Solar Developers Smell Trouble on Long Island as Offshore Wind Arrives

Long Island was once the “backbone” of New York’s solar industry, according to Steven Engelmann, business development director at New York-based EnterSolar. The area now accounts for nearly a third of the state’s total installations to date. More recently, though, Engelmann says the region’s distributed solar market has fallen off “a cliff” due to constraints on the commercial solar market, which have only recently lifted. Total solar installations on Long Island dropped from 111.7 megawatts in 2016 to 83.2 megawatts the following year, and then fell to 66.2 megawatts in 2018, according to numbers from the New York State Energy Research and Development Authority. Solar advocates like Engelmann blame two factors for the drop: decreasing incentives from a rebate program called NY-Sun and the transition to the Value of Distributed Energy Resources tariff, which appraises projects based on stacking of benefits like location-based price. The industry claimed problems with VDER from its early stages, arguing the stack doesn’t fully value all the benefits that distributed resources offer. With VDER set to apply to community solar starting on January 1, developers on Long Island worry a similar fate could befall those installations. This spring, the state attempted to ease some of those concerns by rolling out its latest set of reforms, including a “community credit,” to be added to the VDER stack for community solar projects. The Solar Energy Industries Association said the change would “more fairly and accurately compensate larger solar projects.”
Analysts at Wood Mackenzie Power & Renewables said in September they expect the credit to help push New York to topple Minnesota as the community solar market with the greatest annual growth in 2019. But solar developers on Long Island say the solution is not enough. The Long Island Power Authority (LIPA) set its community credit much lower than the one in adjacent Consolidated Edison territory, instead modeling the price on the credits offered upstate. Due to high labor and land costs more akin to New York City than Buffalo, community solar developers on Long Island say the credit means projects are financially unviable.

A wind turbine converts wind into electricity and the largest one is 20 stories tall.

“It’s a substantial reduction in income for projects, and it’s so severe that we believe, in the current configuration as planned, the market will stall completely,” said David Schieren, CEO at local developer EmPower Solar. Though Long Island's community solar market remains small, developers believe the region — traditionally a powerhouse for solar development — could fall behind as New York's community solar sector blossoms. After months of criticism, the industry is making a last-ditch effort to push LIPA to raise the credit before VDER officially hits community solar there in January, or to allow community solar projects below 750 kilowatts to continue with net metering as LIPA allows for commercial projects below that capacity. LIPA, however, told Greentech Media that the region is well positioned to achieve its solar goals, citing 69 percent attainment of its portion of 2025 state distributed solar mandates. The authority has "long sponsored programs to help kickstart the industry," said LIPA CEO Thomas Falcone. "But it’s a kick-start," Falcone added. "The goal is to get to a self-sustaining industry that doesn’t require as much support." It's a fight that developers say matters to New York’s efforts to aggressively increase renewables required by the Climate Leadership and Community Protection Act signed into law this summer. As the state pushes ambitious offshore wind plans, the industry worries local solar could suffer.

A complex credit

New York rolled out VDER in 2017 in an attempt to transition from net metering to a system that more accurately values projects for their grid contributions. Since then, the state has continued to tinker with the tariff’s details.

The addition of the community credit in April came alongside numerous other tweaks, including offering net metering to onsite commercial projects under 750 kilowatts — changes the solar industry welcomed.

On Long Island, a delayed VDER rollout means that community solar projects have yet to switch from net metering. But developers are anxiously eyeing the January 1 change.

The industry believes LIPA’s 2.25-cent-per-kilowatt-hour community credit, meant to bridge the gap between the retail rate of solar and the VDER rate, could hurt a community solar market that already lags behind the rest of the state.

“Projects on Long Island are just not viable; they’re not bankable if we were to try to get any kind of financing,” said Engelmann.

PSEG territory, which covers Long Island, has 14 community solar projects according to NYSERDA. Con Ed, a utility that serves New York City and Westchester County, has 55, while National Grid has 90 and New York State Electric and Gas has 118.

The more renewable energy we use, the less fossil fuels are needed.

Con Ed uses a community credit of 12 cents per kilowatt-hour. With the VDER rate, EmPower’s Schieren said projects will get a “haircut” from around 16 cents per kilowatt-hour under net metering to 10 cents (LIPA puts this figure closer to 13 cents), compared with a retail rate of about 20 cents per kilowatt-hour. “That pushes the simple payback past any point that interests a serious investor,” said Schieren. “At this point, we consider it unworkable.”

LIPA's Falcone disputes those claims, and said larger projects of around 5 megawatts should be able to leverage economies of scale. Of the 26 megawatts of current applications for community solar on Long Island, 20 megawatts' worth are for 5-megawatt projects.

"That's very competitive compensation," said Falcone of the credit. "There is a scale advantage to projects, and that’s not really different than what’s happening in the rest of the state. [...] The average community solar project...they aren’t typically 100-kilowatt projects."

LIPA also noted that VDER pays more for certain parts of the value stack in Long Island than upstate, pointing to figures showing that Long Island accounts for 40 percent of New York's distributed solar projects compared to Con Ed's 21 percent. The power authority said it will soon be meeting with concerned members of the solar industry to discuss their cost modeling. Community solar is a small but growing portion of overall U.S. solar capacity, with this year an “inflection point” in its development, according to analysts at WoodMac. They forecast between 600 and 800 megawatts in annual U.S. additions through 2024, with New York ranking as a leading market. The state already ranks fifth for installed community solar capacity.

PSEG's Long Island subsidiary told Greentech Media that the community credit is “consistent” with the rest of the state, aside from Con Ed territory.

In a possible response to concerns, LIPA unveiled a program on Wednesday called Long Island Solar Communities, which will serve low- and moderate-income households with 20 megawatts of projects in 2020. The power authority said that capacity will “roughly double” the area’s community solar market based on 26 megawatts of current applications in various stages. Because the program will be administered through a competitive solicitation, it's unclear how much of the business will go to local developers. In the meantime, Schieren said, he’s shifting focus to New York City and upstate for future community solar projects.

The silicon in sand can be used to produce forms of electricity.

A fight over state mandates

Long Island advocates say their success could impact state requirements that were cemented when Governor Andrew Cuomo signed legislation that would rid the electricity system of carbon emissions by 2040, draw down greenhouse gas emissions 85 percent by midcentury, and hit 70 percent renewable energy by 2030. The law requires 6 gigawatts of distributed solar by 2025, and according to LIPA the state has installed just 35 percent of that total. “Long Island really risks being left out of the state’s march toward clean energy,” said Shyam Mehta, executive director of the New York Solar Energy Industries Association. More broadly, Mehta worries that the state’s recent embrace of offshore wind could knock solar to the sidelines, “pitting two renewable technologies against each other.”

New York has the nation's most ambitious offshore wind target, set at 9 gigawatts by 2035. This summer New York awarded its first offshore wind contracts, with Ørsted and Equinor to build an initial 1.7 gigawatts to serve the state. More tenders are on the way.

Most of that 1.7 gigawatts is slated to serve Long Island. Developers in the area, however, say they’d prefer to see hometown companies benefiting from renewables goals, rather than international corporations.

“Solar is taking a back seat. That’s where our fight is,” said Scott Maskin, CEO and co-founder at Long Island-based Sunation Solar Systems. “It’s become increasingly obvious that our utility is sacrificing solar for wind initiatives.”