Where we are at:
Reforming the Energy Vision (REV) – an overarching framework that combines state-level policy processes and regulatory proceedings to transform the energy sector in New York. Goals include increased energy affordability, clean energy innovation, cutting greenhouse gas emissions 80% by 2050, empowering New Yorkers in their own energy choices, improving energy infrastructure, creating new jobs and business opportunities, protecting the state’s natural resources, building a resilient energy system, supporting cleaner transportation, and growing the state’s energy efficiency.
How we got here: REV in large part grew out of multiple mounting crises of addressing and mitigating climate change impacts, deteriorating and aging energy infrastructure, and increasing energy unaffordability. Superstorm Sandy and its devastating impacts were also a flashpoint in the realization that the energy system we currently have will not be sufficient to keep New Yorkers safe and healthy during future extreme weather events, projected to become more frequent in coming years due to climate change.
The process that is underway: The announcement of the REV initiative by Governor Cuomo in 2014 was followed by the opening of a number of proceedings at the Public Service Commission to operationalize and establish the actual regulatory mechanisms that would achieve articulated REV goals in the energy sector. It is these proceedings that form the underlying “Key Policies” that will shape New York’s energy sector for decades to come.
Community Distributed Generation
Case 15-E-0082 Proceeding on Motion of the Commission as to the Policies, Requirements, and Conditions for Implementing a Community Net Metering Program – Order Establishing a Community Distributed Generation Program and Making Other Findings (July 17, 2015)
Summary of the policy:
The 2015 Distributed Energy Resources Order established a community distributed generation program that allows private individuals, non-profit organizations, or governmental entities to collectively organize to act as “project sponsors” in the development of a renewable energy project and the resulting generated energy can be bought by and credited on the bills of remote subscribers or owners of the project. This allows community-based organizations and developers to create projects that benefit utility customers who have been traditionally left behind in the development of renewables in New York State including renters, low-income families, people with limited access to credit, and those that live in homes that are not suitable for the siting of renewables.
Offsite community solar – one type of community distributed generation project is community solar where a large solar array is sited on a building roof or as a canopy installation on a parking lot or other open space and utility customers within the utility territory of the project can subscribe to the system and get offsets on their credits.
Onsite community solar – another type of community solar project is one where a solar system is located on the roof of a multifamily building and the tenants of that same building participate in the project to get off
Low Income Affordability Target
Case 14-M-0565 Proceeding on Motion of the Commission to Examine Programs to Address Energy Affordability for Low Income Utility Customers – Order Adopting Low Income Program Modifications and Directing Utility Filings (May 20, 2016)
Summary of the order and resulting policy priorities:
The Public Service Commission opened the low income proceeding in an effort to streamline low income utility programming as well as articulate guiding policy objectives in the area of energy affordability for the state. This order is often referenced in many other proceedings that have since followed under the REV docket as the basis for considerations around impacts on low income utility customers.
Expansion of access to clean energy, distributed energy resources, and efficiency are key to supporting low income customers: “[T]he best solution for all customers, including low income, lies in facilitating opportunities to invest in clean energy and the means to reduce energy costs. Greater access and support for low income and underserved communities to DER is the best way to narrow the affordability gap that needs to be filled with direct financial assistance for customers with low incomes. Greater access to advanced energy management products to increase efficiency for low income customers will empower those for whom these savings may have the greatest value, as all as allowing the most disadvantaged customers more choice in how they manage and consume energy.”
6% affordability target: In this order the Commission adopted a goal of reducing household energy burden to 6% of household income for all low income utility customers. The Commission articulates the need for a “range of initiatives” to accomplish this goal and that it cannot be achieved “through rate discounts alone.” Therefore, the order includes broad discussion of utility assistance programs as well as references to other tools, such as DER and financing of efficiency, as described above.
Value of Distributed Energy Resources
Case 15-E-0751 In the Matter of the Value of Distributed Energy Resources – Order on Net Energy Metering Transition, Phase One of Value of Distributed Energy Resources, and Related Matters (March 9, 2017). Case 15-E-0751 In the Matter of the Value of Distributed Energy Resources – Order on Phase One Value of Distributed Energy Resources Implementation Proposals, Cost Mitigation Issues, and Related Matters (September 14, 2017) Link: https://www.nyserda.ny.gov/All%20Programs/Programs/NY%20Sun/Contractors/Value%20of%20Distributed%20Energy%20Resources
Summary of the policy and current ongoing process
The Value of Distributed Energy Resources (VDER) proceeding began as the means by which the Public Service Commission would develop and implement a policy to replace “net metering” – the policy at the time that dictated how distributed energy generators would get compensated for the energy they produced on the grid. Net metering allowed for energy generators to receive the retail rate of energy for every unit of energy they produced and fed onto the grid. This meant that if you paid $.14 per kwh of electricity on your utility bill, if you generated a kilowatt-hour of electricity through solar panels (or other distributed energy resources) and fed that onto the grid, the utility would pay you $.14 for that kilowatt-hour.
In contrast to net metering, VDER creates a “value stack” with many layers, within which different values are quantified that relate to the benefits and costs of distributed energy that is fed onto the grid. These layers include the wholesale energy price for that hour, environmental benefits, avoided demand, capacity, potential system relief based on location of the project, and a market transition credit that is intended as a matter of policy to provide short-term support for projects in transitioning to this new valuation scheme from net metering. [Include graphics from DPS and NYSERDA presentations about VDER to illustrate value stack]
As a matter of process, the VDER proceeding has been divided into a Phase 1 and Phase 2, with the Phase 1 policy actively applying to projects as of mid-2017. The Phase 2 process includes a number of working groups where stakeholders are able to meet with staff from the Department of Public Service and provide input as to how the value stack should be structured, how rate design should be reformed to account for VDER, and how low income customers and communities can be better supported and provided access to community renewables. DPS Staff issued a report on the latter topic regarding low-income inclusion in community distributed generation in December 2017, which can be found here [link to Staff LMI CDG report].
A broad spectrum of advocates and developers came together as the “Aligned Parties” in the VDER proceeding to submit a proposal and suite of recommendations to DPS staff on how VDER can work better to support the still nascent community distributed generation market in New York and more specifically, communities and customers that have historically been left out of the clean energy economy including low-income utility customers and environmental justice communities. The Aligned Parties proposal and subsequent comments on the Staff Report on Low Income CDG can be found here [link to the two filings on the docket]
The VDER proceeding is one of the most significant policy processes being undertaken by New York State with respect to impacts on our goals and mandates around renewable energy generation and climate emissions. The shift from net metering to VDER fundamentally changes the economics of distributed energy resources projects including community solar and other types of community distributed generation and therefore changes the game in terms of how and if renewable energy developers will be able to build out projects in the state. Those working in the renewable energy space, particularly on smaller scale projects with a community focus, are finding a number of challenges with VDER: (1) complexity (2) unpredictability (3) low valuation.
As compared to net metering, both the value stack components themselves as well as the policies regarding the applicability of VDER to various projects has created an unprecedented level of complexity for the planning and financing of renewable energy projects. The VDER mechanism requires that developers use a calculator tool to input details about the project in order to assess how many cents per kilowatt hour they can expect to receive for the energy their project generates. Given that value stack components are variable and tied to a host of project characteristics including location, size, the categorization of the offtaker meter as well as values that change over time (whole sale prices for example change hourly), the current process to assess the revenue potential of a given project is quite cumbersome.
Currently if a project falls under the applicability of VDER, the value that is calculated through the value stack is not locked in for the life of the project. Therefore, it is difficult for a developer to project out the revenue stream for the entire 25 year (or longer) time horizon for the project. This primarily creates challenges associated with acquiring financing as financiers often count on reliable estimates on revenue generation for the life of the infrastructure in order to have the confidence to invest or provide a loan.
In many instances, developers have found that after inputting the various variables for their project into the VDER calculator, they receive a value per kilowatt hour that is lower than what they would have received under the net metering policy. The market transition credit (MTC) portion of the value stack was intended to remedy this issue and soften the transition to what would likely be a lower valuation under VDER by bolstering the stack with additional value for certain projects. However, even with the inclusion of the MTC some projects are still unable to make the numbers work as they would have under net metering. Furthermore, the value stack selectively quantifies certain values while leaving other values out, artificially depressing the total value a renewable energy project would receive from the utility for generated energy. For example, the deployment of renewable energy directly offsets the need for additional fossil fuel generation which results in avoided economic and societal costs associated with air pollution and the accompanying human health hazards. Another example is the expansion of participation in community distributed generation projects which would allow many low income utility customers to have more predictability and stability associated with their energy bills and therefore reduce system costs associated with utility termination and non-payment. These sorts of values of should be included in the value stack in order to provide distributed energy projects the full valuation of the benefits brought to the system, the economy, and society.
DER Oversight and ESCo Proceeding
Case 98-M-1343 In the Matter of Retail Access Business Rules – Order Adopting Revised Uniform Business Practices
Case 12-M-0476 Proceeding on Motion of the Commission to Assess Certain Aspects of the Residential and Small Non-Residential Retail Energy Markets in New York State and Case 98-M-1343 In the Matter of Retail Access Business Rules – Order Regarding the Provision of Service to Low-Income Customers by Energy Service Companies (July 15, 2016), Order Adopting a Prohibition on Service to Low-Income Customers by Energy Service Companies (December 16, 2016)
Summary of the Uniform Business Practices requirements for DER providers and brief background
The UBP for DER providers follows largely on the heels of the ESCO proceeding and the desire to address issues that arise out of a lack of regulation in the provision of energy services. This is simultaneous with an interest in not overly stifling the market for DER providers in New York State, which is a relatively new sector. Definition of DER provider that is subject to the new regulations: “An entity that is acting or planning to act as a CDG sponsor for one of more CDG projects, or that is otherwise engaged in soliciting customers, members, or subscribers for a CDG project or CDG projects, through its own employees or agents, on its own behalf. A CDG Sponsor is the entity that organizes, owns, and/or operates a CDG project.” DER providers are required to register with the Department of Public Service and include information about their organizations/companies and the nature of the products they seek to offer to customers including sample sales agreements and documents. DER providers are required to engage in ongoing annual maintenance of registration and provision of information as requested by DPS. There are requirements around demonstrating a basis for estimates when a DER provider is indicating to customers that utility savings are involved in the arrangement. There are requirements around protection of customer data.There are requirements around contacting and marketing to customers. There are required provisions in any sales agreements put out by a DER provider to customers including pricing, termination, details around any savings guarantees, and dispute resolution.