Order Helps Advance New York State’s Ambitious Clean Energy Goals
Today the New York State Public Service Commission (PSC) issued an order that includes several improvements to help improve the finances of solar projects in New York, including community solar projects, as part of the Value of DER (VDER) statewide proceeding.
In 2015, the PSC initiated the Reforming the Energy Vision (REV) process, which seeks to create a new utility business model that incorporates more distributed energy while ensuring that energy remains affordable, resilient, and reliable for consumers. Recognizing the need to develop a more accurate way of valuing these clean energy resources, in March 2017 the PSC issued an order transitioning from net metering to a program referred to as Value of Distributed Energy Resources (VDER), discussed here.
How Community Solar Works
Community solar, discussed in more detail here, allows households to receive the benefits of solar energy without the cost or hassle of a rooftop installation. Roughly half of residences in the U.S. can’t host a solar installation because the occupants don’t own the property, or the roof is too old, too shady, or faces the wrong way for optimal sun exposure. Community solar eliminates these issues. Instead of buying and installing solar panels on a home or property, a person can subscribe to a piece of a large local solar project nearby, often along with a few dozen to a few hundred other people who live in the area. A portion of the electricity generated by these projects gets credited directly to a subscriber’s utility bill, the subscriber gets a discount on electricity, and it typically does not cost anything to join.
Three Big Takeaways from the Order
The order issued today by the PSC helps solar projects in several ways. First, it creates new credits that will provide additional compensation for community solar projects in most parts of the state and allows such projects to include large “anchor tenants," including residents who live in master-metered buildings. Doing so should help reduce financing and customer acquisition costs for these projects, increasing their value, and enable more customers to opt in to community solar. Together these changes create the potential for more than 1,000 megawatts (MW) of additional community solar projects and indicate long-term support for these projects by the PSC.
Second, the order revises the method for how to calculate the reduced cost of delivering energy to customers as a result of the clean energy provided by the projects and injected into the grid (referred to as demand reduction value, or DRV). This revision makes this value more predictable for all solar projects, making it more likely that they will capture most, if not all, of this value. This increases the predictability of the revenue stream, fixing a weakness that prevented the prior tariff from helping to finance as many projects than it otherwise could have. It also allows the continuation of a value (referred to as locational system relief value, or LSRV), with some tweaks, that is designed to provide short-term price signals to renewable energy facilities that relieve temporary congested networks, incentivizing the placement of solar projects, as well as solar projects that include storage, near these congested areas.
Third, the order allows small commercial customers that install on-site renewables before 2020 to receive existing net metering compensation, which they are currently prohibited from doing. Extending net metering to these customers will encourage greater participation and investment in renewables statewide and makes sense given that small commercial customers share many of the same usage characteristics as residential customers who are currently able to participate in net metering.
While there is more work to be done to ensure that the VDER process properly compensates renewable energy projects for the values they provide to the grid, the changes made by the PSC today provides a boost to solar in the state and advances New York’s clean energy goals, including Governor Andrew Cuomo’s recent call to boost the state’s Clean Energy Standard from 50 percent to 70 percent renewable electricity by 2030.