On February 22, 2018, the New York Public Service Commission (“PSC”) issued an order (“Expansion Order”) expanding the size cap on projects eligible to receive compensation under the State’s Value of Distributed Energy Resources (“VDER”) tariff from 2MW to 5MW. The VDER tariff is designed to compensate Distributed Energy Resources (“DERs”) based on their actual value to the electric grid, such as proximity to load and ability to create certain system efficiencies. Prior to the Expansion Order, eligible projects were limited to a 2MW size cap, which created artificial inefficiencies. To work around the 2MW size limit, some developers built multiple 2MW projects directly next to one another, which in some circumstances has necessitated multiple interconnection studies, unnecessary zoning setbacks, and other duplicative efforts. To address these concerns, among others, the Expansion Order is designed to streamline DER project development by allowing project developers to take advantage of economies of scale. Importantly, the PSC made clear that VDER project compensation mechanisms and eligible technologies will remain identical for projects sized in the 2-5MW range compared to projects sized below 2MW. This will allow all eligible project types, including on-site projects, remote projects, and community distributed generation projects, to take advantage of this expansion, provided they opt-in to Value Stack compensation.

Existing generators less than 2MW in size which receive compensation under Net Energy Metering (“NEM”), Phase One NEM, or VDER Value Stack may be eligible to expand their capacity to 5MW. However, such an expansion would require the developer to accept VDER Value Stack compensation for the entire project, rather than expanding its existing compensation mechanism or creating two compensation mechanisms for one project. The Expansion Order allows developers to submit applications for new or expanded projects sized up to 5MW, and designed to receive Value Stack compensation, under the existing Standardized Interconnection Requirements (“SIR”). With respect to consolidation of pending projects currently in the interconnection queue, the Commission will not allow requests for consolidation of projects until it issues an order resolving proposed changes to the SIR, which is currently pending before the Commission in Case 18-M-0018. The Expansion Order does, however, contain favorable language indicating that if a proposed consolidated project “has total capacity equal to or less than the original projects, and if the original projects had received the same [VDER] tranche assignment, the consolidated project will retain that tranche assignment.” This critical language may preserve important economics for consolidated projects. Consolidated projects with different VDER tranches (or which have not yet received tranche assignments) will be placed in the currently available tranche. The PSC is currently soliciting comments on the proposed SIR changes, with initial comments due March 12, 2018 and final/reply comments due on March 26, 2018. Developers with vested interests in how the proposed SIR handles potential consolidated projects should review carefully consider filing comments on this important topic.

By expanding the VDER tariff project size cap to 5MW, the PSC is continuing to drive DER deployment necessary to meet the State’s clean energy and environmental goals, and is further enabling customer access to clean energy options.

Phillips Lytle’s Energy Practice Team has extensive expertise in Public Service Commission/Utility regulatory matters, including all aspects of retail energy regulation in New York and formal petitions to the Public Service Commission. For more information about Phillips Lytle’s Public Service Commission expertise, please contact Thomas F. Puchner, Partner, at (518) 618-1214, tpuchner@phillipslytle.com, or Kevin C. Blake, Associate, at (716) 847-7082, kblake@phillipslytle.com.