New York is tweaking its approach to clean energy development as it works to get its lagging decarbonization ambitions back on track.

The Public Service Commission approved an order that will, among other things, change onshore and offshore renewable solicitations, revise the credits that subsidize those renewables, consider whether to continue nuclear generation subsidies and open a dialogue to better inform the question of whether to allow utility development and ownership of renewable generation.

The May 15 decision came as part of the biennial review of New York’s Clean Energy Standard (CES) submitted as a draft July 1, 2024. (Case 15-E-0302)

The draft acknowledged that the state’s clean energy transition is likely to miss its first mandated target — 70% renewables by 2030 — by a potentially wide margin and suggested ways to address the slow progress.

The 6-0 vote by the PSC finalizes that draft, with some of the suggested changes adopted and some rejected.

Two years ago, New York had a large portfolio of contracted renewable projects, but soaring prices made those contracts untenable and many were canceled. More recently, a president highly supportive of renewable energy was replaced by a president who is highly supportive of fossil fuels and is actively working to hinder renewables development.

The order cites seven key factors — mostly negative — affecting New York’s progress toward the goals mandated by the landmark Climate Leadership and Community Protection Act of 2019:

• • Global interest rates, inflation and supply chain pressures;
  • transmission inadequacies;
  • interconnection delays;
  • NYISO’s changes to its capacity accreditation;
  • federal initiatives including IRA funding and tariffs;
  • siting and permitting processes that are long and complicated and likely to get more so; and
  • expected increase in the statewide electric load.

Marco Padula, director of the Department of Public Service Office of Markets and Innovation, summed up the situation as he presented the DPS staff recommendations to the PSC members:

“The draft order recognizes that New York is in a pivotal moment where we have not seen the expected level of success from our current processes and are faced with massive amounts of new load growth and rising need for new clean firm electric capacity on the grid.”

The changes suggested in the draft drew a wide array of comments giving support, explaining opposition and suggesting tweaks.

The PSC rejected some proposed changes to the CES, including strike-price adjustments due to certain black swan events, those risks unforeseen at time of contract awards.

But it directed several notable changes:

• • The New York State Energy Research and Development Authority can increase the average annual solicitation of Tier 1 RECs (renewable energy certificates for large-scale onshore facilities) from 4,500 to 5,600 GWh, and its procurement authority is extended to 2029.
  • NYSERDA will establish a minimum maturity threshold in all RFPs to attract projects far enough advanced that they have a higher likelihood of achieving commercial operation in a relatively short period of time; at a minimum, they must have completed NYISO’s Phase 1 cluster study and be eligible for the final phase.
  • The maximum term of offshore REC contracts is extended from 25 years to 30; NYSERDA will be allowed to extend Tier 1 REC contracts from the current maximum of 20 years to 25 on a case-by-case basis.
  • NYSERDA is authorized to take greater flexibility on commercial operation milestone dates with Tier 1 and offshore projects and no longer is required to include a right of termination for failure to come online by a certain date.
  • DPS staff will develop separate criteria for repowering baseline hydroelectric resources and submit a recommendation to the PSC.
  • While it still supports the rationale for banning utility ownership of generation during deregulation in the mid-1990s — fostering competition and preventing vertical market control — the PSC also said much has changed in 30 years, and utility ownership of generation now must be reconsidered as a way of accelerating the renewables market. The PSC took only the first tentative steps in this direction, however, laying out 15 questions that would help frame what is certain to be a contentious debate.
  • DPS staff will create a process to define and identify “clean energy zones” that can be incorporated into the PSC’s planning processes and renewable procurements. The zones will be a way to align generation development with planned transmission expansion and economic development as a means of cost and risk reduction.
  • DPS staff will prepare a white paper evaluating how the zero-emission credit program that subsidizes nuclear plants would be structured if it is continued.

Moving Forward

There is a disconnect between the amount of policy support New York provides to renewable energy development and the amount of renewables connected to the grid.

Only 23.2% of customer load statewide was met with renewable energy in 2023, down from 25.1% in 2022 — and most of that came from decades-old hydropower facilities, rather than the new solar and wind generation the state has been trying so hard to encourage.

Generation and transmission development in New York is slow and expensive in the best of times, and there always is concern about heaping additional costs onto ratepayers who already pay some of the highest electric rates in the nation.

Then there are other factors beyond PSC control to consider.

At the May 15 meeting, PSC Chair Rory Christian quoted boxer Mike Tyson:

“Everybody has a plan until they get punched in the face.”

Christian was speaking about another matter before the PSC that day, but his point applies equally to renewable energy development, which has been rocked back on its heels by President Donald Trump.

How best to foster renewable energy development in New York in this environment remains to be seen, but there is room to adapt — the next biennial review of the CES is only a year away.

With the 2024 biennial review finalized, two advocates for energy developers and operators shared their thoughts with RTO Insider.

Marguerite Wells, executive director of Alliance for Clean Energy New York, said she is cautiously optimistic that the CES update will move the needle on New York renewables.

There have been three primary friction points, she said: interconnection, permitting and offtake.

NYISO and the new Office of Renewable Energy Siting largely have addressed interconnection and permitting, respectively; the CES update will help address offtake in a few ways, Wells said, but questions remain.

Uncertain in her mind are which black swans will be eligible for price revision and which ones will not.

Increasing the size of procurements is good, provided there are enough projects to fill the list.

The project maturity threshold potentially is a solution to the issue of developers not familiar with New York bidding proposals at unrealistically low prices and winning contracts, then not being able to follow through once the cost of doing business in the state becomes apparent.

To address this, ACE NY had advocated reducing the weight NYSERDA assigned to bid prices as it awarded contracts, but the PSC opted to retain the emphasis on low prices to protect ratepayers.

Developers that go through Phase 1 cluster studies presumably will have a better sense of what their costs will be, Wells said, so that might discourage lowball bids.

She also is aware of the passage of time.

“I was waiting for this report with bated breath since last July,” Wells said, and when it finally arrived, after 10.5 months, it only kicked the can down the road on some questions, such as utility ownership of generation.

She thinks of the phrase “analysis paralysis” at times, but said, “I do think it’s meaningful. … I think they’ve done what’s in their own scope to fix for now, and we will just keep tweaking. I’m also looking forward to the fact the next CES review is just next year.”

Independent Power Producers of New York CEO Gavin Donohue saw many positive aspects in the decision, including the movement toward continued nuclear subsidies, the increased procurement targets and the repowering of hydropower.

But the fact that the PSC did not open generation ownership to utilities — only sought to frame a possible future discussion — was the most important single aspect of the order for IPPNY and its members, Donohue said.

He feels there were missed opportunities as well.

“The fact that they recommitted to having zero-emitting resources and clean energy into the future is a positive outcome, but the complexities, the details about reliability, affordability, are really important today,” Donohue said.

The 2019 climate law mandated 100% zero-emissions resources by 2040, but the PSC still has not defined zero-emissions, making investment decisions much more complicated. How does an investor approach a project that might be threatened with a phaseout a few years after it goes online?

“I’m frustrated because that’s really, to me, where the rubber meets the road on the practicality of this law,” Donohue said.

“To me, that is a bigger hurdle, in some ways, than building the renewables because of the capacity factor and the amount of megawatts involved. And also the magnitude of change that has to occur in the overall infrastructure of pipelines in the transmission system to make that happen.

“One of the things you can’t do is legislate or regulate economics and physics.”