Category: Climate Act Costs & Benefits

There are two fundamental drivers for New York’s Climate Leadership & Community Protection Act (Climate Act – the presumption that there is an existential threat from climate change and that the transition away from greenhouse gas (GHG) emitting energy sources requires no new technology and will be cheaper because the wind and sun energy is free.  I disagree with both positions.  This article addresses the cost fallacy based on a new analysis at the Cato Institute.

I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 380 articles about New York’s net-zero transition. The opinions expressed in this post 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% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council (CAC) 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 outline of strategies.  After a year-long review, the Scoping Plan was finalized at the end of 2022.  In 2023 the Scoping Plan recommendations were supposed to be implemented through regulation, PSC orders, and legislation.  Not surprisingly, the aspirational schedule of the Climate Act has proven to be more difficult to implement than planned and many aspects of the transition are falling behind.  When political fantasies meet reality, reality always wins.

Cato Report

Travis Fisher described the high cost of offshore wind policy.  He argues that eventually political support for offshore wind will have to confront the costs:  “Recent polling suggests that just 38 percent of Americans are willing to increase their energy costs by $1 per month to address climate change.”  He goes on to show that offshore wind will cost much more.

He makes a compelling case that “offshore wind mandates are bad public policy because they simply cost too much and would not be economically viable without taxpayer support”.  He also points out that there are significant environmental impacts.  He explained that the political targets are coming to grips with these issues:

In contrast to the ease and simplicity of issuing aspirational offshore wind plans, policymakers are now confronting the reality that offshore wind faces many obstacles. The second half of 2023 brought story after story of canceled or renegotiated contracts for offshore wind. BP and Equinor canceled their contract with the state of New York; Ørsted canceled two large projects in New Jersey; and developers in Massachusetts canceled four projects totaling 2,400 MW of offshore wind.

Unfortunately, the politicians have not adjusted their policies:

With such high electricity prices, one might expect political leaders to attempt to reduce the burden of the energy costs their constituents pay. Instead, policymakers in these states have insisted on mandating offshore wind, which will invariably increase electricity rates and impose a higher federal spending and tax burden on the country. There are several ways of looking at the cost of electricity from specific resources, such as wind off the East Coast of the United States. Unfortunately, offshore wind is expensive by every measure.

The reason for this post is Fisher’s explanation of different ways of looking at the cost of electricity.

One way to subsidize offshore wind is through Power Purchase Agreements (PPAs) and Levelized Revenue of Energy (LROE).  Fisher explains:

PPA prices are a generous way to examine the cost of offshore wind. They are the price paid by the offtakers of the energy from offshore wind projects—PPAs do not explicitly show the full cost paid by retail electricity consumers and taxpayers. These contract prices are usually expressed in wholesale units of dollars per megawatt‐​hour ($/​MWh).

As one example, the Vineyard Wind project off the coast of Massachusetts has a levelized PPA price of about $98/​MWh (escalating from a lower base price to a higher final price at the end of a twenty‐​year contract). As the National Renewable Energy Laboratory explained in 2019:

“This LROE estimate for the first commercial‐​scale offshore wind project in the United States appears to be within the range of LROE estimated for offshore wind projects recently tendered in Northern Europe with a start of commercial operation by the early 2020s. This suggests that the expected cost and risk premium for the initial set of US offshore wind projects might be less pronounced than anticipated by many industry observers and analysts.”

Other operational projects, like the South Fork project in New York, don’t advertise the PPA price but have stated that “the power from South Fork Wind … will cost the average ratepayer between $1.39 and $1.54 per month when it starts operating.” (Recall that fewer than 40 percent of Americans are willing to spend $1 monthly to address climate change.)

In short, PPA prices tend to put the cost of offshore wind projects in the best light.

The State of New York has not admitted that even these best-case costs “do not compare well to clearing prices in wholesale markets”.  Comparison to current prices shows that the PPA costs are much higher.

The second way to look at the cost of electricity is through the Levelized Cost of Energy (LCOE).  Fisher describes the parameter:

LCOE is a common measure of the cost of electricity from a given class of resources. LCOE boils down construction and operating costs into a single cost estimate (in dollars), divided by the energy output of the plant over its lifetime (in watt‐​hours). Hence the familiar unit of dollars per megawatt‐​hour. LCOE is a straightforward way to get a sense of the levelized (or averaged‐​out) cost of a standalone power plant.

According to recent LCOE estimates from EIA, the unsubsidized cost of offshore wind exceeds $120/​MWh and is among the most expensive generation resources. The consulting firm Lazard also publishes LCOE estimates that have become common reference points. In the latest Lazard research, the LCOE for offshore wind ranged between $72/​MWh and $140/​MWh.

Fisher notes that if the LCOE parameter is used then “offshore wind compares favorably to the highest‐​cost natural gas generators ($115–221/MWh) but not to the lowest‐​cost renewables ($24–75/MWh for onshore wind and $24–96/MWh for utility‐​scale solar photovoltaics [PV]).”  However, this parameter only considers the cost of the generating capacity.

Fisher explains that the there is a third way to look at the cost of electricity: the Full Cost of Electricity (FCOE) and Levelized Full System Cost of Electricity (LFSCOE).  He notes that:

Recently, scholars have expanded the LCOE model to include spillover costs that are borne by other generators on the system. To remedy the analytical shortcomings of LCOE, the FCOE approach zooms out and considers the all‐​in cost of the entire electricity system. This is the appropriate measure to use when judging society‐​wide costs because the full system costs are ultimately borne by retail ratepayers (and by taxpayers when subsidies are involved, as they are today).

The most important element of FCOE that is missing from LCOE is the cost to the rest of the system of intermittent output. Intermittent or “non‐​dispatchable” generation always requires backup and balancing help from controllable or “dispatchable” resources to satisfy total electricity demand; however, the cost of making other resources fluctuate their output to accommodate intermittent generation—by backing down in times of high intermittent production and ramping up in times of low intermittent production—is not captured in LCOE estimates.

A group of authors who favor using the FCOE of solar PV and onshore wind said, “LCOE is inadequate to compare intermittent forms of energy generation with dispatchable ones and when making decisions at a country or society level.”

Fisher quotes a description of the (LFSCOE):

The LFSCOE are defined as the costs of providing electricity by a given generation technology, assuming that a particular market has to be supplied solely by this source of electricity plus storage. Methodologically, the LFSCOE for intermittent or baseload technologies are the opposite extreme of the LCOE. While the latter implicitly assume that a respective source has no obligation to balance the market and meet the demand (and thus demand patterns and intermittency can be ignored), LFSCOE assume that this source has maximal balancing and supply obligations.

For our purposes what does that mean for costs?  Fisher explains

Under the LFSCOE assumptions, the cost of onshore wind in Texas is approximately seven times higher than its LCOE (an LFSCOE of $291/​MWh compared to an LCOE of $40/​MWh). The details of applying an LFSCOE to offshore wind would only be slightly different from applying it to onshore wind. Specifically, offshore wind has a slightly higher capacity factor than onshore wind (about 43 percent versus 34 percent in 2018, according to the International Renewable Energy Agency’s 2019 “Future of Wind” report). However, offshore wind is still an intermittent resource, meaning its LFSCOE is higher than its LCOE.

Conclusion

While the focus of this analysis was on offshore wind the differences between the three ways of looking at electricity costs is applicable to onshore wind and solar too.  The FCOE and LFSCOE methods of calculating electricity costs are much better approaches for estimating the total costs. When using those parameters the costs of renewables are much more expensive than current electricity prices.  In addition, those parameters do not incorporate the cost of the dispatchable emission-free resource that credible New York analyses project are necessary for an electric system that eliminates fossil-fired generation. 

Proponents of the net-zero transition disparage fossil fuel subsidies but the explicit and implicit subsidies for wind and solar far exceed them.  The Levelized Full System Costs of Electricity calculates the implicit subsidies necessary to integrate wind and solar into the electric system.  Fisher concludes:

Policymakers need to understand the full costs of their actions and come back to the shore. The American people simply don’t want to pay more for energy—not in their electricity bills and not in their tax bills.

Today I found a perfect example of Hochul Administration misinformation.  The New York State Energy Research & Development Authority (NYSEDA) Tier 4 renewable energy solicitation prepared Appendix C Cost Analysis document to support the petition by developers of four proposed offshore wind projects and 86 land-based renewable projects.   The claims made for the societal benefits of greenhouse gas emission reductions that are used to claim that various components of the net-zero transition mandated by the New York Climate Leadership & Community Protection Act (Climate Act) have greater benefits than costs are based on inaccurate methods.  This post explains the problem with the methodology used by New York State.

I have followed 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 by increasing costs unacceptably, threatening electric system reliability, and causing significant unintended environmental impacts.  The opinions expressed in this post 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 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 (CAC) 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. 

Obviously, it is important to consider whether the costs that will be incurred for the net-zero transition are lower than the benefits.  The Hochul Administration narrative claims that the costs of inaction for the net zero Climate Act transition outweigh the costs of action. I have been arguing for years that the statement is nothing more than a slogan and it is misleading because it does not include all the costs of the transition.  My analyses of costs found that there are several necessary program costs not included by the Administration. The benefits claimed are the focus of this post.  The analysis of the benefits that I submitted as a comment to the Scoping Plan shows that they over-estimated the benefits in several ways and incorrectly calculated the benefits.  The Climate Action Council never responded to my comments.  This post will summarize my comments and show the effect of the flawed methodology on the cost-effectiveness analyses in the Appendix C Cost Analysis document.

Societal Benefits

The NYSEDA Tier 4 renewable energy solicitation (“Tier 4 Solicitation”) awarded contracts for two transmission projects.  Clean Path New York (CPNY) and the Champlain Hudson Power Express (CHPE) The projects are:

Expected to deliver 18 million megawatt-hours of clean energy per year to New York City, or more than a third of the City’s annual consumption. During their construction and operation, the projects are expected to generate close to $6 billion in overall net societal benefits statewide, inclusive of greenhouse gas reductions and air quality improvements, and over $8 billion in economic development, including investments in disadvantaged communities.

I am only going to address the societal benefits of greenhouse gas reductions in this article.  For a complete discussion of societal benefits used to justify the Scoping Plan and these projects, I refer you to my Scoping Plan Benefits Comments.  I summarize  some of the details I provided for the greenhouse gas reduction benefits discussion below.

The largest benefits claimed for the Scoping Plan and the Tier 4 Solicitation are related to avoided societal costs from GHG emissions.  These benefits are calculated using the Social Cost of Carbon (SCC) or Value of Carbon.  This is a measure of the avoided costs for estimated global warming impacts out to the year 2300 resulting from a reduction of one ton of today’s emissions.  Models are used to project the benefits of reducing GHG emissions on future global warming impacts including those on agriculture, energy, and forestry, as well as sea-level rises, water resources, storms, biodiversity, cardiovascular and respiratory diseases, and vector-borne diseases (like malaria), and diarrhea. 

Richard Tol describes the value of greenhouse gas emission reductions thusly: “In sum, the causal chain from carbon dioxide emission to social cost of carbon is long, complex, and contingent on human decisions that are at least partly unrelated to climate policy. The social cost of carbon is, at least in part, also the social cost of underinvestment in infectious disease, the social cost of institutional failure in coastal countries, and so on.”  Clearly, the Social Cost of Carbon price is subject to value judgements. It is strongly affected by the choice of impacts included and by the assumptions made for the discount rate.  New York’s choices all maximize the value used.      

Flawed Methodology

The methodology used by New York agencies to calculate societal benefits relies on the New York Department of Environmental Conservation Value of Avoided Carbon Guidance.  The Guidance includes a recommendation how to estimate emission reduction benefits.  In the section entitled “Estimating the emission reduction benefits of a plan or goal” an example is included that states:

The net present value of the plan is equal to the cumulative benefit of the emission reductions that happened each year (adjusted for the discount rate). In other words, the value of carbon is applied to each year, based on the reduction from the no action case, 100,000 tons in this case. The Appendix provides the value of carbon for each year. For example, the social cost of carbon dioxide in 2021 at a 2% discount rate is $127 per metric ton. The value of the reductions in 2021 are equal to $127 times 5,000 metric tons, or $635,000; in 2022 $129 times 10,000 tons, etc. This calculation would be carried out for each year and for each discount rate of interest.

I believe that the guidance approach is wrong because it applies the social cost multiple times for each ton reduced.  It is inappropriate to claim the cumulative benefits of an annual reduction of a ton of greenhouse gas over any lifetime or to compare it with avoided emissions. The value of carbon for an emission reduction is based on all the damage that occur from the year that ton of carbon is reduced out to 2300.  Clearly, using cumulative values for this parameter is incorrect because it counts those values over and over.  I contacted social cost of carbon expert Dr. Richard Tol about my interpretation of the use of lifetime savings and he confirmed that “The SCC should not be compared to life-time savings or life-time costs (unless the project life is one year)”. 

For the record I have made this argument in several different proceedings and with one exception my comments have been ignored.  I pushed for an explanation long enough for the comment that I submitted on the Value of Avoided Carbon Guidance that I did get a response.  There wasn’t any explanation why Dr. Tol and I were wrong.  The reason was “We ultimately decided to stay with the recommendation of applying the Value of Carbon as described in the guidance as that is consistent with how it is applied in benefit-cost analyses at the state and federal level.”

Impact on Claimed Benefits

Appendix C to the Tier 4 Petition describes how the societal benefits were calculated.  It states: “net carbon value provided by the Project is quantified as the difference in carbon emissions between the scenarios with and without Tier 4 on an annual basis, multiplied by respective the social cost of carbon (SCC) per ton of carbon emissions”.  In other words, they used models to project the GHG emissions with and without the Tier 4 projects and then multiplied the difference in emissions by the SCC value.  To their credit they do make a conservative assumption: “Both scenarios are set up in the analysis to achieve New York’s goal of 100% carbon-free generation by 2040, so by 2040 the difference in carbon emissions between the two scenarios reduces to zero.”

Using this methodology, the Public Service Commission Order Approving Contracts for Purchase of Tier 4 RECs claims that:

NYSERDA and Staff estimate that the combination of the CPNY and HQUS projects would provide a societal benefit of between $2.3 and $5.8 billion, using a net present value based on 2021 dollars.

There is no documentation that lists the annual emission reduction projections used and which SCC values were used so I cannot reproduce their estimates.  I made an estimate of the societal benefits of these two Tier 4 transmission projects.  The NYSEDA Tier 4 renewable energy solicitation claims that the projects will “deliver 18 million megawatt-hours of clean energy” per year.   Assuming this energy displaces electric generating units that in 2022 emitted CO2 at a rate of 0.51 tons per MWH, I calculate an emission reduction of 8.35 million metric tons.  Using the 2030 value of carbon at a 3% discount rate the societal benefit is $0.53 billion which is an order of magnitude less than the higher societal benefit claimed.

Conclusion

This post re-iterates a point that I have been making for years.  The Hochul Administration has contrived higher estimates for societal greenhouse gas emission benefits to the point where their valuation is much higher than other jurisdictions.  This manipulation has not been sufficient to “prove” that societal benefits were greater than the costs for various Climate Act transition programs.  To maximize benefits, the State inappropriately applies the Social Cost of Carbon to multiple years rather than once.  This is akin to saying that because I lost five pounds ten years ago I can claim that I lost 50 pounds.  The advocates of the Climate Act transition are the first to claim that they “follow the science” but the reality is that the biased analyses, selective choice of assumptions, and dodgy calculation methods represent misinformation of the highest order.

On October 6, 2023 the New York State Public Service Commission (PSC) turned down the request by renewable energy developers to renegotiate their contracts and there was a fleeting hope that New York State was coming to grips that there was a realization that the costs associated with the Climate Leadership & Community Protection Act (Climate Act) net zero transition could be prohibitive.  However, that hope was tempered on October 12, 2023 when Governor Hochul announced “the release of a new 10-Point Action Plan to expand and support the growing large-scale renewable energy industry in New York.”  On November 16, 2023, Hochul announced that the contracts for offshore wind and land-based renewable energy projects would be re-opened for adjustments on an expedited basis and any hope that affordability would actually be a consideration evaporated.  This post explains my concerns.

I have followed 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 by increasing costs unacceptably, threatening electric system reliability, and causing significant unintended environmental impacts.  The opinions expressed in this post 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 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 (CAC) 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, PSC orders, and legislation.  The comments described follow a recent decision by the PSC to deny petitions seeking to amend contracts with renewable energy projects. 

My major concern with this issue is the impact on consumer prices.  Consumer electric prices are too complicated to fully explain here but there are two things to keep in mind.  In New York electric bills are separated into two components: ““supply” and “delivery”.  When the renewable energy costs are increased it will affect the supply component of utility bills.  The New York Independent System Operator (NYSISO) explains that “Household electricity bills include supply, transmission, distribution, and other charges approved by New York State. ‘Supply’ charges in a typical retail electric consumer bill reflect procurement costs that vary by utility and are influenced by the wholesale cost of producing electricity.”  The wholesale price is made up of multiple components and electricity costs will be directly affected by the renegotiation of renewable energy contracts but note that this price varies by region.  According to the Potomac Economics 2022 State of the Market Report for the New York ISO Markets, the average wholesale all-in price in 2022 averaged ~$70/MWh in Western and Central New York, ~$55/MWh in Northern New York, ~$110/MWh in the Capital region, ~$105/MWh in the Lower Hudson Valley and New York City, and ~$125/MWh on Long Island.

Request for Renewable Energy Contract Renegotiation

In June 2023 a group of offshore wind developers and a state renewable energy trade association sought to renegotiate their contracts requesting billions of dollars in additional funding from consumers for four proposed offshore wind projects and 86 land-based renewable projects. The developers claimed that “unexpected and unforeseeable rise in inflation and supply chain costs and constraints associated with, among other things, the COVID-19 pandemic and the Russian invasion of Ukraine.”  They also stated that the increased costs have eroded internal rates of return and have therefore caused many in-development projects with NYSERDA awards to no longer be economically viable under existing contract pricing terms.

On October 12, 2023 the Public Service Commission (PSC) turned down the request to address the cost issues explaining that they “opted to preserve the robust competitive bidding process that provides critically needed renewable energy resources to New York in the fairest and most cost-effective manner that protects consumers.”  Times Union writer Rick Karlin summarized:

At issue was a request in June by ACE NY, as well as Empire Offshore Wind LLC, Beacon Wind LLC, and Sunrise Wind LLC, which are putting up the offshore wind tower farms.

All told, the request, which was in the form of a filing before the PSC, represented four offshore wind projects totaling 4.2 gigawatts of power, five land-based wind farms worth 7.5 gigawatts and 81 large solar arrays.

All of these projects are underway but not completed. They have already been selected and are under contract with the New York State Energy Research and Development Authority, or NYSERDA, to help New York transition to a clean power grid, as called for in the Climate Leadership and Community Protection Act, approved by the state Legislature and signed into law in 2019.

• Developer response to the PSC decision suggested that “a number of planned projects will now be canceled, and their developers will try to rebid for a higher price at a later date — which will lead to delays in ushering in an era of green energy in New York”. Karlin also quotes Fred Zalcman, director of the New York Offshore Wind Alliance: “Today’s PSC decision denying relief to the portfolio of contracted offshore wind projects puts these projects in serious jeopardy.”

In my opinion, New York ratepayers dodged a bullet when these requests were turned down.  The Supplemental Comments of Multiple Intervenors and the Municipal Electric Utilities Association of New York State on the developer request for renegotiation found that “Using the changes in strike price presented in NYSERDA’s comments together with public information available in the OSW Petitioners’ respective OREC Agreements, it now appears that the OSW Petitioners collectively are requesting an additional $37.7 billion of customer funding above and beyond the value of their existing contracts (and excluding the relief requested in the petitions filed by ACENY, Clean Path NY, and CHPE)”. I excerpted estimates from Table 1. Estimated Cost Impact of Offshore Wind Petitions below.

Table 1. Estimated Cost Impact of Offshore Wind Petitions Excerpt

	Original	Adjusted	Total
	Strike Price	Strike Price	Incremental
	($/MWh)	($/MWh)	Cost ($)
Empire Wind 1	$118.38	$159.64	$6,195,189,000
Empire Wind 2	$107.50	$177.84	$13,382,065,422
Beacon Wind	$118.00	$190.82	$14,461,855,386
Sunrise Wind	$110.37	$139.99	$3,600,148,090

Note that the PSC decision to reject the requests was based on concerns related to the competitive bidding process and not the expected $37.7 billion increase in costs described here.

October Announcement

On October 24, 2023, Governor Hochul announced the results of NYSERDA’s third competitive renewable energy solicitation:

The conditional awards include three offshore wind and 22 land-based renewable energy projects totaling 6.4 gigawatts of clean energy, enough to power 2.6 million New York homes and deliver approximately 12 percent of New York’s electricity needs once completed. When coupled with two marquee offshore wind blade and nacelle manufacturing facilities, this portfolio of newly announced projects is expected to create approximately 8,300 family-sustaining jobs and spur $20 billion in economic development investments statewide, including developer-committed investments to support disadvantaged communities.  

For the offshore wind resources, NYSERDA provisionally awarded three projects totaling 4,032 MW, enough to power 2 million homes: Attentive Energy One (developed by Total Energies, Rise Light & Power, and Corio Generation), Community Offshore Wind (developed by RWE Offshore Renewables and National Grid Ventures), and Excelsior Wind (developed by Vineyard Offshore).  I found the following description of the expected bill impacts:

All three projects are anticipated to enter commercial operation by 2030. The average bill impact for customers over the life of the projects will be approximately 2.73 percent, or about $2.93 per month. The weighted average strike price of the awarded offshore wind projects over the life of the contracts is $96.72 per megawatt hour in 2023 (real) dollars, which equates to a nominal weighted average strike price of $145.07 per megawatt hour. The strike prices comprising the weighted average cited above are subject to certain adjustments in accordance with the terms of the awarded contracts, including, in some cases, adjustments based on certain price indices, interconnection costs and/or receipt of qualifying federal support.

Ten Point Plan

Within a week of the PSC decision to reject contract renegotiation, the Hochul Administration responded with a 10-Point Renewable Energy Action Plan to “expand the renewable energy industry and support high-quality jobs clean jobs in New York State”.  It included two actions directly related to the potential that these renewable projects could get cancelled.  The first action said that the New York State Research & Development Authority (NYSERDA) will “address the directives issued in the October 2023 Public Service Commission (PSC) Order and will assess the impacts on its large-scale renewables contracted portfolio in an expedited manner.”  The second action announced that:

NYSERDA will launch an accelerated renewable energy procurement process for both offshore and onshore renewable energy projects, aiming to backfill any contracted projects which are terminated. The process will be guided by core principles, including prioritizing competition, simplifying bid requirements, incorporating inflation indexing, applying critical labor protections, and collaborating with industry to optimize the accelerated procurement timing, all while coordinating with ongoing transmission planning initiatives.

Consistent with the ten point plan announcement, on November 16, 2023 Governor Kathy Hochul announced that “expedited offshore wind and land-based renewable energy solicitations as part of New York’s 10-Point Action Plan to bolster its growing large-scale renewable industry.”   The new requests for proposals will be released on November 30, 2023, with bids due in January 2024. The new solicitation will be open to all bidders, including those with existing contracts. This would allow the companies to re-offer their planned projects at higher prices and exit their old contracts. In my opinion, I believe every developer will go back out seeking a contract that increases their payouts so we may not have dodged the bullet.

United Kingdom Offshore Wind

In the United Kingdom there is annual auction for companies hoping to build big offshore windfarms which awards contracts to generate renewable electricity for 15 years at a set price.  The starting price for this year’s auction was set at £44 per MWh ($54.81 per MWh) but no one submitted bids.  According to the Guardian:

The companies had warned ministers repeatedly that the auction price was set too low for offshore windfarms to take part after costs in the sector soared by about 40% because of inflation across their supply chains.

The UK Government recently increased the strike price for the next auction to £73 per MWh ($90.93), up 66%.  Energy Security Secretary Claire Coutinho said: 

The UK is home to the world’s five largest offshore wind farms projects.  Today we have started the process of our latest Contracts for Difference auction for renewables, opening in March next year.  We recognise that there have been global challenges in this sector and our new annual auction allows us to reflect this.  This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence.

I think there are two points to consider from this The first is that there is no assurance that the 67% increase is enough to get developers to bid. The second is that New York developers are under the same pressures so the projected offshore wind cost decreases included in the Climate Action Plan are unlikely.

Discussion

I recognize that the Climate Act mandates the net-zero transition, but I do not believe that means that the transition is unconditional.  I am very disappointed that the Hochul Administration has not made the expected net-zero transition costs transparent and established affordability thresholds.  In the absence of that guidance, the PSC should define their expectations for rates that are just and reasonable.  The PSC Order Denying Petitions Seeking to Amend Contracts with Renewable Energy Projects suggested that there are affordability conditions that must be considered.  On page 39 of this order, it states:

We recognize that PSL §66-p(2) adds the pursuit of the 70 by 2030 and Zero Emissions by 2040 Targets to the Commission’s obligations but do not read the provisions of the more recent statute as superseding the Commission’s longstanding mandate to ensure that rates are just and reasonable. There is no indication in the statutory language or history that the legislature intended such a result, which could have the undesirable effect of driving ratepayer costs so high as to put the entire program at risk. To the contrary, the legislature provided the Commission with significant discretion under PSL §66-p(2) regarding how to establish the program to implement the 70 by 2030 and Zero Emissions by 2040 Targets by authorizing the Commission to “address impacts of the program on safe and adequate electric service in the state under reasonably foreseeable conditions,” as well as to “modify the obligations of jurisdictional load serving entities and/or the targets” based on consideration of such factors.

In addition, I believe that another provision of New York Public Service Law  § 66-p. “Establishment of a renewable energy program” includes safety valve conditions.  Section §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”.  The reference to a significant increase in arrears or service disconnections clearly is an implied affordability requirement.

Conclusion

The most recent information on the cost of offshore wind raises legitimate cost concerns.  Offshore wind is expected to provide 9% of the generating capacity and 14% of the electric energy produced by 2030 but at what cost?  The average bill impact for the recently announced offshore wind projects is $2.93 per month.  I project that when the original four offshore wind projects get new contracts it will add another $3.60 to consumer bills.  The $6.53 for the offshore wind resources needed for the net-zero transition does not include the costs for the onshore wind resources, solar energy resources, the energy storage resources, and the dispatchable emissions-free resources that make up the supply component of future electric bills.  It also does not include the delivery component costs of future electric bills that will be needed to pay for the transmission and distribution electric system upgrades.  The Propel NY transmission line recently approved to get 3,000 MW of offshore wind into the New York grid is expected to cost $3.28 billion.  That is just the start of those costs. In addition, consumers will be expected to pay to electrify their home heating, cooking, and hot water systems and purchase electric vehicles. 

Governor Hochul recently said. “We remain committed in powering our state with affordable, zero-emission and reliable electricity.”  Her Administration has yet to document the expected costs of the net-zero transition to consumers or detail the total expected costs.  In order for New Yorkers to test her commitment for affordable electricity, I think it is well past time that the numbers are provided so that we can decide whether the costs are in fact affordable ourselves.  I have no doubt that her idea of “affordable” and mine are not the same.

My fleeting hope that the Hochul Administration had realized that the costs of the net-zero transition are going to be unsustainable when the PSC refused to renegotiate renewable energy contracts has been dashed.  Last week’s announcement that the contracts would be re-opened so that the contact costs can be revised guarantees that the costs will be increased substantially.

A recent Siena College poll found that respondents thought that the cost of living in New York is the top issue for Governor Hochul and the Legislature to address and that threats to the state’s environments was a primary concern for only 4% of the respondents.  This post argues that implementation of New York’s Climate Leadership & Community Protection Act (Climate Act) is inconsistent with the concerns expressed in the poll.

I have followed 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 by increasing costs unacceptably, threatening electric system reliability, and have major unintended environmental impacts.  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. 

Siena College Poll

According to the press release for a recent Siena College Poll Conducted by the Siena College Research Institute:

More than eight in ten voters say that the cost of living in New York is a major problem – including at least 80% of Democrats, Republicans and independents – and 27%, a plurality, say it is the most important issue that the Governor and Legislature should be working on now. Crime, the recent influx of migrants and the availability of affordable housing are the next three most important issues for New Yorkers. Fifty-seven percent say the quality of life in the state is getting worse, while 27% say it’s staying the same and 14% say it’s getting better, according to a new Siena College poll of registered New York State voters released today.

The poll of 804 New York registered voters was conducted September 10 – 13, 2023.  I spent some time looking at the poll results and think that there are ramifications of this poll on Climate Act implementation.  Consistent with my personal beliefs,  responses to questions about the direction of the state, the fiscal condition of the state, and quality of life were all negative as shown below.

The response to the question “Is New York State on the right track, or is it headed in the wrong direction?” yielded the following results:

               Right track                         35%

               Wrong direction                52%

               Don’t know/No opinion  13%

The question “How would you describe the fiscal condition of New York State right now? Would you describe it as excellent, good, fair, or poor?” generated he following:

               Excellent                             6%

               Good                                    20%

               Total Positive                     26%

               Fair                                      32%

               Poor                                     27%

               Total Negative                  69%

Don’t know/No opinion  5%

The quality-of-life question, “As you consider all aspects of living in New York State, do you think the quality of life in the state is getting better, staying the same, or getting worse?” provided the following responses:

Getting better                                                 14%

Staying the same                                            27%

Getting worse                                                 57%

Vol: Combination (Better and worse)        1%         

Don’t know/Refused                                      2%

In addition to the press release highlighted results, questions related to issues confronting New York were included.  The poll asked respondents whether seven issues were “a major problem for New York State, a minor problem for New York State, or not really a problem for New York State.”  The responses ranked by percentage that thought it was a major problem and including the question number follow

Q27: Cost of living in New York

               Major problem                  83%

               Minor problem                  12%

               Not really a problem        4%

               Don’t know/Refused        0%

Q25: The availability of affordable housing

               Major problem                  77%

               Minor problem                  15%

               Not really a problem        6%

               Don’t know/Refused        1%

Q23: Crime

               Major problem                  75%

               Minor problem                  20%

               Not really a problem        6%

               Don’t know/Refused        2%

Q24: The recent influx of migrants

               Major problem                  62%      

               Minor problem                  22%

               Not really a problem        14%

               Don’t know/Refused        2%

Q28: Access to quality, affordable health care

               Major problem                  52%

               Minor problem                  28%

               Not really a problem        16%

               Don’t know/Refused        4%

Q26: Threats to the state’s environment

               Major problem                  44%

               Minor problem                  34%

               Not really a problem        15%

               Don’t know/Refused        6%

Q29: New Yorkers choosing to leave the state for other parts of the country

               Major problem                  38%

               Minor problem                  25%

               Not really a problem        33%

               Don’t know/Refused        4%

The final question in the poll asked which of these issues “is the single most important issue that the Governor and Legislature should be working on now?”.  The ranked order results:

The cost of living in New York      27%

               Crime                                                 19%

The recent influx of migrants       18%

Affordable housing                          17%

Having access to health care        8%

Threats to the environment          4%

New Yorkers leaving the state      4%

               Something else                                2%

               Don’t know/Refused                       1%

With respect to the Climate Act there are two notable results.  The Climate Act narrative is that there is an existential threat to society due to climate change.  The question concerning threats to the state’s environment found that only 44% agreed that environmental threats was a major problem.  That 49% thought that threats to the state’s environment were either a minor problem or not really a problem is inconsistent with the “existential” threat narrative.  Furthermore, only 4% of respondents thought this was the most important issue for the Governor and Legislature to consider.

The Hochul Administration has not provided clear and transparent costs to ratepayers for expected energy costs nor the costs of electrification of homes and transportation.  All my analyses suggest that the costs to achieve the Climate Act mandates will be extraordinary and there is no question that they will add to the cost of living.  The only issue nearly all respondents responded to was the cost of living in New York and 83% of respondents thought this was a major issue.  This was also the highest ranked of the most important issues questions.

Discussion

There is no question that Climate Act implementation will add to the cost of living in New York.  I recently described expected ratepayer costs due to the New York Climate Act.  James Hanley explained: that multiple offshore wind projects that are not even built yet have asked the state’s Public Service Commission (PSC) to renegotiate their strike prices which will add to costs.  Colin Kinniburgh wrote an article that notes that the renewable energy developers are not in agreement that bailing out struggling projects is appropriate.

In other jurisdictions that are further down the net-zero transition there are concerns.  In the Climate Act, section 16 of § 75-0103, there is a mandate to consider efforts at other jurisdictions: “The council shall identify existing climate change mitigation and adaptation efforts at the federal, state, and local levels and may make recommendations regarding how such policies may improve the state’s efforts.”   Although not expressly noted, I believe that this should extend to other jurisdictions wherever they are.

The Prime Minister of Great Britain, Rishi Sunak, recently said he would spare the public the “unacceptable costs” of net zero as he scaled back a string of flagship environmental policies. A summary of articles about this new position suggests that New York Climate Act implementation plans should pay attention to the lessons learned in Great Britain.  A few highlights follow,

The Daily Telegraph, 20 September 2023 states that:

The Prime Minister warned that voters would revolt against making the UK a net zero carbon emitter by 2050 unless politicians were more honest and “realistic” about the costs involved.

Mr Sunak delayed the ban on new petrol car sales from 2030 to 2035, pushed back the ban on new oil boiler sales from 2026 to 2035, and increased heat pump grants to £7,500.

An editorial in the The Daily Telegraph, 21 September 2023 notes that “Market forces and scientific advancement should create a greener world. We won’t get there by impoverishing Britain and alienating voters”.

The Sun, 21 September 2023 editorializes that:

The Sun launched our Give Us A Brake campaign because we knew the hasty, random, unrealistic climate deadlines he inherited would hurt our readers.

His predecessors had no idea how anyone would afford their headlong charge for net zero and didn’t seem to care.

It was neither fair nor wise to impose vast change without public consent.

This PM’s sensible and modest tweaks deal honestly with reality, not green fantasy and wishful thinking.

Another editorial, The Times, 21 September 2023 states that:

Those disappointed by Rishi Sunak’s sensible decision to delay the deadlines that set the pace of the British economy’s transition to net zero should not blame the prime minister. It was Boris Johnson, playing as statesman as the United Kingdom prepared to host the Cop26 climate summit, who rushed forward by a decade the ban on new petrol and diesel vehicles. It was Theresa May, in the final weeks of her premiership, who led the desultory 90 minutes of parliamentary debate that waved a legally binding 2050 net zero target onto the statute book. Both decisions were symptomatic of a political culture that has persistently failed to reckon with the true costs of a policy that will fundamentally reshape the Britain’s economic landscape.

Those articles provide a backdrop to an essay by Ben Pile that calls the entire Great Britain transition into question.  The essay is a worthwhile read.  He describes six failures of green policy:

• “No politician has any clue how to realize Net Zero targets.”  This extends to New York because there is no implementation plan just a scoping plan outline.  The failure to include details ensures that the plans will fail.
• “The green lobby has LONG promised lower prices and greater energy security but has failed to deliver.”  As noted above the New York renewable lobbyists are asking for money before projects even break ground.  Electric reliability issues have been ignored to date by the Climate Action Council.
• “Behind the scenes, the failure of both global and national climate policy has been known for a long time — since the Paris Agreement (PA) at the latest.”  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.  Why is there any urgency in New York?
• “Despite claims that other countries are steaming ahead with boiler bans, car bans, heat pumps, and championing Net Zero policies, especially in Europe, they are in fact creating deep schisms between and within EU member states”.  We are starting to see this occur in the United States.
• “Environmental, Social, and Governance is failing.”  Pile explains that investing using these principles does not provide adequate returns.
• “ Ukraine, Russia, and the realignment of geopolitics.”  Pile explains that “Who really believes that Western diplomats now have any chance of bringing Russia, China, and India into the Net Zero suicide pact? “

Pile concludes:

Sunak could not have done less to correct this mess. But what he has done is a good thing. And it includes setting a trap for the eco-catastrophists. The more they howl and wail, the more they will expose their utter contempt for ordinary people. It is not in Sunak’s gift, even if he wanted it, to reverse the entire sorry policy agenda. Too much stands in his way. But every scream and tantrum from the blobbers will bring that possibility closer to him or a successor. Because no person with a functioning brain believes that banning the boiler earlier, rather than later, is a good thing. And so the blobbers are set to out themselves, for the duration of this controversy, as brainless ideological zombies. Long may it continue.

Conclusion

The Climate Act narrative is that climate change impacts are pervasive and catastrophic, the primary way to deal with them is not through practical adaptation measures but through policies that reduce greenhouse gas emissions, and the emission reduction strategies will be cheaper because wind and solar are “free”.  I believe that all those beliefs are flawed but have been discouraged because it seems that the media pushes the narrative so much that there is little hope that the net zero transition will be slowed down or stopped.   However, the experience in Great Britain clearly shows that the costs of the net-zero transition are enormous there and will be here too.

The Siena College Research Institute poll showed that despite the relentless climate threat propaganda, the public does not agree that there is an existential threat to society due to climate change.  Most of the respondents to the poll thought that threats to the state’s environment were either a minor problem or not really a problem. Only 4% of respondents thought environmental threats was the most important issue for the Governor and Legislature to consider.  Those results contradict the Climate Act existential threat narrative.

The only issue nearly all respondents responded to was the cost of living in New York and the highest percentage of respondents thought this was a major issue.  This was also the highest ranked of the most important issues questions.  It is obvious from the situation in Great Britain that renewable energy costs will increase the cost of living.   This should make all New York politicians stop to think.

It is not unfair to ask the Hochul Administration to define what is unaffordable, what reliability risks are too great, and which environmental impacts are unacceptable.  This poll offers some hope that if the potential costs are made clear that the politicians will consider pausing implementation until the costs are described completely, the reliability risks addressed, and a cumulative environmental impact assessment of the impacts of all the wind and solar developments that are estimated to be needed by the Scoping Plan is completed. 

This is a correction to an earlier post that 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.  Dr. Jonathan Lesser found an error that caused the explosive cost increases estimated in the original article.  Although the correct increases are much lower, I still think that these costs are extraordinary albeit not explosive as I said in the original article.

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.  In my original article I did not pick up on the fact that the incremental costs accrue over 30 years.  In other words I should have divided by 30 to get the annual ratepayer impact.

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.  This value needs to be divided by 30 to get the annual impact.

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.

This is the point where my mistake caused the results to go off the rails.  It turns out that I made the same mistake in a previous post too.  I pro-rated the Informational Report ratepayer Climate Act cost recoveries for $43.8 billion in costs for contracts that have been awarded but not yet authorized for cost recovery but did not account for a 30-year accrual.  In the original post I showed calculations two ways but will only show the slightly more refined version here. 

Recall that Table 4: 2022 Electric CLCPA Recoveries in the Informational Report 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 assume that future ratepayer costs will increase proportionally to the

Informational Report authorized funding to date, offshore wind transmission support, and the Consumer Advocate additional funding requirements in the range of $73.47 billion to $105.7 billion if these numbers are divided by 30 to account for the appropriate accrual rate.

Instead of using the ratio of the totals 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 adds another 4 to 20% increase in the Climate Act costs.  Ultimately, the PSC should provide the refined numbers not the Consumer Advocates or folks like me.  New Yorkers deserve the best estimates of ratepayer costs.

Note that if you want the spreadsheet with these data please contact me.

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.   

The costs shown here are notable and they 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 the cap-and-invest 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.

When I thought that the Climate Act would more than double electric utility bills I said I expected that a ratepayer revolt would occur when the public caught on.  Even at these lower costs I believe that 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 climate change 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 alter 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 in less than a year.

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.