Time to Revalue Solar

New York Utilities and Solar Companies Jointly Revalue Grid-Exported Distributed Generation to Support Solar Growth

On April 18, 2016, a coalition of New York State electric utilities and solar development companies filed a proposal with the New York State Public Service Commission (NY PSC) to transition from the current net energy metering (NEM) compensation model to a mechanism that addresses costsharing issues due to solar growth. The proposal recommends collecting a payment from solar developers for grid-connected community solar and remote solar projects, while preserving utility bill savings for customers. The proposal would generally retain the current mechanism until January 1, 2020, with options for a transition to a new formula that provides a more accurate compensation for the value of the electricity exported to the grid.

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NEM is a billing mechanism for electric utility customers with grid-connected distributed generation (DG), allowing customer generators to sell excess generation back to the grid for kWh and/or financial credits. NEM has been the key policy behind most state distributed solar generation along with federal, state, and utility incentives. With increasing solar generation, consumers without adequate rooftops for solar installations have been able to access solar power through community solar or remote net metering arrangements.
With increasing solar penetration, state utility commissions, utilities, and solar providers have been grappling over proper valuation with regard to potential cost-shift to non-solar customers, aggregation, and ownership models. In the current approach, the utilities typically seek to shift compensation from NEM retail rates to wholesale rates for excess generation sent to the grid. Some states have initiated studies or opened dockets to address these issues, and others have effected changes. Most notably, Hawaii and Nevada became the first states to end retail rate NEM and shift to alternative mechanisms that compensate solar providers at much lower wholesale rates, thereby
decreasing the credit solar owners receive for net excess generation. In contrast, California, which has the largest solar market with more than 3,000 MW on NEM tariff, has passed a successor policy which preserves the basic features of retail-rate NEM through 2019.

The coalition of New York utilities and solar companies formed a “Solar Progress Partnership” to propose a DG compensation model that continues to support solar development in the state, while addressing customer costsharing issues related to solar growth.

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Currently, New York has more than 3,100 MW of NEM-eligible resources installed or in the utilities’ interconnection queues. Notably, NEMeligible applications have more than doubled in Q1 2016, with much of the recent development configured as community distribution generation projects. NY PSC observes that the growth pattern lends urgency to its decision-making on DER compensation mechanisms.

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Siting based pricing mechanism
On April 6, the Vermont Public Service Board proposed changes to the state’s NEM program to use price to encourage siting of NEM systems, a change from the current policy that provides the same price regardless of price or location.
The proposal seeks to set different price levels to encourage siting of NEM systems in developed areas such as roofs, parking lots, landfills, and town preferred sites.

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NEM, the key state policy supporting solar PV, is under a significant transition phase as states and utilities continue to evaluate the financial viability of DG.

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Moving forward, both utilities and solar companies will have a crucial role in seeking alternative rate mechanisms to compensate distributed generation and facilitate implementation of changes.

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The full version of the original article available at enerknol.com