Solar Installations: Net Metering and VDER

Figure 1 – Bi-directional electric grid (Source: Ipsun Solar)

The top picture in this blog illustrates a possible future electric grid that is designed to encourage the shift to decarbonized sustainable energy. Most sustainable energy sources are directly or indirectly (e.g., wind) based on solar energy, which exists independent of consumer needs. The future grid is designed to synchronize the time cycle of sustainable energy sources and consumer needs between buildings, cars, and utilities. As shown in the picture, the synchronization is based on the bidirectional flow of the electricity. The next few blogs will address various aspects of the proposed transition. The new formation is also designed to address other questions of the energy transition, including resiliency to blackouts (powering the house for a short time with a car battery), energy saving (providing refunds for unused energy), and spreading loads more evenly throughout the day to reduce demand for expensive power at peak times.

My attention to this issue increased as a result of a 2024 NYC Solar + Storage Installer Workshop that my university (CUNY) organized. The program of the workshop is shown in the following link. Since the energy transition is a process of constant change, all of us are in a constant learning mode of how best to navigate the required changes. A single workshop cannot address everything but this is a repetition of a similar workshop from last year. A previous blog (April 18, 2023) describes what I learned at last year’s workshop. Two guest blogs by Phil Gallagher (June 21, 2022, and March 21, 2023) describe his experiences of installing photovoltaic cells in his house, including his interactions with the electrical utility company Con Edison and professional installers. An older (2014) link by the sustainability arm of CUNY outlines recommended steps for installing solar cells to power a home in NYC. It addresses the bidirectional flow of both electricity and money between a customer and Con Edison, which was (and still is) the largest utility in NYC. The bidirectional flow at that time was based on net metering. As we will see below, the rules have changed in NYC over the last 10 years but net metering is still a dominant mechanism for bidirectional electricity flow in many states. I will start with the 2014 citation of New York State’s solar map cited above, which includes the bidirectional flow of power (between utility and customers) with the recommended main steps for installing solar power in a building:

Steps for going solar:

1) Contact a solar installer – Receive at least a few different quotes to compare pricing, customer references, and financing options. For a list of participating NY-Sun Incentive Installers, go to:

2) Sign utility interconnection (net metering) paperwork – Your installer will help determine what paperwork needs to be signed to notify your utility and local building department you are going solar. It is important to receive approval from the utility before installing the solar system to understand if there will be utility grid upgrades and additional costs.

3) Utility installs a net meter – Your electric meter will be switched to measure energy flowing both ways. This occurs within 2-4 weeks of the net metering application being approved, and can happen before the solar installation.

4) After the solar install – Please wait for interconnection approval from your utility to turn on the solar system. This is usually a letter or an email. Before your utility can grant approval, your installer must first obtain all jurisdictional permits and inspections, and provide the utility with a completed verification test form. Typically, the utility will witness the installer perform an on-site verification test for systems 25kW and greater.

5) Turn on the solar system and generate renewable energy! Please be aware meter readings are sometimes estimated when the utility cannot access the meter. Energy savings may not appear until meters can be read.

I will now shift fully to the bidirectional electricity flow between customers and power companies.

Net Metering:

Net metering is a billing arrangement between solar energy system owners (you) and utility companies. It allows solar panel owners to feed excess electricity they generate back into the grid in exchange for credits. These credits can be used to offset future electricity consumption when their solar panels are not producing enough energy to meet their needs. Net metering ensures that solar panel owners are fairly compensated for the surplus electricity they contribute to the grid.

How Net Metering Works:

The process of net metering involves the installation of a bidirectional meter that measures both the electricity supplied by the utility company and the surplus electricity generated by the solar panels. When the solar panels produce more electricity than is being consumed, the excess is fed back into the grid, and the meter runs in reverse, effectively giving credits to the homeowner. During periods when solar production is insufficient, such as at night, these credits are used to offset the electricity drawn from the grid.

Net Metering Policy and Availability:

Net metering policies vary by state. Some states and their public utilities have established favorable regulations that support net metering, while others may have limitations or different structures in place considering the recent NEM 3.0 law that was passed in California. It is essential for homeowners to research and understand the specific net metering policies and incentives available in their area. Consulting with local solar installers or utility companies can provide valuable insights into the net metering options and requirements in a particular region.

Net Metering is not available in all states:

Net metering is not available in all states and some states do not regulate net metering at a state level, rather it is managed to the utility level. As of 2020, 34 states plus Washington D.C. and four territories have some form of net metering policies available. Six additional states do not currently offer net metering but offer other compensation outside of net metering. Five states do not currently have net metering laws and net metering policies and decisions are taken into account at the utility level.

Although more than half of the states have net metering policies, each net metering policy can be unique. Net metering policies can vary greatly, from being compensated for the full retail cost of the solar exported, receiving an amount less than the full retail cost, or not being compensated for any electricity that they send back to the grid. Solar policies can change and utilities have different policies as well. Your local solar installer should be able to provide you with the most up-to-date net metering policies for your area.

Figure 2 shows a map of the bidirectional mechanisms between utilities and customers in US states:

Figure 2 – Net Metering by State/Territory (Orange: state-mandated rules for certain utilities, Green: Transitioning to compensation other than net metering, Purple: State-mandated compensation other than net metering, Blue: No state-wide rules but some utilities do offer net metering) (Source: Solar Power World)

As shown in Figure 2, NY (my state) recently changed its bidirectional electricity flow mechanism to a different system, called VDER, which is explained below:

The New York State Public Service Commission (PSC) established the Value of Distributed Energy Resources (VDER) or the Value Stack, a new mechanism to compensate energy created by distributed energy resources (DERs), like solar.

The Value Stack compensates projects based on when and where they provide electricity to the grid and compensation is in the form of bill credits. This is determined by a DER’s:

  • Energy Value (LBMP)
  • Capacity Value (ICAP)
  • Environmental Value (E)
  • Demand Reduction Value (DRV)
  • Locational System Relief Value (LSRV)

Additionally, certain Community Distributed Generation (CDG) projects may have a Market Transition Credit (MTC) or Community Credit (CC). These elements recognize the benefits that DERs provide to the grid and society, including avoided carbon emissions, cost savings to customers and utilities, and other savings from avoiding expensive capital investments. Solar Value Stack Calculator To estimate a solar project’s revenue under the Value Stack, use the Solar Value Stack Calculator

Solar Value Stack Calculator

NY-Sun developed the Solar Value Stack Calculator to help contractors better estimate compensation for specific solar projects. The calculator combines the wholesale price of energy with the distinct elements of distributed energy resources (DERs) that benefit the grid: the avoided carbon emissions, the cost savings to customers and utilities, and other savings from avoiding expensive capital investments. Select the calculator that best fits your project.

We periodically update the calculator—please revisit this page regularly to ensure you are using the most recent version.

As is indicated in the last line, the system is still changing. The outline of what is needed to be an installer in NYC will be explored in the next blog.

About climatechangefork

Micha Tomkiewicz, Ph.D., is a professor of physics in the Department of Physics, Brooklyn College, the City University of New York. He is also a professor of physics and chemistry in the School for Graduate Studies of the City University of New York. In addition, he is the founding-director of the Environmental Studies Program at Brooklyn College as well as director of the Electrochemistry Institute at that same institution.
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