If you live in New York State, then you’re probably well aware that, on average, you’re paying a whopping 15.2 cents per kWh on your electricity bill. This is 57 percent more than the national average, and behind only Alaska, at 16.3 cents per kWh, and Hawaii, which is way out in front at 34 cents per kWh.
In addition over 7 million people lost power in New York City and Westchester County as a result of superstorm Sandy. Due to these factors, it has become clear that New York’s energy policy is long overdue for a revamp. The state’s current energy policies do not promote the development and implementation of new and innovative energy technologies such as microgrids and combined heat and power units, which could address some of the cost and resilience issues.
On April 24, 2014, Governor Andrew Cuomo announced the Reforming Energy Vision (REV) initiative, which would fundamentally change the way New York’s electrical grid would operate. These fundamental changes could present an opportunity for a more resilient, efficient, diverse, environmentally and market friendly energy sector in the state.
In Governor Cuomo’s announcement of REV, he stated that energy generation and distribution in New York State had remained relatively unchanged for over 100 years, despite how rapidly new technologies have been developing. Because of this failure to modernize, microgrid technology with the potential to address all the goals of the REV initiative has been cumbersome to implement.
According to Nick Martin of the Pace Energy and Climate Center, there are three major barriers to microgrid implementation: Regulatory uncertainty, lack of a framework for auxiliary service compensation, and the difficulties of organizing stakeholders to implement outside of the “MUSH” market (Municipalities, Universities, Schools, and Hospitals).
The issue of regulatory uncertainty is a concern due to the fact that microgrids are not clearly defined by New York State law, nor is there any clear framework for their development. This has caused many complications between utility companies and microgrid developers, which ultimately are to be settled in lengthy and costly legal struggles that hinder development. An example of this would be the tedious uphill battle Allied Converters (an environmentally conscious manufacturer in Westchester county) had to fight in order to implement a microgrid, which utilizes solar and combined heat and power for their facility resulting in efficiency yields between 80 and 90 percent.
The issue stemmed from the current policy on net metering benefits which states that the solar energy aspect of their grid qualified for net metering benefits, leaving the combined heat and power unit unrewarded. Consolidated Edison had challenged this grid, due to the concern that the CHP unit would provide for extra, unlawful benefits.
After a two-year legal battle, the case was settled as the Public Service Commission ruled that it was possible to devise a system that would ensure that the generation of energy could be monitored separately, which would accurately award the net metering benefits solely to the solar power generation.
On the other side of regulatory uncertainty, another issue is the unclear determination of standby rates. Standby rates are costs billed to a standalone energy-generating site, to assure the utility gets paid for the use of infrastructure. These issues are all usually settled case by case, which makes it time consuming and costly for developers wishing to implement microgrids. This is why REV will seek to define and design the regulatory framework for implementing these grids, to save the developer time and money, as well as to ensure a simpler path for implementation.
The vague nature of microgrid regulation and the lack of a clear set of steps to build one hurts developers even beyond the challenges in initial implementation. Since microgrids aren’t incorporated in current policies, it is impossible to determine the appropriate compensation for the benefits they provide. Microgrids are inherently beneficial to the main grid, since they have the potential to alleviate capacity constraints, which could ultimately lead to a loss of power.
Lastly, implementation beyond the MUSH market is often difficult due to the increased number of stakeholders when dealing with community microgrids. When dealing within municipalities, universities, schools, and hospitals, fewer people are involved in developing these projects, since these facilities are large and systematically approach opportunities, including those presented by new technologies.
It is more difficult to implement a microgrid in a residential area as every landowner affected would have to be involved, many of whom are unlikely to be knowledgeable on what microgrids are and how they operate. Once the state REV policy and framework are established, microgrid adoption may be more feasible on a residential scale.
The Reforming Energy Vision initiative is a much-needed reconstruction of New York’s energy generation and distribution policy. Just as our phones and computers become obsolete with the development of newer technologies, our policies can, as well.