Is New York about to Spend $1.474 Billion on Distributed Solar in Less than a Year?

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Written by Andrew Lidington, Operations Manager, Policy Analytics

Publish Date: February 22, 2023

Estimated Reading Time: 7 minutes

On April 14, 2022, the New York Public Service Commission (PSC) issued an Order (the Expansion Order) approving the Distributed Solar Roadmap: Policy Options for Continued Growth in Distributed Solar submitted by the New York State Energy Research and Development Authority (NYSERDA) and New York Department of Public Service Staff. The Roadmap proposed to increase the distributed solar target of the NY-Sun program, New York State’s primary incentive program for distributed solar projects, from 6 GW by 2025 to 10 GW by 2030, using $1,474 million of additional funding to create new and expanded NY-Sun incentives.

On November 17, 2022, only about half a year after the new incentives became available, NYSERDA announced that the NY-Sun program had triggered its NY-Sun Mid-Point Review. Given that the program was designed to provide enough project incentives for the State to reach its distributed solar target 8 years in the future, this suggests that the new incentives had a significant impact on New York the distributed solar industry. Does that mean that New York has successfully spurred the rapid deployment of solar energy, and will reach its distributed solar goals several years early, or were other underlying factors at play? A deeper dive into the details reveals that the impact of the new incentives may not be as bright as it first seemed.

On January 17, 2023, NYSERDA filed the Mid-Point Review, in which it included the status of the NY-Sun program budget and MW Block incentive allocations, one of the primary incentives within the program. All of NYSERDA’s analysis used data as of November 17, 2022, the date on which the Mid-Point Review was triggered.

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In NYSERDA’s analysis of how it allocated the incentives, it stated that all projects applying for C/I MW-Block incentives, which composed over 90% of project nameplate capacity receiving the new incentives, had already submitted their standardized interconnection requirements (SIR) application with their interconnecting utility. SIR is the primary interconnection process for energy projects at or under 5 MW_AC. At first glance, this may have seemed like a minor note, but under closer inspection, it becomes the most telling detail of the Mid-Point Review.

To understand why, you’ll need some additional context. Before the PSC issued the Expansion Order, new distributed solar development in most of New York State had grinded to a near standstill. This was because most of the previous distributed solar incentives in the NY-Sun program had already run dry about a year earlier. During this time, projects that had already secured Community Credit and Community Adder incentives, the most significant of NY-Sun incentives, could continue their development, but many projects got stuck mid-development because they were unable to secure those incentives before they were all allocated.

In some cases, developers may have abandoned these incentive-lacking projects, but in other cases, developers held onto the projects, waiting to resuscitate them with a new lifeline of incentives. However, until NYSERDA released the Mid-Point Review, it was unclear how large this cohort of dormant projects was, or how long they could hold on without new incentives before developers pulled their plugs.

We do know, however, that because the point in the development process at which a project qualifies for its NY-Sun incentives is in the middle of its interconnection process, that any projects that had already initiated their interconnection process, but had not already secured incentives, would be one of these hibernating projects that started development, but did not yet have any NY-Sun incentives for which to qualify. Therefore, when NYSERDA stated that almost all the projects receiving incentives following the Expansion Order fell into this category, it confirmed that the rapid response to the new incentives was not so much an indication of a flurry of new projects rushing to qualify for the program, but a humongous backlog of projects that were previously left out in the cold, waiting for their opportunity to receive NY-Sun support.

That means that the nature of the New York distributed solar industry may differ greatly from what the quick response to the incentives approved in the Expansion Order would have suggested. While one might assume that the NY-Sun program would see a similar rate of adoption in the coming years, leading to the State reaching its 10 GW of distributed solar goal well ahead of its 2030 target, we cannot make that determination until we see the quantity and speed with which new projects respond to the new incentives. Thus, although it may have appeared as though the NY-Sun expansion was an immediate success, and possibly even require adjustments to slow the pace of incentive allocation, given the speed with which NYSERDA triggered its Mid-Point Review, program performance thus far has been almost entirely a result of industry circumstances prior to the Expansion Order.

While the Expansion Order did fulfill the needs of projects languishing in limbo in their interconnection queues, after these projects (that are most able to respond quickly to the new support) have secured their incentives, the long-term trajectory of the New York distributed solar industry remains uncertain, as we await how many new projects the Expansion Order will encourage developers to create. As these projects are starting from scratch, it will take longer until they reach far enough in their development cycle to qualify for NY-Sun incentives; nonetheless this tranche of projects likely will be a better indicator of how the industry will respond to the stimulus than the initial wave of projects that triggered the Mid-Point Review.