CDG Model – The Community Distributed Generation Program

Jan Borchert, Current Hydro and Dana Hall, Esq.

What is Community Renewable Energy?

Community renewable energy projects allow the allocation of the electricity output of an independently-owned renewable energy system (solar, hydro, ….) to offset the consumption of multiple residential and/or small business customers. Customers who are unable to install solar on their own home or hydro on their property subscribe to a program to receive credit on their electricity bills for a share of the power produced in a separate location.

According to a 2015 National Renewable Energy Lab and the 
US Department of Energy report, approximately 50% of consumers 
and businesses are unable to host solar photovoltaic systems on their 
rooftops. Shared Solar: Current Landscape, Market Potential, and the 
Impact of Federal Securities Regulation. NREL and US DOE, 2015.
https://www.nrel.gov/docs/fy15osti/63892.pdf 

Community renewable programs almost always involve the distribution utility which meters the host generation and applies credits to customer accounts. In some cases, utilities (many of them rural cooperatives and municipal utilities) have designed and enabled these programs on their own. In other instances, they have been forced to facilitate programs offered by private entities through regulatory or legislative action.

As of the third quarter of 2018, 1.294 gigawatts of community solar 
have been installed in the United States. It is not clear how much 
if any community hydro has been developed to date. 
https://www.seia.org/initiatives/community-solar 

New York’s Community DG Program

The community renewable structure available in New York was created by the New York Public Service Commission (NYPSC) who issued Orders in July and October 2015 under Case 15-E-0082 to establish the conditions, requirements, and criteria for implementing New York’s Community Distributed Generation (CDG) program. The design and intent were to expand consumer options for accessing clean distributed generation and to promote New York’s aggressive clean energy programs and objectives.

The CDG program allows independently owned renewable generation sources to allocate the generation from facilities 5 megawatts (MW) nameplate capacity or smaller to retail (mass market) customers in the same New York Independent System Operator (NYISO) zone and distribution utility service territory.

Eligible resources for CDG include biogas, biomass, liquid biofuel, fuel cells, hydroelectric, solar, tidal/ocean, and wind. The CDG program was first established using net energy metering (NEM) as the means to provide access to renewable distributed generation by retail electricity customers. However, after the Value of Distributed Energy Resources (VDER) Transition Order of March 9, 2017, (Case 15-E-0751), the CDG program now applies a new compensation mechanism referred to as the “value stack.” The value stack will be the topic of another blog post.

Essential Elements of New York CDG

The parties involved in a CDG are the “CDG Host”, who owns or operates the hydro facility, the subscribers, who are electricity customers that agree to accept renewable generation credits from their host on their electric bill, and the utility, facilitating the delivery and credit allocation.

Subscribers sign up for a percentage of the hydroproject’s (host’s) energy output, and the host provides the utility with a list of all subscribers and their respective percentage allocation. The utility applies the credits to each subscriber’s bill, and then provides the host with a monthly statement explaining exactly how credits were applied to each customer’s bill. The host subsequently bills each subscriber for their prior month’s credits. The amount a host charges the subscribers is defined by the subscription contract between the host and each subscriber and is subject to disclosure requirements and other regulations. The CDG Economics will be a topic of another blog post

A note about terminology: The CDG host (sometimes referred to in 
program documents as sponsor) is the entity that operates the renewable 
energy source. The subscriber (also referred to as a CDG customer, 
member or satellite in program documents) is one of the recipients of 
credit for generation output from the host facility. We will try to keep it 
consistent in our blogs and only use the terms host and subscriber.
The term customer will typically refer to a general utility customer.

Creating a CDG really comes down to three things: Owning a renewable energy source, registering with the PSC and the utility, and marketing to customers to sign up and buy your energy. The host is responsible for creating a contract that complies with regulations and the law and to find a price that subscribers agree to for an appropriate credit allocation amount. The specific CDG Legal Considerations will be the topic of another blog post.

Next Steps

If you’re now considering setting up your own CDG, ask yourself the following questions:

1. Is your site feasible for microhydro and interconnection, including all associated cost?
2. Do you have electricity needs on-site that would be physically connected to the facility?
3. Do you expect the annual output of your facility (minus on-site consumption) to exceed 10,000 kWh (kilowatt-hours)? CDG requires a minimum number of ten subscribers with a minimum allocation of 1,000 kWh per year each.
4. Are you comfortable engaging your community to educate them about microhydro and to market your CDG, or would you consider hiring a subscription management organization?
5. Are you interested in operating the CDG business yourself, or would you consider hiring a developer to build and operate your CDG?
6. Do you have supportive neighbors and/or any allies in your community who may want to see your dam maintained as a new clean energy resource available for the community?

If you’re still considering setting up your own CDG, continue reading. Our next blog post will talk about the Key CDG requirements and possible business structures to operate your CDG.

Or download our full Microhydro Community DG report.