New York Offers New Financial Incentives, Security for Renewable Energy Developers

Published April 2, 2020

In an ongoing effort to expand the use of solar and wind power in New York State, the N.Y. Public Service Commission (PSC) ordered the New York State Energy Research and Development Authority (NYSERDA) to offer new financial options beyond traditional fixed-price contracts when soliciting bids to build renewable energy projects.

Easing Funding Access

In addition to the revenue they receive from selling power and payments for guaranteeing a minimum amount of energy capacity through capacity market auctions, renewable energy developers in New York can also earn money from the Renewable Energy Credits (RECs) a project generates.

Unlike energy and capacity market prices, which can rise or fall, currently, REC prices are fixed when developers bid for projects through NYSERDA, the agency responsible for procuring RECs.

Under the PSC’s new order, the REC price would be indexed to rise or fall depending on the direction of prices in the energy and capacity markets. Tying REC prices to price fluctuations in the energy market is intended to ensure a consistent minimum flow of revenue to prevent projects from running short of funds.

PSC says if renewable energy projects face reduced financial risks, they should also enjoy lower financing costs, thus reducing their ultimate price tag.

NYSERDA estimates the new REC program would save renewable power developers approximately $233 million per year through 2030, or about $4.6 billion over the life of the contracts.

“NYSERDA indicated that using an Index REC would likely expand the pool of bidders in future procurements, providing a boost to competition and likely additional downward pricing pressure on REC bids,” PSC stated in a January 17 press release announcing the order.

“[The PSC’s] decision today will benefit renewable energy developers by reducing their risks while also lowering customer costs,” PSC Chairman John B. Rhodes stated in the commission’s press release.

Piling on Renewable Support

PSC’s action arrived on the heels of Democratic Gov. Andrew Cuomo’s announcement in his January 8 State of the State Address that NYSERDA would award competitive contracts to 21 large-scale solar, power storage, and wind projects across upstate New York to provide more than 1,000 megawatts (Mw) of new electric power capacity.

This comes in addition to 2,700 Mw of battery storage, solar, and wind capacity brought online in the state since 2011, and another 7,000 Mw of renewable energy already being developed, in line with the state’s 2019 Climate Leadership and Community Protection Act mandating all the electricity that utilities deliver in New York by 2040 come from sources that emit no carbon dioxide during power generation.

Cuomo has also been instrumental in blocking the construction of new natural-gas pipelines in New York and issued a ban in 2015 on fracking in the hydrocarbon-rich Marcellus shale underlying the state’s economically depressed Southern Tier.

Jointly, these actions underscore the Democrat Party-controlled state government’s desire to expand the use of renewable energy and end the use of fossil fuels.

Efficiency Targets

Also on January 17, PSC directed state utilities to spend nearly an additional $2 billion to support energy efficiency initiatives through 2025, including $893 million for electric energy efficiency programs and upgrades, $553 million for natural gas efficiency improvements, and $454 million on heat pump installation.

“[PSC] has approved an ambitious set of energy efficiency and heat pump targets to dramatically reduce energy consumption in New York,” the commission’s press release said, adding it “reauthorized funding to support current levels of energy efficiency activities through 2025 totaling $1.3 billion, meaning today’s decision will result in over $3 billion in investor-owned utility investments in energy-efficiency and building electrification through 2025.”

Cuomo’s ‘Emergency Action’

The Cuomo administration does not plan on allowing objections from local communities to stand in the way of his vision for a New York covered in wind turbines and solar panels, says John Droz, founder of the Alliance for Wise Energy Decisions.

“New York is a Home Rule State where communities have the authority to establish their own regulations for siting green energy developments, and many have taken full advantage of that right,” Droz said. “Local communities and municipalities haven’t been keen on giant wind and solar megastructures in their midst.

“To end local resistance, the Cuomo administration in February proposed an ’emergency action’ using the state’s Byzantine budget process to create an Office of Renewable Energy Siting, which would have the power to fast-track the approval of wind and solar projects through the acquisition of the land needed, build the necessary infrastructure, including transmission lines, and give it to the developer,” Droz said. “None of the governor’s actions will have any impact on the climate, but they will raise energy costs for New Yorkers, stifle economic growth, and further burden communities in Upstate New York.”

‘Voting with Their Feet’

New York’s anti-energy policies are encouraging an exodus out of the state, says Jay Lehr, a senior policy analyst for the International Climate Science Coalition.

“New York leads the nation in making decisions that work against the best interest of the population, including outlawing hydraulic fracturing of the state’s vast natural gas resources, even though fracking has delivered great economic benefits to the neighbor state of Pennsylvania, and closing their very successful nuclear power plant,” Lehr said. “New Yorkers should recognize wind and solar power would go away without taxpayer subsidies.

“New Yorkers are already voting with their feet and leaving the state for friendlier, less-expensive confines elsewhere,” Lehr said.

Bonner R. Cohen, Ph.D. ([email protected])┬áis a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow (CFACT).