Reforming the Energy Vision Archives

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.

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.

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

New York Staged to Begin Full Community Net Metering Program

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