NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7275C
SPONSOR: Jenne TITLE OF BILL: An act in relation to maintaining the continued
viability of the state's existing large-scale, renewable energy
resources
PURPOSE:
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 of the bill 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.
LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
None to the state.
EFFECTIVE DATE:
Immediately.
STATE OF NEW YORK
________________________________________________________________________
7275--C
2017-2018 Regular Sessions
IN ASSEMBLY
April 17, 2017
___________
Introduced by M. of A. JENNE, HUNTER, BLANKENBUSH, CRESPO, ORTIZ,
L. ROSENTHAL, BLAKE, WOERNER, COLTON, B. MILLER, GALEF, JONES, McDO-
NALD -- Multi-Sponsored by -- M. of A. MAGEE, THIELE -- read once and
referred to the Committee on Energy -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee -- recommitted to the Committee on Energy in accordance with
Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee -- again
reported from said committee with amendments, ordered reprinted as
amended and recommitted to said committee
AN ACT in relation to maintaining the continued viability of the state's
existing large-scale, renewable energy resources
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Legislative findings and intent. The legislature hereby
2 finds and determines:
3 1. New York is a national leader in developing and implementing policy
4 to promote the development of renewable energy resources, the growth of
5 which has significantly benefited the state in numerous ways, including
6 through reductions in pollutants that contribute to climate change,
7 associated reductions in adverse impacts on public health, and substan-
8 tial job growth in the clean energy sector.
9 2. In 2016, more than twenty percent of the state's electric load
10 (representing 2,354 gigawatt hours) was supplied by renewable resources
11 - solar, wind, hydroelectric, biomass, fuel cells and similar resources.
12 To further promote and incentivize the development of renewable energy,
13 the New York state public service commission recently established a
14 clean energy standard requiring, among other things, that fifty percent
15 of the electric load in the state be served entirely by renewable
16 resources by the year 2030 (i.e., 50 by 30 target).
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD10514-04-8
A. 7275--C 2
1 3. A recent study shows that New York's clean energy sector now
2 employs more than 85,000 workers at more than 7,500 business establish-
3 ments spread out across the state, in both the renewable energy and
4 energy efficiency sectors. With implementation of the clean energy stan-
5 dard, clean energy jobs are anticipated to grow by more than six percent
6 per year or double the growth rate of the entire United States economy
7 in 2016. Proper implementation of the clean energy standard will ensure
8 that the state meets these job growth projections.
9 4. To promote achievement of the clean energy standard, and to ensure
10 the continued job growth and other benefits attendant to a clean energy
11 economy, New York needs to assure that its existing large-scale, renewa-
12 ble energy sector is provided with adequate price signals and financial
13 incentives to remain in operation and to sell their renewable energy
14 attributes in New York, allowing the state to count the resources toward
15 the 50 by 30 target and retain the jobs and tax payments supported by
16 these generators. Absent these assurances, it would be difficult if not
17 impossible for the state to meet the recently established target.
18 5. New York's ability to meet the clean energy standard will be
19 hampered if such existing resources provide their wholesale energy
20 products for delivery to adjacent states, some of which have enacted
21 laws that provide for a robust market that provides a stronger opportu-
22 nity to sell renewable energy attributes than is currently available in
23 New York. There is a real and present danger that a significant portion
24 of New York's existing fleet of large-scale, renewable energy resources
25 will participate in the programs offered by these other states and thus
26 will not be available for consideration in terms of meeting the 50 by 30
27 target, and compete effectively with other renewable classes in the
28 clean energy standard.
29 6. It also is of paramount importance to ensure the fuel diversity of
30 the state's energy sector for the purposes of providing energy security,
31 system reliability and protection of consumers from potential price
32 spikes or shortages. For this same reason, it is important for the state
33 to take measures to ensure the continued viability and competitive posi-
34 tion of a wide variety of large-scale, renewable energy resources in the
35 state.
36 7. Accordingly, the overlying intent of this act is to provide exist-
37 ing large-scale, renewable energy resources in New York state with
38 appropriate financial incentives to continue operations for the foresee-
39 able future.
40 § 2. Definitions. 1. "Large-scale, renewable energy resource" means
41 an electric generating facility that: (a) sells its energy within the
42 New York control area with a generating capacity of 25 kilowatts or
43 more; (b) is deemed an eligible technology type pursuant to Appendix A
44 of the "Order Adopting a Clean Energy Standard" and, in the case of
45 hydropower, has a generating capacity less than 50 megawatts; (c) is
46 physically located within the jurisdiction of the New York independent
47 system operator; and (d) the associated energy is delivered in accord-
48 ance with a New York delivery requirement as described in section three
49 of this act.
50 2. "Eligible large-scale, renewable energy resource" means an existing
51 large-scale, renewable energy resource that: (a) at the time in question
52 is not under a contract for the sale of renewable energy credits with
53 the New York state energy research and development authority pursuant to
54 the renewable portfolio standard main tier, maintenance tier or custom-
55 sited tier program or clean energy standard tier 1 program implemented
56 by such authority; (b) is not under an existing contract for sale of
A. 7275--C 3
1 renewable energy credits with a load serving entity; and (c) is other-
2 wise found by the New York state energy research and development author-
3 ity to meet deliverability requirements specified in section three of
4 this act, and other eligibility requirements specified in subdivision
5 one of this section.
6 3. "Qualified independent party" shall have the meaning given to the
7 term in the New York Generation Attribute Tracking System (NYGATS) oper-
8 ating rules promulgated by the New York state energy research and devel-
9 opment authority.
10 4. "Load serving entity" or "load serving entities" means and includes
11 all investor-owned distribution utilities (in their capacity as commod-
12 ity suppliers), energy service companies, community choice aggregation
13 programs not served by energy service companies, municipal utilities
14 under the jurisdiction of the public service commission, and retail
15 customers that self-supply with electricity through the New York inde-
16 pendent system operator.
17 5. "Renewable energy credit" means a tradable, non-tangible energy
18 commodity that represents proof that 1 megawatt-hour (MWh) of electric-
19 ity was generated from a renewable energy resource. To be eligible for
20 sale in New York state and to meet the procurement obligations of load
21 serving entities, each renewable energy credit must be registered with
22 the New York generation attribute tracking systems.
23 6. "Tier 1" means the program designated as tier 1 pursuant to the
24 clean energy standard order.
25 7. "Tier 2 renewable energy credit" refers to a renewable energy cred-
26 it generated by an eligible large-scale, renewable energy resource.
27 8. "Order adopting a clean energy standard" means the public service
28 commission order dated August 1, 2016, and entered in case number 15-E-
29 0302 et seq.
30 § 3. Deliverability. Energy from an eligible large-scale, renewable
31 energy resource shall be deemed to comply with the New York deliverabil-
32 ity requirement if either it is: (a) delivered into a market adminis-
33 tered by the New York independent system operator for end-use in New
34 York state; (b) delivered through a wholesale meter under the control of
35 a utility, public authority or municipal electric company such that it
36 can be measured, and such that consumption within New York state can be
37 tracked and verified by such entity or by the New York independent
38 system operator; or (c) delivered to a customer in New York state, where
39 such delivery shall be subject to independent verification by the New
40 York state energy research and development authority or a qualified
41 independent party.
42 § 4. Program for eligible large-scale, renewable energy resources.
43 Notwithstanding any other provision of law to the contrary, including,
44 but not limited to, any order, rule or regulation promulgated pursuant
45 to the public service law, the public authorities law, and/or the state
46 administrative procedure act, the public service commission, in consul-
47 tation with the New York state energy research and development authori-
48 ty, shall adopt a program within 120 days of the effective date of this
49 act, to provide support to and for eligible large-scale, renewable ener-
50 gy resources through a market for tier 2 renewable energy credits as
51 defined herein to ensure the continued viability of eligible large-sca-
52 le, renewable energy resources for the purpose of meeting the state's 50
53 by 30 target. In developing such program, the public service commission
54 shall create an obligation on load serving entities to purchase tier 2
55 renewable energy credits from eligible large-scale, renewable energy
56 resources through a process and requirements as fully described below:
A. 7275--C 4
1 1. Annual targets for tier 2 renewable energy credits. The public
2 service commission shall provide annual targets and mandates for the
3 acquisition of tier 2 renewable energy credits by load serving entities
4 for the years 2018 to 2030 that ensures market demand for tier 2 renewa-
5 ble energy credits for all resources that become eligible large-scale,
6 renewable energy resources during such timeframe for purposes of achiev-
7 ing the 50 by 30 target. The targets to be established by the public
8 service commission should reflect the quantity of renewable energy
9 generation that is serving total electric load in New York state,
10 excluding generation from facilities owned by the power authority of the
11 state of New York and excluding hydropower from generators with a capac-
12 ity greater than 50 megawatts.
13 2. Load serving entities' tier 2 renewable energy credit obligation.
14 Each load serving entity shall be responsible for acquiring a defined
15 quantity of tier 2 renewable energy credits based upon the total tier 2
16 load serving entity obligation target allocated to all load serving
17 entities proportional to the load each serves; i.e., determined by
18 multiplying each load serving entity's actual load for the prior year by
19 the percentage GWh target for that year. The New York state energy
20 research and development authority shall publish each load serving enti-
21 ty's annual obligation for each annual compliance period on its website
22 or by other appropriate means by December 1 of the year prior to the
23 year such published annual obligation shall apply.
24 3. Tier 2 renewable energy credit price. By each December 1 prior to
25 the annual compliance period, the public service commission shall estab-
26 lish a tier 2 renewable energy credit price to be set at 75 percent of
27 the weighted average cost per renewable energy credit that the New York
28 state energy research and development authority paid to acquire renewa-
29 ble energy credits from resources under the clean energy standard tier 1
30 program in the prior calendar year.
31 4. Financial hardship. Those eligible large-scale, renewable energy
32 resources for which the tier 2 renewable energy credit price is insuffi-
33 cient may seek additional financial assistance from the New York state
34 energy research and development authority through contracts having a
35 minimum duration of ten years for the purpose of ensuring the continued
36 viability and availability of such resources toward meeting the 50 by 30
37 target. The New York state energy research and development authority
38 shall apply the following criteria in determining the eligibility of
39 such eligible large-scale, renewable energy resources to receive such
40 financial assistance, which shall be paid as an increment above the tier
41 2 renewable energy credit price determined pursuant to subdivision three
42 of this section:
43 (a) A showing of financial hardship;
44 (b) The basis for and reasonableness of expected operating and capital
45 costs. This evaluation may include, among other things, a comparison to
46 prior years' costs and a comparison to costs of like generation;
47 (c) The existence of any other cash sources available to the large-
48 scale, renewable energy resource, such as: (i) tax benefits; (ii) subsi-
49 dies; (iii) contracts; and (iv) other sources, including restructuring
50 financing;
51 (d) Whether market rules are increasing the costs of the large-scale,
52 renewable energy resource and, if so, whether any steps can be taken to
53 reduce such costs;
54 (e) Whether the large-scale, renewable energy resource's real property
55 tax assessment is consistent with the assessments imposed in similarly
A. 7275--C 5
1 situated facilities elsewhere, and if not, what action has been taken to
2 address such assessment;
3 (f) Whether the large-scale, renewable energy resource is required to
4 operate as part of a package of assets that is financially viable as a
5 whole;
6 (g) Whether the large-scale, renewable energy resource generates
7 enough revenue, based on expected output, to cover its operating costs
8 and enjoy a reasonable return;
9 (h) Whether the generation facility generates enough revenue to make
10 necessary capital improvements;
11 (i) Whether the large-scale, renewable energy resource generates
12 enough revenue to cover its fixed costs, including: (i) debt service;
13 (ii) property taxes; (iii) security costs; and (iv) other costs;
14 (j) Whether the large-scale, renewable energy resource has attempted
15 to make use of other renewables programs available to it, such as volun-
16 tary green markets; and
17 (k) The regional economic importance of the resource. This evaluation
18 may include job creation and retention, regional spending for fuel and
19 other goods and services, contribution to local tax base, fuel diversi-
20 ty, greenhouse gas reduction, enhanced forest health, flood control,
21 municipal water supply, ecological stewardship and other non-economic
22 factors on a region-specific basis. Any contract entered into with an
23 eligible large-scale, renewable energy resource pursuant to this subdi-
24 vision shall include a reasonable return, and take the form of a fixed
25 price increment to the tier 2 renewable energy credit price that the
26 generator is receiving from a load serving entity or a financial
27 contract for differences to adjust based on fluctuations in the tier 2
28 renewable energy credit price. The totality of all increments provided
29 to resources pursuant to this subdivision shall be recovered from deliv-
30 ery customers in the same manner as in the renewable portfolio standard
31 program maintenance tier.
32 5. Procedures. To implement the tier 2 renewable energy credit
33 program, the public service commission shall also adopt within 120 days
34 of the effective date of this act the following procedures and related
35 requirements:
36 (a) The public service commission shall establish procedures consist-
37 ent with the procedures developed under the clean energy standard tier 1
38 program to determine the eligibility of large-scale, renewable energy
39 resources to participate in the program adopted pursuant to this act and
40 to certify such eligible large-scale, renewable energy resources. All
41 resources that have previously been found by the New York state energy
42 research and development authority to meet the eligibility and delivera-
43 bility requirements in force under the renewable portfolio standard or
44 clean energy standard programs shall be deemed to meet eligibility and
45 deliverability requirements of this act.
46 (b) The public service commission, with the assistance of the New York
47 state energy research and development authority, shall develop an equi-
48 table process by which load serving entities acquire tier 2 renewable
49 energy credits from eligible large-scale, renewable energy resources,
50 which may include the designation of the New York state energy research
51 and development authority as the central procurement entity for tier 2
52 renewable energy credits, whereby the New York state energy research and
53 development authority would ensure the registration of all tier 2 renew-
54 able energy resources from generators in New York generation attribute
55 tracking systems, purchase the required targeted amount of tier 2 renew-
56 able energy credits, and re-sell the tier 2 renewable energy credits to
A. 7275--C 6
1 load serving entities on an annual basis in order to facilitate their
2 collective efficient compliance. The public service commission, with the
3 assistance of the New York state energy research and development author-
4 ity, shall also develop and implement protocols in the event that there
5 is an oversupply or undersupply of tier 2 renewable energy credits
6 offered for sale, relative to the tier 2 renewable energy credit obli-
7 gation applied to the load serving entities, provided that the protocols
8 should recognize and prioritize the realization of economic benefits in
9 New York from generators located in New York.
10 (c) The public service commission shall develop procedures by which
11 eligible large-scale, renewable energy resources may obtain contracts
12 from the New York state energy research and development authority under
13 subdivision four of this section in accordance with the requirements of
14 the state administrative procedure act. Such procedures shall, on a
15 case-by-case basis, authorize eligible large-scale, renewable energy
16 resources to petition the public service commission for a finding of
17 financial hardship, which finding shall be based upon a determination
18 that the established tier 2 renewable energy credits determined in
19 accordance with subdivision three of this section are insufficient to
20 ensure the viability of the resource. The public service commission
21 shall make a final decision with respect to such contract within 120
22 days after a hardship petition is received.
23 (d) Each load serving entity shall demonstrate compliance with the
24 requirements of this section through an annual compliance filing pursu-
25 ant to a process established by the public service commission that is
26 consistent with the compliance filing requirements established pursuant
27 to the tier 1 program.
28 § 5. This act shall take effect immediately.
