By Michael Kuser

At what point will an offshore wind bid in New York become firm and binding? And how will state agencies ensure a project delivers its promised benefits?

State officials discussed these and other issues with developers and stakeholders when they met in New York City Monday to explore contract terms for the planned fourth-quarter solicitation for 800 MW or more in offshore wind energy, the first part of a two-phase plan to develop 2,400 MW by 2030. (See NYPSC: Offshore Wind ‘Ready for Prime Time’.)

The New York State Energy Research and Development Authority (NYSERDA) held a July 23 technical conference to discuss the agency’s request for information (RFI) issued July 20, soon after the state’s Public Service Commission issued an order (Docket No. 18-E-0071) authorizing the solicitation.

“We know that we have a lot of work to do in a short period of time, which is why we wasted no time trying to pull together this conversation,” NYSERDA CEO Alicia Barton said.

The agency’s RFI covered the procurement schedule and quantity, interconnection and deliverability, offshore wind renewable energy certificate (OREC) pricing options, bid price evaluation, economic benefit, project viability, environmental issues and eligibility and contract provisions.

Binding Provisions

“We’re interested to know how much time you would need to develop your proposals … and secondly, we are looking for these bids to be firm and binding for a period of six months,” Doreen Harris, NYSERDA director for large-scale renewables, told prospective developers. “Is this duration reasonable?”

Anbaric Project Manager Howard Kosel said the term “firm” seemed to clearly apply to pricing but asked if “binding” referred “to all internal approvals, court approvals, all necessary such that, if awarded, would be bound to contractually execute?”

NYSERDA Deputy Counsel Peter Keane clarified the agency’s approach would be similar to that for the renewable portfolio standard (RPS).

“We consider the submission of a proposal as an offer,” Keane said, noting that a developer would include its terms in its proposed contract and that NYSERDA can form a contract by accepting. “We do, however, require that within a reasonable amount of time, about 30 days, they provide a corporate confirmation that the authority has been given to the execution parties, etc.”

NYSERDA must issue its offshore wind solicitation in consultation with the New York Power Authority (NYPA) and the Long Island Power Authority (LIPA). The agency 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.

“Will the capacity that NYPA and/or LIPA be purchasing, if they decide to go forward, be a subset of the 800 MW or would it be additive to, and if so, would that be known as part of the RFP?” asked Clint Plummer, Deepwater Wind vice president of development.

Keane said the PSC would have to weigh in on that issue, but his “feeling” was the NYPA and LIPA capacity would be additional.

“Either of the other two power authorities could go out on their own; theoretically, there’s an option that they could join with us and just make a long-term financial commitment for whatever capacity we procure,” Keane said. “In either case, I don’t see those as being automatically subtracted from our Phase 1 goal.”

Harris agreed with Keane and read from the authorizing order: “The quantity of ORECs that is procured by NYSERDA, NYPA and/or LIPA toward the Phase 1 goal need not be limited to the proportional share of retail load to be served but instead could be based on quantities being efficient for each particular solicitation or award.”

Enforcement Mechanisms

NYSERDA plans to 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 expects the Department of Interior’s Bureau of Ocean Energy Management (BOEM) to identify new lease areas for New York early in 2019.

Harris did not attribute questions from those participating in the conference via the web. One asked how NYSERDA would determine or quantify a shortfall in claims — either estimated benefits or expenditures — made at the time of the bid.

“In the land-based renewables context, we do have a very similar category, albeit it was for a slightly different purpose,” Harris said. “However, on the land-based side, we do audit the spending of the awarded developers to verify, through a third-party audit, the spending records that they are claiming to have executed in their project development.”

There will be contractual ramifications for a shortfall, she said.

“What kind of enforcement mechanism should we have?” Keane asked. “We need to have something, for you win eligibility points for the economic benefits that you pledged.”

Wind developers must submit their bids in terms of both fixed-price ORECs and variable — or index — ORECs, and NYSERDA has the authority to specify under what conditions an index OREC contract may revert to a fixed price.

“I don’t think NYSERDA expects to have discretion to just order that trigger on its own for whatever reason. My thought is it would be some sort of event,” Keane said.

Compliance Payments

One web participant expressed concerns about the OREC compliance obligation for load-serving entities in cases of project delays or cancellations: “If there is not an alternative compliance payment, what will happen if projects are not constructed and there are not enough ORECs available for an energy service company [ESCO] to purchase the requirement?”

Harris explained that ORECs will follow a scheme similar to that for zero-emission credit obligations, with LSEs and ESCOs only responsible for purchasing a prorated share of whatever volume of ZECs NYSERDA acquires from eligible nuclear generators.

“If there was a circumstance where a project was delayed, and it came online in July instead of May, and there were fewer ORECs to be had in a given year, it wouldn’t impact the ESCO or LSE in any way other than to just reduce the pro rata share of the ORECS that it would be obligated to purchase,” Harris said.

Transmission and More

Another meeting participant asked how the grid will accommodate large injections of power if 800 MW or more is awarded in Phase 1.

“This is expected to be a primary consideration for the transmission working group … to be formed prior to Sept. 28 this year,” said Matt Vestal, NYSERDA technical advisor.

Kosel pointed to NYISO’s “fairly rigorous” and time-consuming interconnection process, in which costs are not determined until well into the process. With 70% of the RFI’s evaluation criteria based on price, he asked how developers can be expected to plan without knowing costs for system deliverability upgrades.

Vestal said developers have been thinking about those issues for a long time and probably have significant understanding of where their interconnection costs lie.

“We’re seeking to understand and want to be able to assess the reasonableness of those interconnection costs as we evaluate those prices,” Vestal said. “We include that question specifically in the RFI, but NYSERDA, as well as the commission, certainly understands that these prices can be incrementally uncertain relative to the other costs required for offshore wind on the generation side.”

Nora Madonick of Arch Street Communications pointed out the RFI did not address “anything specific to minority, women-owned or service-disabled veteran-owned businesses, and I’m wondering if a percentage has been discussed or if you would like input on that in the RFI, and, if so, in what category.”

NYSERDA now has no plan for a set percentage, but stakeholders can address that topic under any part of the RFI they like, Keane said.

Stakeholders can submit comments on the RFI until 5 p.m., Aug. 10, to offshorewind@nyserda.ny.gov. NYSERDA will post all comments on its website.