New York Measure Would Give Solar a Bigger Bite of the Apple

PHOTO CREDIT: MEREDITH NELSON / SUNPLUGGERS.COM
Proponents of a solar-energy act before the New York legislature say it would result in 22,000 new jobs and about $20 billion in economic output over the next 15 years. Above, the iconic bull on Wall Street.

By Michael Balchunas

Published June 19, 2010

Legislative action is near on a measure that, if passed, would put New York on a path to becoming one of the country's leading solar states.

The New York Solar Industry Development and Jobs Act would require utilities and public power authorities to gradually include more solar electricity in their energy mix over the next 15 years.

The measure would raise statewide solar production capacity to at least 5,000 megawatts, from about 34 megawatts at the end of 2009. The 5,000-mw figure is almost triple the existing grid-tied solar-electric capacity of the entire United States, according to the national Solar Energy Industries Association, based in Washington, D.C.

The measure, consisting of identical bills in the Assembly and Senate, is backed by the solar industry and by several environmental and conservation groups.

"The New York League of Conservation Voters strongly supports" the act, the league said in a memorandum, adding, "Climate change clearly necessitates a shift from the status quo. However, the economic imperatives are equally important. The Solar Industry Development and Jobs Act provides the regulatory mechanism to generate significant and deeply needed economic activity."

GRAPHIC CREDIT: SUNPLUGGERS.COM

The act appears to have ample support for passage in the Assembly, but whether it will pass a Senate floor vote is less clear. Sponsored in that chamber by state Sen. Antoine M. Thompson, D-Buffalo, the act has had as many as 28 co-sponsors, including some bipartisan support, which puts it close to the 32 votes needed to assure Senate passage.

The bills would require New York retail electricity suppliers to annually procure what are called solar renewable energy credits to make up certain percentages of their total electricity sales. The percentage would gradually rise from 0.05 percent in 2012 to 2.5 percent in 2025. The act would require the New York Power Authority and Long Island Power Authority, which are public energy providers, to procure SRECs representing at least 4.5 percent of qualified solar energy generation by 2025.

Solar renewable energy credits are financial instruments that represent the environmental attributes of solar electricity production. One credit is usually allotted for every 1,000 kilowatt-hours of solar electricity generated. An owner who installs a solar-electric system can use the electricity but can choose to sell the credit for generating it. Utilities and other energy providers buy the credits to meet requirements for generating solar or other renewable electricity, such as those called for in the New York measure. Companies and other organizations also may buy them to receive credit for producing "green" energy.

The markets for renewable energy credits in states that offer them are often capped by an "alternative compliance payment." If a utility company is unable to meet its percentage obligation for renewable electricity generation with tradable credits, it can comply with the law by making a direct payment instead. This part of the mechanism acts as a price ceiling for tradable SRECs.

The value of SRECs in many places that use them is not limited to large-scale solar owners but is available to residential owners as well. In New Jersey, for example, where the method originated, SRECs are an important revenue source that helps to offset the cost of a solar photovoltaic installation. For ideally situated owners, the credits can amount to hundreds or thousands of dollars a year and can make solar electricity competitive with or in some cases cheaper than utility electricity prices.

PHOTO CREDIT: MEREDITH NELSON /
SUNPLUGGERS.COM
The solar act would raise New York
state's solar production to at least 5,000
megawatts in 2025. Above, a view of Battery
Park and the lower Manhattan skyline
from the Staten Island Ferry.

Some New Jersey solar owners may sell rights to their SRECs to companies in exchange for an upfront payment, which may be less than they could earn by selling them annually but eliminates any risk of changes in the market system.

Under the proposed New York law, homeowners and other small-scale solar owners, those with systems under 50 kilowatts of capacity, would make up at least 20 percent of the state's total solar generation capacity. Payments to these owners would be at a standard fixed rate to avoid uncertainty.

"What it does is it makes it easier for smaller-system owners to participate," said Ron Kamen, senior vice president of EarthKind Solar and president of the New York Solar Energy Industries Association.

Owners who installed building-integrated photovoltaic systems – those that are incorporated directly into a structure, such as solar roof tiles installed in place of traditional shingles – would receive higher payments than the SREC rate offered for retrofit equipment, such as modules installed on brackets and rails above a roof. The payment would be 125 percent of the standard rate.

"The higher rate reflects the fact that it costs more to install BIPV, which then is considered a permanent installation," said Mr. Kamen.

Larger-scale owners would sell SRECs generated by their systems in the fluctuating market.

Supporters of the New York solar act say it would generate $20 billion in economic output over the next 15 years and would create at least 22,000 jobs. The cost has been estimated at less than $5 a year for electricity customers.

Mr. Kamen said the legislation supports a wide range of solar business approaches, developers and system sizes, so that solar industry growth could occur in all market segments, from small retail solar installations to large utility-scale power providers.

Endorsement of the act is not universal, and one element in particular that pertains to utility-scale providers is vigorously opposed by private power companies.

The Independent Power Producers of New York, a trade association whose membership represents almost three-fourths of the state's electric generating capacity, filed a memorandum in strong opposition.

"Solar itself is not the issue," said Sara Rosenberger, communications manager for the trade association, in an email. "We represent all generation types and advocate for a diverse mix of generation in NYS."

The Independent Power Producers' concern involves a provision in the bills that would allow utilities and the public New York Power Authority and Long Island Power Authority to construct, own and operate qualified solar-energy generation equipment for the purpose of complying with the legislation.

Under the act, the electricity providers could build, own and operate solar installations to meet up to 25 percent of their obligations for providing solar electricity.

This part of the act, Ms. Rosenberger said, "is inconsistent with the foundation of New York State’s policy on restructuring of the electric industry, which applies to the ownership of generation by utilities, as well as public power authorities."

"Our position, and the state's documented preference" under the New York State Energy Plan, Ms. Rosenberger added, "is for new energy infrastructure to be built by merchant providers reacting to market forces or through competitively issued solicitations for new capacity from private developers by utilities, NYPA and LIPA, and does not encourage a role for these entities in the generation business."

The power producers' group, which promotes the motto that "Competition Works for New York," says in its memorandum of strong opposition, "Clearly, the state should not reverse its long-standing policy prohibiting utilities and public power authorities from owning and developing generation, because to do so would harm competitive markets and consumers." It has asked for an amendment to the legislation. 

Proponents have focused on jobs and the environmental advantages of cleaner energy.

In its memorandum of support, the New York League of Conservation Voters said, "Despite its potential, New York's solar industry lags behind its Northeastern neighbors. Currently, New York has less than 36 mw of installed solar capacity from its 1,200 photovoltaic systems."

"In comparison, New Jersey's 5,500 PV systems equate to nearly 150 mw of installed solar capacity – over four times that of New York. Further, New Jersey's capacity continues to trend upward with the installation of 100 new systems and greater than 15 mw monthly. Within 12 years, New Jersey aims to achieve over 5,000 mw of new solar capacity. Pennsylvania and Massachusetts have also recently set similar policies, with the goal of 850 mw and 250 mw by 2021 respectively."

The league said that because the goal of the act is to establish a self-sustaining market, the economic benefits would continue beyond 2025. "Enacting this legislation will result in 22,000 new, long-term and well-paying jobs in New York," its memorandum said. "A commitment to clean energy will result in the creation of additional jobs in the manufacturing sector. The landing of major global solar manufacturers in Arizona and California was tied directly to their clean energy policies."

"The economic and environmental benefits clearly outweigh the costs of this critical legislation," which would amount to less than 1 percent of total spending on electricity in the state through 2025, the league's memorandum added.

The New York Solar Industry Development and Jobs Act is one of many bills the legislature is considering as its 2010 session winds down, still under the specter of a multibillion-dollar budget deficit. Another solar-related measure would allow the Long Island Power Authority to establish a pilot feed-in tariff program, which would pay solar owners for generating electricity.

The solar bills that are coming up for votes would be funded by electricity ratepayers, not state taxpayers.

In addition to the legislative action, which has the potential to dramatically alter the landscape for solar adoption in the Northeast, there is more solar activity in the works. The New York Power Authority is proceeding with its plans to develop up to 100 megawatts of new solar PV capacity, and is reviewing bids from developers. The authority said in a recent news release that the initial installations could be generating power by the end of this year.

Mr. Kamen of the solar industries group has high hopes for the outcome of the impending votes and for the future of solar in New York.

"We're optimistic – cautiously optimistic," he said. "A lot of good things are coming together."