Achieving a Balanced Approach to Distributed Energy Incentives


With the rapid development of the solar industry over the past decade, policymakers, utilities and other stakeholders have increasingly tried to pinpoint the most accurate compensation mechanism for solar energy generation. Feed-In Tariffs, Performance-Bonded Incentives, SRECs, net-metering and community solar programs are an example of policies designed to spur development in renewable energy and/or accurately compensate the owners of these systems for the benefits they bring to the electrical grid.

Many of the programs to date have done an excellent job of driving economic growth. However, some of these incentives have drawn criticism from electric utilities who stand to lose a portion of their market share. Achieving a balanced policy that benefits both solar system owners and power market stakeholders requires a nuanced approach.New York is the latest state to attempt to mitigate these issues.  After several years of policy discussions and working groups including solar industry leaders, New York State has begun to implement the Value of Distributed Energy Resources (VDER) Tariff.  Through VDER, the state aims to compensate solar system owners for the full range of benefits that solar energy brings to the grid by recognizing a “stack” of values per kWh of electricity generated.The components that make up the value stack include the following:

  • Energy: The standard monetary value of energy generated and injected into the electrical grid. This stack is based on day-ahead, location-based energy prices and varies hourly, compensating for the location and time the energy is generated.
  • Environmental: The societal value of generating clean energy, based on Tier 1 renewable energy credit (REC) prices published by the New York State Energy Research and Development Authority (NYSERDA).
  • Installed Capacity: The solar energy system’s ability to produce energy at times of peak grid demand.
  • Demand Reduction: The solar energy system’s benefit to the local distribution system; energy produced in congested, high-demand areas of the grid are incentivized at a higher level than energy produced in rural, low-demand areas.

The New York Public Service Commission (PSC) believes that the VDER tariff will stimulate the market by incentivizing solar developers to install systems in high-demand areas and work toward a more stable, clean, resilient and reliable electrical grid.As the #1 Commercial Solar Developer in New York State, PowerFlex can help you navigate this changing policy market and yield the highest possible returns for your business. If you are a New York business owner interested in going solar, please call 888-225-0270 or email us at