Category: Climate Act Costs & Benefits

Update: There is an error in this post.  Please refer to the corrected version .   Dr. Jonathan Lesser pointed out that I need to adjust the consolidated costs described here for contracts that have been awarded but not yet authorized for cost recovery and other requested costs but did not account for a 30-year accrual.  As a result the correct increases are much lower,  but I still think that these costs are extraordinary albeit not explosive as I said here.

This post consolidates all the recent information on added costs associated with renewable energy development needed to meet Climate Leadership & Community Protection Act (Climate Act) targets that have been authorized or requested.  These costs will eventually show up in electric bills and the projected cost increases are extraordinary.

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 350 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  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.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible using zero-emissions electricity. The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to develop the Draft Scoping Plan.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation. 

Renewable Procurement Background

The NYSERDA is primarily responsible for facilitating projects to meet  Governor Hochul’s target of generating 70 percent of New York State’s electricity from renewable sources by 2030.  For background, I tried to figure out those projects will be funded.  One component is solicitations for large-scale renewables.  That includes a two-step process consisting of:

1. Step One Eligibility Application: A qualifying step through which the proposer must provide evidence that the Bid Facility is Tier 1 eligible and other general information about the Proposer and the Bid Facility. All Step One Eligibility Applications must be submitted via the RESRFP22-1 solicitation website
2. Step Two Bid Proposal: A competitive Bid Proposal step, through which NYSERDA will:

a. examine Bid Proposals to determine whether they demonstrate that the Bid Facility and Proposer meet the Minimum Threshold Requirements; and

b. for Bid Proposals that meet those Minimum Threshold Requirements, perform a competitive evaluation based on price and non-price factors.

The focus of this post is on ratepayer costs associated with the zero-emissions mandates.  I did some research on the funding mechanisms and this is how I think renewable energy projects are funded.  The Clean Energy Standard (CES) is the primary method used to “turn New York State’s ambitious clean energy goal into a reality.”  The CES has two mechanisms: the renewable energy standard (RES) and the zero-emissions credit (ZEC) requirement designed to help create a low carbon energy system.  According to NYSERDA:

• The RES requires every load serving entity (LSE)
   in New York State to procure renewable energy certificates(RECs)
   associated with new renewable energy resources—known as Tier 1—for their retail customers. If LSEs cannot demonstrate they are meeting the Tier 1 obligation through the possession of RECs, they may make alternative compliance payments (ACPs).
• The ZEC requirement mandates the LSEs procure ZECs from NYSERDA. The number of ZECs is based on each LSE’s proportionate amount of statewide load, or energy demanded, in a given compliance year.

In addition to these programs, NYSERDA is also advancing offshore wind energy projects through its Offshore Wind Program. NYSERDA also works with its State partners and local communities to rapidly advance new “Build-Ready” projects, prioritizing the development of existing or abandoned commercial sites, brownfields, landfills, former industrial sites, and other abandoned or underutilized sites.

According to NYSERDA:

The Renewable Energy Standard (RES) is a mechanism enacted by the Clean Energy Standard to help New York State reach its ambitious clean energy goals and transition toward a low carbon energy system. The RES requires utilities and other load serving entities in the State to procure Tier 1 renewable energy credits (RECs).

The LSEs must pay for the RECs.  NYSERDA obtains the RECs from developers in auctions.  For example, the 2022 solicitation tried to “procure approximately 4.5 million Tier 1 eligible Renewable Energy Certificates (RECs) from eligible facilities that enter commercial operation on or after January 1, 2015 and on or before May 31, 2025, unless extended to May 31, 2028.”

The costs for the RECs are passed on to consumers in several steps.  First, NYSERDA awards contracts for the RECs to specific projects.  There is no guarantee that a project that has been awarded a contract will actually get built and operate.  The Utility Intervention Unit (UIU), Division of Consumer Protection NYS Department of State recently submitted a petition that noted that “only a tiny subset of awarded projects has completed the entire solicitation cycle and reached operational status (“Operational Projects”)”.   When a project starts to operate, they are awarded RECs which are sold to the LSEs.  The LSEs pass those costs on to their customers only after the PSC authorizes the cost in a utility rate case.

Note, however, that there are other programs described in this article that are also needed to meet the zero-emissions mandate that also add to consumer utility bills.

Informational Report on Ratepayer Costs

The Department of Public Service (DPS) first annual informational report (“Informational Report”) on the implementation of the Climate Act was released in July.  The report is notable because it provided the first Climate Act ratepayer cost estimates provided by the Hochul Administration.  However, those estimates only cover projects that are in the utility rate cases in 2022.   There are many more costs that will eventually show up in electric bills.

The report was based on data submitted by utilities that were collected to pay for Climate Act projects.  The Department of Public Service presentation on the Informational Report noted that “ the estimates of total funding authorized by the Commission to date for various clean energy programs in some instances reflect actions that pre-date the enactment of the Climate Act.”  The conclusion states that the information presented “represents  direct effects of Climate Act implementation only, and only the portion of direct effects of programs over which the Commission has oversight authority.” 

In an earlier post I described Table 4: 2022 Electric CLCPA Recoveries from the report that summarizes costs recovered in 2022 by utilities for electric programs.  The table states that $1,176 million in Climate Act costs were recovered in 2022 and it shows the amount these costs affected utility bills for seven utilities and eight program categories.  I doubt that there are many people who understand what is in each of these different programs but for the purpose of trying to estimate ratepayer costs for renewable energy development we need to summarize the programs.  The CES awards discussed above accounted for $348 million of that total.  The Clean Energy Fund (CEF) “was established as a commitment to clean energy and efficiency measures”.  The latest annual performance report lists four CEF components totaling $500 million: market development, innovation & research, NY-Sun (the distributed solar program), and the NY Green Bank.  The value of distributed energy resources (VDER) also known as the Value Stack is a new mechanism to compensate energy created by distributed energy resources, like residential solar.  The EV Make Ready Program goal is to support the development of electric infrastructure and equipment necessary to accommodate an increased deployment of EVs within New York State by reducing the upfront costs of building charging stations for EVs. The Integrated Energy Data Resource (IEDR) establishes a statewide centralized computer platform that “will allow effective access to useful energy data and information from New York’s electric, gas, and steam utilities – and other sources – to support new and innovative clean energy business models that deliver benefits to New York energy customers.”  The “Electric EE/BE” program for home heating electrification using heat pumps and another for transmission upgrades needed to support the buildout of wind and solar developments.  This is the other large ($279 million) cost component.  The program categories descriptions that did not include costs total only $48 million.

The purpose of this post is to estimate the necessary cost recoveries for renewable energy development with the latest information.  Informational Report Table 8: Authorized Funding to Date “gives a sense” of some of the expenditures that will ultimately be recovered in rates. The Informational Report explains:

This annual report is a review of actual costs incurred by ratepayers to date in support of various programs and projects to implement the CLCPA and does not fully capture potential future expenditures, including estimated costs already authorized by the Commission but not yet recovered in rates. To complement this overview of cost recoveries incurred to date, we also present below a table of the various programs and the total amount of estimated costs associated with each authorized by the Commission to date. Table 8 gives a sense of expenditures that ratepayers could ultimately see recovered in rates. These values are conservative and reflect both past and prospective estimated costs.

The takeaway message from Table 8 is that the authorized funding to date of program costs that will eventually make their way to ratepayer bills totals $43.756 billion.  I assume that all the CES costs ($25.242 billion) are associated with renewable energy development.  Although there are other components that could support the zero-emissions mandates, I am not aware of proposed adjustments to any other programs.

Offshore Wind (OSW) Transmission Support

The purpose of this post is to update the data in Table 8 with the latest information on renewable energy development costs.  The first additional item is the necessary transmission upgrade for offshore wind.  Buried in a footnote is an admission that these are not all the costs authorized.  Footnote 7 in Table 8 states:

Not included in this table is the Propel NY transmission project, selected by the NYISO Board in June 2023 in response to the Commission’s declaration of a public policy transmission need (PPTN) to support injections of offshore wind energy to the Long Island system by 2030 at an estimated cost of $3.36 billion. Since the Commission did not directly approve this project, the estimated cost is not captured in the Table 8.

I posted an article about this component of the offshore wind implementation requirements earlier this year.  The Department of Public Service has an Order for Public Policy Transmission Need (PPTN) (Case 20-E-0497) regarding Climate Act requirements related to offshore wind that drive the need to expand the number of transmission facilities between Long Island and the rest of the State.  These transmission system upgrades are needed to get the generated offshore wind from where it comes on shore to where it is needed in the state.

In response to the New York Independent System Operator (NYISO) request for proposals for the PPTN 17 bids were received.   The average total cost estimate was $7.1 billion, the maximum was $16.9 billion and the minimum was $2.1 billion.  In June 2023, NYISO chose the Propel NY transmission project totaling $3.28 billion.

These are not the only additional costs needed to support offshore wind.  The Propel NY costs are only for a portion of the new transmission lines needed and do not include additional costs associated with the impacts on the existing transmission and distribution systems on Long Island.  This is the cost associated with 3,000 MW of offshore wind.  The Climate Act goal is for 9,000 MW and the Scoping Plan Integration Analysis projects that 12,675 MW of offshore wind will be needed by 2040 in the Strategic Use of Low-Carbon Fuels mitigation scenario. 

Offshore Wind Cost Renegotiation

The Informational Report Table 8 program costs include the costs for OSW wind projects that have contracts.  One reason for this post is that inflation and supply chain issues have led developers to ask that the contracts be renegotiated.  James Hanley writes:

Multiple offshore wind projects that are not even built yet have asked the state’s Public Service Commission (PSC) to renegotiate their strike prices—the amount they will be paid per megawatt hour (MWh) of electricity produced. (A megawatt hour is roughly enough electricity to power 750 homes for one hour.) 

One of the glaring deficiencies of the Hochul Administration’s Climate Act implementation is the lack of information about ratepayer impacts.  The Informational Report was the first report that provided any estimates of ratepayer impacts and that was a Climate Act mandate.  In order to get a feel for the ratepayer impacts of the contract renegotiations it is up to outside parties to provide estimates.  Multiple Intervenors and the Municipal Electric Utilities Association of New York State (“Customer Advocates”) recently submitted Supplemental Comments to the New York State Public Service Commission that includes estimates of the incremental costs to customers for these renegotiated contracts.

The Consumer Advocates comments addressed the NYSERDA submitted comments that estimated the change in contract strike prices that would result from contract modifications requested by offshore wind developers.  NYSERDA did not provide any estimate of the effect on consumer costs so Consumer Advocates made their own.  Their analysis found that the proposed changes could impose on customers incremental costs of between $20.8 billion and $37.6 billion.

ACENY Tier 1 REC Adjustment

The crony capitalists representing other renewable developments lost no time in submitting their own petitions for additional money.  The Alliance for Clean Energy New York (ACENY) submitted their own petition in June 2023 that claimed:

A number of factors not seen in decades, including the COVID-19 pandemic and the war of aggression in Europe with Russia’s invasion of Ukraine, have collectively led to intractable supply chain bottlenecks and labor constraints. Meanwhile, unprecedented increases in demand for new renewable energy development relative to other goods and services as more States and countries implement their own climate change initiatives has further exacerbated these inflationary effects for the renewable energy industry, leading to wholly unpredictable upsurges in the costs of renewable energy development.

The end result: skyrocketing, unpredictable inflationary spikes. As established herein, these effects collectively (“Post-COVID Impacts”) have eroded the viability of Awarded Projects that have not already been cancelled, are not operational and are not yet nearing operation (“Under Development Projects”). Proceeding with the Tier 1 REC program on a status quo basis is, thus, no longer viable.

Using the same methodology used for the offshore wind renegotiation costs, the Consumer Advocates estimated that the ACENY petition would add another $10.69 billion to ratepayer costs.

Transmission Project Adjustments

The ACENY petition did not over similar adjustments for the Clean Path New York (CPNY) and Champlain Hudson Express (CHPE) transmission line projects. 

CPNY submitted their own petition asking for a similar adjustment:

Clean Path New York LLC (“CPNY”) requested that the New York Public Service Commission (“Commission”) authorize the New York State Energy Research and Development Authority (“NYSERDA”) to adjust CPNY’s strike price to adjust CPNY’s strike price attributable to the generation portion of the Tier 4 Renewable Energy Certificate Purchase and Sale Agreement entered into between CPNY and NYSERDA (the “CPNY Contract”), solely by the amount of the adjustment provided in response to the petition (the “Tier 1 Petition”) filed by the Alliance for Clean Energy New York (“ACE-NY”) requesting that the Commission authorize NYSERDA to incorporate an express adjustment mechanism provision in its Clean Energy Standard Tier 1 contracts (“Adjustment Mechanism”) for projects awarded through NYSERDA’s 2021 Renewable Energy Certificate (“REC”) Solicitation (“Under Development Projects”).  As ACE-NY explained, this corrective action will produce RECs that are consistent with New York Public Service Law Section 65 and is required due to the unforeseen and severe market disruptions that have occurred since those solicitations were held. The changes have resulted in materially adverse impacts that have rendered the Under Development Projects economically infeasible.

CHPE also submitted a petition with Hydro Quebec Energy Services (HQES).  The introduction to the petition states:

Unprecedented economic factors including rising interest rates, inflation, and supply shortages are jeopardizing all clean energy infrastructure projects needed to achieve New York’s climate goals. With respect to the CHPE Project, the construction costs for its new-build transmission components have increased significantly from the time of the CHPE Project bid submission (in May 2021) to the closing on the financing for the U.S. portion of the CHPE Project in October 2022, shortly after which construction began. Notwithstanding these challenges, Petitioners’ actions allowed the CHPE Project to start construction, and they remain committed to this necessary project and to the HQUS REC Contract.

The CHPE Project is indisputably critical to maintaining reliability while achieving New York State’s longstanding goal of decarbonizing Downstate New York energy consumption. By entering service in Spring 2026 as anticipated, the CHPE Project will create sufficient “reliability margins within New York City” to push off the need to add new generating or other resources for up to five or six years.

Like the other many developers that have filed petitions, Petitioners faced global supply chain shortages and market disruption, and the substantial negative impacts of inflation and interest rate increases on construction costs in both the United States and Canada. For this reason, the CHPE Project is similarly situated to the other major New York renewable energy project petitioners seeking cost adjustments and should be treated equally and consistently with respect to any cost adjustments granted by the Commission.

Accordingly, Petitioners propose that the Commission authorize NYSERDA to adopt a program-wide cost adjustment formula covering all Approved Projects, based on the inflationary adjustment already provided by NYSERDA for new Tier 1 REC contracts.9 The adoption of a program-wide, formula-based price adjustment for construction costs for all new-build project components is Petitioners’ preference, as it would treat all developers equally.

Consumer Advocates did not calculate an impact to consumers for these two project renegotiations.  I did not try to estimate any additional ratepayer impacts for them.

Discussion

The Utility Intervention Unit, Division of Consumer Protection NYS Department of State submitted a petition responding to ACENY.  They describe the ACENY petition as follows:

The ACE-NY petition seeks a one-time adjustment mechanism for solar and wind projects claiming it would restore “viability to support project completion, while also ensuring efficiency, transparency, and simplicity in their application.” 

ACE-NY proposes an adjustment factor on each project so that Under Development Projects will become economically viable and claims this is necessary to meet a viable schedule to achieve the 2030 goal.

The Utility Intervention Unit had  issues with the ACENY petition:

Yet, PA Consulting’s assessment did not consider “specific circumstances faced by individual renewable energy project or developer.” Nor did they analyze which portion of Under Development Projects would be successful, fail, or offer new projects in subsequent solicitations due to the number of judgement calls that would be required.10 While PA Consulting focused on the financial aspects, it did not consider or speak to whether the sought adjustment mechanism could overcome supply chain or labor shortages among the increase demand of renewable resources. Therefore, it appears ACE-NY and PA Consulting are proposing an adjustment factor with no guarantee that the 2030 goal will be met. Without such guarantees, UIU opposes the petition as requested and suggests the focus be on supporting only those projects worthy of ratepayers’ support.

For markets and competition to function efficiently, contracts and obligations should be honored. Altering contracts after terms are defined can diminish the competitive process that potentially disadvantages those bidders not selected in a respective solicitation and consumers who are paying for the project. The unsuccessful bidders may have included a risk premium that could be less than the REC price adjustment ACE-NY is seeking in its petition.

I agree with UIU.  There are implications not only to costs but also to the schedule for all the factors cited by the developers. 

Consolidated Ratepayer Cost Estimate

The following table lists all authorized and incremental relief ratepayer costs that could be on the backs of New York ratepayers except for the CPNY and CHPE project costs.  The Informational Report listed $43.8 billion in costs that have been authorized but are not yet in ratepayer bills.  That report did not include the $3.3 billion Propel NY transmission project needed for offshore wind.  If total costs for the Integration Analysis offshore wind projection are proportional to the offshore wind capacity (12,765 MW to 3,000 MW) the transmission upgrades for offshore wind will be $13.9 billion. The Consumer Advocate petition estimated ratepayer costs for the NYSERDA and ACENY petitions ranging from $26.4 billion to $48.4 billion.  When the Informational Report authorized funding to date, offshore wind transmission support, and the Consumer Advocate additional funding requirements are totaled the range is $73.47 billion to $105.7 billion.

Ratepayer Potential Impacts

The Informational Report included Table 7: 2022 Typical Monthly Electric Bills with Climate Act related costs disaggregated that was the first admission by the Hochul Administration of potential costs of the Climate Act to ratepayers.  The basis for the typical electric delivery and supply bills for 2022 was provided for the following customer types:

A.           Residential customers (600 kWh per month),

B.           Non-residential customers (50 kW & 12,600 kWh per month),

C.           Non-residential customers (2,000 kW & 720,000 kWh per month), and

D.           Non-residential high load factor customers (2,000 kW & 1,296,000 kWh per month).

PSC Staff requested that utilities disaggregate the cost components reported in Table 2 (electric) to determine CLCPA related impacts on customers as shown in Table 7.  Climate Act costs added between 9.8% and 3.7% to residential monthly electric bills in 2022.

In a previous post I pro-rated the Informational Report ratepayer Climate Act cost recoveries for the $43.8 billion in costs for contracts that have been awarded but not yet authorized for cost recovery.  I simply calculated the ratio of the authorized Climate Act funding to date ($43.8 billion) to the Climate Act costs that have been authorized and were in the 2022 residential bills ($1.2 billion).   For a rough approximation of impacts by utility I simply multiplied the ratio by each of the monthly Climate Act disaggregated cost components reported by the utilities to determine CLCPA future related impacts on customers. This will not give an exact utility-specific estimate because the money authorizations per utility for 2022 and the future will not necessarily be the same.  The following table uses the same methodology for all the expected ratepayer costs. 

These numbers are so large that I suspect that I am missing something.  I tried an alternative way to estimate ratepayer impacts.  In the alternative approach I prorated costs from the Table 8 program cost categories for all the additional costs expected and then scaled costs per utility for the lower and upper bounds.  This probably is a better estimate of utility costs but the numbers are still extraordinarily high.

I believe that when all the costs not included in the Informational Report are authorized for rate cases that residential bills will more than double, at least.  Ultimately, the PSC should provide the refined numbers not the Consumer Advocates or folks like me.  New Yorkers deserve the best estimates.

Conclusion

I believe that the Hochul Administration is trying hard to coverup the ratepayer cost impacts.  The Informational Report is a useful first estimate of ratepayer impacts but it was a required Climate Act mandate.  It provides as little information as possible.  For example, it excludes the Propel NY transmission costs because “the Commission did not directly approve this project.”  The intent of the Climate Act mandate was to describe all the effects of the Act on ratepayers not just what is politically palatable.   

Furthermore, even the additional costs that I provided in this post are not the total costs.   All the ratepayer costs that are described in this post are only for the supply portion of utility bills.  The Hochul Administration is implementing a Cap-and-Invest program that will increase the costs of delivery.  There has been absolutely no hint of the expected costs for this program but it will certainly cause an additional increase in costs.  In addition, this is just for the costs of the electricity.  The Climate Act plan is to convert homes and transportation to zero emissions energy too so New Yorkers will have to pick up those costs too.

I concluded that electric utility bills would double but I believe that is a lowball estimate.  I think that most ratepayers would be grabbing pitchforks and torches to march on Albany in protest of  these projected utility bill increases if they knew what was coming their way.  Clearly the Hochul Administration has a vested interest in covering up these costs up for as long as possible.  I am disappointed that there have not been news stories about this issue.  There always seems to be space for the latest unsubstantiated claim that an unusual weather event is proof of climate change but there does not appear to be room to show that New York’s plan to do something about it will make electricity unaffordable for many. The real impacts of energy poverty on health and welfare should be a higher priority than the speculative effects of climate change that New York cannot affect because New York GHG emissions are less than one half of one percent of global emissions and global emissions have been increasing on average by more than one half of one percent per year since 1990.  Anything we do is supplanted by emission increases elsewhere.

Earlier this week I published an article about the enormous ratepayer costs of the Climate Leadership & Community Protection Act (Climate Act).  The basis of that article was the Public Service Commission (PSC) first annual informational report on the implementation of the Climate Act.  This article documents cost impacts of the Climate Act in the evidentiary hearing comments for the  New York State Electric & Gas Corporation and Rochester Gas & Electric rate cases. 

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 350 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  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 Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible using zero-emissions electricity. The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to develop the Draft Scoping Plan.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation.  In addition, as the utilities determine what expenditures are necessary to support the Climate Act goals those costs are incorporated into their rate case requests.

Before the utilities in New York were de-regulated there were seven vertically integrated utility companies serving New York.  Even though those companies have been re-organized the rate case proceedings are based on the original service territories.  Subsequent to de-regulation New York State Electric & Gas (NYSEG) and Rochester Gas & Electric (RG&E) were purchased by Spanish owned Iberdrola and both companies are now in Avangrid.   Avangrid Networks, Inc. is a subsidiary of Avangrid, Inc. and “combines the resources and expertise of eight electric and natural gas utilities with a rate base of $11.7 billion, serving 3.3 million customers in New York and New England.” This article documents post

hearing comments related to the NYSEG electric rate case 22-E-0317, RGE electric rate case 22-E-0319, the NYSEG gas rate case 22-G-0318, and the RGE gas rate case 22-G-0320 that address Climate Act costs.

Evidentiary Hearing

The Department of Public Service (DPS) hearing brief explains the purpose of the evidentiary hearing:

An evidentiary hearing was held in these proceedings on July 17, 2023 and July 18, 2023. The

purpose of the hearing was to receive into evidence and evaluate the Joint Proposal (JP) filed on June 14, 2023. The hearing also provided an opportunity to consider the reasonableness of the JP and develop the record to determine whether the JP is in the public interest in accordance with the Settlement Guidelines of the New York Public Service Commission (Commission). At the hearing, Alliance for a Green Economy (AGREE), Multiple Intervenors (MI), Public Utility Law Project (PULP), AARP, Fossil Free Tompkins (FFT), and Ratepayer and Community Intervenors (RCI) conducted limited cross-examination of the Department of Public Service Trial Staff (Staff) and the New York State Electric & Gas Corporation (NYSEG) and Rochester Gas and Electric Corporation (RG&E; collectively, the Companies) Panel who testified in support of the JP.

The hearing addressed specific issues raised by the parties.  I am going to focus on the MI’s cross-examination concerning the affordability of the revenue requirements and other comments related to affordability.

DPS Hearing Brief

The DPS hearing brief argued that the JP helps customers with affordability by mitigating the revenue requirement (Note that all the footnote references have been excluded for clarity):

At the evidentiary hearing, MI’s cross-examination implied that Staff did not adequately consider affordability as part of its analysis of the provisions contained in the JP. Furthermore, MI questioned whether Staff was “aware of the relative economic conditions impacting …your handling of these rate proceedings?” In fact, the JP addresses affordability by: 1) reducing the Companies’ proposed expenditures from their initial filing; 2) accelerating the amortization of the excess depreciation reserve (EDR); and 3) phasing in a necessary increase in storm reserve rate allowance over the term of the rate plan. These provisions significantly reduce the revenue requirement to make the rates more affordable for customers.

The DPS explanation claims that the “proposed revenue requirement increases in the current cases are largely due to the impact of the Covid-19 pandemic (Pandemic) during the Companies’ last rate cases.”  During the Pandemic the PSC reduced rate increases “to help customers who were facing economic upheaval by limiting rate increases to less than two percent total bill impact in each rate year of the rate plan”. To achieve this reduction, the PSC cut cost recovery for “energy efficiency program and vegetation management spending; limited recovery of certain storm regulatory assets by extending the time period over which the costs would be amortized; and passed back several regulatory liabilities to customers in an expeditious time period.”  They note:

These efforts were warranted given the magnitude of the economic impacts that the Companies’ customers faced at that time, however, these costs and resulting build up of regulatory assets at both NYSEG electric and RG&E electric now have to be addressed in the current proceeding. Although there are unavoidable rate drivers in these cases, Staff has worked diligently to mitigate the impact of the revenue requirements on customers, which is reflected in the JP.

The DPS staff claims that they reduced the revenue requirements in several ways.  NYSEG and RGE have reduced discretionary capital expenditures. They “reprioritized the Companies’ electric capital budget and delayed several infrastructure projects that do not address immediate safety and reliability needs.”  The DPS brief notes states that “When compared to the initial filing, the JP reflects a reduction to the requested electric capital budget from 2024 through 2026 by $2.28 billion for NYSEG and $280.59 million for RG&E.”  My interpretation of this is that these projects will still be needed in the future so they are just being delayed so that this rate increase is not so bad.

Another major cost savings related to vegetation management programs.  These programs are needed to improve system reliability and reduce tree-related outages.  The JP proposes a vegetation management program that sets NYSEG on a longer cycle of vegetation trimming projects.  There is a tradeoff here between the desire to reduce outages and costs.

The JP also utilizes additional excess depreciation reserve (EDR) funds to reduce revenue requirements and help address affordability for customers. This looks like accounting magic to reduce costs but the brief claims that they will be “within the 10% band commonly accepted by the Commission.”   It goes on to say “Using any additional EDR could negatively impact the Companies’ credit ratings and would lead to an inevitable sharp rate increase or a hockey stick in subsequent rate cases, when there simply is not any additional EDR that can be used.”

In another example of accounting magic to keep the costs down the JP changes the major storm Operations and Maintenance (O&M) expense allowance to lessen the impact on customers. If there is a major storm and more money is needed than set aside this will come back and result in less timely storm restoration.  “Although the revenue requirement allowances for major storm restoration should be much higher based on historical levels experienced at the Companies, Staff supports the inclusion of a lesser amount to mitigate the immediate rate impact on customers.

The DPS brief concludes that “even with the proposed increases, the rates for residential customers of both Companies will remain among the lowest in the State, which demonstrates that the provisions referenced above will help to keep rates affordable for customers.”

Conspicuous by its absence was any mention of Climate Act spending.

Climate Act Spending

The costs associated with the Climate Act were not a subject of the evidentiary hearing.  In order to estimate those costs I relied on the June 29, 2022 Technical Conference presentation.  I did not try to determine if the costs in this initial proposal are still the same as what ended up in the final rate case but I believe the results are indicative.  The following slide lists capital expenditure estimates that includes costs for the Climate Act.

The important part of the slide is the following excerpt.

The following table calculates the total and lists percentages for each program. 

There are three capital expenditure programs that are directly associated with the Climate Act.  The Electric and Common Capital Expenditures Testimony describes plans.  The following plans were associated with the search term “CLCPA” that I think are included in the CLCPA category:

• CLCPA Transmission Projects Phase 1
  • Project Description: The CLCPA Phase 1 Transmission Projects consist of 23 projects for the purpose of unlocking transmission-connected renewable resources by increasing headroom on the system.
• CLCPA Transmission Projects Phase 2 “Areas of Concern”
  • Project Description: The CLCPA Phase 2 “Areas of Concern” Transmission Projects consist of 46 projects for the purpose of unlocking an incremental amount of transmission-connected renewable resources and to increase headroom on the system.
• Low Income Clean Generation
  • Program Description: This project will develop one or more solar photovoltaic (“PV”) facilities at both NYSEG and RG&E. NYSEG will install 50 MW of installed capacity while RG&E will install 20 MW of installed capacity
• EV Charging Hub Project
  • Project Description: This project is a large-scale, purpose-built facility that will serve 10 corridor charging needs for light-duty, medium-duty, and heavy-duty vehicles within the NYSEG service area.

The other two programs are Make Ready and Ithaca Electrification. Make Ready supports electric vehicle (EV) charging infrastructure:” With our new Make-Ready Program, businesses can now quickly install electric vehicle (EV) charging stations with up to 100 percent reimbursement of costs for the electrical improvements needed to support EV charging.”  The Ithaca Electrification project is described as local transmission and distribution projects needed to  address existing reliability needs and will help to support timely execution of the City of  Ithaca’s electrification initiative.”  The following might be another description of this initiative.

In addition to the capital expenditure projects other clean energy initiative within the rate case were described that support the Climate Act.

Another major Climate Act initiative is energy efficiency support.  The presentation describes the associated costs as follows:

These energy efficiency programs are part of a New York State Energy Research & Development Authority program.  New Efficiency: New York (NE:NY) is a “comprehensive mix of strategies to support building developers, commercial and institutional building owners, industrial facilities, and residential households to pursue improvements that reduce energy consumption across the State. These efficiency improvements will enable New York to meet an ambitious new target of 185 trillion Btus (British thermal units) of end-use energy savings below the 2025 energy-use forecast. That’s equivalent to saving the energy consumed by 1.8 million New York homes.”

Apparently DPS staff had an issue with the proposed costs and this was an issue during negotiations.  The following table shows the differences.

Affordability Issue

Three parties addressed affordability. The Public Utility Law Project of New York, Inc. (PULP) post-hearing brief described the JP rate increases as a ratepayer  “affordability crisis”.  AARP New York called the rate increases “unjust and unreasonable”.  Multiple Intervenors commented that the “delivery rate increase are enormous” and “unprecedented”. 

Multiple Intervenors argued that the delivery rate impacts are magnitudes higher than the impacts that the Commission previously found to be unacceptably high and included the following summary table of impacts.  The cumulative percentage total reflects the fact that the first rate-year is in effect for all three years, the second rate-year is in effect for two years, and the final rate-year is in effect for one year.  That approach projects that NYSEG electric delivery rates will be double the current rate in three years

Safety Valve

None of the comments raised the safety valve conditions for affordability in New York Public Service Law  § 66-p (4). “Establishment of a renewable energy program”.   §66-p (4) states: “The commission may temporarily suspend or modify the obligations under such program provided that the commission, after conducting a hearing as provided in section twenty of this chapter, makes a finding that the program impedes the provision of safe and adequate electric service; the program is likely to impair existing obligations and agreements; and/or that there is a significant increase in arrears or service disconnections that the commission determines is related to the program”. 

Unfortunately, the Hochul Administration has never defined these criteria which I believe should have been a primary responsibility of the Climate Action Council.  The criteria used to define “safe and adequate electric service” and “significant increase in arrears or service disconnections” should be defined so that proceedings like this have acceptability limits.   

Multiple Intervenors expressed the frustration of ratepayers relative to the desire to support the Climate Act within certain bounds of affordability:

Multiple Intervenors supports reasonable efforts to maintain, if not improve, electric and gas reliability and customer service, and reduce greenhouse gas emissions. Significantly, however, customers of all types need to be able to afford electric and gas service, and that is where the Joint Proposal fails miserably. Although Multiple Intervenors identified many specific areas of concern regarding the Joint Proposal in prior submissions, it is not in a position to unilaterally rebalance often-competing priorities to fix the Joint Proposal’s numerous shortcomings. Rather, that authority and responsibility rests solely with the Commission. Multiple Intervenors urges the Commission to (i) conclude that the balancing of priorities reflected in the Joint Proposal fails to weigh affordability concerns adequately, and (ii) take decisive action to ensure that delivery rate impacts are moderated to acceptable levels. This is no “ordinary” Joint Proposal, the Commission needs to reject or modify it to protect customers from excessive delivery rate impacts.

Climate Act Cost Discussion

The rationale for the increased costs ignores the costs of the Climate Act.  I did not find specific information in the Proceeding documentation that summarized all the costs.  Note, however, that most of the capital expenditures are related to Climate Act costs which I believe are primarily due to transmission upgrades necessary to get solar and wind project energy to where it is needed.   As an aside the primary place it is needed is New York City so Upstate ratepayers are paying to support that need. The bottom line for the Climate Act portion of the capital expense in rate year 4/23 to 3/24 is $603 million of $1,085 million (56%) total.  If the costs for advanced metering infrastructure (smart meters) are included as Climate Act costs which I believe is appropriate the rate year costs are $713 million or 66% of the total.

JP Climate Act Implementation

I believe that a major problem with Climate Act implementation is that the vast sums of money attract crony capitalists and rent-seeking opportunists all eager to take advantage of the money.  This money is going to come out of the pockets of New Yorkers so these grifters need to be called out.  The parent company of NYSEG and RGE is a good example of a company taking advantage of the Climate Act to reduce their risks and make money.

Iberdrola brags about their commitment:

The Iberdrola group has undergone a profound transformation, anticipating the current energy transition by 20 years to meet the challenges of climate change and the need for a clean, reliable and smart business model.

Today, it is a leader in renewables and smart grids, has a diversified portfolio of businesses and geographies, is present in highly rated countries and has demonstrated its financial strength, expertise and execution capabilities. Furthermore, 90% of the group’s long-term investment plan is aligned with the green investment criteria included in the EU taxonomy.

Briefing comments show how they are trying to fleece ratepayers under the guise of supporting the energy transition.  Commenters argued that the proposed earning adjustment mechanism, incentive awards for non-wires alternatives and procurement of environmental attributes, and treatment of Climate Act-related capital expenditures all increase the rate case request at the expense of consumers.

This article is already too long so I am not going to delve into specifics of all these adjustments.  One example will have to suffice.  PULP addressed the 9.2% return on equity (ROE) included in the JP.  ROE is considered a gauge of a corporation’s profitability and how efficient it is in generating profits. PULP explains:

The Companies are looking to increase from the current ROE of 8.8%, to the 9.2% ROE, which substantially adds to the already historic rate increases included in this JP. PULP generally urges careful consideration of every aspect of the JP when looking for ways to cut costs. Specifically, we urge the ALJs and the Commission to modify the JP so that the ROE is not set through confidential settlement negotiations, but rather through calculations using the generic finance model, while also providing for an annual recalculation.

The PULP comment argues that uncertainties associated with the Climate Act are not an appropriate reason to increase the ROE as asserted in the JP.  They note that it is “reasonable to assume that the risks presented by the CLCPA would be addressed in a manner that is consistent with past Commission policy that utilities should be able to recover all their operating costs and an adequate return on their investments, assuming efficient and economical management”.  Cynics like me look at this kind of sweetheart deal and wonder if this part of the political calculus of the Climate Act.  The utilities that know that there are enormous affordability and reliability risks for the net-zero transition get a bit more profit for not speaking up about those risks.

Conclusion

The bottom line is that Climate Act costs are a major factor in the extraordinarily large rate case request.  No one has stepped up to say that this is an issue in this instance and every future rate case for every New York utility is going to have to have similarly large costs.

Public Service Law §66-p (4) requires consideration of affordability and reliability for Climate Act implementation but the specific criteria have not been defined.  New York GHG emissions are less than one half of one percent of global emissions and global emissions have been increasing on average by more than one half of one percent per year since 1990.  The Hochul Administration has no plan in place to address affordability.   As a result, New York emission reductions are not going to affect climate change, so it is unacceptable to prove that affordability and reliability considerations are not adversely affected.

The PULP briefing notes that recent collection activity reports are a good indication of whether residential customers are currently able to pay their bills.  They note:

Unfortunately, these numbers are striking. As of June 2023, 130,637 residential NYSEG accounts were behind on their payments by 60-days or more, for a total of $79.3 million. For RG&E, 78,112 residential accounts were behind on their bills for a total of $61.8 million.

It is unimaginable to me that any reasonable affordability criterion defined per Public Service Law §66-p (4) would find that these rate case impacts would be acceptable.  The PSC should temporarily suspend or modify the obligations of the Climate Act until we have a better understanding of the costs to implement the Act.

I sent a link to my All Otsego commentary Zero Emissions Transition Realistic to my distribution list and received some feedback that prompted this article.  The commentary noted that the Public Service Commission’s first annual informational report on the implementation of the Climate Leadership & Community Protection Act (Climate Act) included the first admission of ratepayer costs.  It mentioned that more costs were coming but I did not estimate specific ratepayer impacts and the feedback suggested that information would be useful.  .  In the worst case, my analysis estimates that upcoming Climate Act related costs for every utility in the state will be greater than the total current monthly bill.

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 300 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  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.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible using zero-emissions electricity. The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to develop the Draft Scoping Plan.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation.  In 2024, and every two years thereafter, there will be a program review of the progress in meeting the overall targets for deployment of renewable energy systems and zero emission sources and annual funding commitments and expenditures.

According to the Public Service press release:

The Climate Act’s directives require the Commission to build upon its existing efforts to combat climate change through the deployment of clean energy resources and energy storage technologies, energy efficiency and building electrification measures, and electric vehicle charging infrastructure. In recognition of the scale of change and significant work that will be necessary to meet the Climate Act’s aggressive targets, the Commission directed DPS staff to assess the progress made in line with its directives under the Climate Act and to provide guidance, as appropriate, on how to timely meet the requirements of the Climate Act.

The Scoping Plan does not provide any ratepayer cost impacts but the New York State Department of Public Service First Annual Informational Report on Overall Implementation of the Climate Leadership and Community Protection Act (Informational Report”) does provide estimates for 2022.  I have published three articles about the Informational Report: first impressions,  a comparison of the goals in the report and the New York Cap-and-Invest (NYCI) Program Reference Case with respect to affordability implications of the Informational Report and NYCI.

Ratepayer Impacts in Informational Report

Much of the information in this section was previously published here.  I converted the tables in the Informational Report to a spreadsheet so that I could combine the data from multiple tables.  Three tables are of particular interest: Table 4: 2022 Electric CLCPA Recoveries, Table 7: 2022 Typical Monthly Electric Bills with CLCPA related costs disaggregated, and Table 8: Authorized Funding to Date.

Table 4: 2022 Electric CLCPA Recoveries summarizes costs recovered in 2022 by utilities for electric programs.  The costs recoveries include: CES (electric only), CEF (electric only), certain VDER (electric only), Electric Vehicle Make Ready Program (electric only), Clean Heat programs (electric only), Integrated Energy Data Resource (electric only), and Utility Energy Efficiency programs (electric and gas). The table states that $1,175,788,000 in Climate Act costs were recovered in 2022.  In the context of total ratepayer costs note that transmission upgrades are not included in the 2022 estimates and that there also are gas costs that are relatively small.

Table 7: 2022 Typical Monthly Electric Bills with CLCPA related costs disaggregated is the first admission by the Hochul Administration of potential costs of the Climate Act to ratepayers.  The basis for the typical electric delivery and supply bills for 2022 was provided for the following customer types:

A.           Residential customers (600 kWh per month),

B.           Non-residential customers (50 kW & 12,600 kWh per month),

C.           Non-residential customers (2,000 kW & 720,000 kWh per month), and

D.           Non-residential high load factor customers (2,000 kW & 1,296,000 kWh per month).

PSC Staff requested that utilities disaggregate the cost components reported in Table 2 (electric) to determine CLCPA related impacts on customers as shown in Table 7.  Climate Act costs added between 9.8% and 3.7% to residential monthly electric bills in 2022.

The Climate Act costs in 2022 are just the start of eventual costs to consumers.  Table 8: Authorized Funding to Date “gives a sense” of expenditures that will ultimately be recovered in rates. The Informational Report explains:

This annual report is a review of actual costs incurred by ratepayers to date in support of various programs and projects to implement the CLCPA and does not fully capture potential future expenditures, including estimated costs already authorized by the Commission but not yet recovered in rates. To complement this overview of cost recoveries incurred to date, we also present below a table of the various programs and the total amount of estimated costs associated with each authorized by the Commission to date. Table 8 gives a sense of expenditures that ratepayers could ultimately see recovered in rates. These values are conservative and reflect both past and prospective estimated costs.

It is important to note that the Commission authorized some of the estimated costs in Table 8 prior to CLCPA enactment and that the cost associated with these authorized programs will be recovered over several years to come, based on the implementation schedules for these projects or programs and will mitigate the cost impacts to ratepayers year over year. These estimated costs represent either total program budget, estimated total cost for the program over its duration, or costs incurred to date in support of the program. Additionally, these initiatives will result in a variety of other changes that will impact how much consumers pay for energy. A number of these would put downward pressure on costs, including benefits in the form of reduced energy usage and therefore reduced energy bills to consumers. The Department has also previously described market price effects that are a result of these investments. When load is reduced or more low-cost generation is added, it would be anticipated that energy prices would fall because the market would rely less on higher cost generators. In addition, investments in transmission infrastructure not only unbottle renewable energy but also yield production cost savings and reliability benefits.

In sum, the total estimated costs associated with these programs or projects should not be considered as entirely incremental costs to what ratepayers would otherwise pay. Subsequent annual reports may include additional information about costs recovered relative to the funding previously authorized by the Commission in these programs, including funds already expended in support of these programs.

The takeaway message from Table 8 is that the authorized funding to date of program costs that will eventually make their way to ratepayer bills totals $43.756 billion.  Note that the spreadsheet version of this table details the footnote costs.

Future Ratepayer Impacts

The ratio of the authorized Climate Act funding to date ($43.8 billion) to the Climate Act costs that have been authorized and were in the 2022 residential bills ($1.2 billion) is 37.2.  It is tempting to simply multiply the ratio by each of the monthly Climate Act disaggregated cost components reported by the utilities to determine CLCPA future related impacts on customers. However, this will not give an exact utility-specific estimate because the money authorizations per utility for 2022 and the future will not necessarily be the same.  For example, earlier this year I wrote about the PSC approving requests to develop 62 local transmission upgrades that would alleviate congestion on the transmission system to get power to NYC from wind and solar projects upstate.  The transmission upgrade projects will cost $4.4 billion to support 3.5 GW of renewable energy.  The estimated bill impacts were not the same for each utility because costs were a function of where the upgrades were located.  At this time no one knows how the costs will be allocated amongst the utilities. 

In addition, the costs will not be allocated all at once.  There is no documentation that explains the annual 2022 allocations relative to the total costs of each program.  In the worst case all the costs could be allocated in a single year.

In order to give a rough idea, I used a lower ratio.  The following table gives a conservative estimate of future costs by using a ratio of 30.  I multiplied the ratio of 30 by the 2022 utility-specific monthly Climate Act related costs to estimate the future Climate Act costs.  The future total monthly bill equals the 2022 bill minus the 2022 Climate Act related costs plus the future authorized funding Climate Act cost estimated as 30 times the 2022 costs.

Summary of Ratepayer Costs

The informational Report notes that. Climate Act costs that have been authorized and were in the 2022 residential bills total $1.2 billion.  The Report notes that in 2022 the costs already associated with the Climate Act increased the Upstate residential monthly electric bills 7.6% or $7.15 per month for NYSE&G customers; 7.7% or $7.54 for RG&E customers; and 9.8% or $9.38 for Niagara Mohawk customers.  

The report does not attempt to project future ratepayer costs of the authorized Climate Act funding to date that total another $43.8 billion.  Using the conservative ratio of 30 and assuming a similar distribution of costs per utility and that all costs will be in one year, I estimate that the monthly ratepayer costs associated with the Climate Act will total at least $214.50 for NYSE&G consumers, $226.50 for RG&E customers, and  $281.40 for NMPC customers.  The Climate Act related costs for every utility in the state will be greater than the total current monthly bill.

Discussion

In two recent articles I explained why the claims that the net-zero transition will result in cheaper electricity are rubbish.  The claim that wind and solar are cheaper is only possible if you ignore all the additional costs necessary to get the energy to consumers when and where needed.  In another post I explained arguments that solar and wind are only cheaper than fossil fuels in at most a small fraction of situations and for the overwhelming majority of the world’s energy needs, solar and wind are either completely unable to replace fossil fuels or far more expensive.  These ratepayer costs are for some of the many other services and support necessary to integrate wind and solar into a “zero-emissions” electric grid.  I suspect that future additional costs will be at least an order of magnitude higher.

Unfortunately, these are not the only costs for New Yorkers.  The Scoping Pan proposes to electrify everything possible.  These costs do not include what it will take to electrify home heating, cooking, clothes drying and hot water heating.  Nor does it include the costs for home electric vehicle chargers or the very likely need to upgrade the electric service to the residence when everything is electrified.  In addition to electrification of the home there will be the costs for an electric vehicle.

These estimated costs are high, but there is no escaping the fact that ratepayers are on the hook for an additional $43.8 billion in Climate Act costs.  I admit that the distribution of costs is unlikely to be as concentrated as I have assumed.  The absence of an estimate in the PSC report suggests that even if the eventual ratepayer impact is lower, it is still significant.

Conclusion

New York GHG emissions are less than one half of one percent of global emissions and global emissions have been increasing on average by more than one half of one percent per year since 1990.  These facts coupled with the extraordinary costs noted in the PSC Informational Report suggest that it is time to step back and wrest control of New York’s energy future from the innumerate ideologues who have foisted the Climate Act on New York.

These costs may not mean New York should not do something but it does mean that we have time to re-evaluate the Scoping Plan.  We need determine how much the transition will cost, whether we can maintain current levels of reliability with an electric grid that relies on wind and solar, and determine all the environmental impacts of wind and solar resources at the scale necessary for the net-zero transition before it is too late to prevent an affordability crisis, blackouts, and more damage to the environment from this supposed “cure” than any climate change impacts.

On July 11, 2023 the Partners for Climate Action, Hudson Valley hosted a morning coffee webinar titled “Bringing Climate Into the Classroom”.  The first presentation by Samrat Pathania included a slide that stated that climate change is not a technological problem because “most climate solutions exist and are economically feasible”.  I consider those statements net-zero transition myths that underpin the narratives of climate activists.  This article addresses them both in the context of New York’s Climate Leadership & Community Protection Act (Climate Act) 2040 mandate for a zero-emissions electric grid.

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 300 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  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.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric grid with zero-emissions generating resources.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan.  After a year-long review the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation. 

The idea that the Climate Act has no technological issues and that the transition will be affordable is a basic component of the Act.  Robert W. Howarth, Ph.D., the David R. Atkinson Professor of Ecology & Environmental Biology at Cornell University claims that he played a key role in the drafting of the Climate Act.  His statement supporting the approval of the Scoping Plan explains (my emphasis added):

I further wish to acknowledge the incredible role that Prof. Mark Jacobson of Stanford has played in moving the entire world towards a carbon-free future, including New York State. A decade ago, Jacobson, I and others laid out a specific plan for New York (Jacobson et al. 2013). In that peer-reviewed analysis, we demonstrated that our State could rapidly move away from fossil fuels and instead be fueled completely by the power of the wind, the sun, and hydro. We further demonstrated that it could be done completely with technologies available at that time (a decade ago), that it could be cost effective, that it would be hugely beneficial for public health and energy security, and that it would stimulate a large increase in well-paying jobs. I have seen nothing in the past decade that would dissuade me from pushing for the same path forward. The economic arguments have only grown stronger, the climate crisis more severe. The fundamental arguments remain the same.

The presentation by Pathania included a slide that said that solving climate change was not a technological issue.  In the video he explains that most climate solutions exist and are economically feasible.  The remainder of this article will address those two components relative to the Climate Act requirement that all electricity generated be “zero-emissions” by 2040.  I assume New York will follow the advice of Howarth that New York can “rapidly move away from fossil fuels and instead be fueled completely by the power of the wind, the sun, and hydro”.

Before I address the claims, I want to address why academics like Howarth and the NGOs that evaluate electric energy net-zero transition programs generate misleading studies and reports. Russell Schussler wrote three articles after reading an argument that wind and solar could “easily” be made reliable.  In the first article he points out that analyses that claim reliability is not an issue don’t consider all the complex interactions in the electric system.  Frequently the difference between power and energy is not understood or misused either by the authors or those who reference the studies claiming current technology is adequate.  In the second article Schussler explains that “academics study some problems, determine those are solvable and that is then misinterpreted to imply that greater emerging problems are also solved or easily solvable”.  He states that “Barring major breakthroughs in the areas of critical technical challenges (which don’t seem to be receiving a lot of attention at the policy level) the grid cannot reliably support the envisioned increase penetration of wind and solar need to get anywhere close to a net zero goal.”  In the third article, he points out that we are a long way from figuring out how to solve for a net zero grid in terms of just theory and what might work on paper is not working as planned as new technology is deployed for many fundamental emerging grid problems.

Climate Solution Technology

A fundamental tenet of the Climate Act is that New York’s electric grid can be powered wind, solar, and hydro and that it can be done completely with currently available technologies.  In my opinion one of the greatest missed opportunities of the Climate Action Council was the failure of the Hochul Administration to confront this claim during Council deliberations.  .  On September 16, 2020 In their presentation to the Power Generation Advisory Panel E3 included a slide titled Electricity Supply – Firm Capacity.  Their presentation states: “As the share of intermittent resources like wind and solar grows substantially, some studies suggest that complementing with firm, zero emission resources, such as bioenergy, synthesized fuels such as hydrogen, hydropower, carbon capture and sequestration, and nuclear generation could provide a number of benefits.”  The Integration Analysis future generating resource projections project that this resource will equal the amount of existing fossil generation capacity in 2040.  The Scoping Plan mentions nuclear only in passing, the Council discouraged any thought of combustion with carbon capture and sequestration, and the amount of bioenergy and hydro resources that can be added to New York’s electric system are small relative to the need.   That leaves synthesized fuels.  That technology and any other possibilities are not commercially available.  Despite the best efforts of the New York State Independent System Operator (NYISO), the New York State Reliability Council (NYSRC), and several members of the Council to prod the Administration and Council into confronting the reliability ramifications of reliance on an unproven technology it was essentially ignored in the Scoping Plan.

The New York State Public Service Commission (PSC) recently initiated an “Order initiating a process regarding the zero-emissions target” that will “identify innovative technologies to ensure reliability of a zero-emissions electric grid”.  The press release states:

Today’s action recognizes that as renewable resources and storage facilities are added to the State’s energy supply, additional clean-energy resources capable of responding to fluctuating conditions might be needed to maintain the reliability of the electric grid. The Commission’s work to meet the Climate Act targets must include exploration of technologies that can support reliability once fossil generation has been removed from the system. The order initiates a process to identify technologies that can close the anticipated gap between the capabilities of existing renewable energy technologies and future system reliability needs. Within the order, the Commission asks stakeholders a series of important questions, including how to define ‘zero-emissions’ for purposes of the zero emissions by 2040 target, and whether that definition should include cutting edge technologies such as advanced nuclear, long duration energy storage, green hydrogen, and demand response. The order further elicits feedback from stakeholders on how to best design a zero-emissions by 2040 program, consistent with the Climate Act’s requirement of delivering substantial benefits to disadvantaged communities and New York State’s electric grid reliability rules, while also leveraging other state and federal efforts to research, develop, and deploy zero-emission resources.

The organizations responsible for the reliability of the electric system in New York all say that additional clean-energy resources that do not have emissions and can be dispatched as necessary are needed.  Anyone who disagrees with that is naïve, ignorant or deliberately ignoring reality.

Affordability

The myth that converting to solar and wind resources will be cheaper than using fossil fuels is very persistent.  The only way it can be perpetuated is if only relative costs are considered or if the difference between power and energy is not recognized.  The Scoping Plan claims that “The cost of inaction exceeds the cost of action by more than $90 billion” but that realtive number reduces costs by subtracting value-laden benefits.   

The cost that matters to New Yorkers are the direct costs.  I recently described my response to the claim that “Solar power is now considerably cheaper than new coal, natural gas, or nuclear energy” by Richard Perez, Ph.D.  He claimed that “utility-scale solar electricity has become the least expensive form of electricity generation” but that is true for power capacity (MW).  Even if solar capacity is half the cost of fossil capacity the cost for delivered energy is much more.  We pay for the kWh electric energy we use each month and we expect it to be available 24-7 throughout the year.  In order to provide usable energy, other things must be considered that destroy the myth that utility-scale solar is cheaper than other types of power plants.  On average a well-designed solar facility can provide (round numbers) 20% of its potential energy possible in New York.  A natural gas fired power plant can operate to produce at least 80% of its potential energy over a year.  In order to produce the same amount of energy, that means that you need four times as much solar capacity.  Even if the solar capacity cost is half the cost for the capacity, the energy cost is double simply due to this capacity factor difference.  My response went on to describe other reasons why it cannot be cheaper: the cost of storage when the sun or wind is not available, the need for ancillary transmission services not provided by wind and solar, and the need for the zero-emissions resource described above.

Since then Alex Epstein published what he called The ultimate debunking of “solar and wind are cheaper than fossil fuels.”  His analysis is not confined to resources for the electric system. He explains that:

Solar and wind are only cheaper than fossil fuels in at most a small fraction of situations. For the overwhelming majority of the world’s energy needs, solar and wind are either completely unable to replace fossil fuels or far more expensive.

I encourage any doubters to read the article but provide some highlights below.

• On its face, justifying favoritism toward solar and wind by invoking their cheapness is highly suspicious. If they’re cheaper, why do they need coercive policies to throttle their fossil-fueled competitors (e.g., opposing fossil fuel investment, production, and pipelines) and reward solar and wind?
• That solar and wind aren’t actually cheaper than fossil fuels should be obvious from the fact that despite enormous cultural and political hostility toward fossil fuels that makes fossil fuels artificially expensive, fossil fuel use is still growing.
• When discussing “energy prices” we must recognize that “energy” refers to myriad specific use-cases involving different
  • Types of machines
  • Reliability requirements
  • Locations
  • Quantities
• For the vast majority of use-cases solar and wind can’t compete with fossil fuels.
• While it is very common to use the terms “energy” and “electricity” interchangeably, the fact is that the vast majority of machines in the world today don’t run on electricity—they run on the direct burning of fossil fuels, because that is the only or cheapest way to run them.
• Many instances of “solar and wind are cheaper than fossil fuels” not only ignore the non-electricity uses where solar and wind are totally uncompetitive, they use a bogus metric called “Levelized Cost of Energy” (LCOE) which by its own definition ignores the issue of reliability!
• The basic cost problem with solar and wind is their inherent unreliability. To use them to deliver reliable electricity we need to also pay for a reliable life-support grid (e.g., gas plants). This is very often wasteful; it’s usually cheaper just to pay for a reliable grid.
• When we look at large regions that use solar and wind a lot, we see a trend of price increases and/or reliability decreases, because solar and wind add costs to the reliable grids needed to support them—and if you try to save money by shrinking the reliable grid you get reliability problems.¹¹
• Whenever you hear someone rave about Southern California or Iowa or West Texas in making some general laudatory claim about solar and wind, you can be sure that the person is trying to dupe you through false generalization from one location to every location.
• Note that false generalization from one location to all locations is also common for geothermal energy.
• In addition to all their other problems, solar and wind have mining requirements that make them expensive to scale quickly.
  
  Yet today’s solar and wind prices are falsely generalized to be the same or lower if solar and wind scale on a crazy “net-zero-by-2050” timetable.
• Whenever we talk about the price of energy, we need to recognize that the price of energy can change dramatically depending on the scale it is being used on.
• Sometimes larger scales can reduce prices (economies of scale) and sometimes larger scales can increase prices (diseconomies of scale).

Saying “solar and wind are cheaper” because they might be cheaper at powering midday and afternoon air-conditioning in Dubai is like a CEO saying “teenage labor is cheaper” because it can fill some mailroom positions.

The evidence that solar and wind cannot reduce the price of electricity is overwhelming.

Conclusion

The myths that no new technologies are needed to transition away from fossil fuels and that wind and solar are cheaper than fossil fuels are common.  I recently had a commentary published that argued the solar could not be cheaper than a natural gas-fired turbine and rebuttals were published that ignored all the reasons I described here.  All that pragmatists can do is to continue to point out the facts and hope that policy makers will come to their senses before the economy is devastated by this nonsensical policy. Equally troubling is that the European experience is showing that wind is not viable, the costs of wind and solar in Germany are untenable, and that a rapid energy transition has many risks but that information is also being ignored.

The most troubling aspect of this story is that the “Bringing Climate Into the Classroom” webinar peddled these myths without any limitations.  The presentation by Samrat Pathania included a slide that stated that climate change is not a technological problem because “most climate solutions exist and are economically feasible”.  After making the statement his presentation argued that all we need to do is to make a cultural transformation.  He said that “Hope and Trust are two of the pillars of a classroom community”.  I worry that the constant barrage of existential climate Armageddon stories that can be easily solved  being peddled as in this webinar is going to destroy trust when the inevitability of reality eviscerates these myths.  Won’t the students lose hope when that happens?  Then what will they think?

On July 20, 2023 the first annual informational report on the implementation of the Climate Leadership & Community Protection Act (Climate Act)) was released.  There is a lot of information in this report that needs to be parsed out but because this is the first report that provides any Climate Act implementation estimated costs for ratepayers, I am publishing this initial summary.

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 300 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  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.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric grid with zero-emissions generating resources.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan.  After a year-long review the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation. 

According to the press release:

The Climate Act’s directives require the Commission to build upon its existing efforts to combat climate change through the deployment of clean energy resources and energy storage technologies, energy efficiency and building electrification measures, and electric vehicle charging infrastructure. In recognition of the scale of change and significant work that will be necessary to meet the Climate Act’s aggressive targets, the Commission directed DPS staff to assess the progress made in line with its directives under the Climate Act and to provide guidance, as appropriate, on how to timely meet the requirements of the Climate Act.

The Scoping Plan does not provide any ratepayer cost impacts but the New York State Department of Public Service First Annual Informational Report on Overall Implementation of the Climate Leadership and Community Protection Act does provide that information.  This post summarizes the ratepayer impacts provided in this report.  I will follow up with another post that delves into the details of this report later.

Programs

One of the difficulties trying to understand what expenses have been authorized to date that are covered by this report is the number of programs involved.  Seven authorized programs are covered: Clean Energy Standard (CES) Clean Energy Fund (CEF), certain Value of Distributed Energy Resources (VDER), Electric Vehicle Make Ready Program, Clean Heat programs, Integrated Energy Data Resource (IEDR), and Utility Energy Efficiency programs.  In a subsequent post I will try to address these programs and their place in the Scoping Plan strategies in detail.

The seven authorized programs support various components of Climate Act mandated strategies.  The Clean Energy Standard was originally adopted in 2016 and set a goal for 50% of the electricity consumed in the State by 2030 to be generated by renewable energy sources.  There were subsequent revisions and the initiatives been expanded, where necessary, to support Climate Act mandates.   The Clean Energy Fund provides support for innovation & research, market development, the NY Green Bank, and NY Sun.  Value of Distributed Energy Resources programs support energy generated by distributed energy resources such as solar photovoltaic, energy storage, combined heat and power, anaerobic digesters, wind turbines and small hydro and fuel cells. The Electric Vehicle Make Ready Program funds infrastructure for electric vehicles.  Clean Heat programs and promote the electrification of space and water heating by offering contractor and customer incentives for the installation of air- and ground-source heat pumps. The Integrated Energy Data Resource will be a “statewide resource to securely collect, integrate, and provide access to energy related information”. The Utility Energy Efficiency programs support energy conservation and efficiency programs.

Cost Recoveries

According to the press release:

For the average residential electric customer, the rate impacts for these critically important investments, not accounting for the overall societal benefits, range from 3.7 percent to 9.8 percent, depending on the utility. The rate impacts for non-residential customer varies depending on the utility and the amount of electricity consumed.

I am not familiar with the jargon of the Department of Public Service (DPS) rate descriptions.  I believe that when DPS talks about cost recovery they are referring to costs that the utilities have incurred to implement the Climate Act requirements that have been charged back to the ratepayers.  The report notes:

For purposes of estimating the cost recoveries of CLCPA related initiatives in 2022, Staff issued information requests to each of the utilities. Specifically, Staff requested the utilities provide 2022 cost recoveries for: CES (electric only), CEF (electric only), certain VDER (electric only), Electric Vehicle Make Ready Program (electric only), Clean Heat programs (electric only), Integrated Energy Data Resource (electric only), and Utility Energy Efficiency programs (electric and gas).

The following figure summaries the costs recovered in 2022 by the utilities associated with these gas and electric programs.  The Climate Act program costs paid by New York gas ratepayers totaled $112,967,498 in 2022 (Table 3).  Electric ratepayers paid $1,175,788,000 in 2022 (Table 4). 

These totals were converted to gas and electric ratepayer impacts in the report.

The report estimates the effect of the Climate Act programs typical monthly gas bills in Table 6 using the following assumptions:

Staff issued information requests to each of the utilities to help estimate the bill impacts associated with the CLCPA related cost recoveries. Staff requested the utilities provide typical gas delivery and supply bills for 2022 for the following customer types:

A. Residential heating customers (83 therms per month),

B. Small commercial customers (2,500 therms per month),

C. Commercial customers (10,000 therms per month), and

D. Industrial customers (100,000 therms per month).

The report estimates the effect of the Climate Act programs on typical monthly electric bills in Table 7 using the following assumptions:

Staff requested the utilities provide typical electric delivery and supply bills for 2022 for the following customer types:

A. Residential customers (600 kWh per month),

B. Non-residential customers (50 kW & 12,600 kWh per month),

C. Non-residential customers (2,000 kW & 720,000 kWh per month), and

D. Non-residential high load factor customers (2,000 kW & 1,296,000 kWh per month).

The 2022 combined total costs recovered from gas and electric ratepayers is $1,288,755,498.  Table 8 lists the costs that have been authorized but not yet captured and that total is 43,756,000,000.  Clearly ratepayer costs will have to increase more to cover these additional costs.  The report states:

This annual report is a review of actual costs incurred by ratepayers to date in support of various programs and projects to implement the CLCPA and does not fully capture potential future expenditures, including estimated costs already authorized by the Commission but not yet recovered in rates. To complement this overview of cost recoveries incurred to date, we also present below a table of the various programs and the total amount of estimated costs associated with each authorized by the Commission to date. Table 8 gives a sense of expenditures that ratepayers could ultimately see recovered in rates. These values are conservative and reflect both past and prospective estimated costs.

Conclusion

There is a lot to unpack in this report.  I plan to look at the numbers in various programs and try to reconcile them with other cost estimates.  The report also includes estimates of benefits that need to be addressed. 

Based on this first review it is already obvious that costs are significant and this is only the beginning.  Many more programs will be required to implement the net-zero transition. Stay tuned.