Jan Borchert, Current Hydro and Dana Hall, Esq.
The first and simplest economic model to consider is the ownership model, where the hydro-site owner purchases all system equipment and pays for construction, maintenance and operating costs associated with planning and installing the system or consults with a hydropower developer. If you are considering this model you may pay cash for these costs, or take out a loan, find grants, or purchase the system from a developer over time using lease-to-own financing.
When to use the ownership model
The ownership model assumes the following:
- Your site is environmentally appropriate, and the dam (if there is a dam) is safe for development;
- You plan to use the electricity output yourself (on-site or at remote property that you also own);
- You have the cash or financing tools to pay for the development.
If all of the above apply to your situation, you should consider this model. It is the choice for simple customer-sited, net metered (or remote net metered) projects or for off-grid projects, where the owner wants to defect from the electricity grid all together.
Projects using this model may see value in leveraging traditional net energy metering through their utility.
Net metering is a billing mechanism that credits owners of distributed
energy resources for the electricity they add to the grid. Similarly,
property owners with off-site energy consumption might want to
consider remote net metering.
Owners may also look to government entities, such as the New York State Energy Research and Development Authority (NYSERDA), and other non-profit organizations for grant and incentive opportunities to support project implementation.
Renewable Energy Credits (RECs)
Where appropriate, microhydro projects may make use of the NYSERDACustomer Sited and Large-Scale Renewable solicitations to receive Tier 1 renewable energy credits (RECs) as a small supplementary revenue stream.
The emphasis is on small, but it is still noteworthy. For example, a 45 kW project that generates 200,000 kWh per year may anticipate generating as many as 200 RECs per year. The 2018 price for Tier 1 RECs was $17.01/MWh which would result in $3,400 in revenue if they were procured at that price by NYSERDA. As this example shows, we’re talking about less than $100 per month in RECs revenue from systems smaller than 10 kW.
The value that can be obtained under traditional net energy metering or a NYSERDA contract. The associated billing mechanism credits the owners of distributed energy resources for the electricity they add to the grid.
Remote Net Metering
Remote net metering (RNM) is based on net metering, which allows electricity customers who generate some or all of their own electricity to send excess energy to the grid and receive energy from the grid when their load exceeds their on-site system generation. The difference lays in the “remote”: RNM allows a project built on one site to allocate the energy output to receiving accounts in the same service territory, where all the accounts involved (host/generation accounts and receiving accounts) are owned by the same customer.
In other words, RMN is an enhancement of traditional net metering, in that the energy system is off-site instead of on-site. Energy generated off-site is applied to the load at the customer’s utility meter where they consume power, so long as both the generator and consumer meters are owned by the same customer and are within the same utility territory.
Under New York’s RNM rules, the account to which the renewable energy system is connected is called the Host Account and must be a commercial or a farm account, which means that residential customers cannot take advantage of remote net metering as the host turbine site.
A microhydro site can be developed by setting up a new commercial account as the host, with the receiving account holder applying for the commercial host meter in their name. (For situations where a generation source is interested in sharing their output with different customers in the same service territory see the CDG model description.)
Net metering and remote net metering are both assuming a grid connected system. Check out our next post, which will look at off-grid systems as an alternative approach to the ownership model.
Or download our full Microhydro Ownership Model report.