Standby Fees

DE technologies are used optimally in grid-connected applications. One major issue of concern to those who desire to invest in DE installations is how the local utility will charge the investor for the privilege of having a grid-connected system- whether or not the DE investor plans on drawing power from the grid or feeding power to it. Utility fees for standby services are not to be confused with stranded cost charges. Standby fees represent a charge for a specific service, rather than charges designed to recover expenditures from past investments. In many cases the fees utilities charge for the service are prohibitive and there are many examples of projects that have been shelved or scrapped due to high standby fees alone. In some cases fees are so high that it is as if the project developer is not generating any of its power on site.

The benefits to the developer of having a grid connected system include:

  • increased reliability – the grid can be used as a backup in case the DE technology should fail or require maintenance.
  • elimination of need to purchase costly storage devices because excess power can be fed to the grid

The logic behind standby fees or backup fees thus makes sense: the utlility is providing a service to a DE user and that service deserves to be paid for. The service is two fold: guaranteeing power will be available upon demand and making the infrastructure available to receive power in times when more power is being generated on site than can be used. Because interconnecting to the grid offers the DE investor various benefits over and above the benefits that could be accrued if the investment were to take place off-grid it is fair that some charge apply.

The obstacle however is not whether or not DE investors are charged a standby fee but whether the fee is fair. Often the fact that utilities also benefit from DE technologies is not taken into consideration in designing the standby fee. Benefits to the grid operator from increased DE on their network can include:

  • reduced congestion in distribution and transmission system at time of peak power demand
  • ability to defer costly grid upgrade costs
  • fuel savings from displaced generation

WADE works to ensure that standby fees are fair and do not pose an unnecessary burden to decentralized generators.