The state Public Service Commission (PSC) on Thursday rejected a request from wind and solar developers for financial support. The decision by the commission, which regulates utilities and oversees rates, raises questions about whether major clean energy projects — planned across the state and in the Atlantic Ocean — will move forward as planned.
Renewable energy developers have requested more than double the billions they have already been promised in subsidies to make their projects viable in the wake of rising costs, mostly due to inflation. But the commission said paying companies more would ultimately hit taxpayers with higher electricity bills, and that their original deal should be honored.
“By declining this relief, we are signaling to every vendor that our contracts and obligations are worth the paper they are written on,” said Rory Christian, PSC President. “We point out that taxpayer money is not an unlimited bank at anyone’s disposal.”
Now it is up to the developers to decide whether to move forward with the projects or withdraw from their agreements with the state.
An array of solar panels on the roof of a self-storage building in Gowanus, Brooklyn.
The stakes are high as New York moves to build renewable energy to power the grid. Offshore wind and solar power are a key part of New York’s plans to move away from gas flaring, as required by state climate law.
If developers end up canceling their contracts, that would be “bad news,” said Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia University.
“We strive to get every megawatt of clean energy,” Gerard said. “I don’t know whether companies asking for more money represents a really bad financial situation, a bargaining tactic or some combination thereof.”
Replacing fossil fuels with renewable resources such as wind and solar energy will improve air quality, reduce greenhouse gas emissions and enhance energy reliability. New York City — where gas generates the vast majority of the electricity that now powers neighborhoods — is expected to particularly benefit.
In a statement, Gov. Kathy Hochul called the PSC’s decision “essential to preserve affordability in the wake of global economic pressures and to maintain a competitive process that ensures New York consumers get the best deal” and affirmed her commitment to “building a clean, clean community.” Energy Economy.” On Thursday, her administration released a plan for how to accelerate the development of renewable energy sources and grow the clean energy sector in the wake of economic challenges.
Projects are at risk
When making their case to the PSC, developers warned that solar and wind projects may not come to fruition without increased support. It is unclear what they will do next.
Danish multinational energy company Ørsted is reevaluating whether to pursue an offshore wind project in partnership with Eversource Energy, planned in waters southeast of Montauk.
“Sunrise Wind’s viability and thus buildability face significant challenges without this modification,” David Hardie, Ørsted’s CEO of the Americas region, said in a statement.
Molly Morris, president of offshore wind developer Equinor, said in a statement that the company “will evaluate the impact of the state’s decision” but did not indicate how to move forward. Equinor and BP have won state contracts to develop three offshore wind projects, two southwest of Long Island and one in southern Massachusetts.
Combined, the additional relief requested is about $12 billion on top of the $10 billion already committed in contracts, according to the state Department of Public Service. Residential customers would have seen an approximately 7% increase in their electricity bills if the PSC had approved the full applications. (That could translate to an increase of about $5 on electricity bills, according to an analysis by the New York State Energy Research and Development Authority.)
Demanding increased support puts the state in a dilemma.
On the one hand, New York has been promoting renewable energy projects as evidence of its commitment to cleaner, greener energy and related activities that would stimulate economic prosperity. Any delay could jeopardize these benefits.
On the other hand, it is an inappropriate move to increase the financial burden on taxpayers who already bear some of the costs of the energy transition and who have to face inflation themselves.
The increase was supported by several labor unions, environmental groups and the Real Estate Board of New York, among others. In statements, letters and comments, they encourage the PSC to approve the price increase. If developers cancel contracts, the state may have to restart the entire procurement process, significantly slowing the transition to renewables and resulting in higher costs for taxpayers in the future, they said.
But the PSC was willing to see what would happen.
“Getting an exemption today almost guarantees that we will be asked to do so again in the future. Although offshore wind and onshore renewable energy are important in achieving our goals, what is even more important is the way in which we pursue those goals,” Christian said. “For developers, we have a deal. We expect all developers, regardless of size, to adhere to their obligations.
Anne Reynolds, executive director of the Clean Energy Alliance of New York, said she was disappointed by the decision and hoped it would give the PSC at least some relief given the NYSERDA’s acknowledgment of the price increases.
“I think it would be cheaper for New York taxpayers than what they (the Planetarium Finance Commission) chose to do,” she said. “I think many of these projects are uneconomical.”
Ripple effect
The state’s Climate Leadership and Community Protection Act requires New York to source 70% of its electricity from renewable energy sources by 2030. The four offshore wind projects along with 86 other renewable projects — solar and onshore wind — that requested increased subsidies account for about a quarter. of the expected electrical needs for the year 2030.
A lack of increased support for renewable energy projects could threaten progress toward climate goals, said Patrick McClellan, policy director for the New York League of Conservation Voters.
He painted a “worst-case” scenario: “At the same time, we are putting more electric cars on the road, more buildings have electric heat…demand is rising and we are in a scenario where we are still dependent on electric power.” “There are a lot of climax plants out there in the environmental justice communities,” he said.
Highly polluting gas-fired peaker plants, which are operated during times of high energy demand, are overwhelmingly located in and around low-income, nonwhite communities that already bear higher pollution burdens.
Slow progress in greening the grid could have other ripple effects in New York City as well. Offshore wind in particular is an emerging industry that holds promise for creating jobs and revitalizing older industrial areas in neighborhoods, as The CITY previously reported.
Additionally, city buildings that must comply with emissions limits imposed by Local Law 97 may have a harder and more expensive time complying with the law the longer it takes to transition to a greener grid, a 2021 study found.
The law considers emissions not only as direct exhaust from any fuels used by building occupants’ stoves, heaters or boilers, but also as a by-product of that related to the electricity used by the building, wherever it is generated. Additionally, building owners can purchase renewable energy credits that support transportation projects in order to partially comply with emissions caps.
Like their peers in the offshore wind industry, developers of a transmission line slated to carry wind, solar and hydroelectric power from Delaware County to Astoria, Queens, have requested increased funding. Later, so did the developers of another line that would bring Canadian hydropower to the city. The PSC will make a decision on these applications at a later date. Their decision on Thursday does not bode well for future provisions for granting raises.
