Dive Brief:

• The New York State Public Service Commission today approved a new compensation structure for distributed energy resources, a move designed to help the state value solar power, energy storage and other small, local clean energy systems.
• PSC officials say the order takes a first step toward a new pricing mechanism, known as the Value Stack, to provide more accurate compensation levels for distributed energy resources (DER). The first phase establishes more granular valuation and compensation for distributed generation and sets up broader changes to move away from net energy metering.
• The PSC's decision does not immediately require changes to residential rooftop solar, but the Natural Resources Defense Council (NRDC) says some homeowners could benefit if their system is combined with storage. Otherwise, residential customers will continue to be compensated under net metering rates.

Dive Insight:

Last year in October, staff of the PSC issued analysis on how to best integrate distributed resources into the grid. Today's order enacts that report.

The order establishes a methodology for determining a new Value Stack mechanism based on avoided utility costs and DER values, including components for wholesale energy values, distribution system values and environmental values.

The order directs utilities to file detailed schedules and work plans within 45 days to develop locational DER pricing that reflects the components of the Value Stack. After that, the commission will issue another order to improve the Value Stack and more precisely identify energy-related costs and values of DERs. 

Large solar energy systems known as Community Distributed Generation (CDG), will see a boost from the order, along with smaller systems. The commission said about 70 proposed CDG projects will "benefit immediately" from the order. In a separate order, the PSC also reduced the minimum membership requirement for CDG projects proposed for multiple-unit buildings.

Existing net-metered projects in service now will be grandfathered in as rooftop solar will be eligible for full retail net metering until 2020. For CDG projects under the new VDER value stack, a market transition credit will be offered to support the new market.

While the order recognizes that many solar companies built their business model around the retail net metering policy, it argues that "such business models and NEM in particular are inaccurate mechanisms of the past that operate as blunt instruments to obscure value and are incapable of taking into account locational, environmental, and temporal values of projects."

Orders from the commission also establish compensation for energy storage when combined with eligible DG systems, allow for low-income participation in CDG, and starts a process for greater oversight of DERs.

The commission's order pinpoints areas where more work needs to be done, including: adapting rate designs to stand-alone storage, refining methodologies based on more robust data, and using Green Bank financing mechanisms to further drive down project costs.

The NRDC hailed the decision as a "critical component of New York’s strategy to create a cleaner, more affordable electricity system," and will help the state reach a 50% renewables goal by 2030.

The order appears to have drawn some of its details from a landmark agreement between solar companies and utilities struck last year to transition away from net metering. Dubbed the "Solar Progress Partnership," participants included Consolidated Edison, SolarCity, National Grid and Rochester Gas and Electric to name a few.

Under the agreement, behind-the-meter solar would be credited at the full retail rate until 2020, with possible exceptions for location. Beginning in 2020, the compensation credits would step down in value from retail for new solar users until they are equal to their value as determined by regulators. Community solar customers would receive full retail net metering credits, but they would be partly paid by developers.