Legal & Regulatory

New York's Reforming the Energy Vision

The digital economy has changed the way we shop for clothing, travel, communicate with friends and family, consume news, and watch television—among so many other things. But the innovative potential of the digital economy has not yet found a place within the electric system. With that important goal in mind, New York has embarked on a bold new plan to build an electric generation, transmission, and distribution system that makes sense for the mid-21st century. In fact, information technology, electronic controls, distributed generation, and energy storage are advancing faster than the ability of utilities and regulators to adopt them or to adapt to them. Integrating technology and market innovations will enable New York to meet the challenges presented by aging infrastructure, declining system efficiency, flat sales, and climate change. To get these innovations onto the grid, the business-as-usual approach will no longer work.

Multiple Goals

Building a new electric industry has forced the State of New York to question traditional methods and assumptions, revealing a pathway toward a more efficient, customer-friendly, and sustainable model. That pathway was laid out by Governor Andrew M. Cuomo in an ambitious agenda to reform the energy vision for the state in 2015. Under Governor Cuomo’s strategic “Reforming the Energy Vision” (REV) initiative, the state is actively spurring clean energy innovation, bringing in new investments, and improving consumer choice while protecting the environment and energizing the economy.

New York is focused on reforming its clean energy programs with retooled initiatives to support revolutionary regulatory reforms under consideration by the state’s Public Service Commission in an effort to also better leverage public dollars. Under REV, New York aims to stimulate a vibrant private sector market so clean energy solutions can be delivered to communities and individual customers throughout New York. REV focuses on removing market barriers and bridging market gaps that have historically impeded the clean energy sector from benefiting from technological innovations.

REV will fundamentally change New York’s $22 billion electricity market through a top-to-bottom makeover of utility planning processes, electricity market structures, and rate designs to eliminate barriers that stifle clean-energy innovations and that block deployment of distributed energy resources (DER), like energy efficiency, demand response, distributed storage, and distributed generation.

Industry Response

In response to REV, Con Edison’s “Brooklyn Queens Demand Management” program, for example, recently announced a first-of-its-kind energy management program that encourages deployment of local energy resources and innovation through competition. These efforts, involving customer-side, nontraditional solutions such as energy efficiency, demand management, and distributed generation, will lower overall costs for customers while offsetting the need to build a $1 billion substation.

Like incumbent utilities, third-party energy companies are jumping on the REV bandwagon. Recently, SolarCity unveiled a new microgrid service in New York that combines DER—solar, batteries, and controllable load—to enable a cleaner, more resilient, and more affordable way of providing power. Meanwhile, Exelon Corp. said it was partnering with Anbaric Transmission LLC to create a series of microgrids in New York. The collaboration will initially establish five microgrids ranging from 10 MW to 200 MW at strategic locations throughout the state.

Regulatory Changes

In February, New York transitioned REV from theory to reality when it adopted a reformed retail electric industry framework under which utilities will no longer simply serve as the operator of the local electric grid. Instead, they will also serve as the system coordinator and market manager of the local grid, while remaining under regulatory oversight.

The new electric system being created will be driven by consumers and non-utility providers, and it will be enabled by utilities acting as distributed system platform providers. Utilities will be responsible for reliability, and the functions needed to enable distributed markets will be closely tied to the functions need to ensure reliability. The utilities acting in concert will constitute a statewide platform that will provide uniform market access to customers and DER providers. Each utility will serve as the platform for interface among its customers, aggregators, and the distribution system.

New York will establish a new direction for utility energy efficiency programs to increase efficiency gains and consumer protections related to third-party providers of distributed resources to benefit low- and moderate-income customers. These actions set the stage for unleashing innovation throughout the industry that will support a consumer-driven power system that meets the economic and environmental needs of New York residents and consumers.

REV aims to reorient both the electric industry and the ratemaking paradigm toward a consumer-centered approach that harnesses technology and markets. Distributed energy resources will be integrated into the planning and operation of electric distribution systems to achieve optimal system efficiencies, secure universal service and affordable service, and enable the development of a resilient, climate-friendly energy system.

New York is creating tariffs that put a real value on DER benefits, such as solar; developing opportunities for community solar, which will enable consumers that do not own property to participate in solar; setting rules to allow community choice aggregation; and strengthening demand response programs that will allow energy use to be dynamically managed with local energy resources. ■

Richard Kauffman is chairman, energy and finance in the Office of Governor Andrew M. Cuomo, New York; Audrey Zibelman is chair of the New York Public Service Commission.

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