There has been a lot of waiting by the solar industry and various stakeholders since New York’s Reforming the Energy Vision (REV) process was announced two and a half years ago. However, yesterday state regulators took some of the first definitive steps towards solving one of the key issues under REV, which is the valuation of distributed resources, including distributed solar.
And while New York Public Service Commission (PSC) staff has laid out a proposed methodology for valuing commercial and industrial (C&I) and community solar, the compensation mechanism recommended for residential solar is remarkably familiar: a continuation of net metering.
In terms of valuation for C&I and community solar and other distributed energy resources, NYPSC staff recommends a calculation based on the combination of energy value based on day-ahead marginal price from the grid operator, capacity value, environmental externalities, and a calculation for “market transition”, which Vote Solar describes as a “catch-all for values that could not be calculated”.
There are several significant details for each of these values, first, the day-ahead marginal price will be location-based, meaning that projects in locations which benefit the grid will receive higher payment. This is a consideration that Long Island Power Authority championed as part of its feed-in tariff, and is considered to be a cutting-edge approach to valuing power generation.
Second, for environmental externalities, NYPSC staff proposes using the renewable energy credit (REC) price form the latest state procurement, and setting this for a 20-year term.
And while value to the distribution system was considered, NYSPC staff decided that they could not properly estimate this, and did not include it in their proposal. Instead, projects will receive additional payments if they are in high-value locations on the grid, per the locational basis of the energy price.
But even with this varied set of inputs, the end result is again familiar. The last part, market transition, will be set to bring the other set of values up to retail rate for the first tranche of projects awarded, meaning that they will be compensated at the same value as under net metering. For the second set, it will enable up to 90% of retail value, and for the third, up to 80%.
This does not mean that final values have been determined. “A key component of this tariff is that Staff doesn’t have all the information and analysis they would need to calculate these values in a precise way, so they are using proxies instead as a first step toward more granular compensation,” notes a statement by Solar Energy Industries Association (SEIA).
Regardless the solar industry appears pleased with the outcome of this first step, with Vote Solar Northeast Regional Manager Sean Garren calling it a “strong compromise”. However, he notes that the work before the PSC to determine a final valuation is “far from over”.
The timeline for approval is not clear. The New York PSC is now reviewing the staff report, and a joint release by solar advocates and environmental groups states that an order on the implementation of the methodologies is expected in “upcoming months”.