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PSC: Report recommends improved compensation for rooftop solar

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Tue, Dec 10th 2019 11:40 am

Proposed payment structure 'optimizes benefits of residential solar'

Residential net metering improvements said to ensure continued growth of New York’s solar industry

The New York State Department of Public Service staff issued a report outlining options for the Public Service Commission to consider for future compensation for generation by residential rooftop or small commercial solar customers, also known as mass-market customers. Since 1997, net energy metering (NEM) has been one of the state’s primary mechanisms to encourage mass-market solar installations. The report proposes the continuation of NEM for mass-market solar with improvements to ensure the continued growth of solar across New York while ensuring fairness for all utility customers by increasing the accuracy of price signals and reducing subsidies that are not directly tied to environmental values. These recommendations would affect mass-market rooftop solar systems installed after Jan. 1, 2021. Existing rooftop solar customers would not be affected.

“A smarter and careful improvement in compensation for rooftop solar projects will assure that these markets are developed in a robust, cost-effective and sustainable way,” Department of Public Service CEO John B. Rhodes said. “Solar needs to be a mainstream component of our power generation mix, not a niche industry. Today’s report aims to continue and expand investment in New York’s clean energy economy in a way that is good for all customers and for the state’s clean energy policy.”

A press release said, “NEM has proven effective at incentivizing solar adoption, along with other initiatives like NY-Sun. Since Gov. Andrew M. Cuomo took office, solar in New York has increased nearly 1,700%. But NEM was originally designed to encourage growth in a solar industry that had very little market share. As deployment of solar scales up and solar becomes a mainstream element of the state’s power generation, traditional NEM, when applied to existing default rates, will become unsustainable. It does not send the proper signals in terms of where and when solar resources will deliver the most grid value, and it holds the potential to raise the rates of non-participating customers.

“As large numbers of mass-market customers deploy solar and receive the benefits of NEM, the price impact on other customers increases as the costs of maintaining the electric grid, such as cyber-security and safety initiatives, must be covered by utility rates. Traditional NEM, combined with today’s default rates, allows solar customers to reduce contributions to these costs, shifting the burden to non-solar customers. In addition, under traditional NEM, customers with rooftop solar contribute significantly less than customers without rooftop solar to public benefit programs, including utility energy efficiency programs, the Clean Energy Fund, the Clean Energy Standard, and utility low-income programs, even though most customers with solar have received benefits from one or more of those programs.”

As it began implementation of “Reforming the Energy Vision” (REV), the PSC insisted that rates must be designed to encourage price-responsive behavior to advance policy objectives, while respecting concerns regarding sensitivity to overall impacts on consumer bills and achievement of environmental policies; and that rates should encourage desired market and policy outcomes including energy efficiency and peak load reduction, improved grid resilience and flexibility, and reduced environmental impacts.

The press release said, “As the cost of solar technology continues to decline, and the percentage of customers utilizing NEM continues to increase, adjustments are needed to achieve the desired policy outcomes.”

New York’s energy supply will be going through significant changes in the next two decades. In July, Cuomo signed the Climate Leadership and Community Protection Act. The CLCPA requires the state to achieve a carbon-free electricity system by 2040 and reduce greenhouse gas emissions 85% below 1990 levels by 2050, which will lead to significant amounts of additional clean energy on the system in the 2020s and 2030s.

The options outlined in the report are intended to move the state beyond net-metering to compensate solar projects fairly and adequately for the value they provide, while also assuring fair and acceptable impact on customers who may not be able to install a renewable energy system. Additionally, a new, forward-looking strategy should compensate projects based on where they are located on the grid and when they generate, thereby reducing cost shifting while still providing solid and reliable returns to solar projects.

The report is the result of a year-long process involving stakeholders, including the state’s major utilities, solar developers, and environmental nonprofits, with a focus on bill impacts on non-participants, on existing mass-market customers with rooftop solar, and on new mass-market customers that install rooftop solar.

The press release said, “Ultimately, the objective is to develop a proposed rate design for the successor NEM compensation for mass-market customers, to become effective as of Jan. 1, 2021. Existing NEM customers would have an opportunity to opt-in to this tariff. The report reflects attention to the rate design principles previously articulated by the commission, that the customer experience be practical, understandable, and promote customer choice.”

In this report, staff identified several options for mass-market customers, including a new default option with an effective date of Jan. 1, 2021: continuing NEM at standard delivery rates with a customer benefit charge. The report also calls for continued improvement in rates as advanced metering technology is approved and deployed. The recommendations included the report apply to the state’s investor owned utilities under the PSC’s jurisdiction. The Long Island Power Authority regulates the electric distribution system serving all Long Island and the Rockaways and is expected to implement tariff changes in alignment with PSC policy.

Following the issuance of the report, the PSC will solicit public comment, and department staff will continue to work with all interested stakeholders in developing final recommendations for PSC consideration.

In addition to the report, staff filed a letter requesting PSC secretary formally extend the effective date of any change in NEM to Jan. 1, 2021, to provide certainty to customers and developers while the report is under consideration.

The report may be obtained by going to the PSC documents section at www.dps.ny.gov and entering case number 15-E-0751 (In the Matter of the Value of Distributed Energy Resources) in the input box labeled "Search for Case/Matter Number.”

Commission documents may also be obtained from the PSC files office, 14th floor, Three Empire State Plaza, Albany, NY 12223 (518-474-2500).

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