New York Cap-and-Invest State of the State Update

Recently I posed some questions that I think need to be resolved associated with the New York Cap-and-Invest Program (NYCI) because I believed that Governor Hochul would announce the next steps associated with the implementation of this program when she presented the 2025 State of the State.  I was completely wrong.  The policy initiatives in the 2025 State of the State book only included this reference to NYCI: “Over the coming months, the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA) will take steps forward on developing the cap-and-invest program, proposing new reporting regulations to gather information on emissions sources, while creating more space and time for public transparency and a robust investment planning process.”  This post describes the official announcements and schedule impacts.  I will follow up with another post describing reactions later.

I am convinced that implementation of the New York Climate Leadership & Community Protection Act (Climate Act) net-zero mandates will do more harm than good if the future electric system relies only on wind, solar, and energy storage because of reliability and affordability risks.  I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 490 articles about New York’s net-zero transition.  The opinions expressed in this article do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.

Overview

The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% GHG reduction by 2030. Two targets address the electric sector: 70% of the electricity must come from renewable energy by 2030 and all electricity must be generated by “zero-emissions” resources by 2040. The Climate Action Council (CAC) responsible for preparing the Scoping Plan to “achieve the State’s bold clean energy and climate agenda” recommended a market-based economywide cap-and-invest program. 

The program works by setting an annual cap on the amount of greenhouse gas pollution that is permitted to be emitted in New York: “The declining cap ensures annual emissions are reduced, setting the state on a trajectory to meet our greenhouse gas emission reduction requirements of 40% by 2030, and at least 85% from 1990 levels by 2050, as mandated by the Climate Act.”  In addition to the declining cap, it is supposed to limit potential costs to New Yorkers, invest proceeds in programs that drive emission reductions in an equitable manner, and maintain the competitiveness of New York businesses and industries.  

I have looked for the original schedule for NYCI implementation but could not find anything to document my recollection that the program was planned to be in place and operating so that auction revenues would start in 2025.  There is no doubt that the announcement that the program is taking steps forward on developing the cap-and-invest program “over the coming months” admits that the program is being delayed.  Let’s take a look at the information available and possible reasons for the delay.

NYCI Schedule

The State of the State Book and the NYSERDA State of the State Announcement provided nothing concrete about the schedule.  The only reference to time was “over the coming months”. 

The Nature Conservancy in New York released a statement from Jessica Ottney Mahar, policy and strategy director that is likely to be the most accurate timeline because her husband is the acting Commissioner of the Department of Environmental Conservation.  Her statement included the following:

Unfortunately, in a concerning setback for climate action, Governor Hochul is delaying the implementation of a Cap and Invest Program that would reduce the air pollution that causes global warming. Rather than advancing draft regulations this month, as had been widely discussed, the Governor’s address states that partial program details will be released sometime this year”.

Discussion

Obviously, the Hochul Administration is stalling the progress of NYCI.  Not surprisingly, advocates are “concerned” but the fact is that the aspirational Climate Act schedule is at odds with reality as developments last summer showed. 

Administration descriptions of the 2025 State of the State said; “It includes more than 200 initiatives that will put money back in people’s pockets, keep New Yorkers safe, and ensure the future of New York is a place where all families can thrive.”  The reality is that NYCI will be expensive and at odds with the affordability theme of the State of the State.  At the Energy Access and Equity Research webinar sponsored by the NYU Institute for Policy Integrity on May 13, 2024 Jonathan Binder stated that the New York Cap and Invest Program would generate proceeds of “between $6 and $12 billion per year” by 2030.  In my opinion, costs are primary driver for the delay.

Last September I wrote an article that discussed several reports that should also have influenced the decision to slow down NYCI implementation.  On July 16, 2024 the New York State Comptroller Office released an audit of the NYSERDA and Public Service Commission (PSC) of their implementation efforts for the Climate Act titled Climate Act Goals – Planning, Procurements, and Progress Tracking.  The key finding summary states: “While PSC and NYSERDA have taken considerable steps to plan for the transition to renewable energy in accordance with the Climate Act and Clean Energy Standard, their plans did not comprise all essential components, including assessing risks to meeting goals and projecting costs.”  It recommended:

• Begin the required comprehensive review of the Climate Act, including assessment of progress toward the goals, distribution of systems by load and size, and annual funding commitments and expenditures.
• Conduct a detailed analysis of cost estimates to transition to renewable energy sources and meet Climate Act goals. Periodically update and report the results of the analysis to the public.
• Assess the extent to which ratepayers can reasonably assume the responsibility for covering Climate Act implementation costs. Identify potential alternative funding sources

The Climate Act requires the Public Service Commission (PSC) issue a biennial review for notice and comment that considers “(a) progress in meeting the overall targets for deployment of renewable energy systems and zero emission sources, including factors that will or are likely to frustrate progress toward the targets; (b) distribution of systems by size and load zone; and (c) annual funding commitments and expenditures.”  The draft Clean Energy Standard Biennial Review Report released on July 1, 2024 fulfills this requirement.  Key findings from the report include:

• New York is likely to miss its 2030 target of achieving 70% renewable electricity.
• The state is projected to reach this goal by 2033 instead.
• There is a significant gap of 42,145 GWh or 37% towards meeting the 70% renewable energy goal by 2030

The Final report was due by the end of 2024, but Department of Public Service staff recently announced that publication would be delayed.

The Scoping Plan is an outline of possible strategies that could reduce emissions consistent with the Climate Act mandates.  The State Energy Plan is a comprehensive roadmap to build a clean, resilient, and affordable energy system for all New Yorkers.  That process started last fall with the release of a draft scope of the plan.  The energy plan required analyses have not been updated since 2015.  Section 6-104, State Energy Plan (2) (b) says the state energy plan shall include:

(b) Identification and assessment of the costs, risks, benefits, uncertainties and market potential of energy supply source alternatives, including demand-reducing measures, renewable energy resources of electric generation, distributed generation technologies, cogeneration technologies, biofuels and other methods and technologies reasonably available for satisfying energy supply requirements which are not reasonably certain to be met by the energy supply sources identified in paragraph (a) of this subdivision, provided that such analysis shall include the factors identified in paragraph (d) of this subdivision.

The expectation is that the final Energy Plan scope will be completed in early 2025 and the document will be released for public review in the summer of 2025.  I do not see any way that the Plan will be completed before the end of 2025.

In summary, there are several on-going initiatives that are going to put costs and schedule issues out in the open.  In my opinion, they all should be completed before implementation proceeds.  The Comptroller report emphasized the need for transparent costs.  The Biennial Review is supposed to address those costs albeit I am sure that the Hochul Administration does not want to provide those numbers in the detail that the Comptroller requested.  The Energy Plan also must fulfill a cost documentation mandate and will address issues glossed over in the Scoping Plan or made obsolete by industry and financial changes since the publication of the Scoping Plan.  A major unresolved issue is how to pay for these expected costs.

Conclusion

There are clear reasons for delaying implementation of NYCI.  I have commented numerous times on what I think is the biggest issue associated with the aforementioned initiatives – the obvious need for a feasibility analysis to determine a viable decarbonization strategy for New York.  The Scoping Plan and the organizations responsible for New York State electric system reliability agree that a new technology is needed to support the proposed wind, solar, and energy storage electric energy system envisioned by the Climate Act during extended periods of low resource availability.  It is ridiculous to proceed full speed down an implementation path without knowing if the necessary technology is available to maintain current standards of system reliability.

The other viability constraint is cost.  I believe that it is becoming evident even to the true believers in the Hochul Administration that the costs are so large that they are a political liability.   I believe that costs are the likely reason that the Hochul Administration is delaying NYCI implementation.

I believe that the NYCI reporting regulations will be enacted in 2025.  Based on my extensive reporting experience I think it would be appropriate to give the affected sources time to implement the reporting infrastructure necessary to comply with the new regulations.  I also believe that the Hochul re-election plan will avoid having the auction start in the 2026 election year because this billions a year tax is inimical to claiming to be concerned about affordability.