A confluence of factors make the Empire State one of the best new solar growth markets in the U.S. Lucrative incentive programs, along with recent legislative, regulatory and economic changes; sound citizen and political support; and good market fundamentals make solar energy in New York both a near-term opportunity and a long growth industry with a sustained future.
Significant changes, including on-bill financing, remote net metering, fractional ownership, block grant installation incentives, private-public financing and green jobs incentives suggest strong economic viability for solar projects for companies and investors.
NY Sun-Initiative
This year, Gov. Andrew M. Cuomo authorized $1 billion in funding for the NY-Sun Initiative through 2023 to provide longer program certainty to photovoltaic system developers, attract significant private investment in PV systems, enable the sustainable development of a robust PV industry in New York, create skilled jobs, improve the reliability of the electric grid and reduce air pollution.
In furtherance of the NY-Sun Initiative, the New York State Energy Research and Development Authority (NYSERDA) requested that the Public Service Commission (PSC) issue an Order identifying the source of funding for the renewable portfolio standard (RPS), customer-sited tier (CST) Standard Offer PV and Competitive PV programs, by granting NYSERDA the flexibility to reorganize the NY-Sun Initiative into a cohesive program framework across sectors and system sizes, and employ a transparent regional MW block approach to contribute to a more robust, efficient, coordinated and successful program.
Specifically, NYSERDA's order seeks to do the following:
- Identify the source of funding for the NY-Sun 2014-2015 program years;
- Allow NYSERDA the flexibility to establish, and periodically adjust, the allocation of funds between the Standard Offer PV and Competitive PV programs;
- Allow NYSERDA the flexibility to lower the Standard Offer PV incentive level on a regional basis in response to achieving a designated threshold amount of MW under contract – the MW Block program;
- Eliminate the ‘40% of installed cost rule’ for the Standard Offer PV program; and
- Allow NYSERDA the flexibility to transition the Competitive PV program to a MW Block performance-based incentive program.
NYSERDA also asked the PSC to consider whether there would be greater efficiencies and success if a better-coordinated statewide PV incentive program, including Long Island, were implemented.
The Standard Offer PV incentive program, as authorized by the PSC, currently provides for incentives for systems installed on residential or non-residential properties based on two tiers, 50 kW system size, and a Second Tier with a lower incentive for capacity greater than 50 kW up to 200 kW.
The incentives are the same throughout the state for eligible customers, and NYSERDA may adjust the incentive level every two months to allow a reasonable period for installers and customers to enter into contractual agreements. If applications in the prior two months exceed available funds, NYSERDA reduces the incentive level for the subsequent two months; and if applications in the prior two months did not fully use the available funds, NYSERDA may increase the incentive for the subsequent two months.
Through this program, the solar installations have increased each year, and demand continues to grow, with systems greater than 50 kW up to 200 kW now eligible for incentives. However, the current triggers and process for lowering incentives are not predictable or transparent enough to provide installers with confidence that the contracts they are negotiating with their customers will reference the correct incentive.
Regional MW block
NYSERDA is transitioning to MW Block programs for both the Standard Offer PV program and the Competitive PV program by establishing a ‘declining MW block’ program. Based on California's program, the New York block grant program will result in steady, measured and predictable incentive level reductions.
NYSERDA has proposed a MW block approach on a regional basis, potentially providing different incentive levels and different MW blocks in different regions.
NYSERDA will implement the MW Block program in the context of monthly budgets according to the current practice to avoid having to prematurely terminate the program if demand substantially exceeds available funds through 2015. As a result, incentives will change regionally and across systems size and configuration. NYSERDA believes that through this mechanism, RPS incentives can steadily be reduced, and likely eliminated by 2020 – sooner in some regions of the state.
On-bill financing for residential PV
To eliminate the upfront investment required of homeowners and to tie financed equipment directly to the savings, on bill financing is now available to residential customers seeking to install customer-owned PV and solar thermal systems as part of their energy efficiency upgrades. On-bill financing for commercial customers will also be available, likely in the second quarter of this year.
Installed cost rule
Because the actual tax credits are determined at some future date based upon taxable income, there is no accurate way to determine the value of the tax credits at the time the incentive is approved. NYSERDA seeks to eliminate the 40% of installed cost rule for the Standard Offer PV program and instead, track the installed cost based on market conditions. Currently, the incentives are approximately 30% to 35% of installed cost. NYSERDA will use a market condition metric in setting appropriate incentive levels, including those established through the MW block approach.
NY investment tax credit
The New York State investment tax credit (NYS ITC) is allowed only on primary residences, and an aggregated cap of $5,000 typically does not allow the full benefit of the NYS ITC to residents purchasing both a PV system and a solar thermal system. Advocates seek to maintain the per-system cap of $5,000 but eliminate the primary residence rule and allow for independent NYS ITC caps on multiple systems per taxpayer.
Net metering changes
Net metering was first established in New York State in 1998 with the enactment of PSL §66-j. PSL §66-j has been amended numerous times, and as a result, the requirements for the various technologies and customers are inconsistent and difficult to equitably apply. Proposed legislative and regulatory changes would provide consistent requirements for various eligible technologies. In addition, it is unclear whether net metering applies to leased facilities; legislation seeks to clarify that customers with eligible facilities can avail themselves of net metering, regardless of whether the facilities are leased.
Remote net metering
New York established remote net metering for renewable energy systems to allow generated electricity to be distributed among multiple utility accounts. Utilities must now allow farm and non-residential customers the ability to apply the excess net metering credits they earn under net metering to satellite accounts they own. All accounts must be in the same name, from the same service utility and reasonably close to each other.
At the end of each billing cycle, the utility will convert the excess net metering credits (kWh) to dollars by using the host account's electric rate. The customer makes a determination of what percentage of excess generation is applied to each satellite account and what portion – if any – is kept as a rolling credit with the host account. These percentages and the satellite accounts may be changed, but only once per year. There is no annual true-up, and the utility will not issue a check for excess energy, just credits.
Fractional ownership
Fractional ownership addresses the barriers imposed by specific site requirements by decoupling PV solar investment from on-site generation. Owners lease or own a portion of a project and reap the electricity and incentive benefits proportional to their investment. These solar projects can be installed on the property of one of the project owners, on a separate private site or on a shared location, such as local or state government property. Owners can include renters, homeowners, local businesses and even utilities. Remote net metering allows for a form of fractional ownership, and community solar legislation is working its way through the New York legislature, with an enthusiastic response thus far.
Solar Jobs Act
NYSERDA seeks to provide financing for PV projects in the PSEG Long Island service territory. NYSERDA argues that greater efficiencies for industry and program administrators exist if better coordination of program design and implementation, common installer eligibility criteria, quality control and quality assurance protocols, and sharing of program data takes place across all program territories.
N.Y. Green Bank
The New York Green Bank, a $1 billion public/private partnership, will add significant value to the state's clean energy portfolio by positioning itself alongside private-sector entities and complementing state and utility incentives, grants and rebate programs.
The N.Y. Green Bank offers multiple unique benefits, including increased value of ratepayer dollars through leveraging private capital, and in the process, generating a host of other public goods (e.g., cleaner environment, system resilience, job creation, etc.). This innovative program is gaining recognition both domestically and globally allowing parties to respond to a dynamic marketplace and to manage a portfolio that optimizes the risk/reward trade-off, by operating in strategic partnerships.
New York's solar policies and programs will expedite the transition of the solar industry to a mature alternative energy industry that does not depend on RPS incentives for success, while maintaining healthy growth rates. Changes to the NY Sun initiative is a clear indication by government of the importance to move energy generation from carbon-based to renewable and solar-based energy, and includes a job-growth trajectory originally contemplated in the Solar Jobs Act.
Thomas Polich is legal advisor for renewable energy at TAP Renewable Energy Solutions in Manchester Center, Vt. He can be reached by email at thomas.polich@gmail.com.
