New York Unveils New Way to Price Distributed Energy Resources

price distributed energy resourcesNew York energy advisors unveiled a new, more granular way to price distributed energy resources and transition away from net metering, in a proposal released yesterday.

The report, issued by the Department of Public Services staff, said that current pricing methods fail to take into account the full value of distributed energy.

State regulators had called for the report as part of Reforming the Energy Vision (REV), New York’s strategy to create a decentralized power grid. Valuing solar and other forms of distributed energy marks the next major step for REV. The Public Service Commission (PSC) is expected to take action on the new pricing proposal in January.

“With a more-accurate, market-based approach to compensate consumers for the value of their distributed clean energy investments, we will continue to take positive steps towards making these clean resources a core part of our energy system, resulting in significant benefit to New York’s grid and consumers alike,” said Audrey Zibelman, CEO of the Department of Public Services. “Under this cutting-edge framework, consumers, utilities and energy developers will be rewarded for investment decisions based on the full value that clean energy and other distributed energy resources provide to our electric system.”

The proposal gradually transitions New York away from net metering and instead prices distributed energy based on its energy, grid and environmental values. Consumers and businesses now using net metering could continue to do so for up to 20 years. Or they could drop net metering for the new compensation plans.

The proposal also addresses utilities will be paid for distributed energy development. It calls for utilities to create fee-based ‘virtual generation portfolios’. The portfolios would be made up of new distributed energy projects that utilities would develop in partnership with private developers.

Utilities would be paid based on the project’s worth to the utility’s overall operation. This approach recognizes that distributed energy resources “impact the system not solely as individual projects but also as a part of an ecosystem that influences system planning, operation and development,” the report said.

The report also recommends:

♦A process to unbundle and publicly identify all of the factors that make up — or should make up — the full value of distributed energy resources. The report does not specify a deadline for establishing values, but notes that that pricing may evolve over time. Utilities must first develop the analytical tools to calculate the value of location, particular devices, time of use and other factors that must be considered in compensating homeowners, developers, businesses and others for the full value of distributed energy resources.

♦Establishing interim measures for community distributed generation, or shared renewables, projects that are in advanced development. Such projects will be allowed to choose net metering under a limited time period. After that, shared renewables would use the new, more-detailed compensation approaches.

Initial comments on the report are due to the PSC by Dec. 5.

“We deeply appreciate the continued engagement in this cooperative inquiry as we move beyond status quo and push towards new valuations for distributed energy that are just and reasonable for all consumers,” Zibelman said.

She added the state is just beginning to understand the full value of distributed energy resources, “not just for the system as it exists today but for the system that will exist tomorrow.”

The staff recommendations “are a significant and meaningful start to this process,” she said.

Zibelman emphasized the need to move forward “gradually and deliberately” to avoid disrupting growth in solar and other distributed energy resources.  Since 2012, solar in New York has grown 750 percent – from a little over 78 MW to 669 MW.

The staff report is the result of a year-long collaboration with environmental advocates, utilities, solar and distributed energy providers, and consumer advocates. It represents the initial steps of an ongoing process in New York to price distributed energy resources.

New York is trying to drive more use of renewables, energy efficiency and energy conservation technologies, so that renewables provide half of the state’s electricity by 2030.

The staff report is available on the Public Service Commission website, Case Number 15-E-0751.

What are your thoughts on pricing distributed energy resources? Join the discussion on our LinkedIn group, Distributed Energy Resources.

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

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