New York State’s Microgrid Development Incentives

Report - Microgrids for Critical Facility Resiliency in New York State: In addition to aggressively pursuing greenhouse gas emissions reductions, New York’s Reforming the Energy Vision (REV) Initiativeseeks to enhance the resiliency of the state’s energy system.  In December 2014, the NYS Energy Research and Development Authority (NYSERDA), NYS Department of Public Service (DPS) and NYS Division of Homeland Security and Emergency Services issued a report entitled Microgrids for Critical Facility Resiliency in New York State. As a backdrop, the report included 4 figures depicting widespread electricity customer impacts resulting from several notable weather events, including Hurricane Irene (August 2011), the October 2011 Snowstorm, and Superstorm Sandy (October 2012).  

The report assesses “how microgrids can be used in New York State to sustain mission critical operations during and after severe weather storm events.” A “microgrid” is “a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity which can connect and disconnect from the surrounding utility grid and operate in both grid-connected or island mode.” The following issues were analyzed:

• Whether critical resources (e.g., hospitals, police and fire stations, water and sewage plants, aid organizations) could collaborate on successful microgrids.

• Possible priority geographic areas for microgrids, based on severe storm damage during 2011 and 2012.

• Types of potential microgrid projects, like distributed generation (DG), combined heat and power (CHP), renewables, and alternative energy technologies.

• How microgrids would align with utilities’ duties to provide safe and adequate service to ratepayers.

• The regulatory structure under which microgrid systems would operate.

• The technical and regulatory aspects of interconnecting microgrids to the power grid.

• The readiness and adequacy of microgrids to operate in emergency situations.

• Funding mechanisms for microgrids, including a cost benefit analysis.

A key issue is whether microgrids will be regulated as utilities, or “providers of last resort,” under New York State law. These regulatory implications could present insurmountable barriers to a microgrid’s development. However, there is precedent that a microgrid can avoid utility-level regulation even if it serves multiple unaffiliated users as long as the users are located at or near the project site and the project uses certain technologies, such as CHP, allowing it to be considered a “qualifying facility.”

Another issue noted in the report is the potential need for reform of the structure of utility tariffs to accommodate microgrids. Under many existing tariffs, microgrids and/or microgrid users may face onerous tariff rates for utility service. The PSC and DPS’s work on this and related REV issues will be explored in future postings.   

NYSERDA’s NY Prize Program:

NYSERDA is currently administering a program to support community grid planning and development with awards of funding, called the “NY Prize Competition.” The NY Prize program offers support for feasibility studies (Stage 1), audit-grade engineering design and business planning (Stage 2), and project build-out and post-operational monitoring (Stage 3). An RFP is issued for each stage, and NYSERDA announces winners who receive funding based on the proposals.

• Stage 1. Awards under Stage 1 have been announced and granted. Under Stage 1, NYSERDA approved up to $100,000 in funding for 83 feasibility studies.

• Stage 2. The Stage 2 RFP for design should be issued soon, with an expected due date in April 2016 for proposals. Under this stage, NYSERDA expects to approve up to $1 million in funding per project proposal for approximately 10 detailed designs. Cost sharing by the applicant will be required. Applicants for Stage 2 funding need not be recipients of Stage 1 grants. A feasibility assessment will be an element of competitive proposals under Stage 2.

• Stage 3. NYSERDA anticipates issuing a Stage 3 RFP in the fall of 2017. NYSERDA expects to award up to $5 million per project for approximately seven projects for build-out and construction.