Initially, there was an incentive for customers to build DER at locations where congestion was anticipated, LeBel added. But setting that locational value “has proved to be more administratively complicated than expected and commission staff has proposed eliminating it.”
The utilities did “guesstimates and concluded congested locations should get 50% more than other locations,” he said. “They are not coming to terms with the details.”
Lebel agreed. Getting to that vision “would be a massive change for the utilities,” he said. “But it has happened. It took decades to get from PURPA to restructuring. Maybe, in the 2030s, we will look back at the 2014 start of the New York REV and see a similar transformation. And maybe things will still be changing.”
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.
…“The pace of all this is concerning,” said Bill Dornbos, Connecticut director and senior attorney for Acadia Center, a regional environmental advocacy group that has fought for shared solar throughout the northeast. “DEEP probably would have been better off seeking some simple amendments from the General Assembly in this upcoming legislative session…”
…In a report by the Massachusetts Net Metering and Solar Task Force, task force member Eric Krathwohl stated that economic benefits of solar installation exceed $14 billion, or 20 cents/kWh — close to the residential price of electricity in Massachusetts of 19.52 cents/kWh, according to the most recent data from the Energy Information Administration. Further, a report from the Acadia Center on the “value of solar” – which factors in climate benefits — found that the value that solar photovoltaic systems provide to the grid ranges between 22 to 28 cents/kWh, with additional societal benefits of 6.7 cents/kWh…
Acadia Center today released a study that quantifies the grid and societal benefits of solar photovoltaic systems (solar PV) in Vermont. Establishing the value of distributed resources is increasingly important as states explore ways to meet energy needs and deploy clean energy resources. Acadia Center has also released Value of Solar studies for Massachusetts, Connecticut, and Rhode Island and Maine‘s Public Utilities Commission recently completed a similar type of analysis to inform decision making processes in that state.
Acadia Center assessed the grid and societal value of six solar PV systems to better understand the overall value that solar PV provides to the grid. By evaluating an array of configurations, this analysis determines that the value of solar to the grid – and ratepayers connected to the grid – ranges from 19-23 cents/kWh, with additional societal values of 7 cents/kWh.
“Solar generation is a valuable local energy resource that provides significant benefits to ratepayers,” said Ellen Hawes, Senior Analyst, Energy Systems & Carbon Markets. Solar PV provides unique value to the electric grid by reducing energy demand, providing power during peak periods, and avoiding generation and related emissions charges from conventional power plants. The overall grid value of solar is the sum total of these different benefits.
In addition to the value that solar provides to the grid, Acadia Center’s study finds that solar PV provides broader societal benefits, including environmental gains from reduced or avoided greenhouse gas emissions and other pollutants. “Societal benefits should be included when assessing the overall costs and benefits of solar PV and determining additional incentives,” said Leslie Malone, Acadia Center Senior Analyst and an author of the report.
The recently passed renewable energy standard in Vermont carves out an increasing requirement for distributed generation, opening up a larger role for solar PV in the state. In addition, the Public Service Board is in the process of drafting a revised net metering program, potentially changing rate structure. “We hope that adding to the understanding of the value that solar provides to the grid and ratepayers will help inform this proceeding,” said Malone.
Acadia Center is a non-profit, research and advocacy organization committed to advancing the clean energy future. Acadia Center is at the forefront of efforts to build clean, low-carbon and consumer-friendly economies. Acadia Center provides accurate and reliable information, and offers a real-world and comprehensive approach to problem solving through innovation and collaboration.
A new study this month suggests solar energy in Rhode Island is saving electricity ratepayers money. Solar companies think there are more savings and business to be had — especially on the commercial side — with the rollout of a new state incentive program that could pump an estimated 160 megawatts into the grid over the next five years. The study, conducted by the nonprofit Acadia Center, looked at six solar-energy systems in Rhode Island and estimated solar power in the grid saves ratepayers between 19 and 25 cents per kilowatt hour, largely because it produces an alternative energy resource during hours of peak demand…
The Acadia Center has released a study showing the value of solar projects in Rhode Island. Acadia Center said it assessed the grid and “societal value” of six solar photovoltaic systems to understand the value that they provide to the grid. It found that the value of solar to the grid – and ratepayers connected to the grid – ranges from savings of 19 to 25 cents per kilowatt hour, with additional societal values of 7 cents per kilowatt hour.
A new study released this week by Acadia Center quantifies the grid and societal benefits of solar photovoltaic systems (solar PV) in Massachusetts. Establishing the value of distributed resources like rooftop solar is increasingly important as states explore ways to meet energy needs and deploy clean energy resources.
Acadia Center assessed the value of six hypothetical solar PV system configurations to better understand the overall value that solar PV provides to the grid. The assessment determined that the value of solar to the grid—and ratepayers connected to the grid—ranges from 22-28 cents/kWh, with additional societal values of 6.7 cents/kWh. This value derives from solar PV’s unique ability to produce clean energy and, among other benefits, avoid generation and related emissions from conventional power plants. The overall grid value of solar is the sum total of these different benefits.
Acadia Center also evaluated the impact of orientation (i.e. west- or south-facing arrays with different tilts from the horizontal) on the value of solar PV, which is why six different system configurations were examined. One key finding is that under traditional net metering, west-facing arrays—which maximize output during periods of peak demand like late afternoon—would receive approximately 20% less credit than a comparable south-facing system, despite the fact that they produce approximately the same overall value to the grid. The study finds that solar PV provides broader societal advantages (such as environmental benefits from avoided greenhouse gas emissions and other pollutants) which should be considered when assessing costs and benefits and determining additional incentives for solar producers.
The implications and policy recommendations of the report include the following key points:
Solar generation is a valuable local energy resource that provides significant benefits to all ratepayers, with a per-kWh value in excess of retail rates. Further, in the aggregate, net metering is a fair policy.
Once sufficiently high levels of solar PV are installed, a “value of solar” tariff could correct discrepancies between the individual elements– for example, avoided energy or transmission and distribution costs – of the value of solar and of retail rates. In such a tariff, solar PV generation is credited at an administratively determined rate and the individual value components can be accounted for properly (e.g. distribution portion of benefits paid by distribution companies).
Current policies can discourage the installation of west-facing systems. For customers who cannot install south-facing solar, new policies that recognize the value of west-facing solar (maximizing output during peak demand periods) could be beneficial for both ratepayers and society.
Societal benefits should be calculated when assessing the costs and benefits of solar PV and determining additional solar producer incentives.
Locational values (the added value from solar that reduces grid congestion and avoids expensive upgrades to the distribution system) have not been considered in this study, but are important to maximize the savings in distribution costs that solar can bring to ratepayers. Appropriate incentives can ensure that solar PV, energy efficiency, and other customer-side resources are targeted to defer or avoid the need for new infrastructure spending.
The Value of Solar report has been released in time to provide information for the work of the Net Metering and Solar Task Force in Massachusetts, which will conclude its work at the end of April.
For more information:
Value of Solar for MA and CT