By Michael Kuser

ALBANY, N.Y. — The New York Public Service Commission on Thursday voted unanimously to authorize state agencies to procure 800 MW of offshore wind energy by next year, the first phase of a plan to develop 2,400 MW by 2030.

Offshore wind is “viable, valuable and ready for prime time,” PSC Chair John B. Rhodes said.

Under the commission’s July 12 order (18-E-0071), the New York State Energy Research and Development Authority will issue a solicitation for 800 MW of offshore wind in the fourth quarter, in consultation with the New York Power Authority and the Long Island Power Authority.

NYSERDA will announce the award in the second quarter of 2019 and, if needed, issue a second solicitation next year to meet the 800-MW goal. The agency will hold a technical conference on the solicitation process from July 23 1-3 p.m. at the Department of Public Service’s office at 90 Church Street in New York City; it will also be available via webinar.

High-Stakes Race

Gov. Andrew Cuomo’s office said that offshore wind will not only help achieve the state’s Clean Energy Standard goal of obtaining 50% of electricity from renewables by 2030 but also will support nearly 5,000 new jobs, nearly 2,000 of them long-term career opportunities in operations and maintenance.

“We’re in a race right now with our fellow states along the Eastern seaboard to get these staging and fabrication facilities for this new industry built in our state, and of course they want it in their states,” Commissioner Gregg C. Sayre said. “I think it would be appropriate for us to get moving quickly and win this one for New York.” (See Competition, Cooperation and Costs the Talk at OSW Conference.)

The U.S. Department of Energy in June awarded a $18.5 million grant to NYSERDA to lead a nationwide research and development consortium for the offshore wind industry, with the state to match the federal funds.

In May, Massachusetts awarded a contract for 800 MW of offshore wind and Rhode Island agreed to procure 400 MW. (See Gov. Signs NJ Nuke Subsidy, Renewables Bills.)

Massachusetts officials hope to develop supply chains for the nascent industry in the Port of New Bedford but will have to avoid interfering with fishing operations there, the No. 1 fishing port in the U.S. (See Overheard at ISO-NE Consumer Liaison Group Meeting.)

According to the environmental impact statement issued by NYSERDA in June, the New York offshore wind projects will affect only 3% of the state’s fishing grounds.

Bidding Details

David G. Drexler, DPS managing attorney, told the commission that NYSERDA will solicit two separate bids from each participating bidder. One would be for a fixed-price offshore wind renewable energy certificate (OREC), while the other would be based on a variable OREC tied to an index.

To contain costs, NYSERDA will reject bids higher than a confidential “upset price,” like the method used in Renewable Energy Standard Tier 1 procurements, Drexler said.

“NYSERDA … would at all times have the authority to reject any and all bids, taking into account not only the benchmark upset price but also recent auctions and market conditions,” Drexler said.

NYSERDA will rank bids based on the following weights price (70%); economic benefits (20%); and project viability (10%). The agency will have discretion in fixing the specific terms of the contract, which will run for 20 to 25 years.

Transmission Component

The Phase 1 order for the initial 800 MW makes the generation developer responsible for its own radial transmission to shore, calling it “the most easily implementable and feasible option for jump-starting offshore wind development in New York.”

NYSERDA recommended that backbone transmission and independent ownership be reserved for consideration in Phase 2, to procure the remainder of the 2,400 MW total. It noted that the Bureau of Ocean Energy Management has sold only one wind energy lease directly off New York — Equinor’s site, which is capable of hosting approximately 1,000 MW. The agency said a shared radial system would create unnecessary risks of stranded assets and provide limited cost advantages.

Equinor and Vineyard Wind supported the direct generator lead approach in the early stages of development, arguing in joint comments that “requiring a separate transmission provider would increase project uncertainty and the risk of delay.”

The Green Building Council, the Sustainability Institute and transmission developer Anbaric argued that the first phase should include soliciting bids to develop an “Open Access Offshore Transmission” system, with Anbaric saying it would provide more information about the best options and potentially reduce the costs of the procurement.

Anbaric said that requiring direct generator leads would lead to a piecemeal approach and would not optimize the interconnection, potentially increasing costs for later stages of development. The Green Building Council and the Sustainability Institute concurred with Anbaric’s argument, saying that the generator lead approach would result in a highly inefficient array of separate transmission cables.

Central Hudson Gas & Electric, Consolidated Edison, New York State Electric and Gas, National Grid, Orange and Rockland Utilities, and Rochester Gas & Electric, filing as “Joint Utilities,” also argued that the state should immediately consider developing a transmission backbone and optimizing onshore interconnection locations. They said utility ownership of the transmission portion could produce substantial ratepayer savings. NYPA and New York City also urged that “a coordinated approach to transmission should be initiated immediately,” with NYPA adding it was prepared to assist in the effort.

“Anbaric remains eager to deliver offshore wind to the New York onshore grid quickly and economically,” Anbaric CEO Edward Krapels said in a statement Friday. “We will intensify our development of our New York OceanGrid and look forward to working with generation companies to link the first 800 MW of offshore wind to the New York state grid.”

Cryptocurrency Tariff Change

The PSC also approved new electricity rates for an upstate utility, Massena Electric Department, that will allow high-density load customers, such as cryptocurrency companies, to qualify for service under an individual service agreement.

“As part of our continuing effort to balance the needs of existing customers with the need to attract new companies, we must ensure that business customers pay a fair price for the electricity that they consume,” Rhodes said. “However, given the abundance of low-cost electricity in upstate New York, there is an opportunity to serve the needs of existing customers and to encourage economic development in the region.”

The commission’s order (18-E-0211) said that the individual service agreement tariff includes provisions to protect customers from increased supply costs resulting from the new service.

The program will apply to customers who have a maximum demand of at least 300 kW.

The new rates become effective July 17.

Low-income CDG Initiatives

The commission also adopted three measures to enhance the ability of low-income residents to participate in community distributed generation (CDG) programs: a bill discount pledge program; an income verification service; and a loss reserve fund (15-E-0082).

CDG projects are generating facilities located behind a nonresidential host meter coupled with a group of off-takers who receive bill credits based on the generation of that facility. New York defines low income as at or below 60% of the state median income.

Public funds will be held in reserve to cover losses that CDG project owners or their lenders may incur if low-income subscribers default on or terminate their subscriptions at a higher rate than other customers. DPS staff reported that “a relatively modest amount could provide surety for hundreds or even thousands of subscriptions” but did not define the amount.

Con Ed Smart Solutions Program

The commission approved, with modification, Con Ed’s request for a Smart Solutions Program, which included an enhanced gas energy efficiency program, a new gas demand response program, a new “Gas Innovation” program to encourage renewable alternatives to natural gas heating technologies, and a new market solicitation for non-pipeline solutions.

The order (17-G-0606) established criteria for continued development of the gas innovation program and denied the company’s request “to recover costs associated with parallel pipeline development efforts, thereby maintaining customer protections associated with unsuccessful pipeline development projects.”

The commission said Con Ed’s proposed gas DR program and non-pipeline proposal both “require further information from the company, input from stakeholders, and review from staff, and therefore, these components of the petition will not be considered in this order.”