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New York PSC Adopts Compensation Mechanism To Value Distributed Generation

March 9, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The New York PSC has adopted an order establishing a mechanism for the value at which distributed energy resources (DERs) are to be compensated.

The order establishes a transition away from net energy metering (NEM), allowing net metering as it exists in current tariffs to continue for certain in-service resources, with a modified form of net metering available to resources which interconnect or make a defined financial commitment within 90 days

Otherwise, net metering will not be available for new projects, which will instead be compensated under a Value Stack approach set forth in Value of Distributed Energy Resources (VDER) tariffs

Under Phase One, the Value Stack tariff will only be available for technologies and projects that are eligible for NEM; other DER technologies will be addressed in subsequent Phases.

The Value Stack tariff shall be based on monetary crediting for net hourly injections. Excess credits will be eligible for carry-over to subsequent billing and annual periods, subject to further stipulations as detailed in the PSC's order. Projects eligible for the Value Stack tariff will receive compensation for a term of 25-years from their in-service date. Projects under the Value Stack tariff must be equipped with utility metering capable of recording net hourly consumption and injection.

Compensation under the Value Stack for net hourly injections will be calculated based on the value associated with: 1) Energy Value, based on the Day Ahead hourly zonal locational-based marginal price (LBMP), inclusive of losses; 2) Capacity Value, based on retail capacity rates for intermittent technologies and the capacity tag approach for dispatchable technologies based on performance during the peak hour in the previous year; 3) Environmental Value, based on the higher of the latest Clean Energy Standard Tier 1 Renewable Energy Certificate (REC) procurement price published by NYSERDA or the Social Cost of Carbon (SCC); and 4) Demand Reduction Value (DRV) and Locational System Relief Value (LSRV), based on a deaveraging of utility marginal cost of service (MCOS) studies, performance during the 10 peak hours, and further processes as detailed in the PSC's order.

In addition, utilities were directed to develop options for a fee-based portfolio service under which DG projects can be aggregated into a virtual generation resource.

Community Distributed Generation (CDG) projects compensated under the Value Stack tariff will be eligible for a Market Transition Credit (MTC), equal to the difference between the Base Retail Rate and Estimated Value Stack as detailed in the PSC's order. CDG projects will receive a pro-rata MTC based on the portion of their project that is dedicated to serving small customers and shall not receive a DRV for that portion of their project. Eligibility for MTC compensation will be subject to the availability of MW capacity allocations in each utility that are derived from the incremental 2% net revenue impact limitation, as summarized in the PSC's order.

MW capacity is allocated to three distinct Tranche buckets as follows: Tranche 0 (Phase One NEM)/Tranche 1 (Value Stack plus MTC equal to 100% Base Retail Rate); Tranche 2 (Value Stack plus MTC equal to 95% Base Retail Rate); Tranche 3 (Value Stack plus MTC equal to 90% Base Retail Rate). The specific method and allocations to distinct Tranches is further detailed in the PSC's order.

After 90 business days from the date of the order, any remaining capacity in Tranche 0 shall be rolled over to Tranche 1. Utilities shall provide frequent and transparent reporting on the progress of Tranches and will provide notice upon hitting 85% of the total allocation amount so that the Commission may consider what action is appropriate. Eligibility for placement in a Tranche will be based on the time-stamp of a 25% advanced payment for interconnection upgrade costs or execution of a Standard Interconnection Contract if no such payment is required.

Under the PSC's order, a project that includes energy storage paired with an eligible resource will be eligible for compensation under NEM, for mass market on-site projects, or the VDER Phase One tariff. As part of the development of the final Value Stack tariff, Staff will consider whether there are alternatives to their recommendation to base compensation on net monthly injections in order to better reflect actual storage configurations and value while still avoiding uneconomic arbitrage. The application of the Phase One tariff to stand-alone storage facilities will be addressed in subsequent phases.

See the PSC's order here for more details

Case 15-E-0751

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