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New York’s landmark Reforming the Energy Vision remains both vital and unfinished, analysts say

New York’s 2019 Climate Leadership and Community Protection Act (CLCPA) now dominates the state’s policy debates and agenda on power system transformation, but regulators’ foundational Reforming the Energy Vision (REV) initiatives and regulatory proceedings remain vital, those whose created and shaped it say.

In 2015, the New York power system’s aging infrastructure, declining efficiencies, and rising electricity rates required modernized infrastructure, operations and markets, REV’s Track One Order declared. It offered a vision of a “reoriented” regulatory model with “a consumer-centered approach that harnesses technology and markets.”

“REV’s impacts still reverberate through New York’s regulatory process and its key pillars will make reaching CLCPA’s goals easier, faster, and more cost-effective,” said Advanced Energy Economy (AEE) Policy Director Danny Waggoner, who was in REV proceedings from the beginning. It may not have met all expectations, but “REV animated markets and changed utilities’ business models.”

New York’s energy transition was under way and utilities were changing, Consolidated Edison spokesperson Allan Drury said. But “the heart of REV” was “its recognition that climate change is real and due to human activity” and its regulatory framework, which created “customer empowerment” through customer-owned technologies like distributed solar, batteries, and energy efficiency.

REV drove landmark changes in how distributed energy resources (DER) are valued by utilities and customers, regulators and stakeholders both agreed. Its work on how utility performance is rewarded and how utilities can serve the power system remains unfinished, but if the REV initiatives still underway are completed, it will fulfill the vision and help New York’s ongoing energy transition succeed, they added.

The vision

New York regulatory agencies and system stakeholders collaboratively developed REV’s more than 40 initiatives from Cuomo administration-led clean energy programs and its 2015 State Energy Plan

The 2015 energy plan required a 40% emissions reduction from 1990 levels, 50% renewables generation, and a 600 trillion British Thermal Unit (BTU) energy efficiency improvement by 2030. That year, Hawaii’s nation-leading renewables mandate was 40% by 2030 and 100% by 2045, and California accelerated to 50% by 2030, while Massachusetts targeted only 25% renewables in 2030.

New York Department of Public Service Deputy, Markets and Innovation, Scott Weiner, led the effort for New York Public Service Commission (NYPSC) Chair Audrey Zibelman.

“REV was a new way of thinking about the electric system that changed the roles of the utility and the consumer,” Weiner, now a principal with policy consultant SAW Associates, said. Though CLCPA is now the focus, “REV is fully infused into the state’s energy system and part of every New York energy initiative.”

In the wake of Superstorm Sandy, REV’s core objectives also included increasing system reliability and resilience through enabling and leveraging DER markets, Weiner added. It built on existing programs like New York’s Green Bank, the NY-Sun solar initiative, and the BuildSmart NY public buildings retrofit.

The February 26, 2015, NYPSC REV Track One Order introduced the ambitious REV framework, said AEE’s Waggoner. It also proposed new system planning approaches that recognized DER value and called for utility investments to integrate and operate, but not own, market-driven DER solutions.

The “central vehicle” would be a Distributed System Platform (DSP), not fully defined at the time, that would be operated by utilities or a third party integrator if utilities proved inefficient, Waggoner said. The DSP would enable markets in which DER owners and large-scale generators could transact with power providers, facilitating the efficient use of storage, microgrids and demand-response, the order said.

The order also called for utility-led energy efficiency programs and technology demonstrations and utility adoption of private sector-built non-wires alternatives (NWAs). NWAs would allow utilities to protect system reliability but defer or avoid infrastructure investments with lower-cost, customer-owned, clean energy DER.

The May 19, 2016, NYPSC Track Two Order addressed ratemaking and the utility business model. Its vision was to move away from cost of service regulation and align utility and customer interests by providing utilities with “market-based and outcome-based earnings opportunities” for achieving REV objectives.

Financial mechanisms to compensate utilities for avoiding or deferring capital expenditures with NWAs was an example of the regulatory reorientation, Waggoner said. Earnings adjustment mechanisms (EAMs) would go to utilities for energy efficiency investments. They could also earn revenue for demonstration project investments and impose charges on market participants for DSP services, REV initiatives proposed. 

But Track Two work became dominated by development of the Value of DER (VDER), a successor tariff to net energy metering (NEM), both Weiner and Waggoner said.

“Net metering was successful, but it did not recognize the full value of DER and give customers a return on their investment that would drive the market,” Weiner said. “The idea of greater value in DER was radical at that time, but the long deliberate REV process allowed reaching it.”

VDER was one of REV’s biggest achievements, regulators, utility representatives and other stakeholders widely agreed.

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Two REV wins

Of the many REV initiatives and proceedings, participants and regulators repeatedly noted two accomplishments.

Value of DER

The VDER came out of 2017 and 2018 “transitional orders” in the value stack compensation proceeding (15-E-0751). The Value Stack provides DER owners with credits based on the value to the power system of DER’s energy, capacity, location, and environmental and demand reduction attributes, the New York State Energy Research and Development Authority (NYSERDA) summarized.

An April 18, 2019, ruling resolved stakeholders’ energy value and capacity value debates about cost shifts and determined the appropriate credit for customer-owned community-based projects.

“VDER was a raging success,” Weiner said. DER was “a foundational principle of REV” but required “a REV process that allowed participation by all stakeholders” to resolve contentious issues about its full value. VDER recognized “the various present value streams and left the process open for recognizing future value streams.”

It “avoids cost shifts by recognizing full value,” but also “allows DER owners to understand the system has costs, and they need to pay their share,” he added.

The contentious VDER debates “took a lot of commission bandwidth” and “sidetracked the settling of other issues like EAMs, but it is now generally working well,” AEE’s Waggoner said.

Early iterations of the VDER tariff allowed fluctuation of the values, but the commission’s 2019 adjustments stabilized it and allowed New York solar markets to explode, agreed Dave Gahl, Solar Energy Industries Association (SEIA) Senior Director of State Policy, East.

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