LIPA & PSEG Changing Rules For How Solar Panels Benefit Consumers
Industry insiders nervous about future of industry – Utility is fighting for what it thinks is fair.
According to a recent article released by Newsday, LIPA (the actual owner of the Long Island Grid) and PSEG Long Island (The manager of the Grid) are going to substantially change the way solar customers are compensated for energy produced by solar power systems. Similar changes are set to take place in New York City under the NYSERDA territory.
What Is the Current Deal?
The program which is ending or set to end compensates customers with solar pv unanimously for each and every unit of electricity produced (kWh or Kilowatt hour). The program, called net metering keeps track of the power produced by a solar energy system and sends it back to the gird giving the customer full value for the energy. If the current market rate for power is currently .21/kWh, then the utility applies a credit of .21 cents to the customer’s utility bill for each and every credit produced regardless of location. It is a blanket compensation approach and it spurned the growth of this industry. Under the current program, such compensation would continue for the life of the system which means customers who get grandfathered in will continue to get full credit for the power produced as long as the system continues to function. More about the deadlines and schedule below.
What’s The New Deal PSEG and LIPA is adopting for Solar PV Distributed Resources?
LIPA and PSEG want to take a situational approach to compensation. The purpose of the solar PV (Photovoltaic) and the current net metering law were to alleviate stress on the grid at peak times. The grid is constrained in certain areas more so than others. Unknown to many, the grid is not a perfect system and getting power to some areas is more difficult or costly than others. Some areas of the Grid are not constrained at all either due to happenstance or because of newly built solar systems doing their job. Under the new program, LIPA and PSEG will pay less for power produced in areas where the grid does not need solar capacity. On the flip side, LIPA and PSEG will pay more in areas that need more renewable energy. Developers will thus focus their solar projects to areas of highest grid constraint serving the needs of the utility. PSEG and LIPA as well as the NYSERDA NYC territory are looking to base solar compensation in Long Island and New York respectively on merit.
There is major criticism of this plan since the method to calculating how much compensation will be is very complex. It will introduce uncertainty into the solar investment and the true cost of running solar panels. This is the view of various critics including Steve Englebright, the assemblyman who originally sponsored the existing state net metering act. Right now, a credit produced is a credit earned. This is all going to change.
When Will The Plan Go Into Effect for Commercial Solar PV?
At the onset, large pv customers in the commercial sector will be subject to the ruling after January. It is estimated by the utility that only 200 or so large customers will be newly impacted by the rules.
When Will The Plan Go Into Effect for Residential Solar PV
All systems installed before 1/1/2018 will be grandfathered into current net metering which provides full value solar energy produced in during the entire life of a sytem. Between 1/1/2018 and 2020, any systems installed will get a 20 year of full value net metering only. For Example, A system put into service in 2018 will have uncapped full value net metering compensation until 2038, and a system put into service in 2019 (before the deadline) will have 20 years of uncapped net metering until 2039. By 2040, all PSEG LIPA solar energy systems who were grandfathered in between 2018-2020 all systems will be converted to the new phase-two system. During Phase-two, “value stack” pricing will apply, where each individual system will have an appraised value for the power it produces based on the value of the power in light of grid constraint. The time period between 2018 and 2020 will be absolutely critical for net metering adoption.
How Do I Keep Up With The Progress of This Plan?
On November 27th, there will be public hearings followed by a December 19th board meeting. January 1st would be the official first day of the program. The Large commercial customers who are impacted will be subject to an energy valuation based on location, environmental benefits, and potential for demand reduction.
Originally, the plan was formed by the PSC (Public Service Commission) under the New York State Reforming The Energy Vision or “REV” legislation. Value of distributed resources known also as “VDER” apply a complex calculation to distributed resource production considering factors such as location, time, and a systems effect on grid constraint. Community Solar projects, small commercial and larger commercial projects will be grandfathered as well as mentioned residential customers for the 2020 deadline.
LIPA and PSEG are not required to follow PSC but decided that this plan served their financial interests. From their standpoint, the more control mechanisms there are on compensation, the better.
Prospects For the Future
For the residential and commercial customer, the prospects still seem bright on the condition that the solar energy system is installed before the 2020 deadline. 20 years is a long time to remain on the current plan of unlimited net metered compensation. Most system warranties are limited to 25 years and savings potential within a 20 year period can add up to a compelling value of savings. There should be a rush to get a systems installed before over the next 3 years and there probably will be a surge in demand to get systems installed as soon as possible. Beyond 2020, the industry will focus their efforts to areas where the grid is willing to pay the most for the power. In the fight for democratization of power and control of our energy future, this round goes to the utility. There still is a few years left to get a great value from solar. Time will run out soon so it would be wise to start considering solar asap.