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Who Should Bear the Costs of Advanced Inverters?

Stephanie Wang's picture
Clean Coalition

Stephanie Wang is Regulatory Policy Director for the Clean Coalition. Stephanie is an expert in distributed generation and intelligent grid policy. She received her JD and BA from the University...

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  • Oct 10, 2013

Advanced inverters will soon be required for distributed solar generators across the country. Georgia Power’s latest interconnection agreement, for example, requires that small solar generators use advanced inverters to provision reactive power. Similarly, a group of Western utilities recently endorsed advanced inverters as an effective and affordable tool to regulate voltage and is working to make them mandatory for all new solar facilities within their service territories. While there is clear recognition that advanced inverters offer grid benefits, how to fairly allocate the costs is a topic of hot debate.

Currently, a number of utilities seek to frame advanced inverters as simply a tool to resolve voltage problems caused by solar facilities. Under this argument, many utilities believe solar generators should be responsible for shouldering the costs of using advanced inverters for voltage control. If solar developers must bear these costs, many distributed solar projects may become unviable.

On the other hand, objective experts recognize that advanced inverters enhance overall power system reliability. An Oak Ridge National Laboratory report found advanced inverters to provide substantial benefits to all grid users by provisioning local reactive power, reducing blackouts caused by transmission failures, and other grid issues not related to the integration of renewables. Advanced inverters enable distributed voltage control, which significantly outperforms centralized voltage control. Reactive power suffers far greater line losses than real power, and those losses increase as a line is more heavily loaded (see graphic below). Distributed reactive power from advanced inverters improves power system efficiency by minimizing reactive power line losses and reducing line congestion.

Transmission line absoprtion of reactive power. Source: Oak Ridge National Laboratory

Transmission line absorption of reactive power by Oak Ridge National Laboratory (2008).

The Clean Coalition, in accordance with the Oak Ridge National Laboratory’s findings, is working to ensure that advanced inverters are treated as a cost-effective tool to optimize power quality, system reliability, and ratepayer economics through distributed voltage regulation. Given the system wide benefits, utilities should handle the costs of advanced inverters just as they handle the costs of traditional voltage control solutions, such as capacitor banks and synchronous condensers.

Although it is less expensive to use advanced inverters than to install and maintain capacitor banks, the costs can still be significant for smaller generators. Further, any solar generator with a standard-sized inverter must curtail a portion of real power production (and lose the associated revenue) to provision reactive power when solar resources are around their peak (see below). 

According to joint research by the Clean Coalition and University of California at Berkeley, installing an oversized inverter makes economic sense if reactive power will be regularly needed during a generator’s peak production hours. For example, a 100 kW solar facility with a 10% oversized inverter (110 kW inverter) set at a 0.9 power factor can provision 46 kVAr of reactive power even when the solar facility is producing a full 100 kW of real power. In comparison, a 100 kW solar facility with a standard-sized inverter (100 kW inverter) set a 0.9 power factor may need to divert up to 10 kW of real power output to deliver 44 kVAr of reactive power. Therefore, a 10% oversized advanced inverter, set at a 0.9 power factor, can provision reactive power totaling almost 50% of the inverter’s operating capacity while never curtailing real power production (see below).


There are three ways to fairly allocate the costs and compensate the benefits of advanced inverters. One option is to pay distributed generators for kVAh (total power) or a combination of kVArh (reactive power) and kWh (real power) – instead of only compensating generators for real power on a kWh basis. Another option is to reimburse generators for the costs of providing voltage regulation services, including increased capital expenditures from oversizing inverters and/or lost revenue from curtailment. The third way is for utilities to own and control the advanced inverters of independently owned generators, in the same manner utilities own and control capacitor banks for voltage regulation. This last option avoids the complexities of estimating the full costs and benefits of reactive power and provides utilities with increased capital expenditure opportunities in the distributed energy future while allowing the utilities to fully control the reactive power provisioning. In the utility ownership scenario, solar generators sell simple DC power at the point it enters the inverters and utilities would have constraints on annual inverter downtime.

Once a fair pathway for cost recovery and benefit compensation has been agreed upon, ratepayers will benefit from the widespread adoption of advanced inverters for distributed generation. This affordable solution will improve grid integrity throughout the power system.


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Michael Berndtson's picture
Michael Berndtson on Oct 10, 2013

Nicely done and very interesting. To answer the question posed in the post title, I’d say figure out who’s putting in the least amount of effort and taking out the most profit. That group probably should pay for the biggest chunk followed by a fair allocation of costs on each group’s effort/benefit.

For instance, a cost is borne by energy producers to supply fuel for power generators (utilities and privates). I’m sure coal can’t come into the plant wet and in any size chunk. Same with natural gas. The gas supply probably needs to be processed to a point for delivery to the generator. Couldn’t this type of arrangement apply to solar? It might push out commondity traders. But hey, it’s not like Enron added all that much value to society.

Michael Berndtson's picture
Michael Berndtson on Oct 10, 2013

Not to be too snarky, but…Oh, forget it. You might want to brush up on waste management, assuming you’re from a country that concerns itself with this kind of thing. Waste management during natural resources exploitation, manufacturing and product life should be well regulated. To what extent depends on the industries and regulating governments of concern.  Improperly throwing out a manufactured item containing components and materials of value and/or impactful properties is not a good example of sound waste management practices.

Joris van Dorp's picture
Joris van Dorp on Oct 11, 2013

I figure the dollar equivalent benefit of destributed advanced inverters to the grid is readily calculated, and can then be credited to the owners of said invertors.

But I expect that the size of this credit will be tiny compared to the additional cost of advanced inverters, let alone the cost of the entire rooftop solar grid-tied installation. It will also be tiny compared to the balancing costs of intermittent generation.

If owners of rooftop PV systems hope that the public will pay for their inverters now that it has been shown that such inverters provide a valuable service of sorts to the grid (although it is small), then I think that hope is misplaced. I highly doubt that the dollar-value of advanced inverters to the grid is enough to pay for them.

This whole story reminds me of a project I was auxiliarily involved with, in which a fitness center aimed to install electric generators onto their fitness training bikes, in order to produce clean energy. The fitness center management figured that it could earn back the investment through the energy savings. However, it turned out that the electricity produced on the average grid-tied fitness bike generator was worth only 15 cents per day, and that it would cost about 2000 dollars per bike to hook up a generator to it and tie it to the grid. In other words, the business case was fairly  hopeless.

More importantly, a rough materials life cycle environmental impact assessment of the project concluded that the scheme would actually cause a net *worsening* of the environmental performance of the fitness center. This was because the negative environmental impact of the electronics and cabling was not off-set by the positive impact of the clean energy that was produced.

But in the end, the fitness center decided to go ahead with the investment anyway. It figured that even though there was no business case, and no environmental benefit, the PR value of being able to *claim* that the fitness center was ‘green’ because it ‘harvested the energy of fitness training for clean energy’ was well worth the financial and environmental costs.

Michael Berndtson's picture
Michael Berndtson on Oct 11, 2013

Without electronics and electrical equipment there wouldn’t be too much of a need for high capital cost nuclear, renewable and fossil fuel based power generation. On the other hand, with tight supply chain control, from raw materials exploitation to end us disposal, the world could be wonderful place. Greenies play a necessary role by bring an issue of environmental degradation to the forefront. After that it depends what societies do to solve the problem. Environmental policy for dictatorial and badly managed societies would probably be an interesting career endevour to take on. 

Michael Berndtson's picture
Michael Berndtson on Oct 11, 2013

The stationary bike to electrical power isn’t probably a great analogy. The research into this kind of thing has pointed to the inefficiency of peddling to generation for awhile now. It would probably be more efficient to use the excess energy of exercisers to somehow rotate a giant fly wheel and use the rotatating motion of the fly wheel to power fans and smoothie blenders. Like the old textile factories did for using water wheels to power equipment through belts and pullies. Frankly, it would probably be more efficient to have our more sedentary work force walk to/from work and do jumping jacks during lunch. Therefore eliminating a need for gyms and the electricity necessary to power said gym.

PR, advertising and image consulting is what it is. It’s to sell something and keep on selling it for at least the tenure of the executives in charge. Traditional energy suppliers and power distributers make enough money to set aside for sales and marketing. A giant energy and utility company sales and marketing department may think it to be beneficial to promote its products as green or clean, i.e. clean coal, clean burning natural gas, etc. 

Nathan Wilson's picture
Nathan Wilson on Oct 15, 2013

It should be noted that all “thermal” generators (ie. fossil fuel, geothermal, nuclear), hydro, and even the newer wind turbines provide reactive power support.  

The rooftop solar industry is unique in wanting someone else to pay for this feature.  This is yet another reason that it is better to generate solar energy at utility scale (in addition to the fact the the cost is half), rather than giving into lobbyists and creating more incentives to put it on rooftops instead.

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