NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A4294
SPONSOR: Cusick TITLE OF BILL:
An act in relation to maintaining the continued viability of the state's
existing large-scale, renewable energy resources
PURPOSE OR GENERAL IDEA OF BILL:
New York State has been a leader in renewable energy, beginning with the
hydroelectric power plant at Niagara Falls in 1895. The Clean Energy
Standard mandates that by 2030, 50% of electricity consumed in the state
will come from renewables and establishes programs to develop new capac-
ity. However, economic factors threaten NY's existing large-scale renew-
able generators, in many cases the most cost-effective sources of clean
power. This bill establishes utility support for these facilities to
protect critical infrastructure and ensure that the 50 by 30 goal is
achieved as economically as possible.
New York recognizes the social cost of greenhouse gas (GHG) emissions
and the value of clean power sources. This is reflected in the compen-
sation provided to nuclear generators through the Zero Emission Credit
program. Legacy large-scale renewables (LSRs), however, are compensated
at the same rates as natural gas or coal generators despite their carbon
benefits. Low fuel prices have brought these rates below the long-term
viability threshold of many legacy renewable resources.
Approximately 10% of New York's electricity currently comes from inde-
pendently owned hydroelectric facilities, which also provide flood
control and water levels management to support communities and the envi-
ronment. Biomass plants are a critical economic component of the fores-
try industry in Northern NY and power the US Army installation at Fort
Drum. These facilities face an uncertain future and may ultimately be
compelled to retire or export from the state.
This would not only endanger their community and economic benefits, it
would also undermine the cost-effective achievement of the state's GHG
targets. The current Maintenance Tier program does not adequately
address these issues.
Through the Renewable Portfolio Standard, New York ratepayers have
invested heavily in the development of wind, solar, and biomass facili-
ties. Without fair compensation going forward, at the expiration of the
RPS contracts these generators will likely export into neighboring ener-
gy markets or terminate operations. This will mean that despite being
located in NY, these resources will not contribute to the 50 by 30 goal,
depriving NY ratepayers of continuing benefit from their investment. New
capacity will need to be built at a higher cost to achieve the same
target.
This bill provides compensation for the clean energy attributes of lega-
cy large-scale renewable generators at a variable per-kWh rate equal to
75% of the cost of new renewables. This ensures that it will save rate-
payers money in the achievement of the CES goal by preserving existing
renewable producers at 25% less than the cost of new. This does not
place any additional burden on ratepayers to purchase renewable energy;
rather, it ensures that NY will first look to purchase electricity from
existing, cheaper resources before paying a high price for new renewa-
bles to achieve the mandate already established by the CES.
SUMMARY OF PROVISIONS:
Section One - Provides the Legislative findings and intent of the bill.
Section Two - Defines various terms.
Sections Three and Four - Provide a framework for the program including
deliverability, annual targets, load serving entities' obligations, the
establishment of a Tier 2 Renewable Energy Credit (REC) priced at a
level of 75% the cost of new renewables, the enabling of a process to
show financial hardship in specific cases of need, and provision of an
outline of procedures to implement the Tier 2 REC program at the PSC and
NYSERDA.
Section Five - Provides the effective date.
JUSTIFICATION:
It is often noted that ratepayers in NY face some of the highest elec-
tricity costs in the nation. This is largely due to utility costs, fees,
and taxes, and conceals wholesale prices at historic lows. The low price
of natural gas, above-market support for new renewables, proliferation
of residential solar, and low demand growth have all contributed to a
decline in compensation for baseload electricity generators. Recognizing
this, in its draft CES, Department of Public Service Staff recommended a
"Tier 2" REC program to provide support for legacy renewables. This
program was eliminated without warning when the CES was released.
The North Country alone contains over 500 MW of independent hydro.
These facilities are long-lived and low impact, and are core infrastruc-
ture, often located at the center of towns and managing water levels for
lakes and reservoirs. Direct competition with natural gas, which has
lower costs and no such responsibilities, is proving unsustainable. The
RPS established a Maintenance Tier program for a subset of renewable
generators that predated the RPS. The program does not apply to all
vintage renewable resources and, even where it does has had mixed
results, allowing biomass and hydro plants to close. This bill takes
lessons from recent closure and provides improvements to the program to
streamline the application process and fix support at a level sufficient
to maintain viability.
Wind facilities developed under the RPS between 2003 and 2016 were given
ten-year support contracts. With electricity rates low, at the expira-
tion of those contracts they must seek additional revenue. Though the
NY CES does not allow existing generators to participate in procure-
ments, RPS programs in neighboring states do. The location of a genera-
tor does not determine where its energy is consumed or which state gets
to count its production toward clean energy goals. This export threat
is imminent, with many states already seeking to procure this generation
and transmission lines already being sited across Lake Champlain specif-
ically to deliver wind power into the ISO-NE.
This bill follows the model for Tier 2 established by DPS Staff in the
original CES draft, and will be available to all legacy large scale
renewable generators. The compensation for Tier 2 RECs will be 75% of
Tier 1. The Tier 1 price for new renewables is established by compet-
itive bidding through NYSERDA-managed procurements, and reflects the
additional compensation needed above available wholesale rates to make a
renewable project viable. As wholesale rates rise, REC prices fall. This
ensures that ratepayers will not overpay for LSRs, and will never pay to
develop new generators while existing ones can be kept online for less.
PRIOR LEGISLATIVE HISTORY:
2018: A7275 - ordered to third reading rules cal.482 / S5549 - Passed
Senate.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None to the state.
EFFECTIVE DATE:
Immediately.
