New York utility regulators have just approved the first step in the state's long-range plan to revamp how distributed energy resources (DERs) are valued. The solar industry and environmental groups say they're in support — mainly because the new order keeps much of today's net metering paradigm in place, and boosts community solar to boot.
On Thursday, the New York Public Service Commission unanimously approved an order adopting Phase 1 rates under the state's Reforming the Energy Vision (REV) proceeding. These new 'value of distributed energy resources' or VDER, rates are meant to bring time, location, and grid needs into the calculation of how much each kilowatt-hour of solar generation is worth for each customer.
That's very different than today's net metering rates, which are based on plain vanilla retail rates that don't change according to where the customer is and when they use their power.
And the novelty of New York's approach has been a major point of contention between the utilities and regulators trying to design it, and solar and distributed energy parties worried it will undercut the value of their projects.
The PSC's order deals with this by grandfathering in all residential and small commercial customers into net metering through 2020. Also grandfathered in are “some community solar projects and large commercial customers,” according to a statement from solar groups including Vote Solar New York and the New York Solar Energy Industries Association.
In contrast, some “new community solar customers and larger commercial projects will move to the new tariff presented in the order, which advocates are concerned may not lead to viable project economics in much of the state,” the solar groups wrote.
The new rate hews pretty closely to an interim rate proposal put out last summer. It consists of a blend of an energy value, a capacity value, an environmental value, and the market transition credit (MTC), which serves as the step-down mechanism from net metering.
This MTC function serves to create different branches for mid-size community and C&I projects, with earlier tranches to be compensated at levels equivalent to net metering rates, and later ones to fall under the new VDER rate.
As Katie Tweed wrote for our Squared subscribers in November, most of the state's utilities have plenty of room in these early tranches. National Grid's Tranches 0 and 1 amount to more than 2,000 megawatts, while NYSEG's amount to nearly 500 megawatts.
Other were closer to filled. Central Hudson and Orange & Rockland, two utilities with significant community solar pipelines, have defined Tranches 0 and 1 at 39 and 76 megawatts, respectively.
Solar groups' concerns about the new VDER rate are based largely on uncertainty about how it will be calculated. As the Natural Resources Defense Council noted in a Thursday statement, “New York's new value of distributed energy rate structure is a bold experiment,” and “there is little agreement surrounding how best to calculate each of these sources of value.” Some, like distribution grid value, still require utilities to collect and analyze more data to determine, it wrote.
In the meantime, “too much variation or uncertainty in an untested formula, for instance, could prevent investors from having sufficient confidence in future revenues to support new projects,” it wrote.
Even so, clearing up the rules for these projects will help unlock community solar projects, which make up the largest portion of the state's current backlog of solar interconnection requests. “Approximately 70 proposed CDG projects will benefit immediately from today's action and the number of CDG projects moving toward construction is expected to increase following action on additional steps in the coming months,” the PSC wrote.
Thursday's order also made clear that it's making these changes in support of New York's 50 percent by 2030 renewables framework, its NY-SUN incentives program, and a commitment to advance the community solar market.
Even so, the PSC's new order makes it clear that it intends to move away from net metering, which “does not accurately reflect the values, services and other benefits provided by solar and other types of DER to the grid.”
The NRDC concurred in its own statement Thursday, noting that “net metering doesn't necessarily incent solar investments to be located in the areas where they are most needed, or to combine with other technologies like storage to provide maximum value to the electricity system.”
Thursday's order also:
- Establishes compensation values for energy storage systems when combined with certain types of DER, a first for the state
- “Requires utilities to submit work plans to develop location-based prices that reflect the full value of DER in their service territories,” or in other words, refine their VDER methodologies
- “Limits incremental cost impact on non-participating customers in each utility service territory,” i.e., cushions the effects on customers who don't have solar or other forms of DER
- “Directs the Department of Public Service Staff to issue recommendations on oversight of DER providers for the Commission's consideration,” which means setting up a process to keep an eye on companies seeking to become aggregators of solar, storage or demand response
- And finally, “Commences Phase Two of this proceeding to accelerate further improvements to the Value of DER methodology.” That's the next step in New York's REV process, which will bring improvements to the calculations of energy, capacity and environmental values and expand it to more forms of DERs.
Thursday's decision can be found at the documents section of the commission's website at by entering case number 15-E-0751 in the input box labeled “Search for Case/Matter Number.”
New York's steps toward a distributed energy-friendly utility regulatory structure is happening alongside those being made in bellwether states like California and Hawaii, as they look beyond net metering toward new structures that bring locational, environmental and social values into account.
Greentech Media has been getting into the weeds on the subject of California's very different approach to the same goal at this week's California's Distributed Energy Future 2017 conference in San Francisco — check out the livestream.