Since 1997, New York has allowed customers with certain types of distributed generation systems, including rooftop solar (sometimes referred to as “mass market” solar) and community solar, to participate in net metering. This simple billing method allows a customer’s consumption and generation to be “netted” at the end of every month. If a customer has consumed more energy from the grid than she has generated from her solar panels, she will pay for the net consumption. However, if a customer has generated more power than she has consumed, then that net generation will be rolled over into the next month’s bill and credited toward future consumption at the retail rate—i.e. the same amount that the customer is charged for using a kWh of electricity.
This form of compensation (sometimes referred to as “retail rate net metering”) has supported solar expansion with a simple, predictable formula. However, because this form of net metering relies only on retail rates, which tend not to vary by time or location, solar systems are not always installed in areas where they are most needed or combined with other technology like energy storage to provide additional value to the grid. Some areas of the grid need more congestion relief, some hours of the day have higher electricity demand, and some distributed energy sources are cleaner than others.
New York has decided to move away from retail rate net metering and toward a smarter and fairer pricing scheme that reflects clean energy resources’ value to the grid. The state is now grappling with creating such a system while at the same time ensuring that this transition is gradual and understandable to consumers.
In 2015, the Public Service Commission (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. 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 retail rate net metering to a net metering program referred to as Value of Distributed Energy Resources (VDER) that attempts to more accurately reflect the costs and benefits of these clean resources on the grid.
The first phase of the VDER process applies to larger solar installations including remote net metering (where the electricity produced from a solar installation at one location is credited toward electricity consumption at a different location) and community solar but not to residential rooftop solar. Phase One compensates these projects using a “Value Stack,” which identifies certain components that together represent the value of that clean energy to the grid. The values in the Phase One Value Stack include certain costs that the utility no longer has to incur, which are referred to as “avoided costs” and which are assigned a monetary value. These include:
The cost of the energy that the utility would otherwise have to generate or purchase (referred to as “wholesale” energy);
The amount of energy-producing resources that the utility would have to procure to meet demand (referred to as “capacity”); and
The cost of delivering that energy to customers, as well as the higher costs of delivering the energy in certain congested areas of the grid.
In addition to these avoided costs, the Value Stack also includes a credit for the environmental attributes of certain types of clean energy, primarily the fact that they do not emit greenhouse gases.
A second phase of this transition (referred to as Phase Two Value Stack) is in process to further refine these values. After January 1, 2020, VDER will also apply to new residential rooftop projects under a new compensation method to replace traditional retail rate net metering.
New York’s Solar Gap
Because retail rate is a more straightforward, if blunt, method of net metering, developers may initially struggle to make an easy economic case for solar while transitioning to a value-based compensation structure. However, if done well, this new structure will allow solar to expand more efficiently in New York, with better outcomes for consumers and the climate. Continued expansion of solar is important, because in contrast to other Northeast states such as Massachusetts and Vermont, New York has relatively modest amounts of installed distributed solar given its population (Figure 1). It must accelerate to meet state and regional climate goals.
New York has set a goal of procuring 50% of its energy needs from renewable energy resources by 2030. As shown in Acadia Center’s EnergyVision 2030, with further strategic action New York can reduce greenhouse gas emissions 45% by 2030, a target that will put the state on a path to meet minimum EnergyVision 2030 recommends that, in addition to sharply increasing grid scale wind and solar generation, New York needs to add 13.7 GW of distributed solar, more than 10 times the amount that has been installed to date.
Figure 1 – Per Capita Installed PV
New York’s need for more distributed solar can be addressed from multiple angles: first, by making the transition to value-based compensation as gradual and understandable as possible; and second, by supporting solar expansion through complementary programs. Acadia Center has been an active participant in the VDER proceeding since its inception. Recently, staff from the Department of Public Service approved several changes to the Phase One Value Stack to expand the types of eligible renewable energy resources and make it easier for customers to participate and receive compensation. These changes include:
Removing certain size limits from eligible clean energy resources
Expanding the VDER compensation structure to storage and new forms of renewable energy such as tidal energy
Removing location-based restrictions within utility territories
Acadia Center supported these changes and submitted comments with these and other recommendations for improving various elements of the value stack to make it easier for customers to receive compensation and to ensure these resources are appropriately compensated for the value they add to the system.
Acadia Center also supports solar expansion in New York through statewide initiative and grassroots campaigns. One such state initiative is NY Sun, a program administered by NYSERDA that seeks to add 3 GW of installed solar capacity in the state by 2023. The program works by establishing cash incentives for developers that decline over time as solar installation increases in certain regions of the state. Recently, NYSERDA made improvements to the program by expanding the incentives, supporting larger projects, and encouraging solar installations in a greater variety of locations. In addition, Acadia Center is a founding member of Million Solar Strong, which seeks to double this statewide goal to 6 GW of solar capacity by installing solar on 1 million homes by 2023, including 100,000 low-income households. The campaign has been meeting with public officials and building support around the state.
New York must make the leap to close its solar gap, and both regulatory solutions and grassroots support will be necessary. Together, these efforts have the capacity to make lasting change for this key technology.
This legislation effectively gets rid of net-metering, making Connecticut one of the first states to do that. For commercial projects, that would come in about a year and a half. For residential customers it will be in a few years. Existing customers would be grandfathered for about 20 years.
In place of net-metering consumers would have a choice. One would be rates – known as tariffs – and formulas for applying them that would be determined by the Public Utilities Regulatory Authority. Some argue those unknown factors might be disruptive, if not downright stagnating for the solar industry in the state.
Along with many allies, Acadia Center has worked for months to fix this critically flawed bill, which will imperil the future of distributed solar in Connecticut,” Amy McLean Salls, Acadia Connecticut director, said in a statement. “Several improvements were made, but it is unfortunate that important progress on grid-scale renewables was paired in S.B. 9 with a severe setback on distributed solar.”
The CES and original legislation did away with net metering, replacing it with a “buy-all/credit-all” concept. Essentially a solar owner would have to sell all his or her power to the grid at a rate to be set by the Public Utilities Regulatory Authority (PURA) and buy back what he or she needed at the retail rate.
Such a system would mean higher fees for solar owners and would probably make it impossible to install battery storage or home-based smart energy systems that would help reduce energy demands and integrate with more modern grid concepts.
“Forcing people to go that direction is going be counter-productive in the long run and would undermine grid modernization,” said Mark LeBel, staff attorney for the advocacy group Acadia Center.
“This is radically anti-consumer and, ironically, at odds with the grid modernization recommendations of the CES that want to explore integrating smart meters, efficiency and demand response, storage, solar, and other customer-sited resources for numerous grid benefits, including peak-demand management,” said Bill Dornbos, advocacy director and senior attorney for the regional environmental group Acadia Center, which in December spearheaded a statement of principles by energy and environmental activists.
The Acadia Center said Thursday that while Connecticut’s greenhouse gas emissions have increased over the past five years the reforms proposed as part of the Department of Energy and Environmental Protection’s Comprehensive Energy Strategy “appear to raise significant new challenges to distributed solar deployment that put its crucial climate mitigation at real risk.”
Renewable power is of particular concern to those who champion solar power, such as the Acadia Center.
“While nationwide, forward-thinking states are looking towards smart, interconnected homes, often powered by rooftop solar, the draft CES recommendations for customer-sited solar are a major step away from that future,” Kerry Schlichting, policy advocate for the Acadia Center, said.
“The new policy package for rooftop solar outlined in the draft CES will create barriers for Connecticut residents and businesses who want to install solar, limiting their right to produce and consume their own clean energy,” she added.
The Acadia position paper stated that the draft CES recommends a cap of 20 MW (megawatts) a year through 2030 for customer-sited solar installations.
“In 2016 alone, Connecticut installed about 90 MW of customer-sited solar,” according to Schlichting. “The new cap would result in a nearly 80 percent cut in new installations in 2021 compared to 2016.”
The group is also advocating for a way that allows residents to bank unused kilowatt hours from their solar installations in a way that benefits all ratepayers. There’s a dispute over how much value to give the solar kilowatt.
The report estimates the value of a solar kilowatt hour at 15 cents, but doesn’t, according to Schlichting, go into detail about how it arrived at that number.
“There’s a risk that the draft CES, if enacted, would cut the legs out from under solar PV deployment in our state – effectively preventing consumers from having the choice of rooftop solar. To meet our climate targets and continue to grow the state’s clean energy economy, we need policies that enable even more customer-sited solar, not restrict it.” Schlichting said.
Dennis Schain, a spokesman for the DEEP, said the draft report “presents DEEP’s best thinking about how to meet the goal of deploying the maximum amount of clean energy resources to reduce carbon emissions in the most cost effective manner for ratepayers.”
He said the report is open for comment and that includes comments from the Acadia Center.
In its position paper, Acadia Center said it has four high priority concerns regarding distributed solar, stating each concern must be resolved in the final CES for it to be satisfied.
Those concerns are: continue the expansion of new distributed solar capacity; improve, but do not end, net metering; properly account for all ratepayer benefits from distributed solar; and, seriously commit to a full statewide community solar solar program.
“Connecticut should be heading down a path towards consumer choice and ambitious goals, not new arbitrary limits,” Schlichting said.
The nonprofit Acadia Center says it’s concerned about a possible decline in the growth of customer-sited solar installations.
In a report, Acadia, which advocates for clean energy and consumers, said the Department of Energy and Environmental Protection’s Comprehensive Energy Strategy, a draft of which was released last week, calls for an “arbitrary limit” on the growth of Connecticut’s in-state market for distributed solar.
“Distributed” means the electricity is generated near where it’s used. The most common type of distributed solar is on rooftops.
Although DEEP is pushing for an overall expansion of renewable energy in the state, Acadia said provisions laid out in the draft CES would lead to a nearly 80 percent decline in distributed solar installations in 2021 compared to 2016.
If policymakers move ahead with the draft recommendations, there would be capacity for 20 megawatts of distributed solar per year. That would compare to approximately 90 megawatts installed in 2016.
DEEP is accepting public comments on the more than 200-page draft until Sept. 25.
Asked about Acadia’s concerns, the agency responded Thursday:
“The draft 2017 CES presents DEEP’s best thinking about how to meet the goal of deploying the maximum amount of clean energy resources to reduce carbon emissions in the most cost effective manner for ratepayers. We are now accepting comment on the draft CES and we will carefully review all responses – including those offered by the Acadia Center – to produce the strongest and most effective final strategy possible.”
DEEP Commissioner Rob Klee said last week that the agency wants to rely on larger grid-side renewables, such as solar and wind farms, which DEEP says are more cost-effective than distributed generation.
However, the agency also acknowledged that rooftop solar has “non-price advantages” for the state, such as reducing peak demand and helping large energy users reduce their bills.
Read the full article from the Hartford Business Journal here.