Green Overload

New York State’s Ratepayer-Zapping Renewable Energy Mandate

by Kenneth Girardin and Annette Brocks |  | Reports

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The governor wants to make New York a “national leader” by having renewables provide 50 percent of the state’s electricity by 2030—a goal also known as “50 by 30”—while keeping unprofitable nuclear plants running. But as detailed in this report, the Clean Energy Standard has three major shortcomings:

1. High Cost—While the governor and the PSC have portrayed the financial impact on ratepayers as minimal, the Clean Energy Standard is likely to add nearly $3.4 billion to New York utility bills in just the next five years.

2. Questionable Feasibility—The 50 by 30 mandate will require the expansion of solar- and wind-generated power production on a massive and unprecedented scale—without providing needed improvements to an already strained electric transmission system. The PSC also failed to consider the added conventional generating capacity needed to back up renewables when the sun isn’t shining and the wind isn’t blowing.

3. Low Impact—The overarching goal of the Clean Energy Standard is to fight projected global warming, but the standard will have a barely discernible impact on global greenhouse gas emissions. Indeed, under the Regional Greenhouse Gas Initiative (RGGI), reductions in carbon emissions from New York power generators could be offset by an increase in emissions in eight other RGGI states.

Given the questions that continue to surround the new renewable mandate, the adoption of the Clean Energy Standard should spark a real debate on the means and ends of energy policy in New York. If the standard is not repealed or at least significantly revised within the next few years, it could wreak havoc on electricity markets in New York while making the state’s energy costs even higher and less competitive in comparison with national norms.

1. BACKGROUND

Renewable energy comes from sources such as wind and sunlight, which are not depleted when used but naturally replenished. Because renewable energy for the most part does not generate carbon dioxide, expanded reliance on renewable sources has become a centerpiece of federal and state government strategies for reducing manmade carbon emissions associated with predictions of global warming.

But renewables also come at a price. Except for some hydroelectric power plants, most renewable energy generators need government subsidies to compete with the lower cost of non-renewable power sources in New York.

Solar farms and wind turbines in particular also have the disadvantage of being inconsistent and undependable. To ensure a continuing supply of power when the sun isn’t shining and the wind isn’t blowing, solar- and wind-powered plants must be backed up by traditional energy generation sources, such as natural gas and nuclear plants.

Despite these disadvantages, New York began a regulatory push for renewables more than a dozen years ago, under Governor George Pataki. In 2004, the Public Service Commission enacted the Renewable Portfolio Standard (RPS) to create incentives for more renewable energy generation in New York. Under the RPS, a surcharge was levied on ratepayers’ electricity bills.1 The New York State Energy Research and Development Authority (NYSERDA) then used the funds to subsidize renewable energy installations. This differed from the approach taken by other states, which required utilities themselves to directly purchase more renewable energy.

The objective behind the RPS was to increase the amount of demand met by renewable energy from a 2003 level of 19 percent, which was almost exclusively hydroelectric power, to 25 percent in 2013. In 2010, the Public Service Commission extended that goal to 30 percent by 2015.2

Despite the collection of $1 billion in ratepayer subsidies for renewables, the RPS goal was not achieved.3 Renewable sources—still mainly hydroelectric power—supply 23 percent of electricity demand in New York as of 2015.4

Governor Cuomo’s efforts to promote renewable energy began in 2012 with the launch of the NY-Sun program, through which NYSERDA subsidizes residential, commercial and industrial solar installations.5 NY-Sun was slated to spend about $1 billion toward its goal of installing 3,000 megawatts of solar panel capacity, enough to power 400,000 homes, by 2023.6

In 2014, NY-Sun was incorporated into a broader energy strategy marketed as “Reforming the Energy Vision,” which included a goal to reduce greenhouse gas emissions 40 percent (compared to 1990 levels) by 2030, and 80 percent by 2050. As part of this, Cuomo sought to have 50 percent of the electricity used in New York come from renewable energy sources by 2030, a policy also known as “50 by 30.”7 Cuomo’s plan also called for collecting $5 billion from ratepayers over 10 years to bankroll a separate Clean Energy Fund.

In December 2015, the governor directed the PSC to develop a Clean Energy Standard combining the 50 by 30 goal with support for continued operation of three money-losing upstate nuclear plants.8 These plants—James A. FitzPatrick Nuclear Power Plant, R.E. Ginna Nuclear Power Plant, and Nine Mile Point Nuclear Generating Station—provided some of the “zero-emission” energy on which Cuomo’s plan relied, but faced closure because they could not sell electricity at competitive rates.

2. THE NEW “STANDARD”

On August 1, 2016, after less than eight months of review and public discussion, the Public Service Commission voted to enact a Clean Energy Standard consistent with the governor’s directive.9 The standard applies to all private and public electric utilities, and to all customers purchasing electricity directly from the New York Independent System Operator (NYISO), the non-profit entity that oversees the state’s wholesale electricity market. Starting in 2017, these “load-serving entities” will be required to purchase increasing amounts of “renewable energy credits,” or RECs, from NYSERDA, from renewable generators themselves, or from an intermediary.

Utilities will pass added costs to ratepayers—the residential, commercial, and industrial customers to whom they sell electricity. The state will presumably use the proceeds from RECs to directly subsidize renewable energy producers, although the exact mechanism has not yet been determined.

The standard also requires utilities to support, through the purchase of “zero-emission credits,” or ZECs, the operation of money-losing upstate nuclear power plants. However, nuclear power will not count toward the governor’s 50 by 30 goal.

The cost question

New York residents and businesses, especially downstate, already pay some of the highest electricity rates in the country, as illustrated in Figure 1.10 These rates reflect the cost of electricity generation (“supply”) and transmission (“delivery”), compounded by high local property tax rates on power plants, transmission rights-of-ways, and substations.

figure1-ces

With the exception of large hydroelectric plants, renewable energy is typically not cost-competitive with energy generated from conventional sources such as natural gas. At current prices, boosting the renewable component to 50 percent would effectively double the cost of generating electricity in New York (see Appendix). That figure does not include the cost of needed additional transmission lines or the backup generating capacity needed to produce electricity when the wind slows or clouds roll in.

Added costs associated with the Clean Energy Standard won’t be broken out on utility bills, but will be passed along to consumers as utilities are forced to acquire RECs and ZECs. The significant change in the mix of suppliers also will necessitate upgrades to the electric grid that are likely to further push up costs.

The PSC initially estimated that the new standard would add less than $1 to the average monthly residential electricity bill, while the governor more recently put the figure at less than $2 a month.11,12 The methodology behind these estimates has never been made public. In fact, as explained below, the actual cost is likely to be higher.

NYSERDA has not yet set a price for RECs, but the renewable standards in place in three New England states give an indication of what New Yorkers can expect to pay. Since 2013, RECs in Connecticut, Massachusetts, and Rhode Island have consistently cost more than $40 per megawatt-hour.13 Assuming New York’s RECs also cost $40, the five-year cost of the Clean Energy Standard will be more than $3 billion, as shown in Table 1, below.

table1-ces

Using the PSC’s math, the impact on the “average residential customer’s bill” will exceed $2 a month by the second year of the plan’s 13-year implementation period.

50 percent of what?

Demand for electricity across New York State is a crucial variable in the “clean energy” equation. If demand is significantly greater than projected, it will require utilities to rely on renewables to supply half the added power. In the absence of countervailing factors, the PSC-mandated shift to renewable power chasing a limited supply of renewable capacity actually will tend to drive prices higher.

The decision to adopt the standard was based on projections made by the PSC staff, not by the independent NYISO, which actually operates and monitors the power grid. The PSC’s projection of statewide demand for electricity in 2030 was a simple linear extension of the latest 10-year NYISO projection, which only runs through 2026.14 The PSC also made highly optimistic assumptions about the state’s ability to reduce electricity demand by promoting efficiency.15 The efficiency target requires the state to significantly improve on what has been accomplished in eight years of its most recent energy conservation push.16

But in basing its model on NYISO calculations, then separately assuming successful energy efficiency programs, the PSC double-counted demand reductions already incorporated in the NYISO’s projections.

The PSC’s cumulative projected savings from reduced demand through efficiency are actually larger than the commission’s baseline estimate of the new renewable generation capacity needed to meet the standard.17 The PSC assumes that, by 2030, the total statewide demand for electricity will be 141 terawatt-hours, 12 percent below the 2015 level.18 Half of that power—70.5 terawatt-hours—would need to be generated by renewable sources.

By comparison, New Yorkers used 36.8 terawatt-hours of renewable energy during 2015.19 The 33.7 terawatt-hours of additional renewable energy necessary to meet the 50 by 30 goal is more than double the amount generated in 2015 by the state Power Authority’s Niagara hydroelectric plant, the largest U.S. facility of its kind east of the Rockies.20

What if the PSC is overly optimistic in its assumptions about energy efficiency? In that case, demand could still be higher, compounding the needed increase in renewable generation. For example, if demand is 5 percent above the projection, utilities will have to purchase an extra 3.6 terawatt-hours of renewable energy, almost 15 percent more than the plan assumes.

The baseline for PSC calculations of existing renewable energy supply capacity is itself unclear. For example, electricity generated “behind” a home or business’ electrical meter, such as power from rooftop solar panels, will not count toward the state’s 50 percent goal. But the PSC has been inconsistent in the way it counts “behind-the-meter” renewable generation toward the state’s total renewable energy production.

The bottom line is that future energy demand is notoriously difficult to predict. Predictions by the authoritative NYISO have been off by 7 to 10 percent.21,22 If the calculations behind the Clean Energy Standard are off even by a smaller degree, they will fall far short of the 50 by 30 target—and may require an unobtainable amount of renewable energy.

Demand and capacity

Nearly all of the renewable energy currently sold in New York comes from hydropower, which has limited opportunity for growth.23 As a result, the state will need to rely mainly on building wind turbines and solar panel farms to meet the renewable mandate.

Under its optimistic “base case” scenario, as shown in Table 2, the PSC suggests the plan will require 4,188 megawatts of land-based wind turbines, 1,000 megawatts of offshore wind turbines and 3,855 megawatts of utility-grade solar panels.24

To meet the first goal, the state’s land-based wind power capacity would have to more than triple.25 Assuming each new wind turbine could generate 2 megawatts, this would require building 2,094 wind turbines. The amount of land needed for additional wind turbines depends on local conditions, such as terrain and average wind speed. According to U.S. Department of Energy (DOE) calculations, New York’s additional wind turbines would require between 196 and 922 square miles.26

Alternatively, based on land use at the state’s largest existing wind farm, these added wind turbines would require 428 square miles, an area almost the size of Nassau County.27 The PSC identified 370 prospective land-based wind turbine locations, but each would need to be approved by state and local authorities before construction could begin.28

New York utilities do not currently purchase electricity from offshore wind turbines—because there are none in the Northeast region.29 The PSC has highlighted five areas in the Atlantic Ocean ideal for offshore sites, and a 15-turbine, 90-megawatt wind farm is now proposed 30 miles off the coast of Montauk within the easternmost zone.30

Meeting the 1,000-megawatt target would require construction of another 152 wind turbines of the same type off the coast of Long Island and New Jersey. (Offshore wind turbines can also be built on Lake Ontario; however, the PSC anticipates offshore wind development only in the Atlantic Ocean.31)

To reach 3,855 megawatts of solar-energy capacity, New York would need nearly 200 times the capacity of its sole existing utility-grade solar power plant, which is located at Brookhaven National Laboratory on Long Island.32 Based on that facility’s size and production, and assuming it could be replicated elsewhere, these added solar farms would together cover 38 square miles—an area almost twice the size of Manhattan.

Such wind- and solar-power expansions obviously would require substantial new private-sector investments in an uncertain economic and regulatory climate. The willingness to make such investments has been limited: Even with extensive state and federal incentives, New York’s grid effectively added no wind power capacity in 2015.33

Given the highly optimistic assumptions behind the best-case scenario, it’s more likely that the commission’s “high load” scenario will have to be met. That would require New York to add enough solar panels to cover an area larger than most upstate towns, 244 offshore wind turbines, and a total of 2,869 new land-based wind turbines.34 Using the federal DOE estimate, these land-based wind turbines would cover an area between 277 square miles, the size of Putnam County, and 1,377 square miles—an area larger than all of Long Island.

Nonetheless, the PSC expects to double the rate at which new renewable capacity is added to the grid between 2017 through 2021, increasing renewable generation each year by 1,869,400 megawatt hours—about half of all the power generated from wind in New York in 2015.35,36 And even if these individual renewable energy generators can be brought online to meet the PSC’s arbitrary mandate, the power still needs to reach the customers.

3. TESTING THE GRID

Any major changes to the manner in which power is generated in New York must answer two important questions:

  1. Can enough power be generated, when and where it’s needed, to meet fluctuating demand?
  2. Can the state’s existing transmission network deliver that generated power?

In adopting the Clean Energy Standard, the PSC could not assure New Yorkers of an affirmative answer to either question.

Reliability

The operation of the electrical grid separately requires that a certain amount of generating capacity be available, but not in use, when demand reaches its daily peak. The size of this extra power margin depends on the reliability of generators at the time; because wind turbines and solar panels don’t continuously produce power, the margin needed to back up renewables will be substantially higher than the reserve now needed to back up the state’s current mix of generators.

The margin, which has ranged from 15 to 18 percent for all New York power producers in recent years, will need to climb to between 40 and 45 percent to accommodate the Clean Energy Standard.37 By the most conservative estimate—assuming the state actually meets its ambitious energy efficiency targets, and thus requires a margin of 40 percent—New York will still need to keep the equivalent of several upstate nuclear reactors available, but not necessarily in use, to back up new solar panels, wind turbines and other renewables. The standard has no provision to address this increased need—meaning the PSC has failed to plan for what happens when the wind is not blowing or the sun is not shining.

Daily demand on the electrical grid peaks each afternoon at about 175 percent of the normal load.38 During those peak-demand periods, land-based wind turbines are expected to be operational only 14 percent of the time and solar farms only 45 percent of the time, according to the NYISO.39

In an ideal situation, energy could be stored when the sun is brightest and when wind conditions are optimal. However, the technology to do this remains limited. New York has a small amount of storage ability, such as the state Power Authority’s hydroelectric facilities at Gilboa and Niagara Falls, which use surplus electricity to pump water to higher elevations, then allow it to flow back and turn turbines when electricity is needed.

In the absence of stored energy, utilities will need to rely on oil- or natural gas-fired generators to meet peak demand. These plants can’t simply be turned on and off as needed: sudden starts cause considerable wear and tear, and it takes time to “ramp” them up to the needed power level—meaning they may end up operating, and emitting carbon dioxide, needlessly. Even when they aren’t operating, these stand-by plants will have maintenance and upkeep costs—which ratepayers must cover in addition to the cost of added renewable generators.

After concerns about the intermittent nature of solar and wind power were raised by the NYISO, the PSC criticized the independent grid operator for having a “status quo outlook,” writing in its final Clean Energy Standard order that concern about reserve margin and increased capacity requirements “seems misplaced.”40,41 However, the mechanisms cited by the commission as improving dependability, such as expanded power storage capacity, are not subsidized or encouraged by the standard.

The PSC has failed to heed lessons learned by other regulators who have steered electricity generation specifically toward renewables with unintended consequences. The German government, for example, promoted renewables in tandem with a movement away from nuclear energy, but still remains heavily dependent on coal-fired plants to meet peak demand.42

Transmission

The ability to transmit electricity between generators and customers is constrained, first and foremost, by physics: electrical lines can move only so much electricity at a time. What’s more, the farther electricity needs to be transmitted, the more electricity is lost in the process.

The Clean Energy Standard will add to the existing challenge of moving power from distant generation sites to customers in the densely populated areas that can’t or won’t accommodate new plants. Downstate homes and businesses account for 65 percent of New York’s peak demand, but downstate power plants are capable of providing only 52 percent of that demand.43,44

In 2010, when the NYISO studied the expansion of wind power, it raised concerns about transmission upgrades that would be necessary, and said significant changes to transmission lines would be necessary to “unbottle” the electricity generated by new wind turbines.45

Governor Cuomo’s 2012 State of the State message proposed creation of an “Energy Highway,” consisting of additional transmission lines from the Mohawk Valley through the Hudson Valley to the New York City suburbs.46 At the time, Cuomo cited “an excess of generation capacity and tremendous wind power potential in Upstate and Western New York and north of the border in Quebec” coupled with “tremendous energy needs Downstate.”47 He cited this challenge again in his 2014 State of the State message, estimating ratepayers were overpaying $600 million a year because the power couldn’t be moved downstate.48

In a December 2015 order designed to promote the building of new power lines, the PSC said existing lines across eastern New York were “persistently congested, and such congestion contributes significantly to higher energy costs and reliability concerns.”49

However, local opposition has derailed proposals to expand power lines linking upstate New York power supplies to New York City customers. Also stalled is the proposed Champlain-Hudson Power Express line, which would transmit up to 1,000 megawatts of Canadian hydroelectric power to the New York City area.50

The PSC’s increased focus on high-cost offshore wind turbines closer to the New York City metro area appears to acknowledge the continuing challenge of transmitting power from upstate to downstate New York. At the same time, however, the Clean Energy Standard would require even more upstate generation, including 70 to 84 percent of the solar capacity that would count toward the standard, according to a PSC estimate.51

All of New York’s existing and proposed land-based wind turbines are located in rural Northern and Western New York.52 All but three of 370 PSC-proposed sites for added land-based wind power are north of the Tappan Zee Bridge.53

The NYISO notes that, according to the PSC’s projections, about 90 percent of New York’s added renewable generation will be in upstate New York. NYISO estimated that the Clean Energy Standard would require 1,000 miles of additional high-voltage transmission lines on top of what is already planned.54

Even before the Clean Energy Standard, the 2015 State Energy Plan estimated that, over the next 10 years, New York utilities would need to invest more than $30 billion to replace aging transmission and distribution infrastructure. The push for renewables, entailing more generating plants in upstate New York, could increase these transmission costs.

4. MIXED PRIORITIES

Making utilities purchase renewable energy has the indirect effect of curbing carbon outputs, but the standard would have been more effective and less complicated if it had regulated these outputs directly.

The Clean Energy Standard is needed, Cuomo has said, to “combat climate change and the resulting extreme weather events” by reducing carbon dioxide emissions.55 The PSC has focused on combatting the “global problem” of climate change while giving short shrift to dependability and transmission issues.56

Yet even taken on its own terms, the new policy’s impact will be microscopic in global terms. When fully implemented, the Clean Energy Standard is expected to reduce carbon dioxide emissions in 2030 by 23.6 million metric tons—an amount that, while seemingly impressive, equates to less than 0.3 percent of CO2 emissions in China alone as of 2014.57,58

Further doubts about the potential net impact of the Clean Energy Standard have been raised by the so-called Multiple Intervenors, a group of high-volume power users in New York State. In comments to the PSC, the Multiple Intervenors noted that New York already participates in a multi-state carbon-limiting program, the Regional Greenhouse Gas Initiative (RGGI).

Unless changes are made to the RGGI, the group said:

“[The Clean Energy Standard] likely would result in zero or an immaterial amount of net emission reductions because reductions achieved in New York simply would increase the number of available allowances in the other RGGI states. Were that to occur, there would be little to no net carbon reductions encompassing the RGGI states, and the benefits claimed in the Cost Study would be entirely or largely illusory.59

In sum, the Clean Energy Standard could raise electricity costs and reduce the grid’s dependability while producing little or no change in the amount of carbon dioxide going into the atmosphere. Even accepting the premise that forced renewable usage is justified, it would have made more sense to steer utilities toward a fixed amount of renewable capacity or generation, rather than an arbitrary fraction of an unknown future demand.

The standard also drew an arbitrary line among renewables: only facilities that came online on or after January 1, 2015 are eligible to produce RECs that will count toward utilities’ obligations.

At the same time, the State has a financial interest in giving preference to solar generation. It has invested $750 million in a Buffalo factory that will begin producing up to 1 gigawatt of solar panels annually, as federal incentives for residential solar installations continue to decrease.60,61

Furthermore, non-renewable plants will still be able to run and export their power—incentivizing non-renewable use in other states.

The standard was enacted in a rushed, opaque process. When the state’s previous renewable policy was adopted in 2004, it followed 19 months of analysis and public discussion.62 The Clean Energy Standard was enacted just eight months after proceedings began, and substantial changes were being made to the document in the days leading up to the August 1 vote to adopt it.63 The public did not see the final adopted Clean Energy Standard until after the commission had voted to enact it.

Even as the process was unfolding, operators of upstate nuclear plants had begun threatening to shut down the plants unless a comprehensive subsidy structure was included.64 Threats aside, though, the PSC was under no obligation to tackle the upstate nuclear plants concurrently with the governor’s renewable energy goal.

The PSC’s vote also came before the end of a two-year long review of the electrical grid by the NYISO that would have addressed the practicality of the standard itself.65

Several details of the standard remain undetermined—specifically, compliance costs. In its order, the PSC repeatedly acknowledged the need to revisit elements of the standard in the future, saying it “may decide to adjust near-term targets downward, increase obligations in later years, or focus on actions that can facilitate development.”66

While the PSC has established procedures and conditions under which it will revisit the standard, the renewable requirements will remain in force until at least 2020, absent further action by the Commission.67

Going nuclear—and not

Governor Cuomo’s carbon reduction goals were jeopardized when market conditions—particularly the plummeting cost of natural gas—made the operation of three upstate nuclear power plants unprofitable.

Entergy, the owner of the James A. FitzPatrick Nuclear Power Plant in Oswego County, unveiled plans in November 2015 to close the plant. Exelon, the operator of upstate’s two other nuclear plants, R.E. Ginna and Nine Mile Point, had also signaled earlier in the year that it was considering mothballing the plants’ three reactors. Beginning in January 2016, the PSC subsidized the operation of Ginna by levying a surcharge on Rochester Gas & Electric ratepayer bills, which was expected to collect over $100 million and keep the plant open through March 2017.68

The PSC plans to support the three upstate plants with up to $480 million in subsidies from New York ratepayers each year during 2017 and 2018, rising higher in 2019 and 2020 and reaching as much as $590 million per year for operations during 2021 and 2022.69 To fund these subsidies, utilities across the state will need to purchase “zero-emission credits” from NYSERDA, effectively allowing the plants to continue selling electricity at a loss.

But if the standard were purely motivated by lowering emissions, it would have unambiguously included other struggling nuclear plants, such as Millstone Nuclear Power Plant in Waterford, Connecticut, which are closer to New York City and Long Island than the upstate sites. In fact, it may have been more logistically and politically feasible for the PSC to seek to increase transmission capacity to Long Island from New Jersey and Connecticut via underwater cables than to build new power lines down the Hudson Valley.

Environmental considerations aside, the decision to subsidize the upstate nuclear plants amounts to a job-security program for the plants’ 2,105 employees—at a cost to ratepayers of up to $229,000 per job per year.

While supporting big subsidies for upstate nuclear plants in the name of promoting zero-emission electricity, the Cuomo administration has shown no sign of dropping its opposition to federal relicensing of Entergy’s profitable Indian Point Energy Center, which operates two nuclear reactors in Westchester County—where retail electricity prices and demand already are much higher. In pushing for Indian Point’s closure, Cuomo has cited “deep concerns about the management, maintenance, and equipment standards at this plant.”

The governor hasn’t always applied the same standard of concern to upstate and downstate nuclear plants. In June, for example, an Indian Point reactor was temporarily shut down after a water pipe began leaking. Cuomo immediately issued a statement describing Indian Point situation as a reminder of that plant’s “direct and unacceptable impact on safety.” The governor issued no statement when, on the same day as the Indian Point closure, the Fitzpatrick plant in Oswego had to shut down after losing power to some cooling systems and leaking oil into Lake Ontario.

Good carbon? Bad hydro?

Wind turbines and solar panels aside, some of the other renewable sources explicitly promoted by the Clean Energy Standard would actually generate greater carbon emissions. For example, “biogas” captured from decaying organic matter in landfills or produced in bioreactors from plant or animal waste is primarily composed of methane—the same compound that makes up natural gas. Electricity generated from burning biogas will count toward the standard, while natural gas will not.

Another PSC-approved renewable energy source is biomass, which effectively sanctions the practice of raising crops such as timber, grasses, and soybeans exclusively to burn them or their byproducts.

A 1998 report prepared for the U.S. Department of Energy cited numerous opportunities for New York to construct more hydroelectric dams, including one site on the Niagara River that would generate more electricity than 100 land-based wind turbines.70 However, the Clean Energy Standard rejects additional hydroelectric production from new dams out of concern for methane emissions caused by flooding, offering no criteria to weigh that against potential benefits.71

These contradictions are indicative of a fundamental flaw in the policy: despite the governor’s professed desire to help address global climate change, the Clean Energy Standard is designed primarily to promote renewables rather than reduce carbon emissions.

5. A BETTER WAY

The PSC called the 50 by 30 goal “a component of a larger statewide greenhouse gas goal … the product of a lengthy State Energy Planning process.”72 Audrey Zibelman, chairwoman of the PSC, described the Clean Energy Standard as “an example of government recognizing that proposed actions to prevent climate change [are] now both a moral imperative, no longer a choice but a necessity, and an economic one.”73

But as detailed in this paper, the standard does not directly address carbon emissions.

Instead, it mandates a significant expansion of renewable energy purchases by New York utilities, coupled with subsidies for upstate nuclear power plants. It effectively treats all conventional fossil fuel power sources as equally undesirable—missing an opportunity to promote the use of cleaner-burning natural gas, a goal previously reflected in both federal and state energy policies. It will, at best, have an insignificant impact on global carbon emissions—and might have no impact at all, since any emissions reduction achieved in New York may simply be displaced by an increase in allowable emissions in other states.

By focusing on an arbitrary percentage target for expanded renewable energy supplies, instead of a fixed amount of capacity or generation, the Clean Energy Standard has created a moving target that will be much more expensive and difficult to achieve.

By failing to address the need for upgrades to the statewide grid, especially between downstate and upstate, the PSC has failed to ensure that electricity generated by renewable sources will actually be able to reach places where demand is highest.

If reducing carbon emissions is truly the overarching goal of state policy, the PSC could better achieve it by making two fundamental changes to the standard:

1. Target carbon emissions rather than renewables. Give electric utilities leeway to determine how to reach emissions targets while minimizing the negative impact on ratepayers. They could achieve this not only by promoting renewable generation, but also by encouraging energy efficiency and equipment upgrades. Emission allowances, such as those established under RGGI, would have harnessed market forces to achieve both efficiency and lower emission goals. The PSC also needs to recognize that any effort to reduce emissions may be futile unless RGGI is modified to prevent other states from generating more carbon dioxide even as New York strives to reduce emissions.

2. Move electrons, not cash. New York’s energy policies already have distorted the market in which upstate nuclear plants, and even certain renewable generators, are struggling to compete. The state’s ReCharge NY program, for example, is providing some businesses with subsidized electricity through the state Power Authority in greater amounts than the struggling R.E. Ginna Nuclear Power Plant is generating.74,75

Subsidies scheduled to flow to Exelon for upstate nuclear plants in just the first six years of the standard far exceed the cost of major transmission upgrades that would deliver upstate nuclear power to downstate New York. These upgrades are also needed to move electricity from existing upstate-based renewable generators to downstate customers.

Regulatory overreach

The manner in which the Clean Energy Standard was conceived, developed and adopted also raises a fundamental question about democratic control and governance in New York State.

The Public Service Commission was created in the early 20th century to oversee the state’s nascent electric utilities, which were then monopolies selling power to captive end-users at rates of their choosing. State law gives the PSC the power to oversee the “manufacture, conveying, transportation, sale, or distribution” of electricity, among other things.76

Much has changed, however, since the laws governing New York’s electricity market were reformed in the 1990s. Electricity is now sold in a competitive wholesale market overseen by the NYISO. This market connects customers with the lowest available cost while also providing crucial signals to the private sector, spurring investment in response to demand.

While the PSC’s regulatory functions are still needed in overseeing the transmission and retail components of electricity delivery, no consumer interest is served by having the PSC interfere with the wholesale market, which is regulated by the federal government.

Decisions as far-reaching as the Clean Energy Standard should be made by the Legislature, not a panel of gubernatorial appointees. To prevent the PSC from imposing other expensive, disruptive, and poorly designed standards, the Legislature should modernize the statutes that outline the commission’s authority, and restrict its ability to interfere with the wholesale electricity market.

Separately, the PSC has levied a series of “surcharges”—in effect, taxes—on ratepayers. As documented in this report, through the Clean Energy Fund alone, the PSC is on track to take $500 million per year from ratepayers and spend it without a single vote from the Legislature.

The ability of the PSC to levy such surcharges should be eliminated, and the power should be reserved for the elected representatives in the state Legislature.

CONCLUSION

Energy is the lifeblood of a modern economy. For New Yorkers, in particular, it is also a major component of the cost of living and doing business.

New York residents and businesses are already paying some of the highest electricity prices in the nation. The Clean Energy Standard is likely to drive prices much higher while producing little, if any, progress towards the goal of reducing carbon dioxide emissions.


For Appendix, see PDF page 14.

ENDNOTES

1 NYS PSC Case 03-E-0188

2 Ibid

3 2015 RPS Annual Report, NYSERDA

4 Power Trends 2016, p.2, NYISO

5 The Regional Greenhouse Gas Initiative (RGGI) is the “mandatory market-based program in the United States to reduce greenhouse gas emissions. RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector.”www.rggi.org

6 “About NY-Sun,” NYSERDA, www.nyserda.ny.gov/All-Programs/Programs/NY-Sun/About

7 www.ny.gov/programs/reforming-energy-vision-rev

8 Order Adopting a Clean Energy Standard, NYS PSC

9 Ibid

10 Energy Information Administration, Electric Power Monthly, U.S. Dept. of Energy.

11 “Clean Energy Standard White Paper – Cost Study,” NYS Dept. of Public Service

12 “Governor Cuomo Announces Establishment of Clean Energy Standard that Mandates 50 Percent Renewables by 2030”, Aug. 1, 2016, press release, https://www.governor.ny.gov/news/governor-cuomo-announces-establishment-clean-energy-standard-mandates-50-percent-renewables

13 “Renewable Energy Certificates,” U.S. Dept. of Energy – http://apps3.eere.energy.gov/greenpower/markets/certificates.shtml?page=5

14 The PSC assumed 176.6 TWh demand, then subtracted efficiency savings, to get 141 TWh.

15 “Staff White Paper on Clean Energy Standard,” NYS Dept. of Public Service, Appendix B. The PSC assumes achieve 2.227 terawatt-hours of demand reductions every year for the next 13 years, so that demand will be reduced by 35.6 terawatt-hours by 2030.

16 According to the Energy Efficiency Portfolio Standard, Cumulative Savings Summary, the program produced less than 1 terawatt-hour of efficiency savings during 2015. http://documents.dps.ny.gov/gov/public/EEPS/EEPSReport.aspx

17 The projected savings (35.6 TWh) exceeds the amount of new renewable generation (33.7 TWh) proposed in the DPS white paper (p.7)

18 Order Adopting a Clean Energy Standard, p.84

19 NYISO 2016 Load & Capacity Report, p.11.

20 2016 Annual Report, New York Power Authority, p24 – nypa.gov/NYPA-2015-AnnualReport.pdf

21 2000 NYISO Gold Book (estimate) vs. 2010 NYISO Gold Book (actual).

22 2005 NYISO Gold Book (medium estimate) versus 2015 NYISO Gold Book (actual)

23 Power Trends 2016, NYISO

24 “Final Supplemental Environmental Impact Statement,” PSC case no. 15-E-302, page 4-4, Base Case

25 Power Trends 2016, NYISO

26 “Land-Use Requirements of Modern Wind Power Plants in the United States,” National Renewable Energy Laboratory, U.S. Dept. of Energy, Aug. 2009. www.nrel.gov/docs/fy09osti/45834.pdf – NREL estimated a 1 MW of generation requires between 30 and 141 acres of land. Assumes each wind turbine generates 2 MW.

27 Maple Ridge Wind Farm in Lewis County has 321 MW capacity on 21,000 acres – www.avangridrenewables.us/cs_mapleridge.html – .102 sq miles per MW.

28 “Clean Energy Standard White Paper – Cost Study,” page 133

29 Power Trends 2016, NYISO

30 “DeepwaterWind – Deepwater One South Fork” dwwind.com/project/deepwateronesouthfork/

31 Order Adopting a Clean Energy Standard, App G, p.28

32 2016 Load and Capacity Data, NYISO, p.3, 32 MW of large-scale solar from LI Solar Farm.

33 “Installed Wind Capacity by State,” U.S. Energy Information Administration, U.S. Dept. of Energy

34 “Final Supplemental Environmental Impact Statement,” page 4-4, High Load; additional solar panels would cover 59 sq. miles based on LISF 102 MW per sq. miles.

35 Order Adopting a Clean Energy Standard, p.16.

36 Power Trends 2016, NYISO, p.2

37 NYISO Supplemental Comments, NYS PSC Case No. 15-E-0302

38 “Peak-to-average electricity demand rising in New England and many other U.S. regions,” Energy Information Adminsitration, U.S. Dept. of Energy, www.eia.gov/todayinenergy/detail.cfm?id=15051#tabs_SpotPriceSlider-2

39 NYISO supplemental comments, NYS PSC Case. No. 15-E-0302

40 Letter to NYISO CEO Brad Jones from Richard Kauffman, July 2016

41 Order Adopting a Clean Energy Standard, p.74

42 “How Renewable Energy Is Blowing Climate Change Efforts Off Course” NYTimes.com, July 19, 2016 – www.nytimes.com/2016/07/20/business/energy-environment/how-renewable-energy-is-blowing-climate-change-efforts-off-course.html

43 Power Trends 2016, NYISO

44 Power Trends 2016, p.29, NYISO.

45 “Growing Wind: Final Report of the NYISO 2010 Wind Generation Study,” NYISO

46 “Governor Cuomo Receives Plan to Modernize the State’s Energy Infrastructure and Spur Billions of Dollars in Private Sector Investment,” press release, Oct. 22, 2012 – www.governor.ny.gov/news/governor-cuomo-receives-plan-modernize-states-energy-infrastructure-and-spur-billions-dollars

47 “2012 State of the State Address” – www.governor.ny.gov/sites/governor.ny.gov/files/archive/assets/documents/Building-a-New-New-York-Book.pdf

48 “Transcript: Governor Cuomo’s 2014 State of the State Address” – Jan. 9, 2014 – www.governor.ny.gov/news/transcript-governor-cuomos-2014-state-state-address

49 Order Finding Transmission Needs Driven By Public Policy Requirements, NYS PSC, Dec. 17, 2015 – Case No. 12-T-0502, etc.

50 “Hudson River power line project faces challenges” POLITICO New York, Apr. 7, 2015, www.politico.com/states/new-york/albany/story/2015/04/hudson-river-power-line-project-faces-challenges-021083

51 Final EIS, PSC Case. No. 15-E-0302, p.5-16

52 Power Trends 2016, p.34, NYISO

53 Clean Energy Standard White Paper – Cost Study, p.133

54 NYISO supplemental comments, NYS PSC Case No. 15-E-0302

55 “Governor Cuomo Announces Establishment of Clean Energy Standard that Mandates 50 Percent Renewables by 2030,” Aug. 1, 2016, press release, https://www.governor.ny.gov/news/governor-cuomo-announces-establishment-clean-energy-standard-mandates-50-percent-renewables

56 Order Adopting a Clean Energy Standard, p.70.

57 Carbon avoided by CES based on EPA conversion factor of 7.03E-04 metric tons per MWh offsetting 33.6 TWh of electricity use in 2030. EPA source: https://www.epa.gov/energy/ghg-equivalencies-calculator-calculations-and-references

58 China emission level from edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2014

59 Order Adopting a Clean Energy Standard, Appendix B, p.153

60 “Solar Subsidy” – www.empirecenter.org/publications/solar-subsidy/

61 “Solar Investment Tax Credit (ITC)”, Solar Energy Industries Assn., http://www.seia.org/policy/finance-tax/solar-investment-tax-credit

62 NYS PSC Case No. 03-E-0188

63 NYS PSC Case No. 15-E-0302

64 “Another Oswego County nuke threatens to close: Nine Mile 1 on the brink” Syracuse.com, June 15, 2016 www.syracuse.com/news/index.ssf/2016/06/another_oswego_county_nuke_threatens_to_close_nine_mile_1_on_the_brink.html

65 The State Resource Plan, a two-year study of reliability and transmission issues, was initiated by NYISO on Aug. 1, 2014.

66 Order Adopting a Clean Energy Standard, pp.90-91.

67 Order Adopting a Clean Energy Standard, p.117

68 “Extra fee to keep Ginna afloat OK’d,” Democrat & Chronicle, Feb. 23, 2016, www.democratandchronicle.com/story/news/2016/02/23/extra-ginna-fee-okayed/80813778/

69 Order Adopting a Clean Energy Standard, pp.50-51

70 “U.S. Hydropower Resource Assessment: New York,” p. 2, Idaho National Engineering and Environmental Laboratory, U.S. Dept. of Energy, 1998

71 Order Adopting a Clean Energy Standard, App. A, p.3

72 Order Adopting a Clean Energy Standard, p.76

73 NYS Public Service Commission Webcast, Aug. 1, 2016

74 ReCharge NY provides 910 megawatts of capacity: nypa.gov/RechargeNY

75 R.E. Ginna Nuclear Power Plant’s generation capacity is 576 MW: www.exeloncorp.com/locations/power-plants/r-e-ginna

76 NYS Public Service Law §5

- Kenneth Girardin is the Communications and Marketing Manager at the Empire Center for Public Policy.