Distributed Energy Resources

New York eyes changes to ‘value stack’ compensation

New York regulators are in the early stages of fine-tuning the way distributed energy resources are paid while boosting opportunities for community projects by about 1,000 megawatts.

At issue is the New York Public Service Commission’s Value of Distributed Energy Resources policy that aims to pay DERs for how they benefit the grid and reduce customer costs.

In an initial order, the PSC last year directed that eligible DERs transition from net metering compensation to the “value stack,” a methodology that bases payments on the benefits created by the distributed resources.

The value stack is based on a utility’s avoided costs plus other benefits a resource may bring such as demand reduction and environmental values.

The effort is part of New York’s Reforming the Energy Vision, which is overhauling the state’s electric utility business model.

The New York State Department of Public Service released two white papers last week with recommendations on how to enhance value stack compensation and spur additional community distributed generation, called CDG.

“Distributed energy resources, such as CDG, are critical to building out an energy system that will meet half of New York’s electricity needs with clean and renewable energy by 2030,” said John Rhodes, NYSDPS chief executive officer. “Smarter, forward-thinking compensation for these projects will assure that these markets are developed in a robust, cost-effective and sustainable way.”

The PSC is taking public comments on the recommendations.

Currently, the value stack compensation includes a payment for the demand reduction value a DER provides.

As part of the transition away from net metering, mass market customers are eligible for a “market transition credit.”

The arrangement has encouraged the planning of 800 MW of CDG projects serving mass market customers, NYSDPS said in one of the reports.

However, the NYSDPS is recommending the PSC revise the market transition credit framework to bolster areas of the state where CDG development has been slow. It would also increase the amount of incentives available in utility service territories that have reached the program’s limit.

Developers have had a hard time planning projects serving a large commercial customer or CDG projects that have a commercial customer as an anchor because of their ineligibility for the market transition credit, according to the report.

On the issue of calculating value stack payments, some stakeholders contend the demand reduction value and locational system relief value component of the value stack lack required certainty to allow for project financing, according to the NYSDPS.

“The desire to compensate for precise grid values must be balanced with the risk that a more sophisticated tariff may result in price signals that do not fully incentivize and motivate developers and customers to make decisions based on the objective of maximizing grid value,” the agency said.

The state agency is recommending that projects be able to choose between two options that would have a more predictable demand reduction value that could spur more large on-site and remote projects.

The locational system relief value should be phased out, according to the report.

The department also proposed expanding net metering to commercial customers for up to 750 kilowatts in cases where onsite generation is mainly used to satisfy customer demand.

The reports are available here and here.