On October 12, 2023, the New York State Public Service Commission (“PSC”) issued a key decision denying petitions of offshore wind developers and a state trade association requesting billions of dollars in additional state money on four proposed offshore wind projects and 86 land-based projects. The PSC decision determined to preserve the competitive bidding process and deny the developers additional subsidies. Based on the reaction of green energy developers and climate change proponents, the decision may have long-range impacts on New York and the federal transition to renewable energy.
As reported in past articles, New York’s Climate Leadership and Community Protection Act (“CLCPA”) calls for greenhouse gas reduction from 1990 levels of 40% by 2030 and 85% by 2050. Consequently, New York is seeking a renewable energy generation target of 70% by 2030 and 100% emissions free by 2040. These targets are exceedingly ambitious and are rift with siting, approval, implementation, and reliability concerns.
A Final Scoping Plan (“the Plan”) developed by the CLCPA Climate Action Council was approved by the Council on December 19, 2022, by a 19-3 vote. The Plan mandates transforming New York’s power system to meet the CLCPA standards. Although market changes with wind, solar, and hydropower have transitioned away from fossil fuel sources such as coal for electric generation and reduced emissions by 46% since 1990, the Plan aims to move rapidly beyond that. In particular, to meet the 2040 goal of an electric system that produces no emissions in 2040, it calls for the deployment of 6,000 megawatts of solar by 2025 and 9,000 megawatts of offshore wind by 2035. The Plan also calls for deploying 3,000 megawatts of energy storage by 2030 in an attempt to create more in-state power and flexibility.
The petitions to PSC were submitted by Empire Offshore Wind LLC and Beacon Wind LLC, Sunrise Wind LLC, and the Alliance for Clean Energy New York (“ACENY”). The petitions sought adjustment to the Renewable Energy Credit (“REC”) and Offshore Wind REC purchase and sale agreements entered with New York State Energy Research and Development Authority (“NYSERDA”) to address recent inflationary issues impacting the proposed projects. In denying the requests, the PSC Commission Chair Rory M. Christian stated that “[t]he requested amendments to the contracts would have provided adjustments outside of the competitive procurement process; such relief is fundamentally inconsistent with long-standing Commission policy. The Commission has repeatedly stated that competition in the procurement process is necessary to protect ratepayers and provides the soundest approach to mobilize the industry to achieve our critical State goals dependably and cost-effectively, and we do so again through today’s action.”
Significantly, the PSC found that the requested contract amendments sought by Empire/Beacon, Sunrise and ACENY “were not in the best interest of the State’s ratepayers.” In particular, “on monthly bill basis, granting the request to amend the executed contracts outside the competitive procurement process would have resulted in as high as 6.7 percent increases for residential customers and as high as 10.5 percent for commercial or industrial customers on a monthly bill depending on service territory and the level of relief provided ---above what has already been committed.”
The four projects impacted by PSC’s decision, Empire Wind 1, Empire Wind 2, Beacon Wind, and Sunrise Wind, represent approximately half of the offshore wind capacity that New York State has committed to achieve by 2035. The four projects all remain in the proposed phase and were slated to enter operations between 2025 and 2028. The only other New York wind project in place, South Fork Wind, was approved by the federal government in 2021.
The PSC decision was quickly criticized by clean energy groups. ACENY’s Executive Director, Anne Reynolds said that “[t]the decision is shortsighted. We were hoping the Commission would act strategically on behalf of ratepayers and the environment; instead, their decision will result in increased costs and greenhouse gas emissions.” Similarly, the American Clean Power Association CEO, Jason Grumet said that “[w]ith one shortsighted decision, the NYSPC has thrown New York’s environmental and clean energy future into peril. Absent robust offshore wind industry, it will not be possible for New York State to achieve its climate and environmental justice goals.”
Following PSC’s decision, Governor Hochul announced a 10-point plan to expand and support large-scale renewable energy in the state. One of the action points is to expand offshore wind development through increased competition and a larger pool of developers. In the wake of PSC’s decision to deny the additional subsidies for the four projects, there are mounting concerns from green developers and climate change interest groups that the companies will cancel their contracts due to lack of profitability. NYSERDA has been charged with exploring expedited procurement process to meet the state’s lofty renewable energy goal of 70% by 2030.
Until this point, the CLCPA and the Plan have moved forward with little resistance. PSC’s decision to raise issues about competitive bidding on large-scale wind and solar projects and protection of ratepayers is a significant first roadblock. While the CLCPA goals have been lauded by the state, green developers, and interest groups, there has been virtually no consideration of implementation costs and what will be passed along to New York consumers and taxpayers. The PSC decision should serve as an awakening that compels other agencies and elements of New York’s government to fundamentally consider whether the CLCPA goals and objectives are achievable.
George S. Van Nest is a Partner in Underberg & Kessler LLP’s Litigation Practice Group and Chair of the firm’s Environmental Practice Group. He focuses his practice in the areas of environmental law, development, construction, and commercial litigation. George can be reached at gvannest@underbergkessler.com.
Reprinted with permission from The Daily Record and available as a PDF file here.