Earlier this month, New York regulators unveiled their new plan to expand consumer access to clean energy through a shared renewables program. Solar and wind advocates cheered the proposal, saying it is one of the most aggressive in the nation, but utilities see it presenting new challenges at a time of dramatic change in their regulation and business models.
Like other policy innovations emerging from the landmark New York Reforming the Energy Vision (REV) process being overseen by the state’s Public Service Commission (PSC), the shared renewables program is impressively designed, renewables advocates say. Utilities worry it goes too far, too fast and could cost ratepayers.
“We support policies that encourage the development of solar energy and that make it easier for our customers to choose renewable resources,” Con Edison Spokesperson Allan Drury told Utility Dive. “We also believe it is important that these policies be fair to all our customers.”
The proceeding in which the New York PSC wrote the rules for the Community Shared Renewables program began with “a public comment process that got a lot of interest and participation from the solar industry and a wide range other stakeholders, including a Joint Utilities group,” explained New York State Energy Research and Development Authority (NYERDA) Program Manager Max Joel.
“Overall this is a great step forward," he said.
The Community Shared Renewables program
The program is the newest campaign in the NY SUN Initiative, aimed at driving the state’s solar marketplace. NY SUN is one of the programs in Governor Cuomo’s REV initiative aimed at transforming New York's utility business models and modernizing the transmission and distribution grid.
Cuomo and other state leaders determined, in the wake of Hurricane Sandy, to impose regulatory changes on utilities that would lead to more efficient energy use, more renewables, and more distributed energy resources (DERs) like micro-grids, roof-top solar, and energy storage. The ultimate goal is to alter the business models of the state's utilities to stimulate the growth and proliferation of DERs, ultimately leaving customers with more independence and choice in their electricity use, as well as lower prices.
"The Commission was forward-thinking in establishing community DG at the heart of REV's vision for an interactive grid," said Pace Energy and Climate Center Executive Director Karl Rábago. Rabago’s center played a key role in the program’s design, which was applauded by Clean Energy Collective (CEC), the leading U.S. community shared solar developer, and VoteSolar, one of the most important national solar advocacy groups.
The essence of the shared renewables program program, according Sean Garren, a regional manager at the solar advocacy group VoteSolar’s, is that it extends New York’s net energy metering (NEM) policy to centrally-located solar arrays and other types of renewable generation of up to 2 MW. Now not only do rooftop arrays qualify for retail rate reimbursment, but shared solar arrays as well.
The program also establishes full rules for shared ownership. The generation will have a project sponsor that can be an energy services company, a municipal entity, or any type of business, non-profit, or civic association. The sponsor will be responsible for building, interconnecting, owning, and operating the behind-the-meter generation.
Ownership shares will be sold to utility customer members. In return, each member’s account will be credited with the output of the generation at full retail rate credit through remote metering. Members may be residential or commercial accounts and are eligible for special NY-Sun program provisions.
The generation must be in the same utility territory as the customers it serves, and the generation projects must have at least ten members. Ownership portions of over 25 kW can be no more than 40% of the project’s output. Members can own no more of the output than their own yearly use.
Sponsors are also responsible for providing the utility with all necessary details about the members including how the credits are to be distributed among them. Members can alter, transfer, or give up ownership with a month’s notice. The sponsor must distribute all credits at least annually.
Utilities are required to track and distribute credits according to the sponsor’s guidance. They must also format, bill, and protect the members’ information.
The program will roll out in two phases. Phase 1 will be from October 19, 2015, through April 30, 2016. Sponsors can only build during this period if the project is in a utility-designated Community DG Opportunity Zone or at least 20% of its members are low/moderate income (LMI) customers. Phase 2 begins May 1, 2016, and has no restrictions.
Each utility is expected to designate the Opportunity Zones. They must make up at least 40% of its service territory. The are expected areas in which the locational benefits of the DG are maximized.
LMI customers are those enrolled in officially designated state assistance programs.
A unique provision of the program is the Low-Income Customer Collaborative NYSERDA is required to form and lead by January 2016. The collaborative is tasked to find ways to remove barriers to LMI customer participation.
It is a “really good program that is well thought through…[and] forward-thinking,” observed Karen Gados, Business Development Director for SunShare, one of the top U.S. community shared solar developers.
“People have asked me for years what the model state community solar program is,” said CEC Policy and New Markets Director Hannah Masterjohn. “There has not been a good answer. New York is it. This is the one we have been waiting for.”
The Joint Utilities
The Joint Utilities (JU) group, composed of Consolidated Edison, Orange and Rockland Utilities, Central Hudson Gas and Electric, Niagara Mohawk Power (d/b/a National Grid), New York State Electric & Gas, and Rochester Gas and Electric, “provided comments with a lot of detail on their perspective,” Joel said.
In their comments, the JU urge the PSC to restrain extension of NEM because customers who have it “reduce or eliminate their contribution to the upkeep of the electric grid” even as they use it and that “shifts grid costs to those customers who do not participate.” The shift, the filing explains, puts “upward pressure on rates for those who are unable to afford or cannot install renewable distributed generation.”
The JU say they support efforts to expand DER, but want to slow the transition and institute the community shared solar program when more of the REV initiatives, such as new tariffs, are put in place. If the PSC, in order to implement a program sooner, chooses to “extend the cross-subsidization inherent in the net metering construct by implementing community net metering,” the group recommends, it should be limited "to an interim measure.”
Among its specifics, the JU filing proposes more formulaic pricing revisions, a limit on the NEM-backed program to seven years, and either relieving utilities from handling customer bill credits or paying them to do so.
It also proposes adding a minimum bill charge, special rates, or new demand charges to ensure that “all customers participating in a community net metering project contribute fairly to the electric system that is necessary to facilitate the flow of energy from the host site to the members.”
Responses to the Joint Utilities
Had the PSC followed JU recommendations, Garren said, the program would have been delayed, limited in size, and had a more complicated rate structure.
“The electric utilities were not excited about this expansion. They threw the book at it in obstacles, delays, and cuts.”
“CEC has partnered with 21 utilities across the country. We know this can work for them,” Masterjohn said. “But putting myself in their shoes, the REV docket is shaking up their business model. I understand the resistance expressed in their public comments.”
In its order, the PSC responded to the JU directly and unequivocally.
“Coordinating Community DG with the coming decisions in REV would further the public interest,” it writes, but there is “strong support for moving forward with Community DG as quickly as is feasible…[and] after more decisions are arrived at in REV, the application of the REV principles to Community DG would be expanded.”
Some of the JU’s proposals “would unduly constrain or overly restrict Community DG programs,” the PSC adds. In particular, the seven year time limit would impose program-disrupting uncertainties, regulators wrote, and it is the responsibility of utilities to handle the billing and properly credit member accounts.
The PSC did, however, side against solar advocates in affirming the JU proposal to require all members in a project to be in the same service territory and load zone as the project.
“The NY PSC knows their responsibility is to look out for the best interests of NY ratepayers and they do it well,” Masterjohn said.
“It was suggested utilities should be allowed to own DG since there is a priority to build it and utilities have the capability to do that,” Garren added. “The PSC decided that, as with other generation, utilities should not [own community shared renewables].”
Masterjohn is convinced NY utilities would still like to be sponsors in the program and own projects, which is prohibited by New York’s deregulation.
“Whether the commission will ultimately allow that is to be determined,” she said.
The cost shift
“Everybody understood this is an access issue we need to solve now, to allow access to solar for all customers,” Masterjohn said. “We will answer the much harder valuation of DG question but we are going to take our time and do it right.”
In two ways, the cost shift debate in New York is different, she added. First, the “deep and diverse coalition advocating for this legislation included low income advocates, communities of color, and environmental justice advocates. That provides a welcome counter to arguments we hear about solar hurting poor people.”
Second, because the PSC is forward thinking, the program “is fully subject to change within the context of the broader REV docket. As the net metering successor tariff comes out and as the cost-benefit analyses come out, this program will evolve.”
There is no research that conclusively proves NEM causes the cost shift the JU described, Garren said. “The commission seems to want to study those things without making the assumption net metering is the wrong choice and it looks like it is going to do a really good job on the analyses.”
What could happen
“New York represents a huge market potential for community shared solar,” Masterjohn said. New York City is the posterchild. It represents something like 30% of the state’s energy demand. Our back of the envelope estimate is that no more than 2% or 3% of the utility customers in New York City can put solar on their roof.”
There are 7,317,755 occupied housing units in New York City, NYSERDA’s Joel pointed out. Some 53.3% (3,897,837) are owned outright or through a mortgage or loan. The other 46.7% (3,419,918) are rented and those renters are ideal candidates for community shared solar membership.
“New York City is a shining example of people who would want to go solar but can’t put it on their roof,” Garren said.
“New York City is a challenging marketplace, one that a lot of solar developers have been trying to crack for years,” Masterjohn said. “They working on lowering soft costs and simplifying things but it remains a challenge. And the order requires that projects and customers be within the same load zone. It will be interesting to watch how that works out.”