5 Important Questions About New York’s Energy Market Reform

By: Olivia Chen |

It’s been over three years since New York’s Reforming the Energy Vision effort began.

Under the initiative, regulators, utilities and third-party technology companies are coming together to recalibrate and optimize New York’s electricity market with distributed energy resources.

There are still a lot of unanswered questions about how the state will achieve its goals.

In advance of Greentech Media’s NY REV Future 2017 conference, GTM Research analysts address some of the most pressing questions.

1. Will there be a storage target for New York?

Earlier this summer, New York’s Assembly and Senate passed a storage bill for New York; now it is awaiting Governor Cuomo’s approval. It’s still unclear whether that bill will get signed. (Richard Kauffman, New York’s energy czar, has signaled skepticism over storage mandates.)

California, Oregon and Massachusetts have already set storage targets and initiated programs to achieve storage-related goals. New York is a state with massive potential for storage, but to date it has seen limited growth.

If passed, the bill will no doubt lead to an upside in the storage market, but the ultimate size remains to be seen, according to GTM Research and Energy Storage Association’s soon-to-be-released Q3 2017 U.S. Energy Storage Monitor.

There are still obstacles, such as lithium-ion permitting issues in New York City. However, according to the U.S. Energy Storage Monitor, if hurdles can be overcome, “an energy storage program would encourage storage that can add value to the electricity system, but also help New York reach its aggressive grid modernization goals.”

2. How are non-wires alternatives projects providing benefits?

Non-wires alternatives are a mechanism for both transmission and distribution (T&D) deferral and leveraging DERs. New York’s regulatory reforms are positioning the state as a leader in these projects.

In 2015, New York utilities identified 17 non-wires alternatives (NWAs) opportunities, equivalent to 345 megawatts of capacity. Since then, an additional 58 opportunities have been identified that provide an additional 600 megawatts of capacity.

The New York Public Service Commission articulated its vision for NWAs. It does not want the utilities to contemplate necessary infrastructure upgrades and then issue requests for proposals to resolve the underlying system needs; rather, it wants them to “consider the procurement process earlier and more broadly incorporate system design into NWA solutions.”

The ongoing Brooklyn Queens Demand Management (BQDM) Program is an example of this type of planning. The project is expected to defer $1 billion of T&D investment; notably, it beat its behind-the-meter target. A total of 41 megawatts of capacity from behind-the-meter solutions was expected, and as of Q4 2016, there were 46 megawatts expected.

In mid-July, the New York Public Service Commission approved the continuation of BQDM. Con Edison had only spent 21 percent of its project budget through Q4 2016, allowing it to continue its expansion without additional funding.

— Daniel Munoz-Alvarez, Grid Edge Analyst

3. What mechanisms will drive programs that will broadly engage energy consumers?

A goal of NY REV is to provide households, businesses and communities with tools to engage with their energy usage. The design of these customer programs must establish standardized structures for customers to engage.

To fully engage energy customers, utilities will adapt their business models and operations to become distribution system platform providers. For this paradigm shift to take place, a new structure that can facilitate customer activity at the distribution level in concert with third-party aggregators will be needed.

Standardized rules governing the market will enable distribution system platforms to attract third parties and manage customer activity in an efficient way. Demonstrations are on the roadmap for New York utilities, with National Grid being the first to test its capabilities.

— Elta Kolo, Grid Edge Analyst

4. How will marketplaces engage customers and bring additional revenue streams for utilities?

Out of the 17 REV demonstration projects, five of them are focused on establishing utility-branded marketplaces. Currently, the majority of operating marketplaces only offer energy-efficiency products.

Utilities view the marketplace as an additional way to engage customers, and the marketplace’s ability to generate revenues is a secondary goal at the moment. However, some utilities are setting up marketplaces with a more integrated approach. For example, Central Hudson Gas & Electric’s CenHub Marketplace, a REV demonstration project, integrates energy insights with product and service offerings.

While the current focus of marketplaces is primarily on residential customers, some utilities are planning to launch offerings for C&I customers as well. One of the two REV demonstration projects by Con Edison, called the Building Efficiency Marketplace, aims to identify energy savings and demand reduction opportunities for C&I customers and connect them with DER service providers. Overall, utilities view marketplaces as an add-on to their customer engagement efforts and are starting to explore ways to utilize them more efficiently.

— Fei Wang, Senior Grid Edge Analyst

5. How is New York using microgrids to address grid resiliency?

Another goal of NY REV is increasing the resiliency of energy systems. The New York State Energy Research and Development Authority (NYSERDA) is helping increase community resiliency in the face of grid outages by funding a three-stage competition, NY Prize, to design and ultimately build community microgrids.

In March 2017, NYSERDA awarded $11 million in grants for Stage 2 of the NY Prize. Each of the 11 winners will get $1 million to design the final microgrid plans. These final design plans will determine the Stage 3 winners, which are expected to be announced by the end of 2018. Stage 3 winners will receive $5 million each to build the microgrids and will be eligible to apply for up to $50 million in financing from the NY Green Bank.

In addition to increasing resiliency for the communities that are awarded funds, NY Prize funding gives the private sector a chance to figure out what different business models might be successful for community microgrids beyond this competition.

It will be especially interesting to watch how the NY Green Bank structures its deals to finance the microgrids, since many banks are unsure how to appropriately price the different value streams that come from multiple generation and storage sources.

— Colleen Metelitsa, Grid Edge Analyst

5 Important Questions About New York’s Energy Market Reform