Can New York State satisfy nearly 30 percent of its electricity needs with solar projects less than five megawatts in size by the year 2030? In September of this year, Governor Hochul announced a framework to do just that, setting 10 gigawatts (GWs) of deployed distributed solar by 2030 as the goal, enough to power 700,000 New York homes – even more than the 2019 Climate Leadership and Community Protection Act’s (CLCPA) six-GW deployment requirement.
And on Friday, December 17, New York State Energy Research and Development Authority (NYSERDA) and New York Department of Public Service (DPS) Staff released the much-anticipated “whitepaper” to achieve Governor Hochul’s goal – New York’s 10 GW Distributed Solar Roadmap: Policy Options for Continued Growth in Distributed Solar (the “Roadmap”). The Roadmap will soon be noticed for public comment on the DPS docket, leading to an order of the Public Service Commission (PSC) in the spring of 2022. That order is expected to codify many of the proposals of the Roadmap and to direct NYSERDA and the state’s regulated utilities to implement them.
According to NYSERDA, the CLCPA’s six GW goal is already “nearly achieved” – 93 percent of the six GWs consists of projects either completed or in later stages of development. To reach 10 GWs, NYSERDA and DPS Staff propose to expand the existing NY-Sun MW Block program with additional upfront “adders”, with enough initial funding to last through the end of 2022. This approach is favored over increasing the environmental value or “E-value” in the Value of Distributed Energy Resources (VDER) tariff’s value stack, for which some industry stakeholders had advocated, and/or implementing an auction or solicitation model.
The Roadmap was warmly received by solar industry stakeholders as a necessary step. NYSEIA and SEIA applauded this as an “ambitious investment” that puts New York on the path to achieve 10 GWs, while looking forward to working on the proposal’s details, and Anne Reynolds of the Alliance for Clean Energy New York similarly looked forward to “digging in to this blueprint” so that its members could continue “to invest in – and create new jobs in – New York.” Representatives from labor and environmental justice organizations also voiced support for the proposal.
Initial rates for the proposed additional NYSERDA-administered MW Block and Community Adder would represent a stepdown from the most recent incentives, most of which are currently depleted. Below is a summary of the Roadmap’s key proposed NYSERDA Incentives:
- Upstate C&I. A new NY-Sun Upstate C/I MW Block of 800 MWs with a $0.17/W incentive (representing an increase over the last, fully allocated MW Block 17 at $0.11/W). Funding beyond the 800 MWs would incentivize a total of 2,943 MWs of new upstate C&I capacity.
- Con Edison Non-residential/C&I. New MW Block with initial incentive rates of $0.75/W for projects 1 MW and larger, and $1.30/W for projects below 1 MW, with initial block sizes of 30 MW for each size category, incentivizing a total of 150 MW across multiple blocks.
- Community Adder. Additional 2,270 MWs of community adder capacity, with initial rate of $0.07/W for upstate projects, and $0.10/W in Con Edison territory. Based on the incremental cost to develop a community solar project compared to a Remote Credited project, including customer acquisition and management costs.
- Con Edison Residential. New MW Block of 150 MWs at $0.15/Watt (lower than current MW Block rate of $0.20/Watt).
- Continuation of Policy Support Adders. NYSERDA will continue to offer additional upfront incentives for projects achieving certain policy goals, including affordable housing, siting on brownfields and landfills, and using carports/parking canopy designs.
Upstate C/I projects that have already received a NY-Sun incentive at the time the Roadmap was published will not be permitted to cancel their applications and re-apply. NYSERDA and DPS Staff found expanding NY-Sun’s MW Block program preferable to increasing the E-value given the former’s “proven track record for transparency and flexibility.” Increasing the administratively-set E-value, according to Staff, would introduce administrative complexity in maintaining multiple, periodically adjusted E-Values “across different regions, sizes, and levels of DAC benefit,” and could potentially increase certain “out-of-market” costs resulting in an “imbalance of cost recovery obligations across ratepayer groups.”
Prevailing Wage for 1 to 5 MW Projects
The Roadmap also recommends that solar projects sized one MWac of nameplate capacity and larger should be required to pay the prevailing wage or be subject to project labor agreements. State law and NYSERDA competitive solicitation requirements already require such payments for large-scale renewable projects. DPS Staff recommends that this new requirement for smaller solar projects only be applicable to projects that submit their initial interconnection applications after December 17. NYSERDA and DPS Staff estimate this change will cause an additional cost of $0.125/Watt for Upstate C/I projects, and $0.20/Watt for Con Edison C/I projects, but will affect only 1,550 to 1,850 MWs of projects. NYSERDA has requested NY-Sun incentives of $239 million to help the solar industry adjust to this new requirement.
Emphasis on Disadvantaged Communities
NYSERDA and DPS Staff recommend in the Roadmap that new incentives associated with no less than 1,600 MWs of projects be directed toward low- to moderate-income residents, regulated affordable housing, disadvantaged communities, and environmental justice communities. Of this, 1,357 MWs would be targeted to an expanded Solar Energy Equity Framework. These measures would comply with the CLCPA’s requirement that disadvantaged communities receive at least 35 percent with a goal of 40 percent of the overall benefits of clean energy program efforts.
NYSERDA and DPS Staff also recommend interconnection policy improvements to enable the realization of the 10 GW target, including modification of utility planning processes, the inclusion and consideration of distribution system investments that expand hosting capacity in future utility Capital Investment Plans, and expansion of the Cost-Sharing 2.0 framework.
Solar developers currently face increasing interconnection costs as many attractive sites on the distribution gird have been developed, increasingly leaving only sites requiring more expensive grid upgrades. The Cost-Sharing 2.0 framework, the final iteration of which is currently pending before the PSC, aims to address the first-mover disadvantage where a project that triggers a significant grid upgrade would have to pay for the entire cost upfront, and hope to be reimbursed by subsequent interconnecting projects. The Roadmap highlights the PSC’s ongoing transmission and distribution proceeding, (Case 20-E-0197), as an avenue for improving hosting capacity of the grid through utility investments.
Through the Roadmap, NYSERDA requests a total budget of nearly $1.5 billion in NY-Sun Program funding to achieve the incremental four GW target by 2030. This would represent an estimated average ratepayer impact of about 0.79%, or $0.71 per month for the average residential customer.
However, the Roadmap’s calculations do not assume federal passage of the Build Back Better Act, the provisions of which could reduce program costs by $525 million or more. If Congress enacts and the President signs that legislation in its most recent form, NYSERDA would refile the operating plan to account for, among other things, any increases in the federal investment tax credit.
The Roadmap’s proposals will likely be noticed for 60 days of public comment under the State Administrative Procedure Act in the coming weeks. This will likely be followed by a PSC order adopting some or all of the Roadmap’s recommendations. During the comment period, stakeholders will have to opportunity to weigh in on the Roadmap’s myriad policy choices and assumptions.
From a higher level, though, the Roadmap represents another significant investment by New York in its distributed solar industry in the face of uncertain federal support.
It is also an insurance policy towards the 10 GW goal. Though utility scale solar projects are expected to play an increasing role in the State’s energy mix in the 2020s, no major projects have yet to reach commercial operation. Almost all of the three GWs of solar deployed thus far are distributed, and betting on that sector can hedge some of the risk associated with larger projects.