California Time-of-Use (TOU) Transition: Effects on Distributed Wind and Solar Economic Potential

Ashwin Ramdas, Kevin McCabe, Paritosh Das, Benjamin Sigrin

Research output: NRELTechnical Report


Time-of-use (TOU) retail energy rates price electricity differently by the time of day, thereby communicating to consumers the costs of supplying electricity throughout the day. This study evaluates the impact of Decision D.15.07-001, which mandates a transition to default TOU rates in California, on the economic viability of behind-the-meter distributed wind and solar systems. We assess viability through 'economic potential,' a metric we define as the amount of generation capacity that exceeds a specified rate of return (5.4%) and therefore would be economic to construct; we do not attempt to project deployment or adoption. In addition, we identify cost improvements needed for a robust distributed wind market and the specific counties and sectors with substantial economic potential. Over the scenarios considered, model results indicate realistic pathways to reaching a robust, 1-GW distributed wind market in California though solar economic potential was found to be substantially larger than that of wind. Distributed wind's capacity factor does not appear to be strongly correlated to the periods of peak electricity prices as set by utility's TOU periods. Because of this disassociation and nuances in the billing of tiered electricity, the transition to TOU is projected to moderately decrease distributed wind economic potential and increase that of distributed solar. However, a limitation of this analysis is that it does not factor in the change in rate values as California works toward its goal of 100% renewables. As variable renewable energy penetration increases to meet this goal, our results suggest that wind generation will become increasingly correlated to periods of peak electricity prices. Increased variable renewable penetration, especially of solar, is likely to shift periods of higher electricity demand to later in the evening, and any periodic adjustments in TOU periods to reflect these new periods of demand will positively affect the value of wind generation more than the value of solar generation. High distributed wind capital costs are a significant barrier to large scale adoption; we explore the sensitivity of capital cost reductions on distributed wind economic potential. We find that distributed wind economic potential increases substantially in 2020 for capital costs below 3 dollars/W - particularly for residential- and commercial-scale turbines; capital costs must fall below 2 dollars/W in 2030 to support a significant increase in economic potential, in large part due to the expected continued cost reductions in solar. We identified an upper limit to the state's behind-the-meter distributed wind economic potential at approximately 5 GW. Overall, California exhibits over 1 GW of economic potential for distributed wind by 2030, even with the moderate decrease in potential under TOU. This potential is represented mostly by Southern California, which sees the most notable increase in economic viability as capital expenditure prices decline.
Original languageAmerican English
Number of pages58
StatePublished - 2019

NREL Publication Number

  • NREL/TP-6A20-73147


  • California
  • California distributed wind
  • California TOU
  • dgen
  • distributed generation
  • distributed solar
  • distributed wind
  • TOU rates


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