One might legitimately expect a future TV series to be called, “It’s Always Sunny in New York City.” This is not because there is a spin-off of the acclaimed FX series in the works, but because the economics of solar power in Con Edison’s service territory have never been more attractive. It is worthwhile for clients who may have considered on-site solar in the past to re-examine the options that are available. Highly attractive incentives from the federal government and Con Edison in addition to rising utility rates have created an ideal opportunity to get new or updated on-site solar proposals. There is some degree of time sensitivity, since incentives from the utility will run out once enough solar projects have been approved by Con Edison.
The federal financial incentives for onsite solar are better than they have ever been in the past. The Inflation Reduction Act, which went into effect last summer, has extended the Investment Tax Credit (ITC) for 10 years at 30%, which means 30% of an on-site solar project’s cost will be returned as a tax credit. Non-profit organizations can now also receive the ITC in the form of a direct payment. This new direct payment provision increases the financial benefits that solar can offer tax-exempt organizations and warrants an updated evaluation of an on-site installation. There is an additional 10% credit for projects located in certain brownfield sites, low-income communities, and communities that have recently retired fossil fuel plants. There’s also a 10% ITC adder if all iron, steel and 40% of the manufactured products are sourced from the US. Additionally, interconnection costs for projects up to 5 MWs will be eligible for the ITC starting in 2023. This is significant because a project’s interconnection costs can often be substantial and significantly change a project’s financial feasibility.
Con Edison’s on-site solar incentives are also very attractive. Upfront cash incentives are paid in dollars per Watt as shown in Table 1.
Table 1: NY-Sun Con Edison Base Incentives
There are additional incentives that can be added on to those shown in Table 1. These include adders for parking lot canopies and for community solar projects which require 60% of the output to be allocated to residential customers. These adders each amount to an additional $0.20 per Watt and are additive to the incentives in Table 1. The combination of federal and utility incentives can offset up to 80% of costs associated with solar array installations in Con Edison’s service territory.
High energy prices are another reason to consider on-site solar projects in and around New York City. Figure 1 shows how the average annual cost of spot wholesale electricity in Con Edison has changed over the last ten years. This chart shows that there has been a significant increase in electricity prices since the pandemic. Clients who were paying 5 to 6 cents/kWh for electricity supply saw prices jump to between 12 and 13 cents/kWh last year, making solar even more valuable because of greater avoided electricity supply costs. Con Edison’s distribution costs are also expected to drastically increase.
Figure 1: Historical Spot Electricity Rates, by 5
Figure 2 shows how Con Edison’s delivery rates have changed over the last six years. Delivery costs are expected to increase by 20.2% based on the latest Joint Proposal (JP) filed by New York’s Department of Public Service. These rate increases are expected to take effect over the next three years. More details on these rate increases can be found here.
Figure 2: Con Edison Historical Delivery Rates
Recent quotes for onsite solar Power Purchase Agreements (PPA) in Con Edison’s territory have been between 7 and 8 cents/kWh for 20-year contract terms, which consider both federal and utility-based incentives. Purchasing solar energy from a PPA will offset both electricity supply and delivery rates. Additionally, there are no upfront costs. An onsite solar array will provide a hedge against escalating utility rates and some budget certainty at very attractive rates. Some clients are seeing between 12 and 13 cents/kWh of avoided costs (7 to 8 cents/kWh on supply and 5 cents/kWh on delivery rates) based on recent proposals. With these kinds of potential cost savings, it makes sense now, more than ever, to examine onsite solar options for your business. Who knew that it was so sunny in New York City? Reach out to your 5 Energy Advisor to learn more.