Horrific wildfires, toxic algae blooms, withering summer heat: all over the world, the repercussions of climate change are alarmingly evident and the clock is running down on the dire need to lower carbon emissions.
But here in New York State, which has set a goal of getting 50 percent of its electricity from renewable energy sources by 2030, state initiatives moving toward green energy have been dealt a setback. A change in how the state values solar-produced electricity and compensates solar energy users is causing a significant slowdown in the installation of commercial solar projects, making that 50 percent/2030 goal ever more elusive.
The state Public Service Commission, which regulates New York’s electricity and telecommunications markets, has replaced its net metering practice with a complicated, convoluted valuation system for customers’ solar-generated excess electricity that gets sent back to the grid. It’s called Value of Distributed Energy Resources, or VDER.
Under VDER, the valuation for the excess energy is variable, making it difficult for solar customers to predict the amount they’ll be compensated for — although, solar producers say, it’s almost always less than it was under net metering. With net metering, the juice solar customers produced with their panels was always, kilowatt for kilowatt, worth the same as what the utility charges for electricity. That was a much easier and more reliable method of calculating the savings. Residential solar customers are still using net metering, although once a utility reaches a certain amount of solar-produced megawatts for its territory, net metering will be phased out entirely and residential customers will be switched to VDER as well, according to Tom Kacandes, president of Inside Track Solar, Inc., which is based in Dutchess County and installed the first community solar project in downstate New York. Kacandes said those numbers are arbitrary — he didn’t know offhand what the number is from Central Hudson — and on January 1, 2020, net metering will be phased out completely.
According to Kacandes, residential and commercial solar customers who installed their meter prior to March 8, 2017, can use their meter as long as the system works. Those who installed their meter after that date are subject to a 20-year limit, after which time they have to switch to VDER.
But all commercial customers are already under VDER rules. At a press conference hosted by Citizens for Local Power (CLP), a Rosendale-based nonprofit dedicated to moving communities to green energy, at Kingston City Hall on Tuesday afternoon, CLP board president Susan Gillespie said the solar industry estimates $800 million in investment in solar energy projects has been cancelled due to VDER. That amount is equal to half the solar the state has installed to date, according to the industry.
“VDER is killing solar projects in New York,” Gillespie said. Referring to the new initiative as “Darth VDER,” she said citizens’ groups and solar providers were holding a series of simultaneous press conferences all over the state in a bid to get Gov. Andrew Cuomo to step in and fix the problem — namely, by restoring net metering as an option for solar customers.
Also present at the Kingston press conference were Kacandes and Anthony Sicari, owner of SunPower by New York State Solar Farm, based in New Paltz.
Sicari, who said his company employs 40 and “has helped 200 families to go solar every year,” said VDER “makes the sales process for solar more complicated,” with the result that “many individuals don’t go with solar at all.” The rate structure implemented by VDER “punishes small business owners, farmers and other individuals by taking away most of the benefits. If you’re getting 15 cents on the kilowatt, now that value has been cut in half. You have to build more solar to offset the cost.”
VDER also requires more staff to work with customers to analyze their electricity bills, putting an additional burden on suppliers. “The new meter policy is failing the people. We’re nowhere close to hitting the governor’s [renewable energy] goal with VDER in place,” Sicari said, adding that yet another disadvantage is the loss of “high-paying construction jobs affiliated with each project.”
While Tom Kacandes said “business clients, such as Bread Alone, have installed solar, other projects have been stopped in their tracks,” thanks to “a much more complicated auditing process.” As for Bread Alone, “the company wanted to go 100 percent solar, but they held off from installing solar for their parking lot because of VDER,” he said.
Also attending the event was Tom Konrad, chair of Town of Marbletown’s Environmental Conservation Commission. Konrad noted that the variability of VDER discourages businesses from investing in solar. “Businesses are much happier with a fixed long-term price,” he said.
Ulster County Legislator Kathy Nolan, who was in the audience as well, said she recognized the fact that VDER represented an attempt to “come up with a mathematical way to credit [solar usage] taking into account all the variables,” such as time of day and location. However, she noted the need is to “incentivize solar instead of going through an equation that might discount it.”
A Lego-based metaphor
How does VDER work? A CLP handout compared it to a stack of Legos, with each block representing a benefit or cost to the grid, utility or environment, expressed as the monetary value per kilowatt hour of electricity generated. The combined value of all the blocks equals the amount a solar customer will be credited on the utility bill for each kilowatt hour produced. The blocks consist of the following:
• The wholesale electricity rate, which changes hourly and requires hourly meters to be installed so the solar array can capture the variation in the value of the power at different times of day, as well as the difference by location within the grid.
• The capacity value — compensation for producing power during times of peak demand, such as a hot summer afternoon, when the solar installation reduces the need for utilities to fire up dirty, inefficient back-up plants to meet the additional need for electricity.
• Climate benefits of reduced carbon emissions, whose monetary value is calculated using either the Environmental Protection Agency’s social cost of carbon or the state’s REC market prices, whichever is greater.
• Avoided distribution costs, which depends on part on the location of the installation in the transmission system. The Public Service Commission is still determining the value of this and is in the meantime using a proxy value.
The combined value of these blocks will vary by location and time of day. Solar customers will receive a dollar amount on their bill for each kilowatt hour generated, which may be more or less than the value of a kilowatt hour of retail electricity.
While CLP “sees benefit, conceptually, in a pricing system that rewards beneficial investments,” the group is concerned that some benefits of solar are not being monetized in the new system, such as having lower and more stable energy costs over the long term, local job creation and resiliency of solar, compared to electricity sent over transmission lines.
“I understand why the Public Service Commission with their view of managing the profit making of the utilities would go with VDER, but it ignores too many things to achieve the policy end,” said Kacandes. “The governor set out a polity that’s not being met, because the solar projects are not getting built. Massachusetts built more than 1600 MW worth of solar generation last year and [New York State is] still less than 1000 MW. [Massachusetts] created a clear policy with lots of incentives, but the utility rate analysts at the PSC have a policy that doesn’t work. We would like the governor to intervene to make a decision that customers have the option of using net metering.”
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