By Kacie Peters, Director of Business Development, and Kelly Hadayia, Director of Subscription Services, Turning energy
Community Distributed Generation (CDG), also known as community solar or shared solar, is getting a facelift. Much has changed since New York signed one of the most promising and progressive energy laws in 2014, including the state’s renewable energy goals. The aggressive but achievable Reforming the Energy Vision (REV) implemented a lofty target of 50% renewable energy generation by 2030. Including the standard diminishing incentives, New York developed a new approach to pricing and credit values through the “Value of Distributed Energy Resources” (VDER): REV.
Since then, the Empire State has adopted its approval 2.3 GW of new renewable capacity. 300 MWAC of the total capacity comes directly from the community’s distributed solar energy. Its success led Governor Cuomo to raise the overall renewable energy target to 70% by 2030.
Despite this record growth (or as a result), many developers have seen their project development stall as various incentives were depleted and the uncertainty surrounding key areas of VDER, such as “E-Value”. Now developers are asking, “What’s next?”
Two programs are on the way: remote lending and the inclusive community adder. Each has vastly different goals and structures for solar shared energy, requiring new approaches to financing, strategy and risk mitigation. While it’s important to understand current uncertainty and the impact of future incentives, one clear headline remains: increasing access to renewable energy. Let’s take a deeper look at these new structures, opportunities and what the future holds for community solar in New York.
Background: the end of the era of predictable stimuli
The New York State Energy Research and Development Authority (NYSERDA), the entity responsible for setting New York program rules, has worked with the Department of Public Service to develop the incentives and VDER rate inputs. The implementation of VDER brought new complexities to the more well-known pricing structures. But when developers, asset owners, and managers began to understand how the stack was valued, the market reacted – quickly. More than 1,600 MW of incentives for the Market Transition Credit, Community Credit and Community Viper were used up in just four years, stalling the development of a robust pipeline of ongoing solar projects for the community.
At the same time, New York is focused on a specific part of the VDER stack, the “E-value” or Environmental Value, which takes into account the environmental and social impact on a kilowatt hour of renewable energy. While others pieces of the pile remained constant, reassessment of E value is expected to be a positive shift towards more accurate and financially beneficial results.
A moment of uncertainty
As community solar in New York continues to expand, so do the incentives from NYSERDA. As of February 2021, the Community Adder was exhausted in the majority of upstate utilities – make the E-Value review a welcome opportunity. However, it also caused a pause in project development as developers wait for certainty about the project economy without legacy incentives. This scenario has both advantages and disadvantages.
Con: Slower project development and some uncertainty for developers.
Pro: The social value of carbon was previously calculated using an “estimate of the global, net damage from an additional ton of carbon dioxide added to the atmosphere”, while the new approach broadens the definition to “based on marginal costs for the reduction of greenhouse gases “. or on the global economic, environmental and social impact of the release of a marginal tonne of greenhouse gas emissions into the atmosphere. “
The new proposed E-value methodology encompasses more factors influencing greenhouse gas emissions and is therefore a promising development that will push the project economy in a positive direction and could inspire action around future incentives.
New market opportunities
During the slowdown in growth, New York has not interrupted efforts to pursue new goals and strategies in an already robust CDG landscape. NYSERDA and other stakeholders are pursuing new programs that will change the landscape of community solar acquisition and management: a revised remote lending program and the addition of a Includes Community Solar Adder.
Remote credit: the all-anchor project
The loss of the Community Adder has taken away a significant portion of project revenue, so naturally developers are looking for a way to reduce operating and financing costs accordingly. One solution is a program with fewer participants that is easier to subscribe.
New York had a remote net credit program targeting large commercial and industrial users. Still, it was full of challenges, as projects had to be placed on a participant’s land and there were limited satellite meters. After years of stagnation, that program is finally overhauled. In the latest designs, a maximum of 10 participants with an unlimited number of related or unrelated meters are assigned to a project. Participants can now participate in multiple remote lending projects and tender up to 5 MW of total capacity. These new rules are likely to attract larger entities that have not been able to offset their full load.
There’s a small catch, though: projects enrolled in remote credit may have lower revenues, putting even more pressure on E-Value expansion. In short, remote credit holds great promise for developers looking to reduce costs, but its future depends on the E value.
New York program updates pave the way for changes in the solar community
New York’s accelerated growth in distributed solar power was revolutionary; VDER created the price signals to drive development where it was most needed and supported early market adoption through new incentives. As the community solar market thrives, NYSERDA is evaluating the following evolution of the program through:
- Make VDER more substantive with an increase to the fixed E-Value.
- Reduce project risk through consolidated utility billing and an improved program for large,
- Create incentives to support the development of LMI projects.
It’s likely that consolidated billing plus a redesigned E-Value will drive even more developers to New York. It is increasingly likely that projects developed in 2022 and beyond will deviate from 2019. The appeal of flexible underwriting and lower management costs is likely to drive a new segment of all-anchor projects. Likewise, the right incentives and support for consolidated utility billing will drive a thriving LMI program. New York is once again on the cusp of the growth and evolution of the community’s solar energy and we can’t wait to see the wider impact of the industry in designing community solar programs.
Kacie Peters has more than ten years of experience with distributed solar energy. During her tenure in renewable energy, she has led sales teams, developed new products and developed a market strategy for companies and organizations, including SunEdison and Alta Energy. She has served as a board member of the Illinois Solar Energy Association and is a current board member of Colorado Solar and Storage Association. In her current position at Pivot Energy in Denver, Kacie leads business development for SunCentral, a leading software platform for managing community solar subscriptions. Kacie has been recognized for her contributions to the segment as a Top Woman in Energy in 2020 by the Denver Business Journal and as an E2 Clean Power Player.
Kelly comes to Pivot Energy with nearly three years of solar community experience specifically focused on marketing, sales, e-commerce and subscription services. She has experience working in community solar in 17 states and represents more than 100 solar energy projects. Prior to Pivot Energy, Kelly worked at Clean Energy Collective, prior to which she spent 15 years in marketing for higher education institutions such as Harvard University and EdTech Consulting. She has a Bachelor of Arts degree from the University of Massachusetts.