On August 1, 2016, the New York Public Service Commission issued its Clean Energy Standard (CES) Order, which establishes requirements needed to achieve the goals of the State Energy Plan (SEP), to not only achieve 50% of the state’s energy from renewable sources by 2030 but also to protect other existing non-emitting sources by introducing the first-ever clean energy credits.

Key Details

• The CES is an evolution of the Renewable Portfolio Standard mechanism that was previously used to procure sources of clean energy and includes two main components—the Renewable Energy Standard (RES) and Zero Emission Credit (ZEC) requirements
  • The RES focuses on procuring new, and maintaining existing, sources of renewable energy to meet incremental targets to achieve the SEP objective
  • The ZEC requirement focuses on providing subsidized support to financially troubled nuclear plants in New York to retain the zero-emission attributes of their power generation, thus preventing increased emissions from a substitution of fossil generation
• The RES obligation is imposed on all load-serving entities (LSEs) and will require the purchase of Renewable Energy Credits (REC) in proportion to the load served by each LSE or an Alternate Compliance Payment (ACP). It will be divided into two categories:
  • Tier 1 will include new large-scale renewable sources of generation and the bulk of the RES focus
  • Tier 1 REC producers will generate energy using new clean sources and be able to sell a REC for every MWh produced
  • Tier 2 consists of a maintenance program to support existing renewables that would otherwise retire, limited to currently operating run-of-river hydroelectric facilities of 5 MW or less; wind turbines; and direct combustion biomass facilities in commercial operation prior to January 1, 2003
  • ACPs are not penalties but rather cash transactions to comply with the REC requirement without purchasing RECs, initially at a 10% premium to the REC price
• Each LSE that serves end-use customers in New York, beginning April 1, 2017, will be obligated to purchase the percentage of ZECs representing the portion of the total state electric energy load served by the LSE
  • The ZEC requirement is a phased subsidy to maintain the carbon-free attributes of the economically challenged nuclear generators, which in 2014 generated 31% of New York’s electricity
  • Nuclear generators will be eligible to sell ZECs if they have made a verifiable historic contribution to clean energy resource mix of New York, require support to preserve zero-emission characteristics, have beneficial costs vs. benefits relative to other clean energy alternatives, and produce minimal impacts to ratepayers and the public interest
  • Eligible nuclear facilities will generate zero-emission energy and be able to sell a ZEC for every MWh produced
• As indicated in the CES White Paper in January, no blanket authorization is given in the Order for traditional utility owned generation
  • Long-term PPAs are also not mandated
  • To provide certainty of return to investors to spur renewable development, fixed price, REC-only, long-term contracts will be used
  • However, allowances for utilities to invest in storage to support integration of renewables, as outlined in the Track 1 Order, are reinforced in the CES Order
• Cost impacts
  • The NYISO has pointed out that the achievement of the CES goals will require additional transmission upgrades to move power from the upstate and offshore locations where most large-scale renewables will likely be developed to the downstate load centers
  • Achieving the CES will require nearly doubling renewable generation procurement, while supporting existing financially challenged renewable and nuclear generation assets
    • As the carbon-free emission attributes are monetized through RECs and ZECs (the first two-year ZEC tranche will cost $965M), the bill to ratepayers will increase as they take on costs that were previously externalized
    • One estimate by Empire Center, a non-profit, non-partisan, think tank, puts the total price tag for the Clean Energy Standard at $3.4B over the next five years
  • The CES Order argues it is within PSC jurisdictional boundaries that were recently tested in the Hughes v. Talen Energy Marketing US Supreme Court case because they are setting prices for only the carbon-free attribute of large-scale renewable and nuclear generators (rather than wholesale prices)
  • Many parties have petitions for clarification or rehearing, requesting clarification of ZEC requirements and rehearing to include certain categories of hydroelectric facilities, among other issues. The PSC has solicited additional comments, due November 14, as they consider amending the CES Order

 Implications

The CES Order in New York shifts the paradigm from procuring new renewable offerings to valuing the clean energy characteristics of new and existing generation. The Order could offer a blueprint for other states’ energy plans if it can clear the jurisdictional questions, absorb the cost impacts, and clear the many petitions for rehearing. By offering a credit for zero-emissions generation, it also offers a lifeline to a nuclear industry that has been shutting down plants in the face of cost pressures.

More Information:

CES Order
Comments of the New York Independent System Operator, Inc. on the Staff CES White Paper
Utility Dive: With Clean Energy Standard, New York looks to save nukes, skirt legal challenges
Greentech Media: New York Approves 50% Renewable Energy Target—and It Will Depend on Nuclear to Get There
Utility Dive: Nuclear plants safe, New York ISO CEO Brad Jones readies for a low-carbon grid
Utility Dive: New York’s Clean Energy Standard could pad utility bills by $3.4B