New York’s Value of Distributed Energy Resources (VDER) tariff compensates distributed resources on a varying hourly basis for the specific benefits they provide to the grid. While VDER applies to both front of meter (FTM) and behind the meter (BTM) projects, economics generally favor FTM installations.
Stem partners with businesses, project developers and EPCs on solar plus storage and standalone storage projects to help New York achieve its ambitious clean energy goals – which include 70% renewable energy and 3GW of energy storage by 2030.
VDER compensates solar, storage, and other resources based on when and where they provide electricity to the grid, making project economics highly location dependent. And while New York is one of the few markets favorable to standalone energy storage, returns depend entirely on discharging during the year’s highest peak demand hour.
VDER’s “value stack” compensates distributed resources according to multiple attributes – energy, capacity, demand reduction, environmental, and locational system relief – plus an incentive for community-level projects.
Projects don’t dispatch into a specific VDER subcomponent but rather an hourly aggregate per-kWh rate, and currently earn a majority of annual revenues in summer (when demand reduction and capacity values are highest). Because VDER compensates projects for dispatching energy into the grid and not for serving site load, economics favor FTM installations.
Incentive funding comes from New York’s Retail Storage Incentive Program (RSIP), a declining block incentive that provides developers an up-front payment for projects up to 5MW. (Funds under a different program for projects larger than 5MW have been exhausted.) As of summer 2021, RSIP funds remain for projects in Long Island and Westchester County.
RSIP is only available for new storage installations, but storage may be retrofitted onto an existing solar project. Incentive levels are based on energy storage system (ESS) duration:
VDER succeeds New York’s prior Net Energy Metering program and provides monthly monetary credits on customers’ utility bills. Finding eligible “offtakers” for those credits is therefore key for project developers.
Developers should weigh the pros and cons of AC- and DC-coupled solar plus storage systems carefully. AC-coupled projects can charge from the grid and discharge anytime regardless of solar production, and therefore offer additional flexibility. But DC-coupled systems can capture otherwise “clipped” solar generation, enabling larger solar projects and more efficient use of solar generation. An experienced storage provider can model revenues under different scenarios to help you find the right configuration for your project.
VDER’s capacity component is linked to New York’s wholesale market – specifically the Installed Capacity (ICAP) market, which supports reliability. Developers must select one of three alternatives: Alternative 1 (or “Alt 1”) is for solar-only projects; Alt 2 is standard for solar plus storage; and Alt 3 is available for solar plus storage and mandatory for standalone storage. Developers may prefer Alt 3 for solar plus storage, as it provides a significant earnings opportunity for accurately predicting and dispatching into the peak hour of the year.
Applicants must be a “participating contractor” with the New York State Energy Research and Development Authority (NYSERDA). Key milestones for securing funding include completing an interconnection application and 25% downpayment on any needed utility system upgrades, and producing AHJ sign-off (or indication of progress) and proof of site control. Stem helps developers and EPCs navigate the application process and provides the ESS-specific documentation needed for successful applications.
Featured Case Study: Front of Meter Solar Plus Storage
This project in Mount Kisco, New York – BQ Energy’s first solar plus storage project, and Westchester County’s first municipal community solar project – delivers clean energy to the grid and guaranteed bill savings to local subscribers. Stem’s AthenaⓇ software optimizes VDER revenues, particularly during summertime Local System Relief Value (LSRV) events, and ensures incentive and warranty compliance.