meter distributed energy resources (DERs), particularly photovoltaic (PV) and storage, is the impressive decrease in technology costs over the last years together with favorable policy and regulatory environments that created early-stage incentives to the proliferation of these assets. However, when looking at the next decade, the evolution of the regulatory framework and the trajectory of technology costs are difficult to predict. This uncertainty poses a new challenge to prosumers and microgrid owners who are trying to find the best moment to invest in these DERs. In particular, unpredictable changes in the conditions of the investments may translate into economic risks to potential DER adopters, which raises the need for new risk-mitigation methods to support their investment decisions. To address this issue, this paper proposes a multi-period DER investment model with economic risk constraints, considering technology costs and regulatory uncertainties. A case study, involving a large building in California, is used to show that different types of economic risk constraints can affect not only the size, but also the optimal timing of these investments in a multi-year planning horizon with significant DER technology costs and regulatory uncertainties.