Opportunities for New York Public Entities to go Solar
By: By Aaron Silverman, Project Developer, Borrego Solar Tuesday, June 2, 2015
Governor Andrew Cuomo's commitments to solar has put New York on a clear trajectory to become one of the nation's leading solar states. His push for solar started with the NY-Sun Initiative, which has expanded the state's solar energy market and driven down the cost of solar for New Yorkers.
Last year, lawmakers announced $94 million in funding for large-scale solar projects and its Megawatt (MW) Block program, which assigns each region and sector a series of MW targets at certain incentive levels, or "blocks" that decline over time. NY-SUN began accepting applications for the first stage of the MW Block program for systems more than 200 kW in size in early May. The program creates a positive sense of urgency by providing more incentives to the solar projects that sign up early.
Last year, lawmakers also doubled the state's net metering cap to 6 percent, which enables twice as many homeowners and businesses to receive credits for the solar energy their systems feed onto the grid. New York also approved remote net energy metering (RNM) for distributed renewables, creating a new mechanism to build solar and receive on-bill credits for remote generation.
The state did, however, recently announce some changes to its NEM rules that will affect New York entities' ability to install solar through a financing mechanism called a power purchase agreement (PPA). Many businesses and public entities afford solar with a PPA, whereby a third-party investor finances and owns the solar energy system and agrees to sell the power generated to the solar offtaker at a $/kWh rate that is less than the rates charged by the utility. This agreement to purchase cheaper power lasts the term of the PPA agreement—typically 20 years. The NEM credits are a key determinant in how lucrative the investment is for the PPA-provider and ultimately the offtaker.
On June 1, New York changed the way it assigned value to the RNM credits solar owners receive, by shifting from what is known as "monetary" to "volumetric" calculation. This will reduce the value of the credit for customers on demand-metered service by enough to make an investment in RNM solar for demand-metered customers much more challenging to finance.
There is good news though. Entities can still utilize a PPA, while also getting the more lucrative monetary RNM credits offered prior to June 1, 2015, by partnering with a solar company that secured sites for solar by submitting interconnection agreements to the utilities before the rule changed. More on this below under "Being an offtaker."
Ways New York businesses and public entities can go Solar
So, what's the next step to taking advantage of incentives and going solar? There are a few options, including:
Being an offtaker: Entities that don't have space suitable for solar, but have a high energy need and an interest in offsetting those costs can buy energy through remote (virtual) NEM. As an offtaker, you agree to purchase the solar energy produced by an installation built on a remote site within the same utility load zone. The system cost is covered by a third-party, and the energy credits are applied to your meter at the full retail rates. You pay the system owner a set dollar amount per kilowatt hour ($/kWh) of energy applied to your meter, which is less than the retail rates. With PPA's, there are no upfront installation costs and you're cash flow positive on day one.
Being a host: Entities that have space for solar, but don't need to offset energy costs can host an installation and receive lease payments. As a host, you're generating additional revenue by providing access to space where a solar installation is built. This is similar to leasing roof space for cell phone towers in the 90s. Solar hosts receive a simple monthly or annual lease payment for the right to access their space, and their energy consumption and costs are unchanged. This is a simple additional revenue source for landowners or facilities with at least 100,000 square feet of rooftop or parking lot available.
Being a turnkey solar user: This approach combines both the offtaker and host option for when you already own space that can accommodate solar and are the offtaker. This is the most traditional way to participate in the solar market. As an owner-occupied entity, the solar will be constructed on property you own, and the credits will be applied to your meters. For multi-meter property owners, thanks to remote net metering, the solar installation doesn't have to be constructed at the same meter where the solar energy credits are applied, potentially yielding greater economic benefits.
By Aaron Silverman
Project Developer, Borrego Solar
Mr. Aaron Silverman was the third member to join Borrego Solar's growing New York Project Development Team. As a Project Developer, Aaron specializes in working with customers in the commercial and public sectors. Aaron supports clients in the Mid-Atlantic region, with a primary focus on New York, where market forces and supportive government policies are enabling ratepayers to earn attractive returns on their solar investments. Prior to joining Borrego Solar, Aaron spent five years in the wind energy industry with Gamesa, where he led cross-functional project M&A teams and played an instrumental role in the development, construction, and sale of over 400 megawatts of wind projects. Before working in wind, he was a management consultant with Bain & Company and a renewable energy consultant with the Rocky Mountain Institute, an independent, non-partisan think tank dedicated to research and education in the field of sustainability. Aaron earned his BA in Psychology and his MBA from Yale University.COMMENTS & RATINGS
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