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Value of DER: Pricing Distributed Resources

Regulation: Order Establishing the Benefit Cost Analysis Framework [PDF]

Known as: BCA Order
Issued: January 21, 2016, NYS Public Service Commission, Case 14-M-0101

Regulation: Order on New Energy Metering Transition, Phase One of Value of Distributed Energy Resources, and Related Matters [PDF]

Known as: Value of DER Order
Issued: March 9, 2017, NYS Public Service Commission, Case 15-E-0751

Regulation: Order on Phase One Value of Distributed Energy Resources Implementation Proposals, Cost Mitigation Issues, and Related Matters [PDF]

Known as: Phase One Implementation Order
Issued: March 9, 2017, NYS Public Service Commission, Case 15-E-0751


Several orders have helped utilities evaluate DER values and how those values holistically stack up against conventional utility services.

Distributed Energy Resources (DER)

DER generate energy and/or manage the demand for it efficiently. DER can include:

  • Distributed generation
  • Energy storage, demand response, and other technology and services to help manage the timing and amount of energy demanded from the system
  • Energy efficiency technology and services

Benefit-Cost Analysis (BCA)

Benefit-cost analysis (BCA) is a structured, transparent process for evaluating DER. Using BCA, utilities will analyze and assess DER for their incremental benefits to the grid and to customers. To ensure the utilities achieve REV Objectives cost effectively, they must perform a BCA when considering and evaluating proposals across four expenditure categories:

  • Energy efficiency programs
  • Investments in distributed system platform (DSP) capabilities
  • Procurement of DER through competitive selection
  • Procurement of DER through economically efficient tariffs

New York State adopted the societal costs test as the primary measure of cost effectiveness under its BCA framework.

Each utility has developed and filed a BCA handbook that ranks the value of societal costs and benefits of a DER investment to society as whole. This includes the avoided carbon emissions from DER and the net impact on grid reliability. The BCA helps compare these net benefits against conventional utility investments.

Value of Distributed Energy Resources (VDER)

New York has undertaken a comprehensive approach to determine the value of distributed energy resources (VDER). A market-based mechanism, VDER will ultimately lead to better understanding of the benefits of DER. More importantly, this holistic approach will encourage the deployment of DER in a manner that maximizes overall value to utility customers.

With VDER, utilities will compensate DER owners for the benefits their resources provide to the energy system based on prices that reflect specific values. Collectively, these values make up what is known as the value stack. Values include:

  • Energy (kWh) is the market value for kWh delivered, inclusive of electrical losses
  • Capacity (kW) is the market value for capacity delivered
  • Environmental impact is value of reduced emissions as a result of using DER
  • Demand reduction is the value of avoiding new distribution system capacity by reducing distribution system peak demand
  • Locational System Relief is the location-specific value of the DER to a given utility location, for example due to voltage support or avoiding infrastructure upgrades.

The Public Service Commission is defining and delivering VDER in two phases. The new Phase One methodology takes the first step in moving beyond Net Energy Metering (NEM) to a more accurate valuation and compensation for defined categories of DER.  The Commission set the Phase One VDER compensation values in the fall of 2017.

Technologies Eligible for VDER Compensation Under Phase One

Intermittent and non-dispatchable technologies Dispatchable technologies
Solar photovoltaic (PV) (≤ 2MW) Fuel cells (≤ 2MW)
Wind (≤ 2MW) Farm Waste Generators (≤ 2MW)
Micro hydroelectric (≤ 2MW) Micro combined heat and power (≤ 10kW)
Energy Storage paired with Eligible Generator


The second phase will further refine the values that DER provide to the energy system. Phase Two Stakeholder Working Groups are advancing work around the Value Stack, Rate Design, and Low- and Moderate-Income customers, with materials available at

Visit for additional resources on the VDER methodology, including an overview of the Commission Orders and a Value Stack calculator.

This section will review the regulation underlying REV. To learn more about the more than 40 initiatives that comprise REV, read the New York State Energy Plan and visit