NYSERDA and Staff Whitepaper Regarding a Clean Energy Regulatory Structure


7/1/20 N.Y. St. Reg. PSC-26-20-00011-P
July 01, 2020
I.D No. PSC-26-20-00011-P
NYSERDA and Staff Whitepaper Regarding a Clean Energy Regulatory Structure
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:
Proposed Action:
The Commission is considering a whitepaper filed by NYSERDA and DPS Staff proposing a regulatory structure to address the Climate Leadership and Community Protection Act requirements for a renewable energy program.
Statutory authority:
Public Service Law, sections 4(1), 5(1), (2), 66(2), 66-p; Energy Law, section 6-104(5)(b)
NYSERDA and Staff whitepaper regarding a clean energy regulatory structure.
To develop a renewable energy program to meet Climate Leadership and Community Protection Act goals.
Substance of proposed rule:
The Public Service Commission (Commission) is considering a whitepaper filed by the New York State Energy Research and Development Authority (NYSERDA) and Department of Public Service Staff (Staff) proposing a regulatory structure to address the Climate Leadership and Community Protection Act (CLCPA) requirements for a renewable energy program (Whitepaper). The CLCPA directs the Commission to establish a program whereby: (1) jurisdictional load serving entities (LSEs) have secured adequate amounts of renewable energy resources to serve at least 70% of load in 2030 (the 70 by 30 Target); and (2) there are zero emissions in 2040 associated with electrical demand. The CLCPA also directs the establishment of programs for the procurement of specific technologies, including the deployment of 6 gigawatts (GW) of photovoltaic solar generation by 2025, 3 GW of energy storage resources by 2030, and at least 9 GW of offshore wind by 2035. The Whitepaper proposes to: (1) use the existing regulatory and procurement structure established under the Commission’s Clean Energy Standard (CES) to meet the 70 by 30 Target, and (2) adopt policy changes and other modifications to the CES in order to align with the CLCPA and meet this Target.
The Whitepaper proposes to align all future procurements conducted by NYSERDA with the eligible technologies defined under the CLCPA. While this would exclude biomass and biogas from future solicitations, the Whitepaper proposes that Renewable Energy Certificates (RECs) produced by biomass and biogas facilities subject to existing contracts continue to be eligible to satisfy LSEs’ CES Tier 1 compliance obligations through 2029. The Whitepaper further proposes that fuel cells be ineligible under the CES except when they utilize a non-fossil fuel resource, such as hydrogen that has been produced using a “renewable energy system” as a primary energy source.
Procurement Process
The Whitepaper proposes to use a load projection for the year 2030 of approximately 151,700 gigawatt hours (GWh) as the initial basis for formulating procurement targets to meet the 70 by 30 Target. Using this load projection and taking into consideration resources that are already in operation, under contract, or separately determined by statute, the Whitepaper estimates that an incremental quantity of approximately 42,900 GWh of renewable energy must be deployed to meet the 70 by 30 Target. The Whitepaper proposes an offshore wind procurement schedule that averages just under 1 GW annually through 2027 designed to meet the CLCPA requirement of 9 GW of offshore wind operating by 2035. Additionally, incremental Tier 1 procurements will need to average almost 4,500 GWh annually over the 2021 to 2026 period in order to meet the 70 by 30 Target, according to NYSERDA and Staff.
To achieve this Tier 1 procurement target, the Whitepaper proposes adjustments to the Tier 1 procurement process. The Whitepaper proposes that the Commission authorize NYSERDA, beginning in 2021, to conduct annual Tier 1 procurements in amounts necessary to achieve the 70 by 30 Target, but with neither minimum nor maximum quantity limitations in any given year. Instead, the Whitepaper proposes that NYSERDA assess the LSE participation in an upcoming solicitation, and annually revise the average annual amount required to reach the 70 by 30 target based on the latest data. The Whitepaper proposes to discontinue the triennial review process after 2020 and further proposes that NYSERDA should no longer be required to conduct make-up solicitations if the average target is not met, instead making up any shortfalls in the following year’s solicitation.
The Whitepaper also proposes two changes to the way project viability is considered, proposing that: (1) NYSERDA be authorized to reject a proposal outright upon a unanimous determination by the Technical Evaluation Panel that the project is not presently viable; and (2) that the two evaluation factors of “viability” and “Operational Flexibility and Peak Coincidence” be merged into a single category, weighted at 20%.
Additionally, the Whitepaper recommends that the Commission permit NYSERDA to develop new portfolio risk factors intended to take account of the interactive effects caused by the increasing penetration of renewable energy resources on the grid. These factors include: the geographic concentration of projects with similar generation profiles; portfolio-wide dependence on particular technology types; anticipated impacts of curtailment portfolio-wide; and impacts on network upgrade costs, congestion, and transmission development in general. The Whitepaper also proposes that any new portfolio risk factors be developed in consultation with Staff and New York Independent System Operator (NYISO) Staff, if necessary, and that NYSERDA publish a description of any such factor(s) in its Request for Proposals.
NYSERDA and Staff also propose to clarify the delivery requirements for out-of-state intermittent renewable generators, offering that for renewable generators located in control areas adjacent to the NYISO, the electricity associated with the RECs should be scheduled, transmitted, delivered, and settled in the NYISO energy market in each hour, and be accompanied with documentation of a unit-specific contract path between the injection point in the control area of origin to the delivery point in New York.
Offshore Wind
With respect to offshore wind, the Whitepaper recommends formal adoption of the CLCPA’s minimum statewide goal of 9 GW of offshore wind by 2035 and granting NYSERDA authority to procure the remaining amount of offshore with RECs (ORECs) necessary to achieve that goal. Specifically, the Whitepaper proposes that NYSERDA conduct offshore wind procurements in a manner that ensures, at a minimum, cumulative contracted capacity equivalent to between roughly 750 megawatts (MW) and 1,000 MW per year through 2027, but without any minimum or maximum procurement requirements for any one solicitation. Additionally, the Whitepaper recommends that the Commission allow LSEs to procure ORECs directly for compliance. Moreover, the Whitepaper recommends that the Commission grant NYSERDA authority to re-sell ORECs to non-LSE buyers, provided that it do so at a cost no less than it sells to LSEs. With respect to offshore wind projects located in the Great Lakes, the Whitepaper proposes the development of a feasibility study that would consist of three primary components: Stakeholder Outreach, Analysis, and Policy Options.
Tier 2
With respect to Tier 2, the Whitepaper seeks comments regarding the New York Power Authority’s role, if any, in the Competitive Tier 2 Program proposed by NYSERDA in a January 24, 2020 petition filed in this proceeding.
Tier 4
In order to increase the penetration of renewable energy consumed in the downstate region of the State, NYSERDA and Staff propose the creation of a new Tier 4 within the CES. The proposed Tier 4 would extend financial support for renewable energy delivered into NYISO zone J and would be procured through a separate process than the procurement of offshore wind attributes. The Whitepaper proposes that any resource that qualifies as a “renewable energy system” under the CLCPA should be eligible under Tier 4, subject to several conditions. First, the Whitepaper recommends that a project’s date of commercial operation must be on or after the date of any Commission order on the Whitepaper. Second, with respect to hydropower resources, the Whitepaper proposes that Tier 4 be closed to any hydropower impoundment not already in existence or under construction as of the date of issuance of the Whitepaper. Third, the Whitepaper proposes that the generation associated with Tier 4 RECs be additional to the supplier’s baseline production and that such an additionality requirement consist of a supplier energy baseline requirement, and a supplier Greenhouse Gas baseline requirement. Regarding deliverability requirements, NYSERDA and Staff propose that in order for environmental attributes to create Tier 4 RECs, there must be a demonstrable increased delivery of renewable energy into zone J.
Additionally, the Whitepaper proposes that the Commission grant NYSERDA authority to solicit both Fixed and Indexed REC bids under Tier 4, using the same methodology previous authorized by the Commission in the CES proceeding, and utilizing a price cap for Tier 4 RECs. The Whitepaper recommends that the Commission grant NYSERDA authority to procure environmental attributes from up to 1,500 MW of Tier 4 resources, through one or more solicitations, before seeking additional approval from the Commission, and further recommends that NYSERDA not be subject to any minimum Tier 4 purchase requirement. NYSERDA and Staff propose that Tier 4 follow the same solicitation process established for Tier 1, except that they propose that NYSERDA have the flexibility to negotiate commercial operation dates in Tier 4 agreements on an ad hoc basis depending on the applicant’s documented project schedule, and that NYSERDA have authority to enter a contract for up to 30 years. Alternatively, the Whitepaper proposes that the price for Tier 4 RECs could be set via a standard offer or directly negotiated between NYSERDA and a potential developer.
Recognizing that it may be necessary for NYSERDA to enter into transactions involving more than one purchaser and/or to re-sell some of the Tier 4 RECs it has procured, the Whitepaper also recommends that NYSERDA have discretion to purchase any percentage or fixed quantity of RECs delivered by a selected project, and to enter contractual arrangements with more than one entity as may be necessary. Additionally, in situations where a seller has obtained fixed Power Purchase Agreement pricing with a zone J LSE or end-user for some but not all of the energy from a project, the Whitepaper recommends that NYSERDA have authority to procure both Fixed and Index RECs separately from the same project, if doing so results in the lowest levelized net cost. Given that some New York City building owners may also have an interest in purchasing Tier 4 RECs, the Whitepaper recommends that NYSERDA have the authority to re-sell the Tier 4 RECs it procures through an open offer in which any purchaser may participate. NYSERDA and Staff further recommend that NYSERDA have authority to conduct such sales annually through compliance year 2029.
The Whitepaper proposes that a Tier 4 obligation based in proportion to their overall share of statewide load be imposed on all LSEs serving retail load in the territory of electric distribution companies.
With respect to repowering of existing facilities, the Whitepaper recommends that the Commission amend the requirements for repowered facilities to be eligible for Tier 1. To be eligible, the White proposes that: (1) the project must be a qualifying technology and meet all other requirements of the Tier 1 solicitation; (2) until the end of the facility’s useful life, generation in excess of the facility’s projected generation, rather than its historic production, will be eligible for Tier 1; (3) the repowering includes replacement of each prime mover; and (4) the repowering must have the result that 80% of the tax basis per Generally Accepted Accounting Principles from the completed Repowered Facility is derived from capital expenditures made on or after the date of any Commission order implementing this proposal.
LSE Obligations
The Whitepaper proposes that the existing ZEC deficit be cured through the use of existing, uncommitted, and unspent Energy Efficiency Portfolio Standard, Renewable Portfolio Standard, and/or Systems Benefit Charge funds. Going forward, NYSERDA and DPS propose to exclude the “uncollectable” portion of the New York Power Authority’s load when determining the various LSE obligations.
Regarding the annual compliance targets that are set three years in advance on a rolling basis in the annual Divergence Tests, NYSERDA and Staff recommend that the mandated LSE Tier 1 REC obligations for 2021 through 2022 be revised to reflect delays in permitting and construction of awarded projects.
Funding and Reporting
With respect to administrative funding, the Whitepaper proposes that funding for all CES programs be combined into one comprehensive annual CES 2.0 funding request. Finally, with respect to reporting, the Whitepaper proposes the adoption of the revised programmatic reporting schedule that combines and streamlines CES program reporting requirements and includes the proposed Tier 4 program.
The full text of the whitepaper and the full record of the proceeding may be reviewed online at the Department of Public Service web page: www.dps.ny.gov. The Commission may adopt, reject, or modify, in whole or in part, the action proposed and may resolve related matters.
Text of proposed rule and any required statements and analyses may be obtained by filing a Document Request Form (F-96) located on our website http://www.dps.ny.gov/f96dir.htm. For questions, contact:
John Pitucci, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, (518) 486-2655, email: [email protected]
Data, views or arguments may be submitted to:
Michelle L. Phillips, Secretary, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, (518) 474-6530, email: [email protected]
Public comment will be received until:
60 days after publication of this notice.
Regulatory Impact Statement, Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement
Statements and analyses are not submitted with this notice because the proposed rule is within the definition contained in section 102(2)(a)(ii) of the State Administrative Procedure Act.
End of Document