Assessing the economic value of renewable distributed generation in the Northeastern American market

Incentive programs and tax rebates are commonly offered to offset the high initial costs of small-scale renewable energy systems (RES) and foster their implementation. However, the economic costs of RES grid integration must be fully known in order to determine whether such subsidies are justified. The objective of this paper is to assess the economic value of RES, including their environmental benefits, using hourly generation information in conjunction with hourly wholesale price data. Reaching the paper′s objective will provide a better estimate of the bias that could result from neglecting 1) the time pattern of the hourly wholesale price, 2) the impacts of carbon taxes on the hourly wholesale price and 3) the value of the marginal hourly GHG emissions. Selected RES include two types of grid-connected photovoltaic panels (3 kWp mono- and poly-crystalline) and three types of micro-wind turbines (1, 10 and 30 kW) modeled for different climatic conditions in the province of Quebec (Canada). The cost of electricity is based on the technical performance of these RES using a life cycle costing methodology. The economic value of RES electricity is estimated using the hourly wholesale electricity price in Northeastern American markets in 2006–2008. Results show that distributed generation (DG) has no economic benefits using the selected RES, even with a US$100/tonne of CO₂-equivalent carbon tax. This finding remains the same when the value of the avoided GHG emissions is fully internalized, except for one scenario (micro-wind 30 kW). Our results are key to understanding the extent to which subsidies for distributed RES can be economically sustainable when the latter are integrated into regional networks driven by centralized electricity production.