NY Moves from Retail Rate Net Metering to Value-Based Compensation for Distributed Generation

By on March 21, 2017
Posted In Renewables

The New York Public Service Commission (NYPSC) approved an order on March 9 that will shift the state’s mechanism for compensating distributed energy resources from retail rate net metering to value-based compensation. The order is the next step in New York’s broad Reforming the Energy Vision (REV) plan and was praised by environmental groups and solar advocates for both preserving existing net metering (NEM) benefits for residential and small commercial customers and boosting benefits for community solar. New York’s move away from net metering follows a hard-fought compromise in Arizona that will move Arizona away from net metering as well.

The New Value Stack Tariff

The order created a new Value Stack tariff intended to more accurately reflect the value of distributed generation renewable resources. The Value Stack tariff will set forth a mechanism to compensate distributed energy resources based on the value of the products the resources provide: energy, capacity, environmental attributes, and demand reduction and locational system relief. The value of the environmental attributes will be the higher of the latest Tier 1 REC procurement price published by NYSERDA or the Social Cost of Carbon (as calculated by the US Environmental Protection Agency). Eligible projects will be entitled to receive compensation for 25 years from their in-service date. The Value Stack tariff will be available for all technologies and projects that are currently eligible for NEM.

The Transition

All projects interconnected to the grid in New York prior to March 9, 2017, will continue to receive NEM compensation under existing tariffs. Additionally, new wind projects will be eligible to receive existing NEM rates until the existing statutory cap under NY Public Service Law § 66-1 is reached. Projects operating under existing NEM compensation are eligible to opt-in to the Value Stack tariff.

A transitional “Phase One” NEM tariff will be available to residential and small commercial service class customers interconnected before January 1, 2020. The Phase One NEM tariff is identical to the current NEM tariff, except that projects will be compensated for a term of 20-years from their in-service date and will have the ability to carry-over excess credits to subsequent billing and annual periods. Service under the Phase One tariff will be subject to a MW capacity allocation for each utility. Phase One NEM will also be available to certain projects that interconnect or pay 25 percent of interconnection costs by June 7, 2017. This option is available to remote net metered projects (residential and nonresidential farm operations), large on-site projects (non-residential demand-based or mandatory hourly pricing customers), and community distributed generation projects, which is expected to provide a boost to community solar in New York.

What’s Next?

Phase Two of the REV is expected to refine the methodology for calculating the components of the Value Stack compensation. Thursday’s order included compensation for energy storage paired with an eligible resource. Future orders are expected to address stand-alone storage facilities.

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