New York Approves $1.47 Billion of New Incentives for 3,393 MW of New Distributed Solar Projects

Written by: Andrew Lidington, Senior Analyst

Publish Date: May 2, 2022

Estimated Reading Time: 7 Minutes

On April 14, 2022, the New York Public Service Commission (PSC) issued an 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 Department of Public Service (DPS) Staff. The Roadmap proposed to increase the distributed solar target of the NY-Sun distributed solar program 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. The 6 GW by 2025 target is a statutory requirement of the Climate Leadership and Community Protection Act, whereas the 10 GW by 2030 goal is not codified in law. The PSC approved the incremental 4 GW target and directed NYSERDA to incentivize an additional 3,393 MW of projects through the NY-Sun program, as NYSERDA and DPS Staff proposed, to help the State reach that target. NYSERDA and DPS Staff expect the remaining 607 MW to come from projects on Long Island and residential solar projects built without NY-Sun incentives.

MW-Block Program Expansion

  • The PSC approved splitting the incentives into separate carveouts for upstate and downstate project development.
    • The PSC directed NYSERDA to create an incentive tranche for 150 MW of projects that are greater than 1 MW, a 100 MW tranche for projects between 1 MW and 200 kW, and a 50 MW tranche for projects below 200 kW. The PSC stated that it was important to have a carveout dedicated to smaller-sized projects (the originally proposed cutoff between large and small projects was 1 MW) because smaller projects are easier to site in New York City.
    • The PSC reduced the value of the proposed MW-Block incentives in ConEd territory (New York City and parts of Westchester County) from $1.30/W for small projects, $0.75/W for large projects, and $0.15/W for residential projects to $1.20/W for small projects, $1.00/W for medium projects (NYSERDA and DPS Staff did not propose a medium-sized category), $0.50/W for large projects, and $0.20/W for residential projects (pictured below).
 Figure 1: ConEd MW Block Incentive Tranches

Nonresidential projects in ConEd territory that either (i) applied to the NY-Sun program after NYSERDA and DPS Staff filed the Roadmap or (ii) nonresidential projects in ConEd territory that submitted applications to the current block (Block 10) before the Roadmap filing and that did not receive a Community Credit incentive, may opt-in to the new incentive.

The PSC approved the proposed new Upstate Commercial/Industrial incentive (projects 750 kW to 7.5 MW) of $0.17/W for 800 MW of projects, shared across projects in the service territories of any of the upstate utilities. The proposal and the Order were silent on upstate residential incentives.

The PSC confirmed that upstate projects that already have received MW-Block base incentives will not be allowed to cancel their applications and reapply to the program to receive the higher incentives.

Community Adder

  • The PSC increased the value of the proposed community distributed generation (CDG) Community Adder in ConEd territory from $0.10/W to $0.20/W, with an initial block of 100 MW.
  • The PSC maintained full Community Adder availability to CDG projects that supply opt-out community choice aggregations (CCAs). The PSC determined that although it is possible that the opt-out CDG structure may reduce customer management costs and therefore have a lesser need for upfront incentives, it is too early to reduce or remove Community Adder eligibility to these projects because the PSC has not yet ruled on DPS Staff’s Straw Proposal on Opt-Out CDG for that project structure.

Solar Energy Equity Framework

  • The PSC established a goal for the Solar Energy Equity Framework to reach at least 1,600 MW of projects serving low-to-moderate-income ratepayers, those living in regulated affordable housing, and disadvantaged and environmental justice communities.
  • The PSC ordered NYSERDA to increase its Inclusive Community Solar Adder (ICSA) for projects in ConEd service territory from $0.10/W to $0.30/W, and $0.40/W for projects that meet additional environmental justice criteria to allocate more of the program incentives toward disadvantaged communities and to avoid many projects shifting from CDG to remote crediting, a possible outcome about which some commenters expressed concern.
    • The PSC also directed NYSERDA to provide incentives for an additional 50 MW tranche of ICSA projects in ConEd territory, with incentive values based on State progress toward the 10 GW target and market response to the initial incentives.
  • The PSC ordered NYSERDA to increase the base Multifamily Affordable Housing Incentive (MAFI) from $1.00/W to $1.60/W. The PSC did not change the $2.00/W MAFI for projects that meet additional qualifying criteria.
  • The PSC determined that projects that did not receive a MW-Block incentive because the applicable base MW-Block incentives were fully allocated at the time, but that went on to receive ICSA or brownfield/landfill adders, will be allowed to receive the new MW-Block base incentives. Normally, projects would not be allowed to receive both types of incentives, but the PSC granted an exception to these projects because they provide benefits to low-income customers and/or help to redevelop landfill and brownfield areas, and there are few enough projects meeting these criteria that they would not significantly affect the NY-Sun budget.

Value Stack

  • The PSC declined to make any adjustments to the Value of Distributed Energy Resources (VDER) Value Stack, explaining that it “views the Value Stack methodology as sufficiently developed and believes it would benefit from a period of stability.” The PSC also decided not to re-establish the VDER Value Stack Working Group, which is not currently active.
  • The PSC approved NYSERDA and DPS Staff’s proposal to fix the VDER Environmental Value at $31.03/MWh and to allow projects to continue to receive this fixed value for 25 years. The PSC decided not to replace the existing 3% discount rate used to calculate the Environmental Value to a 2% discount rate because it determined that doing so could result in market inefficiency, overpayments for carbon avoidance, and imposition of higher costs on ratepayers than is supported by project economics.

Prevailing Wages

  • The PSC approved NYSERDA and DPS Staff’s proposal that projects 1 MWAC or larger that submit interconnection applications after the date of the Order must pay prevailing wages for construction activities to be eligible for NY-Sun incentives.
  • The PSC also approved a new $0.125/W Prevailing Wage Adder for upstate projects and a $0.20/W Prevailing Wage Adder for ConEd projects to make up for the increased project development costs. The Adder will be available to any project required to meet the prevailing wage requirement, but not to projects that voluntarily choose to pay prevailing wages.
    • NYSERDA must file a report to the PSC describing Prevailing Wage Adder spending by region, and any recommended changes once it has used half of the Prevailing Wage Adder budget.

The PSC directed NYSERDA to file an updated NY-Sun Operating Plan by May 31 to reflect the program changes from the Order. NYSERDA and DPS Staff’s expected annual deployment of newly-incentivized projects is pictured below in Figure 2.

Figure 2: Expected Annual Deployment of Newly-Incentivized Projects 
Source: DPS and NYSERDA Staff

Before the Order, distributed solar development in New York had slowed significantly, as most incentives had started to run dry. With the Order, New York looks to reignite interest in distributed solar development, especially in the downstate and environmental justice communities where it has historically been the most difficult to develop such projects.

Sustainable Energy Advantage analyzes the progression of the distributed solar market in New York in both its New York Eyes & Ears and New York Renewable Energy Market Outlook services. You may also contact Andrew Lidington to discuss the array of New York distributed solar market analysis that we can conduct.