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

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.




Environmental Organizations File Litigation Briefs Supporting New York’s ZEC Program

Two environmental organizations, Environmental Defense Fund (EDF) and Natural Resources Defense Council (NRDC), have weighed in to defend the legality of New York State’s Zero Emissions Credit (ZEC) program in ongoing litigation concerning that program.  This blog is tracking the ongoing litigation and this article summarizes the arguments made by EDF and NRDC in their recent filings.

The ZEC program, which was approved by the New York Public Service Commission (NYPSC) in August 2016, compensates eligible facilities for the zero-emissions attributes of produced nuclear energy through long-term contracts with New York State Energy Research & Development Authority (NYSERDA) for the purchase of ZECs.  New York’s load-serving entities are required to purchase those ZECs from NYSERDA in proportion to their share of statewide load. The NYPSC determined that New York’s FitzPatrick, Ginna and Nine Mile facilities were eligible to participate in the ZEC program.

In October 2016, various electric generators in New York and surrounding states filed a complaint against the NYPSC in federal court, asserting that the ZEC program intrudes on the exclusive authority of the Federal Energy Regulatory Commission (FERC) by “effectively replacing the [wholesale electricity market] auction clearing price” received by the nuclear facilities with a higher price and thus artificially suppressing wholesale electricity prices in the New York market.  The NYPSC and the owners of the New York nuclear facilities moved to dismiss the complaint in December and both EDF and NRDC recently filed briefs in support of the motions to dismiss.

The environmental organizations (like the NYPSC) deny that the ZEC program intrudes on FERC’s authority.  They argue that the program compensates the nuclear power providers for the environmental attributes of their electricity, rather than sets wholesale electricity prices.  The environmental organizations’ support stems from the similarities between the ZEC program and renewable energy credits, which are a key component of many state renewable energy programs and might be threatened by a judicial opinion extending FERC’s exclusive jurisdiction to the sale of unbundled environmental attributes.

The outcome of litigation over New York’s ZEC program will likely have impacts outside New York.  In Illinois, the recently enacted Future Energy Jobs Bill establishes a Zero Emission Standard program that utilizes the same framework to support nuclear generation facilities in Illinois.  Illinois and other states considering such programs will be watching the outcome of the litigation in New York to determine whether and how to implement their own programs to support struggling nuclear facilities.




New York’s New Renewable Energy Standard

Last week’s article discussed New York’s Zero-Emissions Credit (ZEC) for nuclear power. The ZEC is one component of New York’s Clean Energy Standard (CES). The other major component of the CES is the new Renewable Energy Standard (RES). In the RES, the New York Public Service Commission (PSC) formally adopted the goal set by Governor Cuomo in December 2015: 50 percent of all electricity used in New York by 2030 should be generated from renewable resources. This goal builds on the State’s previous goal of achieving total renewable generation of 30 percent by 2015.

The RES consists of a Tier 1 obligation on load-serving entities (LSE) to support new renewable generation resources through the purchase of renewable energy credits (REC), a Tier 2 program to support existing at-risk generation resources through maintenance contracts, and a program to maximize the potential of new offshore wind resources.

The goal of the RES is to reduce carbon emissions and ensure a diverse generation mix in New York. The state’s existing nuclear facilities, supported by the ZEC program, will close in 2030 (absent a renewal of their licenses) and the RES aims to ensure that the electricity provided by those units is replaced with new renewable resources.

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NY Creates New Emissions Credit for Nuclear Plants

The New York Public Service Commission’s (PSC) Clean Energy Standard (CES), adopted in August, includes a new emissions credit—the ZEC. The ZEC, or zero-emissions credit, is the first emissions credit created exclusively for nuclear power.

The ZEC is the result of a highly politicized effort to support New York’s struggling nuclear power plants. New York’s four nuclear plants account for 31 percent of the state’s total electric generation mix. According to the PSC, “losing the carbon-free attributes of this generation before the development of new renewable resources between now and 2030 would undoubtedly result in significantly increased air emissions due to heavier reliance on existing fossil-fueled plants or the construction of new gas plants to replace the supplanted energy.” The ZEC Program is intended to keep the state’s nuclear plants open until 2029 and provide an emissions-free bridge to renewable energy.

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New York Staged to Begin Full Community Net Metering Program

Community net metering is relatively new to New York.  Last July, the New York Public Service Commission (PSC) issued an order establishing a “community distributed generation program” that allows multiple customers to net meter from a single solar generation facility.  Community net metering will implement principles that are part of New York’s sweeping energy policy reform efforts in the ongoing Reforming the Energy Vision (REV) proceeding.  In order to coordinate the community net metering program with the broader REV program, the PSC delayed full implementation of its community net metering program until May 1, 2016.

The goal of community net metering is to expand opportunities for participation in solar and other forms of clean distributed generation to utility customers that would not otherwise be able to access that generation directly.  Many utility customers, such as residents of multi-unit buildings, lack control over sites that can be configured into a location for a clean generation facility.

To be eligible for community net metering, a generation facility must meet the requirements for New York’s regular net metering program.  Instead of having one owner, a community net metering project is owned by 10 or more members, all of whom are located within the same load zone and within the same utility’s service territory.  Besides multiple owners, community net metering projects have a sponsor, which may be the generation facility developer, an energy service company, a municipality, a business or non-profit, or other another form of business or civic association.  The sponsor builds the generation facility, owns and operates the generation facility, and acts as the liaison between the community members and the utility.  Each member of a community net metering project owns or contracts for a proportion of the credits accumulated as a percentage of the facility’s output in excess of usage at the host site.  The project sponsor reports these percentages to the utility, and the utility is responsible for distributing the credits to the members in accordance with the sponsor’s instructions.

Due to the PSC’s desire to coordinate community net metering with the REV program, New York’s community net metering is being implemented in two phases.  Phase 1 lasts through April 30, 2016.  During this period, the PSC will permit community net metering projects only if (1) the project site is in a location that will bolster grid reliability or provide other locational benefits or (2) the project meets a threshold level of low-income customer participation.  According to the PSC, these requirements will “advance selected REV principles” above and beyond general clean energy goals.  Phase 2, beginning soon on May 1, 2016, has no such restrictions and will be open to all qualifying projects.




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