It has been nine months since New York’s Public Service Commission (PSC) issued its order establishing a Clean Energy Standard (CES). In an instant, it seemed the state turned from creating the new 50% by 2030 CES to implementing it. But what progress has there been?
First, there has been a series of five follow-up orders from the New York PSC, all geared toward setting up a system of compliance with this new structure and answering remaining policy design questions.
In its order providing clarification, the PSC said that the state, specifically the New York State Energy Research and Development Authority (NYSERDA), would not resell the renewable energy certificates (RECs) it owned by virtue of NY-Sun and other programs to support customer-sited renewables, and the 2017 obligation for electricity suppliers was reduced accordingly. The second order, Order Approving Administrative Cost Recovery, Standardized Agreements and Backstop Principles, addressed key questions about how NYSERDA would recover the costs of procuring RECs and approved language for NYSERDA REC-sales agreements.
Then, in December, the PSC issued an Order on Petitions for Rehearing that denied all petitions for rehearing it had received (save one, from Exelon, regarding the nuclear portion of the CES) but also directed commission staff to re-examine eligibility for Tier 2, which applies to existing renewables. This issue is relevant to all of the pre-2015 biomass, hydro and wind projects in New York. Petitions, submitted by the Alliance for Clean Energy New York and others, questioned the fairness of counting these resources toward the 50% goal without compensation, as well as the risks of these facilities shutting down operations or exporting to the New England REC market. An exploration of the eligibility requirements for Tier 2 is due from PSC staff in August.
Hopefully, this expected white paper will set the foundation for a fair and sustainable program to maintain New York’s existing fleet of renewable generators so that they can contribute to the 50% goal.
The fourth implementing order was the Order Directing Tariff Amendments, issued in February of this year, creating a backstop financing mechanism for the program and directing utilities to modify their tariffs to implement it. Also in February, the PSC released Order Approving Phase 1 Implementation Plan, which lays out the details and timing of the REC purchase obligation for electricity suppliers and the structure and timing of the planned NYSERDA procurements, a topic of great interest to wind developers.
This plan, for example, indicated that NYSERDA will issue annual requests for proposals for new renewable generating projects. Responding bids will be judged 70% on price and 10% on each of three factors: project viability, local economic impact and operational flexibility (e.g., generation at times of peak demand or ability to dispatch).
Meanwhile, during this same period, New York announced the outcome of its 2016 solicitation for projects – the last under the old renewable portfolio standard – which resulted in 11 contract awards for a total of 260 MW of new renewable capacity, including two wind projects, one solar project, one fuel cell project and seven hydropower projects. Although just two of the 11 awards were for wind power, the resulting generation is expected to be roughly 80% wind. These awards represent a down payment on the total new capacity needed to reach 50%.[adright zone=’190′]
The CES consists of two distinct parts: the 50% renewable energy standard (RES) and the Zero Emissions Credit program, which is the nuclear portion. The renewable component itself also has two basic parts: a new obligation for electricity suppliers to purchase RECs annually and a new NYSERDA program to procure RECs under 20-year contracts. Therefore, NYSERDA takes on the role of buying RECs under long-term contracts and selling RECs on a one-year tenure.
During its deliberations leading up to the CES order, the state released the CES cost study white paper. The cost study projected that half of the new renewable generation required by 2030 would result from land-based wind power, with another 20% coming from new in-state hydropower and bioenergy and imports. The remaining 15% would be from utility-scale solar and 14% from offshore wind. This is just one of many possible scenarios, of course, but it equates to 4.5 GW of wind and 3.9 GW of solar – clearly an ambitious goal. The actual mix will evolve over time in response to trends in technology costs, the availability of sites, challenges in permitting and interconnection, and related policies.
There are strong signs that the market is responding to the new 50% CES in New York, even as the details of the program are still being hammered out. The New York Independent System Operator (NYISO) queue now shows a total of 36 wind proposals (totaling more than 4.9 GW) and 40 solar projects (totaling 920 MW). The great majority of these proposals, although not all, were added to the NYISO queue since Gov. Andrew Cuomo announced the 50% goal in December 2015.
History shows that many of the proposals that appear in the queue do not come to fruition, as companies or investors change plans or projects encounter public opposition. All of the projects in this list need to successfully navigate New York’s complex siting, permitting and interconnection process. To make progress toward the 50% mandate, New York needs to make sure that projects keep progressing through the parallel processes of the Article 10 permitting procedure (administered by the state’s siting board) and the lengthy interconnection process at the NYISO.
For both of these processes, there are positive signs but real concerns. On the permitting side, just one wind project has submitted its full Article 10 application, but there are 15 wind projects that have embarked on the process. And on the NYISO side, a new “class year” study commenced March 1 of this year and includes seven wind projects and one solar project. But despite its name, the class year has been a multiyear process in New York – a problem that the NYISO is striving to address through its queue reform initiative. In sum, a significant list of projects have gotten out of the gate and begun the slog toward the finish line.
Competing for contracts
For developers, the ability to compete for a 20-year contract with the state to sell RECs is the enticement to begin this race. The first solicitation from NYSERDA was due out in April and was intended to be for 1.9 million MWh. This would represent a real and significant increase from the past 10 years in New York, and developers are anxiously awaiting this first call for projects under the new 50% regime. The CES order calls for a NYSERDA solicitation in 2018 and 2019 of 2 million MWh, rising to 2.1 million MWh in 2020 and 2.2 million MWh in 2021. Meeting this demand will require a healthy pipeline of projects and the ability for projects to successfully navigate the permitting and interconnection process.
Also since the August order, Cuomo announced a state goal of constructing 2,400 MW of offshore wind by 2030, and agencies are directed to finalize a plan to make this a reality – the Offshore Wind Master Plan – by the end of this calendar year. Meanwhile, the Long Island Power Authority (LIPA) has signed a power purchase agreement for the state’s first offshore wind project, Deepwater Wind’s 90 MW South Fork Wind Farm. Arguably, New York needs offshore wind development to make it all the way to 50% by 2030, and the offshore wind component is a crucial, but still evolving, component to a successful CES policy.
There are a variety of moving parts in the evolution of New York’s 50% RES – the release of the NYSERDA solicitations and the level of response each solicitation receives; the next actions of LIPA and the New York Power Authority to meet their share of the 50%; design of the offshore wind portion of the program; possible changes related to procurement of the existing, pre-2015 fleet of renewables; and the pace of progress of projects through the siting and interconnection procedures. Separate from these issues concerning grid-scale renewables, there are continuing developments in the nuclear portion of the program (e.g., litigation) and with policies to support distributed renewables, which will also count toward the 50%.
What the industry now has in New York is a strong policy foundation for the successful achievement of ambitious renewable energy goals, but all of these moving parts need to move in harmony for the state to make solid progress toward 50%. That is what it takes to make it real.
Anne Reynolds is executive director at the Alliance for Clean Energy New York, a regional partner of the American Wind Energy Association. She can be reached at firstname.lastname@example.org.