Energy Policy 166 (2022) 112744

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Energy Policy
journal homepage: www.elsevier.com/locate/enpol

The locational value of distributed energy resources: A parcel-level

evaluation of solar and wind potential in New York state
Thomas Bowen *, Sam Koebrich, Kevin McCabe, Ben Sigrin
National Renewable Energy Laboratory, 15 013 Denver West Parkway, Golden, CO, 80 401, USA

A R T I C L E I N F O A B S T R A C T

Keywords: Distributed energy resources (DERs) are poised to play a significant role in evolving power systems because of
Value of distributed energy resources their flexibility to be sited in areas of high value to the grid. Traditional DER compensation frameworks, spe­
Distributed generation cifically net energy metering (NEM), inadequately communicate differences in the locational and temporal value
New York state
of DER generation to the grid. As a transition from NEM, New York State’s (NYS’s) Value of Distributed Energy
Parcels
Net energy metering
Resources (VDER) framework provides a methodology for calculating different value components that DERs offer
Front-of-the-meter the grid. To study the impacts of VDER frameworks on DER deployment, we developed a model to assess the
value of distributed solar and wind systems configured as either a behind-the-meter system or a front-of-the-
meter system for each parcel of land in NYS. Using parcel-level granularity, we can closely evaluate DER loca­
tional value and siting availability, particularly in urban and suburban settings. Our analysis finds while most
DER generators would be modestly compensated for deferred transmission and distribution infrastructure up­
grades (~0.01 $/kWh for solar PV), a subset of projects receive significant value from this component (0.035 to
0.089 $/kWh for top 5% of parcels for solar PV). Finally, our analysis finds VDER provides less overall
compensation than NEM to the average DER generator, however, it increases access to compensation for front-of-
the-meter DERs – a large and emerging market.

1. Introduction
The value of electricity is influenced by conditions that vary
considerably both spatially and temporally (Hogan, 2013). These con­
ditions include the cost of generation from the marginal generator dis­
patched to meet load, costs of new and existing infrastructure to meet
demand throughout the grid, and diurnal and seasonal patterns in en­
ergy demand and supply. Although utility-scale assets benefit from
economies of scale and lower levelized costs, by virtue of their proximity
to demand, distributed energy resources (DERs) can provide unique
system benefits (e.g., reduced losses, congestion, and curtailment, and
deferred infrastructure investment) and thus higher value per
kilowatt-hour (kWh) generated (Fitzgerald et al., 2015; Prakash et al.,
2016; Zinaman et al., 2020). However, many of these benefits are not
fully incorporated into electricity markets or compensation structures
(Zinaman et al., 2020).
Though utility-scale resource siting availability is constrained by
public attitudes and land-use considerations, DERs typically have more
siting flexibility to be colocated with demand in urban and suburban
settings (Prakash et al., 2016; Carlisle et al., 2016). Such siting flexibility
could allow a project developer to pursue sites with the highest loca­
tional value. This stands in contrast to prevailing net energy metering
(NEM) policies, wherein DER compensation is not spatially defined but
is based on netted retail electricity expenditures (Taylor et al., 2015;
Zinaman et al., 2017).
1.1. Value of distributed energy resources
A developing theme in the management of U.S. power system is the
modernization of compensation mechanisms to better reflect spatial and
temporal variability in the value of exports from distributed generation
(DG) (Hansen et al., 2013; Linvill et al., 2013; Harari and Kaufman,
2017; Holm et al., 2019; Proudlove et al., 2020). Regulators seek to
balance the need for comprehensible tariffs and compensation mecha­
nisms with the benefits of increased visibility into the fluctuating value
of energy (Bonbright, 1961; Linvill et al., 2013; Rábago et al., 2018).
Most current U.S. compensation mechanisms do not communicate the
range of spatial and temporal variance in the value of exports from

* Corresponding author.
E-mail address: kevin.mccabe@nrel.gov (T. Bowen).

https://doi.org/10.1016/j.enpol.2021.112744
Received 8 December 2020; Received in revised form 19 October 2021; Accepted 24 November 2021
Available online 16 May 2022
0301-4215/© 2022 Elsevier Ltd. All rights reserved.
T. Bowen et al.
DERs. This misalignment between the rates at which distributed gen­
eration are rewarded and the “true” value of that generation can lead to
misalignment between power system needs and the deployment and
operation of DERs (Zinaman et al., 2020; O’Shaughnessy et al., 2020). In
response to these concerns, as well as to higher penetrations of distrib­
uted generation, many stakeholders have advocated for a transition to
more reflective and responsive approaches, such as value of solar (VOS)
frameworks (Hansen et al., 2013; Taylor et al., 2015; Proudlove et al.,
2020; O’Shaughnessy et al., 2020).1 These frameworks seek to capture
the value of a diverse set of services DERs can provide to the power
system, taking into account how this value may change depending on
when and where power is injected.
Some of the more common value of DER frameworks attempt to
estimate value categories including energy, environmental, transmission
and distribution losses, generating capacity, and transmission and dis­
tribution capacity (Hansen et al., 2013; Denholm et al., 2014; Harari and
Kaufman, 2017; Proudlove et al., 2020). Some of these values, notably
energy and capacity services, are already realized, and ongoing efforts
seek to improve DER access to these markets (NYISO, 2017; Lavillotti
et al., 2019; Federal Energy Regulatory Commission, 2020). However,
other potential services DERs could provide are more difficult to reliably
quantify (e.g., the costs and benefits of DERs on distribution systems, as
they are highly complex and context-specific) (Denholm et al., 2014;
Horowitz et al., 2018). One leading example of a framework to quantify
the value of DER exports is New York state’s Value of Distributed Energy
Resources (VDER) regulation, which seeks to harmonize the locational
and temporal value of exports across wholesale and retail scales (NYPSC,
2017). VDER and similar frameworks offer the potential to alter the
historical paradigm of unidirectional power flow from centralized gen­
eration to one where DER adopters can become both consumers and
fair-value generators (Astoria, 2017).
One salient feature of NYS’s VDER framework is the unbundling of
exports into multiple value streams, particularly the demand reduction
value (DRV) (Section 2.6.6) and the locational system relief value
(LSRV) (Section 2.6.7), which correspond to the value of DERs in
deferring transmission and distribution infrastructure investments
respectively. These revenue streams only apply during high-demand
periods and, in the case of LSRV, are only available within specifically
designated distribution systems. The degree to which DERs can provide
these services and their magnitude of value is still considered an open
question.
In this paper, we refer to the compensation of systems operating
under both NEM and VDER frameworks as “values.” However, it should
be emphasized only VDER frameworks are explicitly driven by the
theoretical value they can provide to the power system. Thus, although
VDER compensation represents value to both the customer and the
power system, NEM compensation represents value to only the
customer.
1.2. Role for front-of-the-meter resources
In addition to NEM versus VDER, another comparison is of behind-
the-meter (BTM) and front-of-the-meter (FTM) configurations. Unlike
BTM resources, FTM resources interconnect at the distribution or sub­
transmission level and their generation does not directly offset end users
load. As a corollary, all generation from FTM systems is compensated
under VDER, whereas for BTM-VDER systems, only nonconsumed gen­
eration is compensated under VDER.
1 though it is less relevant for spatially-agnostic frameworks (e.g., NEM).
In this analysis, we use the term “framework” to loosely capture potential
methods of ascribing value to generation from DERs. This is distinct from a
“compensation mechanism,” defined as comprising (1) a metering and billing
arrangement, (2) a retail tariff, and (3) a sell rate (Zinaman et al., 2017).
Compensation under a VOS framework could be described as a net billing
scheme, in which the sell rate varies temporally and spatially.
2
Energy Policy 166 (2022) 112744
FTM systems compete for economic viability against two ends of the
spectrum: smaller, retail-compensated BTM systems and larger,
wholesale-compensated, utility-scale resources (Ackermann et al.,
2001). In comparison with utility-scale generation resources, FTM sys­
tems are more expensive per kilowatt and accesses lower quality wind
and solar resources. However, in comparison to BTM, FTM resources are
less expensive per kilowatt but potentially more challenging to site
because of land constraints and interconnection limits. This suggests
there may be significant economic potential for FTM resources under
locational value frameworks because their value is assessed indepen­
dently of on-site loads.
It is unclear, however, whether FTM resources can be sited in loca­
tions that would be more highly compensated under a locational value
framework. Factors that could inhibit siting availability in such locations
include land availability for development, shading, turbulence from the
built environment, and interconnection limitations (Allen et al., 2013;
Allen, 2014; Lee et al., 2019). Even if it is technically feasible to site FTM
resources at high-value sites that would be inaccessible to utility-scale
systems, it is not obvious the additional revenue would be sufficient to
offset higher FTM capital costs (Reiman et al., 2020; McCabe et al.,
2018; Cole et al., 2016).
1.3. Evaluating renewable energy potential at the parcel-level
As the VDER framework defines locational value at a highly granular
level, we hypothesize there is substantial variance (Gooding et al., 2013)
in the locational value of DERs across NYS that may not be captured
through the existing NEM framework (Case et al., 2018a). Sources of
variance in locational value include DER siting availability, quality of
wind and solar resources, utility territory and associated retail tariffs,
and whether DERs can access unique value streams such as the DRV and
LSRV.
Rather than applying a rastered (gridded) or clustering approach, we
evaluate siting availability and locational value for each unique parcel in
the state (n = 6.23 million).2 Our literature review did not identify any
existing distributed wind and solar locational value studies at the parcel
level for an entire region, though others have studied spatial aspects of
renewable energy technical and economic potential (Brown et al., 2016;
Lee et al., 2019). Most existing regional renewable energy potential
studies use rasterized cells with digital surface or digital elevation
models (Lopez et al., 2012; Sun et al., He and Kammen, Yushchenko
et al., 2018; Chow et al., 2014), though these approaches ignore the
impact of property ownership. Rasterized models particularly struggle
when applied to higher density areas because parcel size and geometry
affects siting availability. Some parcel-scale analysis does exist for
microgrids (Mavromatidis et al., 2015), but none exists for large regions.
Other studies have sought to assess the technical potential of rooftop
solar at the building level using either lidar or aerial imagery (Mansouri
Kouhestani et al., 2019; Elshurafa and Muhsen, 2019, Sigrin and
Mooney, 2018).
We argue evaluating renewable energy potential at the parcel level is
needed to accurately assess DER locational value, particularly in urban
and suburban settings. Parcel-level methods are better suited to
modeling the existing built environment and the decision-making of
individual investors than rasterized approaches. In the specific context
of the VDER policy, a rasterized approach is insufficient to model
applicability of the LSRV and how site-specific load patterns contribute
to VDER valuation. Furthermore, spatial granularity is needed to iden­
tify high-value locations that could be masked through averaged results
(e.g., evaluating average VDER results at the utility or state level),
The aim of such approaches is to identify sites with higher value to the
power system and, ultimately, align investor interests with power
2
A parcel is a contiguous piece of land, which may contain a building.
T. Bowen et al.
system value.
1.4. Contributions to literature
In this article, we provide novel contributions to the literature
regarding the locational value of DERs as implemented in the New York
state VDER framework. Specifically, we demonstrate the application of
parcel-based methods over rasterized and top-down approaches, which
inadequately represent correlations in land-use, siting availability, and
locational value. This paper is one of few to analyze the VDER frame­
work in such depth and in such granularity. Many jurisdictions are
debating transitioning from NEM frameworks, and VDER offers one
promising alternative to align compensation with value provided to the
power system. Our analysis of the VDER framework provides significant
insight into the impact of such transitions on customers which can
inform ongoing discussions on DER compensation. Finally, we contrast
the value of DERs under both BTM and FTM configurations and
demonstrate the opportunity that VDER could offer FTM systems, an
opportunity that does not exist under NEM frameworks.
1.5. Research questions
We address three research questions
1. To what degree does wind and solar generation provide DRV and
LSRV value? How much do these components contribute to overall
project revenue?
We find that on average for all parcels across NYS, the LSRV and DRV
provide only a small portion of the overall value of BTM and FTM solar
PV and wind systems under the VDER framework (see Table 2). How­
ever, for select parcels, the combined DRV and LSRV can provide sig­
nificant value, presumably in more constrained areas of the power
system. This finding indicates both the value of providing locationally
specific values to distributed resources aligned with power system needs
and the importance of evaluating these systems’ performance at a suf­
ficiently granular level.
2. Does transitioning from NEM to VDER frameworks lead to reduced
revenue for DER generators? Does it result in greater variance in
revenue?
We find that generators transitioning from BTM-NEM to BTM-VDER
and FTM frameworks on average suffer decreases in revenues (5.8% and
7.5% for solar PV and 16.9% and 14.4% for wind) (see Section 3.2). We
also find that while wind exhibits more variance in break-even costs in
general (see Table 4 and Fig. 5), the impact of transitioning from NEM to
VDER on variance is utility-specific.
3. How does VDER affect revenue for FTM systems? Are FTM systems
able to be sited in areas of high locational value?
We find that although the developable potential under the FTM
VDER framework is smaller than for NEM (see Table 3), there is still
significant potential for both FTM solar PV and wind: approximately 20
GW for solar PV and 92 GW for wind in the ~2000 $/kW to ~4000
$/kW range. The answers to these questions are based on a snapshot in
time of grid conditions, captured based on historical data for 2018. It
should be noted that as the grid continues to evolve (i.e., more customers
adopt DER and NYS transitions to cleaner utility-scale generation), the
value of new DER and consequently of VDER will also change.
The rest of the article is organized as follows. Section 2 describes our
methodology for assessing parcel data; determining siting availability
for distributed wind and solar in BTM-NEM, BTM-VDER, or FTM
frameworks; and assessing their locational value. Section 3 describes our
results, which are organized around the intersection of the parcels with
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Energy Policy 166 (2022) 112744
the largest locational value and siting availability. Section 4 discusses
the primary implications of the work regarding locational value under
VDER. Additional details on the methodology are available in the Sup­
plemental Information.
2. Methodology
This analysis develops a parcel-level database of potential DER sites
in NYS and evaluates their potential for siting distributed solar or wind
generators. For each parcel, we compare hourly generation profiles with
(a) on-site load (for BTM frameworks) and (b) either the hourly values of
VDER components (for VDER frameworks) or retail tariff rates (for NEM
frameworks) to evaluate project economics.
2.1. Data sources
Assembling a geographic database of parcels for an entire state was a
significant endeavor. The core data sets used include a commercially
available parcel database providing zoning, land-use, and other property
characteristics (Homeland Infrastructure Foundation-Level Data, 2020),
supplemented by data sets of different resolution. Wind resource data
were licensed from AWS TruePower at a 20-km resolution using
methods described in (Lantz et al., 2016). Rooftop area available for
solar development was sampled from county-level distributions of lidar
measurements (Kwasnik and Sigrin, 2019). Utility rate information was
selected from the Utility Rate Database, considering the most popular
tariff in each utility service territory for each sector (residential, com­
mercial, and industrial) [Open Energy Information, 2020]. Geographic
boundaries of protected areas and easements were compiled using the U.
S. Geological Survey Protected Area Database (U.S. Geological Survey
(USGS) Gap Analysis Project (GAP), 2018). Consumption data were
taken from the U.S. Energy Information Administration’s Residential
Energy Consumption Survey and its Commercial Buildings Energy
Consumption Survey (EIA, 2008). Though our assembled database is
comprehensive in many regards, it does not include parcel-level con­
sumption data or feeder-level interconnection restrictions. No person­
ally identifiable information was used in this study.
2.2. Wind and solar siting
The siting and sizing of systems on parcels was intended to maximize
the system size on the parcel irrespective of load. For each parcel, we
were able to compare the same system across valuation frameworks
(BTM-NEM, BTM-VDER, and FTM-VDER) and isolate differences in
revenue. Constraints such as land-use restrictions lead all development
within protected areas to be excluded. For each eligible parcel, the solar
and wind system sizing was independent based on the parcel’s
characteristics.
For wind, we tested a variety of turbine rotor diameters and heights
to see whether they would clear the canopy coverage on the parcel while
meeting statewide setback requirements. Of the eligible wind systems,
we chose the largest system capacity. If the area of the parcel was larger
than 5 acres, we tested to see whether multiple turbines could be sited to
maximize the total installed capacity on the parcel. Although we did not
model wake effects between the turbines, a power density limit of 3
MW/km2 was applied to parcels with multiple turbines. Detail about
how the resource data were estimated at an 8760 resolution is provided
by (Sigrin et al., 2016; Appendix B2).
For solar, developable rooftop area was sampled from published
county-sector distributions derived from previous lidar measurements
(Kwasnik and Sigrin, 2019). The tilt and azimuth of the rooftop pitch
were similarly sampled. These samples were not matched on an address
basis, but the total area sampled was normalized to match the measured
county-level developable rooftop area. For parcels larger than 5 acres,
we allowed for ground-mounted solar PV installations sized to match the
annual energy production of the selected wind system.
T. Bowen et al.
After excluding protected land-use applications and selecting only
parcels with a nonzero siting potential for both solar and wind in­
stallations, the number of eligible parcels was reduced from 6.23 million
to 1.04 million.3 This study focuses exclusively on sites capable of
hosting both wind and solar PV systems in order to better enable a
parcel-to-parcel comparison of the two technologies. However, this
methodology may underestimate the absolute siting potential for each
technology throughout NYS.
In addition to parcel-related constraints, the ability to site a given
DER depends on the ability to interconnect it to the existing distribution
system and the extent of distribution upgrades needed to safely inter­
connect the system. Interconnection barriers to DER could arise for
several reasons; for example, (Case et al., 2018b):
1. The generator is located on an isolated network, which might cause
protection equipment to trip if DER generation exceeded behind-the-
meter load.
2. There is inadequate service capacity, in which the rating of existing
conductors delivering power to the building is lower than the ca­
pacity of the DER.
3. There is inadequate local load, which could cause excess DER gen­
eration to backflow and cause protection equipment to trip.
Given the limited availability of highly granular data on the hosting
capacity of the NYS distribution system, we did not model discrete
interconnection limits. When siting, we did enforce a 5-MW intercon­
nection limit, which is the upper limit for distributed generators and
energy storage systems provided by the NYS Public Service Commission
(Commission, 2017).
2.3. Load Zones and utility territories
For this study, all the major investor-owned utilities in NYS were
evaluated for their potential to site DER systems and the value of those
exports to the grid. As municipal utilities are not required to offer VDER
as a compensation mechanism, they were excluded from consideration.
For a map of these utility territories see Figure A1 in Appendix A.
2.4. Behind-the-meter load considerations
Regardless of the interconnected system size, each parcel and tech­
nology combination was compared under three different valuation
frameworks: BTM-NEM, BTM-VDER, and FTM VDER. NEM refers to
crediting BTM generation in excess of on-site consumption exported to
the grid at the retail electricity rate. This credit can be used to offset
consumption from the grid in the current, and often future, billing cycles
(Zinaman et al., 2017). At the time of writing, NEM was available across
NYS, but it is expected to be replaced with the VDER framework. In both
the BTM-NEM and BTM-VDER frameworks, generation is first used to
offset any BTM load before being exported. For BTM frameworks, load
profiles were synthesized using normalized hourly electric consumption
patterns derived from [Office of Energy Efficiency & Renewable Energy
(EERE), 2013] in combination with the average annual electricity load
by building type.
2.5. Technology costs and net present value
In addition to calculating the locational value ($/kWh), we also
calculated project NPV ($) and the break-even capital cost ($/kW) of
each theoretical generator to estimate DER economic potential in NYS.
3
The considerations for siting and sizing excluded factors typically included
for technical potential estimates, such as the slope of the ground. Therefore, we
refer to “siting” potential throughout the paper as opposed to “technical”
potential.
4
Energy Policy 166 (2022) 112744
Economic potential is a subset of the technical or siting potential that
meets or exceeds a target rate of return for economically viable gener­
ating capacity, and it is influenced by both the revenues a generator can
earn and the costs associated with building and operating a given
generator. Wind project costs are a function of turbine size and hub
height, and they were derived from (Sigrin et al., 2016). Solar costs are a
function of the system size and were derived from (National Renewable
Energy Laboratory, 2019). In determining the project NPV of systems for
this study, the technology lifetime assumed for wind and solar systems
was 30 years and the discount rate was set to be the nominal
weighted-average cost of capital. The weighted-average cost of capital
value used in this study was 7.7%, taken from the 2019 National
Renewable Energy Laboratory’s Annual Technology Baseline for
land-based wind in 2018 (National Renewable Energy Laboratory,
2019). In this analysis, we assumed all the initial capital investments for
a generator were made in Year 1, the year in which the system was
built.4
2.6. Project valuation
Project valuation represents the sum of all value streams available to
a project under NEM and VDER frameworks. For NEM, the value stack
comprises offsetting self-consumption at the prevailing retail rate and
exported generation credited toward future consumption within the
same year.
VDER project valuation considers offset consumption value for BTM
frameworks but not for the FTM evaluation of parcels. The VDER
framework has four additional components that are applicable to all
parcels: the hourly value of energy, an hourly allocation of capacity
value, an environmental value, and a DRV intended to capture periods of
peak demand within transmission-constrained areas. Additionally, there
is the LSRV, only available within utility-specified geographies, which is
dispatchable by utilities to incentivize demand reduction (or genera­
tion), as needed. This study’s methodology and relevant input values for
calculating these value stack components were derived from the official
New York State Energy Research and Development Authority’s Value
Stack Calculator, which in turn were based on the official VDER
compensation framework, using 2018 as the reference year (NYPSC,
2019).5
A key underlying assumption of this study is that the values that the
distributed systems under VDER receive remain constant over the sys­
tem’s lifetime. This has been necessary given a lack of information on
future values. The validity of this assumption varies by component
value, as some values fluctuate year-to-year and others are fixed for a
long period of time to provide revenue certainty to investors (see below).
As more DER comes online, and as other broader changes take place (e.
g., increased electrification and additional clean utility-scale genera­
tion), power system conditions will change. In a framework such as
VDER that seeks to pass information on local power system conditions
on to DG owners, this ultimately means the price signals they see will
also change. Thus, the results presented in this work provide only a
snapshot of the distribution of high-value locations, which are certain to
change over time. Despite the limited ability to forecast future power
system conditions, the results in this study provide insight into areas of
high value and a general sense for the impacts DG adopters will face as
4
In reality, large capital expenditures would likely be made over several
years, with a portion of the project financed with equity and the rest by debt
that is amortized over several years.
5
In addition to the values explored in this analysis, the VDER Framework
includes a community distributed generation value to expand access to the
benefits of distributed generation, and it offers compensation in terms of
($/kW) or ($/kWh) (NYPSC, 2015). The availability of the community distri­
bution generation value, however, is limited by “tranches,” which are full in
most territories and therefore excluded in this analysis (NYPSC, 2018).
T. Bowen et al.
they transition from NEM to VDER.
2.6.1. Value of self-consumption
The value of self-consumed generation (i.e., the avoided electricity
consumption from the grid offset by generation from BTM systems) is
determined by the relevant retail tariff rate. Retail tariffs were taken
from the Utility Rate Database [Open Energy Information, 2020] and
representative rates were assigned to each customer based on their
sector (e.g., residential, commercial, or industrial). Sector-specific
representative rates were mapped to individual parcels based on the
given parcel’s land-use type. The amount of self-consumption was
calculated by clipping the system’s generation profile to the parcel’s
load (i.e., the hourly amount of generation offsetting consumption). The
total electricity bill with the system was then deducted from the calcu­
lated electricity bill, absent any system to isolate the annual revenue
from self-consumption.
2.6.2. Net metering value
Although FTM frameworks were only evaluated using the VDER
framework, BTM frameworks were evaluated under both NEM and
VDER frameworks to compare the resulting value. Under the NEM
frameworks, DER generation in excess of consumer demand exported to
the grid was credited at the retail tariff rate that the customer pays to
consume electricity (Zinaman et al., 2017).6
2.6.3. Avoided energy value
The avoided energy value represents the variable costs, such as fuel
costs or operation and maintenance costs, avoided when DG offsets
generation from centralized units. The net energy benefits associated
with DER exports are quantified in VDER via a generator’s ability to
reduce the purchases load-serving entities need to make from the elec­
tricity market by meeting demand locally. Specifically, we calculated
the product of the hourly electricity exports to the grid with the equiv­
alent day-ahead market price for the New York Independent System
Operator (NYISO) load zone from which the DER exports. The day-
ahead market prices were taken from (NYISO, 2020b) for 2018. In
practice, the avoided energy value changes hourly and by NYISO load
zone.
2.6.4. Avoided capacity investment value
The avoided capacity investment value represents the costs utilities
avoid when DERs can be reliably expected to help meet peak demand,
thereby reducing a utility’s obligation to build additional capacity or
procure it from a capacity auction (as is done for investor-owned utilities
in NYS). As only a select number of hours contribute to peak demand and
determine capacity auction requirements, only DER exports within these
hours can provide capacity value. The VDER framework defines these
periods as those in which the entire NYISO territory is likely to experi­
ence peak demand, defined in the latest Value Stack Order (NYPSC,
2019). The capacity value of exports during these hours was determined
by the capacity auction for the NYISO load zone from which the DER was
exporting (NYISO, 2020a). In practice, the avoided capacity investment
value remains fixed throughout a given year but changes by NYISO load
zone and varies year-to-year based on actual capacity market spot
prices.
2.6.5. Environmental value
The environmental value captures the benefits that accrue to society
when renewable distributed generation offsets fossil-fuel generation.
6
In 2020, New York established a customer benefit contribution charge
[$/kWDC] to reduce cost shifting and ensure customers with distributed gen­
eration under the NEM framework continued to contribute to public benefit
programs (NYPSC, 2020). This charge was not included in this analysis, as it
uses price data and other data from the historical year 2018.
5
Energy Policy 166 (2022) 112744
Although these benefits do not directly accrue to the utility (e.g., they do
not offset infrastructure or fuel costs), they indirectly benefit society at
large and are compensated under policy regimes. Within VDER, the
monetary value for the environmental value was based on the higher of
either the Clean Energy Standard Tier 1 renewable energy certificate
prices or the social cost of carbon calculated by the New York Depart­
ment of Public Services (NYSERDA, 2019). The renewable energy cer­
tificate price was used for this analysis to compare the environmental
values of the BTM and FTM resources more easily, and for 2018 was set
to $17.01 per megawatt-hour of generation (NYSERDA, 2020). Although
the price of renewable energy certificates can fluctuate throughout the
year, the value was fixed over the lifetime of the system for this analysis
which is consistent with the VDER framework.
2.6.6. Demand reduction value
Similar to the avoided capacity investment value, the DRV is a
measure of the ability of DER exports to reduce utility infrastructure
investments by reducing the load utilities must meet during peak pe­
riods. Rather than addressing the fixed costs associated with the gen­
eration fleet, however, the DRV expresses the value of reducing fixed
costs associated with the transmission and distribution capacity needed
to deliver power.
Both the valid hours during which DER exports qualify for the DRV
and as well as the monetary value associated with exports are utility-
specific. And while the DRV awarded to new systems can vary year to
year, once a system is installed, its DRV is locked in for 10 years. For this
analysis, the utility-specific valid hours and monetary value were taken
directly from the Value Stack Order (NYPSC, 2019). See Section B.2 of
the Appendix for more information on the DRV and how its rates and
times varied between, and in some cases within, utilities.
2.6.7. Locational system relief value
The LSRV measures the value of a DER’s export to reduce congestion
at specific points by injecting power near demand. This value is limited
not only to specific time periods but also to specific subsections of the
power system that utilities identify as experiencing significant conges­
tion. Only exports originating from within these LSRV zones can qualify
for LSRV compensation. Similar to the DRV, the LSRV awarded to new
systems can vary year to year, but once a system is installed, its LSRV is
locked in for 10 years. Unlike the DRV or capacity value, the periods
during which exports qualify are determined dynamically by utilities
through “calls.” Utilities are required to make at least 10 calls per year
and each call must be at least 1 h in duration and no more than 4 h.
Unlike the DRV, only the minimum instantaneous generation within the
given call was applied to the $/kW-call value for the duration of the call.
We simulate LSRV calls by taking the 10 days with the highest peak load
for a given utility and creating a 4-h period around each call with the
highest cumulative load across the 4 h. For an illustration of a LSRV
zone, see Figure B1 of Appendix B.1.
2.6.8. Avoided transmission and distribution losses value
Compared to centralized generation, generators located on the dis­
tribution system suffer fewer losses when meeting customer demand, as
the power must not travel as far. This is particularly true for BTM sys­
tems satisfying on-site customer demand. To account for these reduced
losses, the hourly generation profiles used to calculate energy and ca­
pacity values are scaled up by the avoided loss percentage for that
utility. FTM evaluations only receive a transmission loss multiplier,
whereas BTM receive both a transmission and distribution loss multi­
plier (NYSERDA, 2019).
3. Results
Our analysis focuses on understanding the drivers of DER locational
value under different frameworks, differences therein between NEM and
VDER frameworks and BTM and FTM configurations, and the resulting
T. Bowen et al.
investment opportunities. In particular, we examine the amount of DER
potential (3.1); total DER compensation under VDER as compared to
NEM (3.2); the specific components in the value stack (3.3) with
particular focus on the value of deferred transmission and distribution
(T&D) investments locational value; and the resulting economic po­
tential for DERs (3.4), with a focus on whether VDER increases variance
in project returns. Overarching this is our thesis that locational value
frameworks, unlike NEM, provide greater opportunity for project de­
velopers to target sites of higher value, especially for midscale FTM
systems.
3.1. Siting potential
Technical potential provides an estimate of the total solar and wind
capacity that could be installed subject to siting and sizing constraints.
This analysis provides an estimation of the “siting” potential for wind
and solar DERs, which does not include considerations of factors such as
slope or interconnection limits. Project sizes varied considerably: the
mean system size for solar PV was 780 kW (33 kW when excluding
ground-mounted systems) and 515 kW for wind. The median system
sizes were 177 kW and 100 kW for wind and solar respectively. As
mentioned in 2.2, for comparison siting potential was held constant over
configurations and frameworks. Because the largest technically feasible
system size was used, independent of optimizing around on-site load,
economic potential estimates under net metering are likely inflated. The
average capacity factors for solar PV and wind among developable sites
were 14.3% and 20.8% respectively.
Table 1 shows the cumulative siting potential by technology for each
utility examined. Across the state, we estimate a siting potential of 702
GW or 892 TWh for distributed solar, and 464 GW or 902 TWh for
distributed wind. For comparison, the 2019 annual retail sales in NYS
were 161 TWh (NYISO, 2019). Thus, DER potential is one of surplus,
exceeding annual consumption by nearly 6 times, indicating only the
most promising sites should be developed. Note that not all this potential
will be useable, given the presence of interconnection constraints and
conflicting local zoning and land-use preferences.
One critical question for this analysis is the opportunity for FTM
systems to be sited in areas of high locational value. The ability of a
system to interconnect as BTM or FTM is highly variable and context
dependent. In this analysis, the primary difference between FTM and
BTM systems was whether or not system generation was used to offset
customer load. However, in reality, this may be insufficient to distin­
guish the two configurations.
As an estimate of the siting potential of FTM systems, only systems
larger than 1 MW were considered. Furthermore, only systems capable
of achieving a total per-kWh value (see Section 3.2) in the top 5% of all
Table 1
Siting Potential by Utility and Technology (GW).
Utility Technology
Solar (GW) Wind (GW)
CHGE 32.41 26.35
CONED-NYC 0.78 0.59
CONED-WCHSTR 3.34 2.26
LIPA 17.02 8.93
NGRID 344.34 226.23
NYSEG-LH 8.62 6.23
NYSEG-NYA 245.77 162.99
ORU 12.44 9.94
RGE 37.48 20.41
CHGE: Central Hudson Gas & Electric; CONED-NYC: Consolidated Edison - New
York City; CONED-WCHSTR: Consolidated Edison - Westchester; LIPA: Long
Island Power Authority; NGRID: National Grid; NYSEG-LH: New York State
Electric & Gas - Lower Hudson; NYSEG-NYA: New York State Electric & Gas -
New York Area; ORU: Orange & Rockland Utilities; RGE: Rochester Gas &
Electric.
6
Energy Policy 166 (2022) 112744
parcels in NYS for each technology were considered “high value.” For
NYS, the cumulative siting potential for FTM systems in high-value lo­
cations was 7.42 GW for solar PV (achieving more than $0.089/kWh)
and 5.60 GW for wind (achieving more than $0.070/kWh). This in­
dicates that even under VDER-styled compensation, there would be
significant developable potential for both solar PV and wind FTM
systems.
3.2. Total per-kWh values
Next, we compute each system’s annual revenue, normalized against
the annual generation ($/kWh), which is referred to as the “total per-
kWh value” [$/kWh] throughout.7 Mean total per-kWh values for
solar were $0.099/kWh for BTM-NEM, $0.079/kWh for BTM-VDER, and
$0.069/kWh for FTM. The total per-kWh values for distributed wind
were lower: $0.097/kWh for BTM-NEM, $0.065/kWh for BTM-VDER,
and $0.056/kWh for FTM.8 Unsurprisingly, systems evaluated under
the NEM framework—which has been criticized for overvaluing
distributed generation—are more valuable than the same systems
evaluated under VDER, which considers the time and locational value of
energy (Hess et al., 2020). Similarly, FTM systems were less valuable on
a per-kWh basis than BTM systems, as the latter offset consumption at
the avoided retail rate, which was higher than revenues available
through VDER. Despite the lower per-kWh value, FTM projects might
ultimately have higher net value to a developer because they benefit
from economies of scale and are easier to site than larger
transmission-interconnected systems. Notably, across all frameworks,
configurations, and technologies, the lowest mean total per-kWh value
($0.056/kWh) is still significantly higher than the average NYISO
wholesale energy price ($0.045/kWh) in 2018 (NYISO, 2019), indi­
cating that DERs compensated under VDER can provide more value to a
developer than those participating in the wholesale NYISO market.
Comparing DER value under the three frameworks for a given parcel,
transitioning from the BTM-NEM framework to the BTM-VDER or FTM-
VDER on average, led to a − 5.8% reduction and − 7.5% reduction in
solar per-kWh value respectively. However, wind generation suffered
steeper losses transitioning from BTM-NEM: 16.9% under BTM-VDER
and − 14.4% under FTM.9 The primary explanation for the difference
in distributed solar versus wind value under VDER is a correlation of
system production during periods of higher system value, whereas NEM
provides a temporally static value.
Fig. 1 shows the cumulative distribution function for the total per-
kWh values for solar PV and wind BTM-NEM and FTM systems. There
is considerable similarity in the distribution of solar PV and wind BTM-
NEM total values, which matches intuition, as BTM-NEM values gener­
ation generically based on the retail tariff rate and does not take vari­
ations in generating patterns into account. BTM-NEM systems also
generally see higher total per-kWh values than FTM systems, which also
conforms with expectations. FTM solar PV and wind systems also see
fairly similar total per-kWh values, largely between 0.05 and 0.075
$/kWh; however, solar PV has a longer tail at the higher values than
wind, indicating several solar PV FTM systems can earn significantly
more than the average FTM system.
Several factors contributed to spatial variance in DER value per-kWh
across NYS, including differences in wind and solar resource quality,
7
“Value” refers to the financial compensation that would accrue to the
customer. As discussed in the introduction, NEM frameworks do not align
customer compensation with power system needs. However, under VDER
frameworks, customer compensation should be better aligned with power sys­
tem needs.
8
Using a Student’s t-test, the mean value for solar was significantly higher
than wind for each framework-configuration (p < 1e-5).
9
Note that comparisons across frameworks are only for those parcels that
could site all three frameworks.
T. Bowen et al.
Fig. 1. Cumulative distribution function for total per-kWh values for solar PV (left) and wind (right) for the BTM-NEM and FTM frameworks in NYS. Note the
different x-axis ranges for solar PV and wind technologies.
retail tariffs (for BTM configurations), nodal energy and capacity prices,
and monetization of DRV and LSRV components (for VDER frame­
works). Fig. 2 shows the total per-kWh value for solar and wind tech­
nologies and BTM-NEM and FTM configurations. The large map to the
left shows the total per-kWh value for wind, FTM. The three maps on the
right show the differences between the total per-kWh value for wind and
FTM and the following configurations (from top to bottom): solar and
FTM, wind and BTM-NEM, and solar BTM-NEM. The large map for wind
and FTM shows a clear concentration of high-value parcels in the
southeast, particularly in LIPA. Compared to wind and FTM, solar PV
and FTM tend to have a higher total per-kWh value, as shown in the
predominantly blue-green upper-right map, particularly in Consolidated
Edison (CONED). Conversely, BTM-NEM parcels, both solar and wind,
are typically of a higher value than FTM, with particularly higher values
in LIPA.
In particular, we note that:
(1) Values under the BTM-NEM frameworks are significantly higher
for solar PV and wind (0.099 and 0.097 respectively) than for the
BTM-VDER frameworks (0.069 and 0.056).
(2) Values under the FTM framework are broadly higher for solar
than for wind, specifically in CONED.
(3) LIPA and CONED territories in southeast NYS have a significantly
higher value for DER generators than other utility territories. (1)
For solar and BTM-NEM, the top three utilities by average total
per-kWh value are LIPA (0.203), CONED (NYC) (0.149), and ORU
(0.137). (2) For solar and FTM the top three are CONED (West­
chester) (0.128), CONED (NYC) (0.116), and LIPA (0.091). (3)
For wind and BTM-NEM, the top three are LIPA (0.199), CHGE
(0.135), and ORU (0.134) [CONED (Westchester) is fourth and
CONED (NYC) is seventh]. (4) For wind and FTM the top three are
CONED (NYC) (0.078), LIPA (0.073), and CONED (Westchester)
(0.065).
(4) A comparison of Fig. 2 and Table 1 shows significant potential to
site DERs in high-value areas such as LIPA (17.0 GW and 8.9 GW
for solar and wind respectively), CONED (Westchester) (3.3 GW
and 2.3 GW), and ORU (12.4 GW and 9.9 GW).
3.3. Component per-kWh values
Next, we explore the magnitude and coincidence of each individual
component of value under each of the configuration frameworks by
technology (Table 2). While the total per-kWh values for the BTM-NEM
framework are largely a function of the retail rate, the BTM-VDER and
FTM frameworks’ values are driven by a series of distinct “component
values” (see Section 2.6).
Several trends are apparent from Table 2. First, by definition, BTM-
NEM systems derive value through the NEM and Consumption compo­
nents exclusively (i.e., generation exported to the grid and self-
consumed respectively). Solar and wind BTM-NEM per-kWh values are
7
Energy Policy 166 (2022) 112744
broadly similar, given that both are based on similar retail rates. For
VDER frameworks, the Energy and Environmental components made
significant contributions to the total per-kWh value. For FTM systems,
which do not offset BTM consumption, the energy component is
particularly substantial, accounting for over 50% of per-kWh value. For
VDER frameworks, on average, the Energy, Environmental, and, in the
BTM configuration, Consumption values represent 80%–95% of the total
per-kWh value for wind and solar generators.
In contrast, both solar and wind on average derived modest value
from the Capacity, DRV, and LSRV components under VDER. Each of
these components is time-constrained in the sense that they could only
be earned in certain windows. Notably, the solar per-kWh value for each
component was 2–4 times larger in magnitude than wind, indicating the
windows for eligibility for these time-constrained values align substan­
tially better with solar generation than wind. Conversely, for both BTM
and FTM configurations, time-unconstrained components (i.e., those
earned in all hours) such as Energy and Environmental play a larger role
for wind than solar PV, even though the absolute value is smaller for
wind.
This analysis only covered nondispatchable generators without en­
ergy storage and assumed that only generation in excess of load (for
BTM frameworks) was exported. Therefore, it is not surprising that such
generators would not see significant value from these components. More
strategic operation of these distributed generators, especially if com­
bined with energy storage, could help such systems capture more of
these limited eligibility component values.
One of the guiding principles of VDER is to align power system needs
with customer compensation. LSRV and DRV values are structured to
compensate for “nonwires” alternatives to distribution and transmission
upgrades and their associated fixed infrastructure costs. We find that,
combined, these components provide $4–$7/MWh for wind and $11–
$18/MWh for solar generators in value, which partially refutes the hy­
pothesis that these components would be important value streams for
eligible generators. For most systems, the value from DRV and LSRV
components is unlikely to spur significant additional investment.
However, although the LSRV and DRV values are not particularly
valuable on average, they do provide substantial value in select loca­
tions (Fig. 3).10 Among the top 5% of sites, the combined LSRV and DRV
value for solar PV ranged from 0.035 to 0.089 $/kWh, which is well
above the average. We estimate 3.35 GW of siting potential for solar
generators with a combined LSRV and DRV value above $0.05/MWh.
However, the top 5% contributions of these two components are
significantly smaller for wind generators: 0.008—0.025 $/kWh. For
wind, 0.28 GW derive at least $0.015/kWh from the combined LSRV and
DRV. These outliers show that parcels within the LSRV and DRV
10
The FTM framework was selected to avoid complications with behind-the-
meter load patterns interfering with the generator’s ability to achieve the
component values.
T. Bowen et al. Energy Policy 166 (2022) 112744

Fig. 2. Rasterized map of total per kWh values for wind, FTM (main) and differences for solar PV, FTM (top right); wind BTM-NEM (middle right); and solar PV BTM-
NEM (bottom right) for New York state.

Table 2
Average Component per-kWh Value and Contribution to Total per-kWh Value by Framework and Technology.
Component Solar PV Wind

BTM-NEM BTM-VDER FTM BTM-NEM BTM-VDER FTM

Consumption 0.023 (24.27%) 0.023 (24.57%) 0.000 (0.00%) 0.023 (24.86%) 0.023 (27.51%) 0.000 (0.00%)
NEM 0.076 (75.70%) 0.000 (0.00%) 0.000 (0.00%) 0.067 (75.12%) 0.000 (0.00%) 0.000 (0.00%)
Energy 0.000 (0.00%) 0.030 (42.46%) 0.037 (54.29%) 0.000 (0.00%) 0.027 (45.73%) 0.035 (61.63%)
Capacity 0.000 (0.00%) 0.004 (5.39%) 0.005 (7.55%) 0.000 (0.00%) 0.001 (1.71%) 0.002 (2.65%)
DRV 0.000 (0.00%) 0.006 (8.36%) 0.009 (12.13%) 0.000 (0.00%) 0.002 (2.90%) 0.003 (4.62%)
Environmental 0.000 (0.00%) 0.013 (18.82%) 0.017 (25.34%) 0.000 (0.00%) 0.013 (21.89%) 0.017 (30.69%)
LSRVa 0.000 (0.00%) 0.005 (6.32%) 0.009 (11.25%) 0.000 (0.00%) 0.002 (3.97%) 0.004 (6.33%)
Totalb 0:099 (100:00%) 0:079 (100:00%) 0:069 (100:00%) 0:097 (100:00%) 0:065 (100:00%) 0:056 (100:00%)
a
For the “LSRV” component, the averages are only for those parcels in qualifying LSRV zones.
b
Please note that as these are average values across all relevant parcels, the sum of the component values may not equal the Total.

zones—especially those suitable for solar project development—can
likely receive significantly higher overall project value than the average
system could.
Many of these high-value sites are located in Consolidated Edison’s
DRV zone, which offers 0.854 $/kWh for the hours in which generation
is eligible (see Table B1 in Appendix B.2). Similarly, the LIPA territory
has some of the highest wind resource potential in the state, and offers a
high LSRV compensation (NYSERDA, 2019). Thus, although most pro­
jects do not derive substantial value from the LSRV and DRV compo­
nents, there is significant variability in the distribution. Qualification for
high LSRV and DRV values is likely to spur targeted investment at these
sites.
3.4. Break-even costs
Our last results consider the degree to which DER deployment is
economic under the frameworks considered, and the impact of the VDER
framework on heterogeneity of project returns as compared to NEM.
Specifically, we evaluate the break-even cost for each parcel, defined as
the minimum capital cost ($/kW) needed for the system to achieve a
positive NPV, or the transition point whereby the system becomes
economically viable. Higher break-even costs indicate lucrative parcels
in which generators are more profitable on a per-kW basis (or could
tolerate higher capital costs and still maintain a positive NPV).
Solving for the system break-even cost requires an initialization of
the estimated break-even cost, defined as “CAPEXEstimated”. This

8
T. Bowen et al.
Fig. 3. Rasterized map of combined LSRV and DRV per-kWh values for solar PV (top) and wind (bottom) for the FTM frameworks for NYS, for the top 5% of values,
with a focus on specific utilities.
estimated capital cost ($/kW) is then used to calculate the system NPV.
From there, the break-even cost formula linearly perturbates from the
NPV to find the break-even CAPEX. For example, if a 5 kW solar system
has a NPV of -$500 using an “estimated” cost of $2000/kW, this implies
that the system is uneconomic at $2000/kW and would have a break-
even cost of $1900/kW. Estimates of current distributed wind and
solar technology costs are from Lantz et al., (2016) and National
Renewable Energy Laboratory (2019) respectively. Equation (1) de­
scribes how the capital costs, system size, and original NPV (calculated
as explained in Section 2.5) are used to calculate the break-even cost.
Equation (1). Calculation of the break-even cost ($/kW) using esti­
mated capital expenditures (CAPEX), NPV, and system size:
NPV
CAPEXBreakEven = CAPEXEstimated +
System Size
The break-even cost metric for analysis is preferable in this instance
to NPV, as it is not indexed to a specific technology cost at a moment in
time. DER capital costs are both projected to continue to decline and can
vary substantially based on the system design, so the break-even cost is a
relatively agnostic way to evaluate them. Although the break-even cost
has advantages over NPV metrics, it is not a measure of economic po­
tential, but rather an estimate to determine under which conditions a
technology in a given location would be economically feasible. There­
fore, we refer to “developable” potential rather than the “economic”
potential. We decline to provide estimates of economic potential, as
these depend on assumptions about CAPEX costs, which are constantly
changing and, in the case of distributed wind, difficult to estimate. As
noted earlier, because distributed wind generators have higher capacity
factors, they tend to have higher break-even costs.
A supply curve of break-even costs was generated for both
9
Energy Policy 166 (2022) 112744
technologies and the BTM-NEM and FTM frameworks (Fig. 4). The
supply curves provide an ordered ranking of all parcels to show how
each parcel contributes to the cumulative developable potential (here
represented by positive break-even costs). These are useful for priori­
tizing economic development, or comparing the developable potential
across technologies, frameworks, or territories. Furthermore, the supply
curves allow for an estimate of economic potential by comparing the x-
position of a point along the curve at a given y-coordinate, which rep­
resents the assumed CAPEX value.
Consistent with prior results examining the per-kWh value of DERs
under the NEM and VDER frameworks, we generally find i) transitioning
to VDER leads to poorer economics for DERs than NEM, ii) there is a
higher economic opportunity for solar distributed generation than
distributed wind, and iii) there is a smaller range of break-even costs
under VDER than NEM. As with the cumulative siting potential, the
cumulative developable potential (systems with a break-even cost above
0 $/kW) for solar is higher than for wind (approximately 725 GW versus
475 GW), though these result in a similar amount of annual generation
(GWh).11 In general, for solar PV, the BTM-NEM framework has more
developable potential than FTM and a wider range (from ~0 $/kW –
~3500 $/kW for BTM-NEM versus 400 $/kW – ~2500 $/kW for FTM)
(Table 3). The average break-even costs for solar PV were 1413.33 $/kW
and 996.26 $/kW for the BTM-NEM and FTM frameworks respectively.
As with solar PV, for wind the BTM-NEM framework had more
11
For solar the break-even capacity is identical across both frameworks, but
for wind some parcels had a sufficiently low capacity factor that, even with a
$0/kW CAPEX, fixed operating costs prevented a positive NPV. These sites were
excluded from consideration in this section.
T. Bowen et al. Energy Policy 166 (2022) 112744

Fig. 4. Supply curves of break-even costs for solar PV (left) and wind (right) for the BTM-NEM and FTM frameworks in NYS, for positive break-even costs. Please note
the different x-axis ranges for solar PV and wind technologies.

Fig. 5. Violin plots of the break-even costs ($/kW) for solar (top) and wind (bottom) across all frameworks for each utility. Note that for violin plots, the width of the
plot at a given y-axis value is proportional to the frequency of that outcome.

heterogeneous under the VDER framework than the NEM framework.

Table 3
However, to our surprise, we find mixed results. Across all developable
Cumulative Capacity (GW) by Break-Even Costs for the BTM-NEM and FTM
parcels considered, we found the statewide coefficient of variance for
Frameworks.
break-even costs for BTM-NEM was slightly lower than for BTM-VDER,
Break-Even Solar PV Wind
but higher than for FTM (BTM-NEM: 0.433; BTM-VDER: 0.449; FTM:
Cost Bin [$/kW]
NEMa FTM NEMa FTM 0.391). We find a similar trend in the variance of distributed wind break-
0-1000 170.0 650.0 49.0 140.0 even costs (BTM-NEM: 0.559; BTM-VDER: 0.594; FTM: 0.479), and wind
1000–2000 510.0 68.0 130.0 260.0 returns were more variable than the solar returns. Although solar
2000–3000 38.0 20.0 180.0 69.0 resource potential is fairly uniform across NYS, wind resource potential
3000–4000 15.0 0.0 91.0 23.0
varies significantly. All differences in the coefficient of variance were
4000–5000 0.0 0.0 9.7 0.00056
5000–7500 0.0 0.0 6.4 0.0 found to be significant (Marwick and Krishnamoorthy, 2019). One
7500–10,000 0.0 0.0 2.2 0.0 reason NEM may have more variable project economics is simply that
10,000–12,000 0.0 0.0 0.036 0.0 there is substantial variance in the inter-utility retail price of electricity.
a
NEM refers to the BTM-NEM framework. For example, the default residential rate in Consolidated-Edison (which
serves the New York City metropolitan area) is $0.149/kWh, whereas
the cost for a residential customer in NY State Electric & Gas Corp.‘s
developable potential and a larger range of break-even costs (from ~0
territory is only $0.097 [Open Energy Information, 2020]. These results,
$/kW to ~11,000 $/kW for BTM-NEM versus 0 $/kW to ~4800 $/kW
counter to our hypothesis, indicate that over the entire state, BTM-VDER
for FTM). The long, flat tail on the solar FTM supply curve shows a
does produce more variable project economics than BTM-NEM, but has
saturation of projects that would require solar prices less than $1000/
greater variance than the FTM project economics.
kW to be economically viable—current all-in installed costs are
Comparing project economics across frameworks within the same
approximately $2300/kW for residential or $1600/kW for commercial
utility territory is one approach to control for the effect of varying retail
(National Renewable Energy Laboratory, 2019).
rates across NYS. At the utility level, however, there is mixed evidence of
In some sense, the mean break-even cost is irrelevant. Instead, what
changes in revenue variability under VDER as compared to NEM
is significant is the variance between sites, or the presence of outliers
(Table 4) and is generally utility-dependent. For example, in Consoli­
where DERs provide substantially higher revenue. One way to measure
dated Edison - NYC, which had the highest mean value of DERs (an
variance in project revenue is based on the coefficient of variance, a
average of $0.144/kWh for solar FTM projects), project break-even
statistical metric defined as the ratio of the standard deviation to the
variability substantially decreased under VDER for solar projects and
mean of a data sample. To this end, we hypothesized that, because of its
modestly so for wind projects. However, for the next two-highest utili­
emphasis on locational value, project economics would be more
ties, Consolidated Edison - Westchester ($0.128/kWh) and LIPA

10
T. Bowen et al. Energy Policy 166 (2022) 112744

Table 4 this study are unique to NYS, the general trend of high-value compo­
Coefficient of Variance for Break-Even Costs by Utility and Technology for the nents incentivizing deployment in constrained areas of the grid is likely
BTM-NEM and FTM Frameworks. to be more universal. Allowing FTM systems to access the full value of
Utility Solar PV Wind their generation through a clear and consistent framework such as VDER
NEMa FTM NEMa FTM
reveals a large opportunity for these systems to contribute to the power
system, which is not available under NEM frameworks. Finally, from a
CHGE 0.241 0.074 0.425 0.531
methodological standpoint, and applicable well beyond NYS, this study
CONED-NYC 0.270 0.088 0.524 0.463
CONED-WCHSTR 0.264 0.373 0.351 0.360 revealed the power and importance of evaluating DER economics at the
LIPA 0.086 0.106 0.331 0.413 most granular level possible, helping reveal geographic and temporal
NGRID 0.457 0.087 0.634 0.472 trends not accessible through aggregated approaches.
NYSEG-LH 0.240 0.405 0.343 0.375
NYSEG-NYA 0.139 0.084 0.389 0.513
ORU 0.275 0.103 0.449 0.482 4.1. Significant opportunity for DERs to contribute to state-wide goals
RGE 0.070 0.084 0.309 0.392
a Both distributed solar PV and wind, on a technical basis, could
NEM refers to the BTM-NEM framework.
contribute substantially to NYS’s decarbonization goal of 100% clean
energy by 2040. As noted earlier, the combined technical potential for
($0.091/kWh), variability increased for both wind and solar projects.
distributed solar and wind is approximately 900 TWh, or nearly 6 times
One method for viewing population distributions is through violin
the entire statewide electricity consumed in 2019. For example, hy­
plots, wherein the width is proportional to the frequency of the outcome.
pothesizing that 25% (40 TWh) of the overall NYS decarbonized load is
Fig. 5 shows violin plots for the break-even costs for wind and solar PV
met by DERs, we can identify the most suitable sites to meet this goal.
for all frameworks for each utility in NYS. This figure demonstrates that
Starting by filtering the supply curve on only the most profitable 40 TWh
wind technologies exhibited more variance in the break-even costs than
of DER generators and for solar FTM projects, the minimum per-kWh
solar (also visible in the supply curves, Fig. 4).
value is $0.081/kWh. These values are substantially higher than
Fig. 5 also demonstrates there is significant inter-utility variance in
compensation under wholesale markets or via power purchase agree­
the value of DERs. The sources of variance include explicit differences
ments and should incentivize substantial DER investment as a fraction of
such as the amount of population served, renewable resource quality,
NYS total demand in 2019.12
and service territory area, to the design of retail rates to recover revenue,
Also, the methods developed herein enable a new capability to pre­
to more subtle differences in the implementation of the VDER policy.
cisely evaluate which DER sites might best contribute to deployment
Two general trends we observe are that DER compensation is correlated
goals based on technoeconomic feasibility. For instance, approximately
with grid constraints (i.e. higher energy, capacity and DRV/LSRV values
23.2 TWh of the hypothetical 40-TWh goal would be sited in LIPA, 8.3
as one approaches the more constrained areas of NYC and Long Island)
TWh in National Grid, 4.8 TWh in Consolidated Edison, and 3.7 TWh in
(see Tables A1 and A2 as well as Figures A1 and A2). Second, the specific
all other utilities. Grouped by land use, the modal land-use types were
DRV values and hours of generation that qualify for compensation under
vacant plots (7.0 TWh), followed by 6.0 TWh for residential condos, 3.0
these mechanisms vary significantly (see Table B1). Understanding the
TWh on single-family residential properties, and 24.0 TWh on all other
variation of DER compensation is a critical research aim for this paper,
types. These tools would allow policymakers to iteratively define goals
as one key aspect of the VDER policy is introducing heterogeneity in the
for the contribution of DERs to future power system and evaluate
spatial and temporal value of DER generation that is better aligned with
possible deployment trends. Currently, these figures may actually un­
system value.
derestimate the developable potential in NYS, as only parcels capable of
siting both technologies were evaluated. Future work could expand to
4. Conclusion and broader U.S. implications
include parcels that can only site one technology for a more compre­
hensive estimate.
This analysis focused on the impact of theoretical DER systems
installed in NYS under VDER, but it revealed trends that are broadly
4.2. Comparisons of NEM and VDER
applicable to distributed generators in most jurisdictions in the United
States and elsewhere. There is a tremendous opportunity for DERs to
Under NEM valuation frameworks, the per-kWh revenue is similar
contribute to policy ambitions for clean energy generation that can be
for projects of different technologies and geographies, as the temporal-
tapped by properly aligning incentives and addressing interconnection
spatial value of energy is not considered. Historically, this similarity
barriers (which were not a focus of this study). Furthermore, as more DG
has led to DER adoption trends driven by socio-demographic trends,
comes online, there may be a shift away from generous compensation
independent of factors such as transmission and distribution grid con­
mechanisms such as NEM toward more granular, reflective mechanisms
straints or the internodal wholesale value of energy. In contrast, loca­
like VDER, which can help align investment decisions with power sys­
tional frameworks like VDER compensate generation coincident with
tem needs. In practice, policymakers must balance a variety of objec­
periods of grid scarcity. Put another way, the VDER framework aligns
tives, some of which may at times compete (such as providing economic
grid and project developer interests to deploy DERs to sites with the
signals and enabling equitable uptake of DER). The evolution of DER
greatest value to the grid.
compensation frameworks will necessarily be influenced by the trade-
This alignment comes with the expense of decreases in DER
offs policymakers choose to make between these different policy goals.
compensation relative to NEM. Our analysis shows that on average, the
This study revealed a trend likely applicable outside of NYS: gener­
per-kWh value for solar PV generators decreases by 5.8% and 7.5% for a
ators on average will see declines in their compensation during the
parcel when transitioning from NEM to BTM-VDER and FTM, respec­
transition from NEM to VDER-like mechanisms. Significant variance in
tively, and declines for distributed wind are even larger (16.9% to BTM-
project economics indicate there will be projects that are more economic
VDER and 14.4% for FTM). However, the mean level of compensation
under cost-reflective VDER-like mechanisms than under NEM. While
can be a misleading metric, as there is substantial variance in the project
time-invariant components (Energy, Environmental, and Consumption)
will likely play the largest role in compensating DG on average, more
constrained components (Capacity, DRV, and LSRV) can be significant 12
Note that this calculation is based on the 2019 consumption, and 2040
drivers of investment for DG in high-value areas, driving deployment
consumption could differ substantially, which is beyond the scope of this work.
where it is most needed for the grid. While the individual components in
Also, it only considers energy served and not meeting peak demand.

11
T. Bowen et al.
revenue. For instance, we model at least 20 GW of FTM PV with a break-
even cost of >$2000/kW and 23 GW of FTM wind with a break-even cost
of >$3000/kW, both of which are competitive with current best-in-class
project costs. These shifts are likely to incentivize larger DER systems
that can benefit from economies of scale. Similarly, VDER may dis­
incentivize small-scale DERs, which are well known to have high
customer acquisition costs (Tegen, 2016; O’Shaughnessy, 2018). Under
VDER, customer acquisition is likely to be more complex because of the
increased variability and data requirements between projects. Tools that
can analyze the value of DERs to customers and the power system in high
geospatial and temporal fidelity will be essential to efficiently direct
investment.
4.3. Deferred T&D value is modest for most, substantial for some
One of the most contentious aspects of DERs is their ability (or lack
thereof) to defer transmission and distribution investments needed to
meet growth in peak demand and energy served. Because these calcu­
lations are data-intensive and often idiosyncratic to a particular power
system, generalization on this topic remains elusive. The VDER frame­
work provides clarity by providing a transparent algorithm for assessing
deferred T&D value via the DRV and LSRV value stack components. We
find that the DRV and LSRV components comprise a negligible portion of
the total per-kWh value for most eligible systems. However, looking at
the top 5% of combined LSRV and DRV component value (Fig. 3), there
are areas where the LSRV and DRV components provide significant
value.
As the LSRV and DRV (as well as the capacity) components are only
earned in a select few hours of a year, they are sensitive to underlying
load patterns and could potentially be missed if energy from the
distributed generator is used to meet the BTM load instead. There may
be additional potential for battery storage coupled with distributed
generation to supply generation during these market signals. Although
the highest value areas for LSRV and DRV are currently concentrated in
Consolidated Edison for solar PV (where there is high compensation and
the DRV windows naturally align with solar PV generating hours), and
the LIPA for wind, with the addition of storage more areas could prove to
be profitable.
4.4. VDER and potential for FTM projects
Based on our analysis, the transition to VDER is likely to incentivize
growth of DERs deployed under front-of-the-meter configurations if they
are eligible for compensation. Net-metering arrangements typically
restrict system sizes to annually generate an approximately equal
quantity to the customer’s load. These rules are intended to help ensure
Appendix A. Utility Territories & NYISO Load Zones
For this study, we evaluated all the larger utility territories (excluding municipal utilities) for their potential to site solar PV and wind generators
for BTM-NEM, BTM-VDER, and FTM-VDER frameworks. As municipal utilities are not required to offer VDER as a tariff/compensation mechanism,
they were excluded from consideration. Figure A1 shows the major utility territories in New York state.
12
Energy Policy 166 (2022) 112744
utility revenue sufficiency and prevent a shift in the burden of paying for
fixed infrastructure costs from adopting to nonadopting customers. For
these reasons, FTM systems are largely inconsistent with NEM-
framework-styled compensation, as there is no BTM load to credit and
they have historically been deployed either as utility-sponsored “com­
munity” projects or wholesale merchant plants. Under VDER, however,
there is a clear framework for investors to evaluate FTM value. This
analysis shows that there is substantial siting potential for FTM systems
in high-value locations under VDER, with 7.42 GW of solar and 5.60 GW
of wind potential capable of achieving at least $0.070/kWh. Additional
factors that could shift the balance from BTM to FTM systems are: i) the
decrease in the per-kWh value, which motivates economies of scale; ii)
the increase of the maximum interconnection size to 5 MW; and iii)
higher heterogeneity in locational value, which discourages deployment
in arbitrary locations. FTM systems—disconnected from load but
interconnected at the distribution level—could prove to be a high value
and rapidly expanding market segment.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Acknowledgements
This work was authored by the National Renewable Energy Labo­
ratory (NREL), operated by Alliance for Sustainable Energy, LLC, for the
U.S. Department of Energy (DOE) under Contract No. DE-AC36-
08GO28308. Funding was provided by the U.S. Department of Energy
Office of Energy Efficiency and Renewable Energy Wind Energy Tech­
nologies Office. The views expressed in the article do not necessarily
represent the views of the DOE or the U.S. Government. The U.S. Gov­
ernment retains, and the publisher by accepting the article for publi­
cation acknowledges that the U.S. Government retains, a nonexclusive,
paid-up, irrevocable, worldwide license to publish or reproduce the
published form of this work, or allow others to do so, for U.S. Govern­
ment purposes. This research was performed using computational re­
sources sponsored by DOE’s Office of Energy Efficiency and Renewable
Energy and located at NREL.
The authors thank Billy Roberts (NREL) for preparing maps pre­
sented in the article, Margaret Mulhearn (NREL) for conducting GIS
analysis to encode the LSRV zone boundaries, Donna Heimiller (NREL)
for assistance in procuring the parcel data set, and Schuyler Matterson
and Luke Förster (New York State Energy and Research and Develop­
ment Authority) for interpreting the VDER framework.
T. Bowen et al. Energy Policy 166 (2022) 112744

Fig. A1. Major New York utility territories, with municipal utilities, used in this analysis. Source: Government of New York (2020).

Table A1
Factors of Adjustment Based on Transmission and Distribution Losses, DRV and LSRV Values by New York Utility Territory for 2018. Source:
NYSERDA (2019).

Utility Factor of Adjustmenta DRV ($/kWh)b LSRV ($/kW)c

Q1 Median Q3

CONED 1.063 1.049 1.063 0.85 14.08

ORU 1.025 1.052 1.080 0.22 3.96
CHGE 1.006 1.020 1.026 0.05 0.00
NGrid 1.021 1.060 1.084 0.21 3.07
RGE 1.049 1.018 1.069 0.11 4.80
NYSEG 1.000 1.073 1.073 0.09 5.63
LIPA 1.000 1.067 1.067 0.34 5.49
a
Factors of adjustment are used to scale up other values; see Section 2.6.8.
b
For additional information on the DRV, see Section 2.6.6 as well as Section B.2.
c
For additional information on the LSRV, see Section 2.6.7.
Some values, such as Energy and Capacity were based on NYISO Load Zones, shown below in Figure A2. Table A2 shows some summary statistics
for the Energy and Capacity broken down by NYISO Load Zone. The Energy value is based on Locational Based Marginal Pricing (LBMP) Day Ahead
Market prices, which vary by load zone in each hour. Table A2 shows the first quartile, median and third quartile LBMP values for 2018 by load zone.
The Capacity value is based on monthly Installed Capacity Market (ICAP) values ($/kw-month), summed to a total annual value ($/kw-year) divided
by the number of eligible hours in the year during which the capacity value can be earned to yield the final value ($/kWh) by NYISO load zone.

13
T. Bowen et al. Energy Policy 166 (2022) 112744

Fig. A2. NYISO Load Zones.

Table A2
Day-Ahead LBMP and Capacity Prices by NYISO Load Zone for 2018.a Source: NYISO (2020b).

NYISO Load Zone Energy Value (¢/kWh) Capacity - Values (¢/kWh)

Q1 Median Q3

Capital 2.51 3.15 4.01 8.91

Central 2.08 2.71 3.53 8.91
Dunwoodie 2.49 3.17 4.03 31.37
Genesee 2.01 2.62 3.42 8.91
Hudson Valley 2.48 3.14 3.98 31.37
Long Island 2.95 3.79 4.88 20.88
Mohawk Valley 2.07 2.68 3.53 8.91
Millwood 2.49 3.16 4.01 31.37
New York City 2.63 3.42 4.25 31.38
North 1.48 2.02 2.93 8.91
West 2.05 2.7 3.63 8.91
a
Note that LBMP prices (Energy value) were converted from $/MWh and ICAP auction prices (Capacity value) were converted from
$/kW-month. For additional information on these conversions, see Sections 2.6.3 and 2.6.4.

B Assumptions Used in Calculating the Component VDER Values

B.1 The Locational System Relief Value, Supplemental Information

As explained in Section 2.6.7, the LSRV component value is only available in certain subsections of a given utility’s territory, based on areas of
known grid constraints. Figure B1 highlights those subsections for the utility territory of LIPA.

14
T. Bowen et al. Energy Policy 166 (2022) 112744

Fig. B1. LIPA LSRV zones with focus on a specific zone.

Appendix B. The Demand Response Value, Supplemental Information

As explained in Section 2.6.6, the DRV component value is only eligible for compensation during certain periods, and this window and the un­
derlying rate at which exports were valued varied between and within utility territories. A breakdown of these values by utility is shown in Table B1. A
breakdown of Consolidated Edison’s territory for the DRV component as indicated in Table B1 is provided in Figure B2.

Fig. B2. The DRV Subsections of the Consolidated Edison Utility Territory.

Table B1
DRV Values and Time Windows for New York Utilities.

Utility Annual Value( Hour Window Date Window DRV Value(

$/kW-year) nonholiday weekend hours $/kWh)

CONEDa
A 199.4 11:00–15:00 June 24—September 15 0.854
B 199.4 14:00–18:00 June 24—September 15 0.854
C 199.4 16:00–20:00 June 24—September 15 0.854
D 199.4 19:00–23:00 June 24—September 15 0.854
ORU 64.78 14:00–19:00 June 24—September 15 0.222
CHGE 14.55 14:00–19:00 June 24—September 15 0.050
(continued on next page)

15
T. Bowen et al. Energy Policy 166 (2022) 112744

Table B1 (continued )
Utility Annual Value( Hour Window Date Window DRV Value(
$/kW-year) nonholiday weekend hours $/kWh)

NGrid 61.44 14:00–19:00 June 24—September 15 0.210

RGE 31.92 14:00–19:00 June 24—September 15 0.109
NYSEGb
Summer 29.67 14:00–19:00 June 24—September 15 0.089
Winter 29.67 17:00–19:00 January 1—January 31 0.089
LIPA 109.86 14:00–19:00 June 1— August 31 0.338
a
Consolidated Edison, or CONED divided its utility territory into four noncontiguous subsections based on each subsection’s summer peak.
Exports in each of these sections are awarded at the same value, but they only qualify in different hours during the same June 24 to September 15
window.
b
New York State Electricity and Gas has two distinct peaks in its territory: one in the summer and one in the winter. To incentivize exports to
reduce both peaks, the utility offers a DRV bonus in the summer and winter. Values ($/kWh) are still calculated by dividing 10 times the annual
amount by the number of qualifying hours over a 10-year period. Source: NYPSC (2019).

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