Governor Andrew Cuomo’s establishment of New York’s Reforming the Energy Vision (REV) is changing the entire field of energy production and use. Traditional producers of electricity, such as large power plants, are transitioning from burning fossil fuels to creating renewable sources of electric generation. Private companies are becoming electricity producers, and even traditional consumers, such as you and I, are placing solar panels on our roof tops and producing electricity.
As a result, the entire electric grid is also being transformed. The future electric grid will impact how we consume electricity and what we use to consume it, from incentives to consume at off-peak hours to charging our electric vehicles at home or in public.
As a dual degree student with the Elisabeth Haub School of Law at Pace University and the Bard College Center for Environmental Policy, I’m experiencing the administrative law that is bringing the Governor’s policy into the real world during my internship with the Pace Energy and Climate Center.
The Center is located on the law school’s campus in White Plains, NY. It believes that engagement of the government and key stakeholders leads to better public policy. This academic approach to energy policy and law allows the Center to turn ideas into action. The Pace team are experts in almost all aspects of the energy law arena.
l to r: myself, intern Justin Hannah, Staff Attorney Jordan Gerow, Executive Director Karl Rabago, Dean Emeritus and Founder Richard Ottinger, Staff Attorney Radina Valova, intern Alexandra Cirra, intern Jullee Kim, intern David Solimeno.
My internship involves working in the dynamic energy areas of
- Valuing of Distributive Energy Resources
- Effects of Energy Bills on Low and Moderate Income Customers
- Combined Heat and Power Financing Projects
- Con Edison Rate Case Proceedings
- RGGI
Of these, probably the most exciting and emerging area of energy for Pace and myself is the first–valuing of distributive energy resources (DER).
The Value of DER
Proceedings are underway to create a methodology to value distributive energy resources, such as solar or wind. When large power plants generate electricity and utilities supply it to the public, the prices they charge are regulated by public policy and law. The next big question is, what price can a private company or private citizen charge for creating their own electricity by the use of solar panels or wind turbines?
The easy answer so far has been, the same price. Although this answer makes sense in some respects, it does not reflect the nuances of a complex electric grid, pricing schemes, and public policy. Utilities by law must maintain the grid system at a cost, while their profits are regulated by the government. So, why should a private individual be able to collect the same profits, while being subsidized by the government, and pay for none of the maintenance?
To address these issues, New York State, under REV, is creating one universal methodology, or equation, that is fair to the utilities as well as the private citizen. This methodology will be applied to all forms of distributive energy resources, such as solar, wind, hydro, etc. The creation of this methodology is bringing together the government, private stakeholders, the utilities, and the public. The goal is to create a template for all other states to follow as they undergo this transition in the future.
Although aspects of the methodology involve trade secrets or corporate finances, areas of consideration for the equation may be the following:
- Time-dependent values – if you produce energy during a peak demand (say 2PM in July) the energy is worth more money
- Locational values – if you produce energy at a location that needs it (say Brooklyn, NY) the energy is worth more money
- Resiliency Value – if you produce energy that could be used during a blackout (say within a storm surge flood plain) the energy is worth more money
- Avoided Energy Costs – if enough people in a community produce energy that a utility does not need to build new expensive infrastructure, the energy is worth more money
- Environmental Costs – if your energy displaces CO2, Sox, or NOx, the energy is worth more money
Ongoing Efforts Linked to the Policy Framework
The implementation of REV in New York State is creating a new environment for the economic structure of renewable energy generation. The development of a two-way grid where consumers and utilities can sell, purchase, or off-set their use when they need to, will lead to an efficient and environmentally sustainable future. My work with Pace is helping to guide administrative law proceedings as Pace holds utilities and private companies to a standard that represents the future of energy use in New York in relation to the affordable right of all to electricity.
First off, let me say that this is a wonderful post and it makes me happy that a fellow BCEP’er is working on such an important piece of energy policy. Working in a rural, upstate NY county, I have come across stakeholders who have expressed concern about being unable to access/benefit from the innovative pilot program and demonstration projects being implemented in the more urbanized area of the state. That being said, how would you go about making people in rural areas care about the REV.
Hi Danny,
Rural and urban people alike should be interested in REV. It is a state-wide policy and would effect all residents of NYS. The valuing of Distributed Energy Resources would be different for people in different areas of the state. It appears that urban areas may receive higher values, referring to locational, resiliency, and avoided energy costs, but rural and urban would receive the value of their energy for time dependent values and environmental offsets. Also, these are just suggested values of interest, and their weighted percentages have not been determined yet. If you think of additional areas of interest, the comments portions are open to the entire public.
The NYS Department of Public Service is the moderator of the collaboration process. During the administrative proceedings, stakeholders from the utilities, private companies, non-profits, and non-governmental organizations were present. As for the utilities, Con Edison (NYC area), PSEG (Long Island), and Central Hudson (Hudson Valley area) were all present. Determining a value for energy production should have an effect on all residents of New York State. Thank you for your interest.
Hi Morgan,
I learned a lot by reading this post and I am thrilled that you are engaging in such interesting work. I have many friends who adding solar, including small solar fields and I will share this post with them. This is useful for institutions like Bard as well to consider as it moves forward in generating its own clean energy -thanks!
Monique
Hi Monique,
People and companies that have been proactive in initiating solar energy should be rewarded. An interim value for DER should be established by early next year. At that time all producers who have already established energy generation, are in the process of doing so, or have filed paperwork to do so, will be grand-fathered in under that interim value (what constitutes enough progress as to filing paperwork is still under debate).
After the point of the initial interim value, all future projects will be subjected to the then current interim value, or “final” methodology. Even the “final” methodology will be inspected and altered if necessary at determined intervals of time.
An interesting point is whether proactive producers will actually be rewarded or not. It appears to me that utilities believe the true value of DER will be lower than the current rate, thus rewarding producers who get grand-fathered in. Many organizations believe that the true value of DER will be higher than the current rate, thus rewarding people who wait and initiate the process in the future under a possible higher value. Ultimately I believe that the security that comes with grand-fathering in proactive producers with a locked in value and guaranteed returns is enough incentive to signal to potential producers to start the process now. So I believe that your friends may be correct in leading the way by adding their solar fields now.
Dear Morgan,
Thanks for your interesting blog post and for breaking down REV a little. I am particularly interested in how citizens, nonprofits, and other organizations can have a voice in renewable energy development under REV. Do you know which points in implementing Gov. Cuomo’s plan these organizations can have a seat at the table? I am also happy to see that electricity pricing will be responsive to environmental costs. Valuing these costs is complex in its own right, but I wonder at which end of the chain are you referring to the prices being more or less valuable? Wouldn’t it help spur renewable energy development to have consumers paying less for cleaner electricity than emissions intensive electricity?
Hi Collin,
It would help spur renewable energy development if cleaner electricity was cheaper than emission intensive electricity, but the question is how to go about this in the most efficient way. Utilities are not necessarily the enemy. Electricity is considered a basic human right, and the utilities are able to provide this right to all residents at a fair price.
A problem emerges based upon a historical pricing system associated with the utilities. A value for DER attempts to create a methodology to establish a true value for energy production. From this value, the utilities and all residents and private companies are able to compete in an open market for electricity production. Considering the value for environmental offsets, a competitive market should spur renewable energy in lieu of emissions intensive energy.
As for who gets a seat at the table, I am not able to answer that question. I know that the number of seats are limited. A guess would be that the NYS DPS, as the moderator of the administrative proceedings, determines who has access. They probably base it upon importance of a party, effect on a party, number of comments submitted, etc. Even when the number of seats at the table is limited, there is plenty of room in the audience, and you are free to raise your hand and be heard. That is where my seat was in this process.
Dear Morgan:
Thank you for a very interesting blog post, and for the work you’re doing.
As an economist, I was naturally drawn to the section on DER pricing. While REV is making an earnest effort to revise pricing rules that are more closely aligned with economic values (time-dependent values, locational values, and avoided costs) along with resilience and environmental values, I strongly suspect that there cannot be a single pricing system that can fully address each of these while being “fair” to various generators. The interesting issue for me is, which of these objectives will be reflected most in the final rule, and which actors are able to exercise political clout the most.
Staying tuned …
G.
The National Association of Regulatory Utility Commissioner (NARUC) staff committee developed a draft manual on distributed energy resources and ratemaking. It is a draft, but even so, there are many critics that believe in does not do enough for the value of DER. The Regulatory Assistance Project (RAP) has made some very good comments to the draft, here http://www.raponline.org/knowledge-center/rap-comments-naruc-distributed-energy-resources-compensation-manual/
Everything is in the collaboration and comment stage. The object is to apply an interim methodology now, and a fully realized methodology at some point in the future.