Regulatory proposals threaten community solar growth in New York
New York is at the forefront of community solar growth across the United States. The community solar boom has helped the state make significant strides towards its climate goals, and legislation in recent years has positioned the state for future growth. A ruling passed in 2020 allows community choice aggregation (CCA) municipalities to automatically enroll and distribute community solar credits via opt-out community solar programs to any households within their jurisdiction, regardless of income level or creditworthiness. The first community choice solar programs in the U.S. were launched in September in the Finger Lakes region of New York.
These opt-out programs see roughly 90% participation from eligible households as opposed to only 2-3% for traditional opt-in programs and can further accelerate the transition to green energy and help the state accomplish its goals. Gov. Kathy Hochul recently announced expanded goals for the NY-Sun program, which would more than triple the state’s energy capacity in a decade and deliver 10GWs of community solar by 2030. In addition to helping achieve those goals quicker, opt-out programs are beneficial to developers.
Opt-out programs enable solar developers to, in essence, fully subscribe community solar projects overnight with offtakers of all income levels. Because municipal leaders can prioritize low-income households to receive solar credits, developers can easily qualify for low-income incentives. These programs have also sharply reduced the cost of acquiring and managing projects that rely on solar credits.
While that seems like a lot of good news, not everything in the pipeline is positive for the future of community solar. Some proposals that could impede community solar growth have been submitted to New York’s Public Service Commission (PSC) for consideration.
The most notable is the Expanded Solar for All (E-SFA) proposal, which was submitted jointly by the New York State Energy Research and Development Authority (NYSERDA) and National Grid. The aim of the proposal is to increase access to community solar benefits for low-income residents in the state, an admirable goal attached to a deeply flawed plan. If passed by the PSC this fall, the proposal would revert power back to utilities, undoing two decades of progress made toward deregulating the state.
Here’s how it would hurt hit developers most:
Community solar has recently become more challenging for developers because incentives have decreased and project development hurdles, like permitting and interconnection, have been on the rise. E-SFA would only perpetuate these issues and create new ones.
If passed, the E-SFA proposal would give utility conglomerate National Grid control of 600 MWs of community solar resources, the vast majority of the available resources intended for homeowners on the market, creating a de-facto monopoly. This would make National Grid the largest buyer of CDG credits in the state, limiting developers’ options for who they can operate through.
Reduced competition would put developers at the mercy of a utility company, potentially forcing them into risky contract terms and below-market prices. The proposal would also create an exclusive bidding process that could significantly slow down RFP’s and put developers in a holding pattern as they wait for National Grid’s decisions.
Additionally, the proposal could hurt profit margins. Under E-SFA, developers would have to give up more than 20% of the value stream of community solar projects, as opposed to the 5-10% they give up in the current market structure. The proposal also provides a path to remove the 1% administrative fee cap that is standard for any utility. If passed, National Grid could raise its fee through a simple administrative application without going to the Public Service Commission, further eating into developer revenue or adding to residents’ electricity bills, including the LMI residents the proposal purports to help.
The demand for new community solar capacity in New York is there. Proposals, such as the E-SFA, would only add friction to the regulatory process and hinder the growth of existing programs that have massive potential to achieve the same goal of expanding solar access to LMI residents. For example, the roughly 150 municipalities in New York that are authorized to implement opt-out community solar programs right now contain enough low-income households within their purview to support more than 1,000 MWs of new community solar capacity alone.
Grassroots energy movements that empower local municipalities will only help spur further community solar growth and development opportunities in New York. This is where the focus should be rather than pushing the market back toward centralization.
Mike Gordon is the founder and chief strategy officer at Joule Assets. Gordon is considered a “founding father” of the demand response industry. He also played a critical role in expanding and enhancing the CCA market, and in architecting new financing solutions for the energy efficiency marketplace.
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