The lead agency in New York’s clean energy transition has come out in favor of inflation adjustments for renewable projects under contract but not yet under construction.

Inflation and interest rate hikes have emerged as a significant threat to the state’s statutory emissions-reduction goals, as developers of 91 projects totaling 13.5 GW of capacity are seeing construction costs soar. Some are saying they may not be able to proceed under terms negotiated, and three petitions representing numerous developers were submitted to the state Public Service Commission in June seeking relief.

More recent solicitations by the state have offered adjustment mechanisms to account for cost changes, but the solicitations these developers bid into did not.

A flurry of comments was submitted Monday, the PSC’s deadline for input in Case 15-E-0302.

The sentiment fell largely along predictable lines: Those who are fighting for decarbonization and those who would profit from it favored a retroactive boost for the earlier contracts. Opposition came from those who would pay for it or fear they would lose a competitive edge because of it.

The New York State Energy Research and Development Authority submitted a lengthy analysis of options, costs, benefits and risks and concluded that a price adjustment could help maintain New York’s forward momentum toward the goals of the Climate Leadership and Community Protection Act (CLCPA), which requires renewable power make up 70% of the state’s generation mix by 2030.

If developers walk away from their contracts to provide it, the state will have to seek new contracts; bids will inevitably come in higher, perhaps higher than the adjustments the current contract holders seek. These new contracts inevitably will take longer to complete, and the delay will prolong the damaging effects of greenhouse gas emissions generated by burning fossil fuel.

NYSERDA said bid prices submitted in the latest solicitations are significantly higher than those in the earlier contracts.

More Money

Developers of nearly all of New York’s offshore wind portfolio and much of the onshore wind and solar pipeline sought relief through similar petitions submitted to the PSC on the same day in June.

Soon after, Clean Path New York — an $11 billion portfolio of wind and solar projects with an underground transmission line to carry the power they generate to New York City — said it needed the same adjustment if the PSC grants it to the Tier 1 generation projects. Two-thirds of its generation portfolio is Tier 1, so Clean Path would be paying them more.

Another shoe dropped this week: The Champlain Hudson Power Express asked the PSC in a petition Monday to level the playing field and make any inflation-related price adjustment apply to all new-build project components.

The underground HVDC line to carry emissions-free power from Quebec hydropower plants to New York City was first proposed in 2010. Early cost estimates were in the $2 billion range, but the PSC in 2022 authorized up to $6 billion in debt to build it. Construction began this year.

Champlain Hudson said in its petition it has suffered the same unforeseeable cost increases as everyone else, mentioning a converter station whose cost jumped 40% in less than a year. The adjustments it is seeking would not make it whole, it said, and would mean only a modest increase in costs.

A spokesperson for developer TDI told RTO Insider the issue is one of fairness: Any inflation relief must be extended equally to all participants in the state’s renewable energy certificate (REC) program. “CHPE’s petition reflects the necessity that large-scale renewable developers who participated in competitive NYSERDA solicitations and have all faced the same economic and geopolitical challenges are treated equally,” it said.

Reactions

Comments ranged from hundreds of the same supportive message from individual members of unions that expect to work on clean energy projects, to NYISO, which has warned of potential shortfalls in generation capacity amid the transition.

The ISO took no position on whether or how the REC agreements should be modified. Instead, it emphasized the importance of continued progress in the buildout. If development of renewables is not “rationally coordinated” with retirement of fossil fuel resources, system reliability is jeopardized.

As NYSERDA and others commented, losing the existing contracts would slow progress.

NYISO already has identified a potential deficiency of up to 446 MW in New York City on peak summer days, and its warnings about the slow pace of the state’s energy transition have grown increasingly firm in recent months.

In its comment to the PSC, NYISO wrote: “A sufficient fleet of new generation resources that satisfy the CLCPA must be available before more of the existing, traditional generators retire voluntarily or are forced out of service.”

The Public Utility Law Project of New York laid out a different set of priorities: a consistent and transparent review of the developers’ requests for more money, and an effort to cushion ratepayers from the impact of any increase.

“We strongly believe that ratepayers, especially those who are low-income or who live in disadvantaged communities, cannot and should not be left to shoulder the financial burden, especially unexpected cost adjustments,” it wrote.

The state Department of State’s Utility Intervention Unit came out in opposition to the increase.

“For markets and competition to function efficiently, contracts and obligations should be honored,” it wrote. “Altering contracts after terms are defined can diminish the competitive process that potentially disadvantages those bidders not selected in a respective solicitation and consumers who are paying for the project.”

The unit also urged that the PSC scrutinize each project’s costs carefully, and that it limit any adjustment mechanism to those projects more likely to succeed: “Ratepayers should not be throwing good money after potentially bad projects.”

New Yorkers for Clean Power urged the adjustment be granted, as the projects in question are critical for not only meeting the CLCPA’s goals, but also boosting the state’s economy. “The petition demonstrates that failing to redress the economic circumstances will result in both years of material delay and substantial additional cost,” it wrote.

Offshore wind developer Rise Light & Power dismissed the idea of giving other offshore wind developers more money than they agreed to. “It is unprecedented and unwarranted to ask the commission to direct NYSERDA to change ex post facto the most material terms of a competitively bid contract to benefit a petitioner and increase the cost and risk of such contract to NYSERDA.”

Rise had a similarly dim view of the onshore wind and solar petition, saying an increase would be “unfair to prior and current bidders in Tier 1 solicitations, harmful to ratepayers and would violate bedrock principles of competitive public contracting.”

The New York City Mayor’s Office of Climate and Environmental Justice led off with a pointed observation: The process is already too slow. Since 2016, NYSERDA has entered into 115 contracts totaling 13,730 MW of renewable generation and storage, it wrote. But only 14 of those projects have come online, delivering just 681 MW.

For this reason, the city endorsed relief for renewable developers, though not as much as was requested, because of the likely effect on ratepayers. “There is much work to do, and time is of the essence to achieve the state’s 2030 goal,” it said.

Nucor Steel Auburn — whose electric arc furnace is one of the largest loads on the New York State Electric & Gas system — blasted the request for an inflation adjustment for the Tier 1 onshore contracts as unsubstantiated, unjust and not in the public interest. It wrote: “The added cost to New York consumers from such a measure would approach $10 billion over the 20-year life of REC contracts.”

New York’s investor-owned utilities, commenting jointly, made a similar point, warning of billions in extra costs for ratepayers. “These petitions, if approved without modification, would create a perverse incentive and weaken the effectiveness of future NYSERDA REC contracting cycles and create unnecessary costs for customers throughout New York state,” they said.

The Sierra Club and Environmental Advocates of New York backed the idea of inflation adjustments weighed with impact on consumers, the market and the environment.

“While we do not endorse any particular level of support for contracted at-risk renewable energy projects, an inflation adjustment of the type requested by petitioners should be strongly considered as part of a least-cost approach to achieving New York’s renewable energy commitments.”