A tax on Westchester solar is coming in 2022

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The struggle between utlity companies and the distributed solar industry remains ongoing. The latest salvo on the New York front, the Customer Benefit Contribution (CBC) charge, is set to hit the industry in 2022. It's effectively a tax on the solar industry. The New York Public Service Commission (NYPSC) recently approved the CBC for all New York state utility customers who interconnect their solar systems after 2022.

The size of this charge depends on whether or not the customer chooses to be compensated for the execess electricity produced via net metering, or via the value stack tariff. Now, net metering has been the traditional mode of compensation, and a key policy mechanism used to promote the adoption of solar. In a net metering situation, homeowners are compensated for the electricity they produce at a retail rate.

The utility sector initially accepted net metering as a necessary the solar industry. However, as the numbers have begun coming year after year, the utilities are not liking what they're seeing on their balance sheets and have begun pushing back against the policy. They claim that they must charge higher rates across the board, which disproporiately affects non-solar customers (one-way consumers of power), a practice known as cost-shifting. They buy electricity from independent power producers (IPPs) at wholesale rates. Now, all of a sudden, they have to pay retail?

Utilities have begun to move to some called the "value stack" tariff (vder), which sets the price of electricity depending on when (what hour/what day) and where it was produced. This is already in place for commercial and industrial customers.

Breaking down the CBC for the Con Ed Region

Residential customers of the Con Ed region now have two options starting 2022. They can either choose net metering and pay a monthly CBC charge of $1.09 per kilowatt installed, or they can choose vder and pay a CBC charge of $0.545 per kilowatt installed. The charge is lower for vder customers because they're compensation per kwh from ConEd is lower.

Let's break it down.

Say you install an 8kw system and interconnect it this coming January and the system produces 750kwh per month on average. If you went with net metering, you'd be compensated at roughly 24 cents per kwh, or $180, minus the CBC, which for your system size would be $1.09 x 8. So your final compensation would be $180 - $8.72 = $171.28.

If you were to chose the value stack, you might be compensated at a rate of around 13 cents per kwh. You'd make $97.5, minus the lower CBC of $.545 x 8 = 4.36. We get $93.14.

As you can see from the above math, net metering wins out by far. And it must be said that the above charge, pesky as it is, will not significantly change the payback period for solar customers, though it is a blow to the solar industry and by extension to the state's climate agenda. The New York Solar Energy Industries Association makes that case here.