Nuclear New York Comments on Proposed Tier 4 Contracts of NYSERDA

Last December I posted an article that compared residential cost impacts of the recently announced New York State Energy Research and Development Authority (NYSERDA) contracts with Clean Path New York LLC for its Clean Path NY (CPNY) project and H.Q. Energy Services (U.S.) Inc. (HQUS) for its Champlain Hudson Power Express (CHPE) with the energy needed as part of the Scoping Plan.  I was recently contacted by Dietmar Detering from Nuclear New York who called my attention to the comments that they submitted to the Department of Public Service on those contracts.  This post reproduces their comments and describes their context relative to the Climate Leadership and Community Protection Act (Climate Act). I have written extensively on implementation of the Climate Act because I believe the ambitions for a zero-emissions economy outstrip available renewable technology such that it will adversely affect reliability and affordability, risk safety, affect lifestyles, will have worse impacts on the environment than the purported effects of climate change in New York, and cannot measurably affect global warming when implemented.   The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

The Climate Action Council is responsible for preparing the Scoping Plan that will “achieve the State’s bold clean energy and climate agenda”.  The Climate Act requires the Climate Action Council to “[e]valuate, using the best available economic models, emission estimation techniques and other scientific methods, the total potential costs and potential economic and non-economic benefits of the plan for reducing greenhouse gases, and make such evaluation publicly available” in the Scoping Plan. Starting in the fall of 2020 seven advisory panels developed recommended strategies to meet the targets that were presented to the Climate Action Council in the spring of 2021.  Those recommendations were translated into specific policy options in an integration analysis by the New York State Energy Research and Development Authority (NYSERDA) and its consultants.  The integration analysis was used to develop the Draft Scoping Plan that was released for public comment on December 30, 2021. The NYSERDA contracts described here are one component of Climate Act implementation.

Tier 4

I described this effort in a previous post.  According to the NYSERDA Tier 4 webpage:

The Public Service Commission’s October 15, 2020 Order [PDF]establishes a new Tier 4 within the Clean Energy Standard (CES) in response to NYSERDA’s CES White Paper. The new Tier 4 will increase the penetration of renewable energy into New York City (NYISO Zone J), which is particularly dependent on polluting fossil fuel-fired generation. NYSERDA’s CES White Paper found that without displacing a substantial portion of the fossil fuel-fired generation that New York City currently relies upon, the statewide 70 by 30 Target would be difficult to achieve. Through Tier 4, the State will procure the unbundled environmental attributes (in the form of Tier 4 RECs) associated with renewable generation delivered into Zone J. These environmental attributes include the avoidance of GHG emissions, as well as the avoidance of local pollutants such as NOx, SOx, and fine particulate matter.

On November 30, 2021 New York Governor Kathy Hochul announced that finalized contracts for two projects to meet this solicitation had been awarded.  In order to complete this process NYSERDA and the Department of Public Service (DPS) submitted “a petition for approval this Petition and two contracts for renewable energy credits (RECs) entered into under Tier 4 of the Clean Energy Standard (CES)”.  These documents are available on the DPS website for this matter.  For the reader’s information and because trying to access the DPS website is a challenge I have posted the petition, press release, cost analysis, and the contracts on this website.  According to the petition:

Tier 4 was established by the Public Service Commission (Commission) in October 2020 to overcome the challenge of New York City’s reliance on fossil fuels and to help accelerate achievement of New York’s target of 70% renewable energy by 2030. To this end, the Commission instructed NYSERDA to proceed with a Tier 4 solicitation that will increase the penetration of renewable energy into New York City (Zone J). NYSERDA issued its solicitation in January 2021 and received a highly competitive response with seven projects submitting proposals.

Following a robust and comprehensive evaluation process, which considered bid prices, viability and economic benefits, in September of 2021, the selection of two projects was announced: (1) the Clean Path New York (CPNY) project; and (2) the Champlain Hudson Power Express (CHPE) project. Contract negotiations have now concluded, and in accordance with the Commission’s instructions, NYSERDA and Staff are submitting the signed contracts for the Commission’s consideration and approval. The selected projects are expected to deliver 18 million megawatt-hours of renewable energy per year to Zone J, more than a third of New York City’s annual electric consumption, from a diverse generation portfolio including onshore wind, solar and hydroelectric power from Upstate New York and Québec.

The bid evaluation document describes the two projects.  The CPNY proposal has three main components:

    • New Tier 4 renewable generation to be built in New York (CPNY Resources), located largely upstate,
    • A new 1,300 MW HVDC controllable link from upstate to New York City, and
    • The use of the New York Power Authority owned Blenheim Gilboa pump storage facility to store energy produced by the CPNY resources that is generated in excess of the Tier 4 transmission capacity.

The CHPE project is an underground transmission line from Quebec to New York City that will deliver 1,250 MW of hydro generation from Hydro Quebec.  Both projects terminate in New York City so that it can be considered “in-city” generation.

Nuclear New York Comments

Last November the DPS submitted “a petition for approval this Petition and two contracts for renewable energy credits” and asked for public input.  Nuclear New York submitted a comment on 2/14/22.  They were “formed in response to the travesty of shutting down Indian Point” and support long-term investments in zero-emission infrastructure.  The comments note that: “Most importantly, the contracts will provide system benefits and emission avoidance for much longer than the thirteen years used to calculate them (2028–2040), an aspect overlooked by some commenters.”  I reproduce the following nine points made in their comment letter below with my italicized and indented comments.

  1. CPNY gets to use NY Power Authority’s Blenheim-Gilboa pumped storage facility presumably free of charge. The estimated dollar price of this unique facility would be about $2 billion should New York build it today. In reality, Blenheim-Gilboa is priceless: New York will most likely be unable to build another like it. Yet, there is barely any mention of this gift by the people of New York in the Tier 4 Bid Evaluation, making the comparison with CHPE, which gets no such gift, unfair. Without Blenheim-Gilboa, CPNY’s intermittent generation would be much less valuable to NYC and the proposed transmission line much too undersized. The connection would either sit idle when variable renewables are not generating or simply transmit electricity from fossil combustion to NYC most of the time.

In my Tier 4 article I pointed out that the CPNY capacity factor for the new Tier 4 renewable generation is so high because the project plan uses the Blenheim Gilboa pump storage facility.  However, Blenheim Gilboa was built in 1973.  It has been in daily use storing energy when prices are low and producing energy when prices are high.  It does not represent anything new even if the plan is to use it differently.  As pointed out in the Nuclear New York comments this is just a shell game. 

 2. The annual bid quantity for CHPE is higher than that of CPNY, which is also reflected in the higher costs and system value of CHPE over CPNY. However, NYSERDA expects cumulative carbon abatements of 49 million metric tons by CPNY but only 37 million metric tons by CHPE over the 13 years under evaluation. Per kWh, this translates to 479 grams of carbon avoided by CPNY, and only 274 grams per kWh avoided by CHPE. It is slightly worse in NYSERDA’s Benefit Cost tables: $50 per MWh in Carbon Value delivered by CPNY, but only $27 for CHPE. Even more extreme is the valuation for air quality improvements, where CPNY scores $27 per MWh vs. CHPE’s disappointing $12. If there is a clear explanation for this somewhere, we haven’t seen it.

The proposal treats CPNY as an entirely new sources of carbon abatement but that is not the case.

 3. If anything, the Carbon Benefits that NYSERDA calculated for CPNY should be lower than those of CHPE given that most of CPNY’s wind and solar projects are already planned and, so far, tallied as so-called Tier 1 Renewable Energy Credit (REC) projects. Little is being won with CPNY since it is difficult to add additional Tier 1 projects upstate due to the ever growing number of transmission-constrained “pockets”. These pockets can host the same projects either for Tier 1 or Tier 4, but to benefit from both credit schemes requires additional transmission investments, ignored in NYSERDA’s Bid Evaluation analysis.

Nuclear New York makes the point that it is even worse than I claimed because the State already took credit for the Tier 1 renewable energy projects.

  1. NYSERDA and the PSC need to examine how extreme weather may impact New York’s expected energy imports. In the payment formula, both projects get the promised Strike Price “minus the simple (not load-weighted) average of Zone J’s marginal price” for each MWh delivered during that month. This is treating both CPNY and CHPE like baseload power sources but without actually getting baseload service. Quebec and NYC often experience the same weather. Consequently, CHPE will deliver electricity during low or moderate demand periods. But Hydro Quebec will keep all power at home during grim winter weeks, such as on January 22 of this year: Exports to ISO-NE (the New England grid) were reduced to the contracted minimum, and, instead of exporting power to New York, Quebec needed to import power from New York. On really cold days in the Northeast, NYC will get no power via CHPE and will again rely on fossil-fueled “peaker plants”. Yes, CHPE and CPNY will get paid little for their electricity in the wholesale market if they fail to serve NYC in times of most desperate need. However, New Yorkers are still going to pay plenty for the RECs generated during “nice weather” hours.

This is a very important point.  The Climate Action Council is supposed to develop the Scoping Plan that will direct the future Energy Plan.  Reliability is a crucial requirement for the Energy Plan but I have not seen any indication in the Draft Scoping Plan or during deliberations of the Council that they understand the primary problem with providing electricity when it is needed most is during peak load periods.  The future New York electric grid is going to peak in the winter and the really cold days issue is a big problem.  If Hydro Quebec “keeps all power at home during grim winter weeks” this resource will be worthless when needed most.

 5. While CPNY cannot make any enforceable guarantees as to when they are able to deliver their weather-dependent power, CHPE could. However, the only assurances that the CHPE contract provides is a vague Minimum Delivery Requirement, calculated over the six months of “Winter” or “Summer”. This incentive structure does nothing to guarantee New Yorkers access to hydropower at times when it is needed most to balance intermittent wind- and solar-based generation and to protect against deadly power shortages, such as seen during the Texas Freeze of 2021. Therefore, neither project will help displace the need for fossil-fuel-based backup power plants.

I have long believed that one of the hidden problems with the Climate Act transition to zero emissions by 2040 is that market mechanisms have to be developed that will provide the services needed when needed.  This example supports my concern that serious problems are inevitable.

 6. Both contracts sound strong in Sections 4.03/4.04: NYSERDA is going to pay nothing for RECs created during hours in which the marginal price of electricity in NYC is zero or negative. However, this provision expires after the first 200 such hours in a year – a mere 2.3% of the time. However, over the lifespan of the contracts, NYSERDA is planning to connect not 9,000 MW, but possibly 19,000 MW of offshore wind power to NYC and Long Island. Often, these facilities will produce no electricity at all, but when the wind blows NYSERDA is obligated to accept all the generated power or pay for curtailment. Given federal production tax credits, this will force NYC wholesale electricity prices into negative values, perhaps for thousands of hours every year. The contracts’ pricing formula, however, forces NYSERDA to compensate CHPE and CPNY for these depressed prices, irrespective of whether NYC needs their output or not.

The Nuclear New York comments provide another example where the contract language is not going to be in the best interests of New York ratepayers.  In this instance it appears that costs will be higher than would be expected in an ideal system.  I am confident that the Draft Scoping Plan Integration Analysis does not include curtailment costs as part of the total costs of implementing the Climate Act.

  1. NYSERDA and others expect New York’s peak electricity load to move to Winter as heat pumps replace gas boilers for space heating. Thus, capacity market prices will be much higher in Winter than in Summer. The REC pricing formula for both contracts subtract the capacity value of each project from the respective strike price. However, for the CHPE contract, this adjustment only happens in the six months of “Summer”. For the “Winter Capability Period”, this adjustment is set to zero and New Yorkers are “paying” CHPE, via the unadjusted strike price, for capacity that CHPE is not guaranteeing. Adding insult to injury, all the careful clauses of the contract, for “Loss Factor”, “Unavailability Factor”, and “Mitigation Factor” are being multiplied by the same “zero capacity” factor in Winter, when they should matter most.

One of the problems with Climate Act implementation is that there is no master plan.  We know peak load planning is important and we know that the winter peak will be the future issue. Is it in the best interests of New York to support a solar project on the Tug Hill downwind of Lake Ontario where 300” of snow per year are common when we know we cannot rely on energy from there when it is needed most?  This example in the comments reveals an astounding disconnect between future needs and the contracted resources from CHPE. 

 8. NYSERDA calculates the “Carbon Benefit” using the globally-suffered Social Costs of Carbon as calculated by the New York State Department of Environmental Conservation. However, this value has been calculated using a 2% discount rate, whereas everything else in NYSERDA’s Bid Evaluation is using a discount rate of 3.68%. NYSERDA is mixing apples and oranges, and no one seems bothered. In partial acknowledgement, NYSERDA is offering a “low carbon value scenario”, employing a social cost of carbon calculated at a 3% discount rate. But this is still a HIGH carbon value scenario in the context of this analysis. The only Carbon Benefit we should be looking at would be one based on the same discount rate used elsewhere in the analysis, 3.68%, yet NYSERDA denies us this clarity.

I have previously shown that NYSERDA’s carbon benefit calculations are biased, incorrect, and inconsistent with other jurisdictions.  These comments show that they are also inconsistent with other state policies.  There is no question in my mind that NYSERDA knows full well that they are running a con game with this metric in a desperate attempt to claim the transition benefits will out-weigh the costs.

  1. Sadly, the benefits of both projects combined already show a diminishing rate of return. With relatively cheap Quebecoise hydropower tapped out, and priceless Blenheim-Gilboa pumped hydro power given away for free, how is NYSERDA planning to sell New Yorkers on the next Tier 4 projects, which will be more expensive and offer smaller benefits?

This is an excellent point.  The comments correctly point out that the best chances for substantial renewable resources have been used.  Moreover, existing renewable resource developments are likely sited in the best locations so any future developments will also be more expensive and have smaller benefits. 

Cost Estimates

My previous post on this topic looked at costs.  The petition includes the following cost estimates:

The costs of program payments for the purchase of Tier 4 RECs from the projects are projected as $5.9 – $11.6 billion, equating to an estimated increase in customer electric bills of 2.1 – 4.1% (or $2.08 – $4.08 per month for the average residential customer) on average across the State for the 25-year period of the Tier 4 contracts. The range of these projections reflects future uncertainties including energy and capacity prices and includes the benefits to ratepayers from the expected purchase of Tier 4 RECs by the City, which reduces the ratepayer impact by $0.8-$1.7 billion. Additional cost reductions could occur as a result of federal transmission tax credits, which could reduce the remaining costs of Tier 4 to ratepayers to 1.8 – 3.8%. Voluntary purchase of Tier 4 RECs by New York City organizations with interest in switching to renewable energy could reduce ratepayer impact even further.

Keep in mind that these comments point out that CHPE won’t necessarily provide power to NYC when needed the most in the winter, that the costs listed here do not incorporate curtailment costs, and that the CPNY does not represent a significant addition to renewable resources because it is mostly a re-packaging of the priceless Blenheim-Gilboa hydro pumped storage assets.  Throw in irregularities in the cost calculations and these comments should be considered in the petition process. 

Conclusion

Clearly the utter hypocrisy of claiming that there is an existential threat due to climate change but shutting down 2,000 MW of emissions-free dispatchable generating capacity is a major flaw in the Climate Act.  The Nuclear New York comments are completely consistent with my concerns about the viability of a New York zero-emissions electric system without using nuclear energy.  The comments point out numerous issues related to contracts associated with one of many future contracts necessary to implement the Climate Act.  This does not portend well for the transition.  The comments also reinforce my concern that the hurdles for the transition are not limited to technological constraints and costs.  If the market mechanisms and contracts don’t deliver what is needed, then New York ratepayers will be left holding the bag. 

Author: rogercaiazza

I am a meteorologist (BS and MS degrees), was certified as a consulting meteorologist and have worked in the air quality industry for over 40 years. I author two blogs. Environmental staff in any industry have to be pragmatic balancing risks and benefits and (https://pragmaticenvironmentalistofnewyork.blog/) reflects that outlook. The second blog addresses the New York State Reforming the Energy Vision initiative (https://reformingtheenergyvisioninconvenienttruths.wordpress.com). Any of my comments on the web or posts on my blogs are my opinion only. In no way do they reflect the position of any of my past employers or any company I was associated with.

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