Posted on October 16, 2023
ALBANY, N.Y — Gov. Kathy Hochul’s administration Thursday rejected a request from companies for bigger payments to complete large-scale wind, solar and offshore wind projects — leaving the developments in doubt and threatening New York’s ability to meet its climate goals
The dismissal by the Public Service Commission sets off a scramble for developers to decide whether to cancel contracts with NYSERDA, sacrificing millions of dollars in security payments. It also places New York’s clean-energy ambitions in peril. The state’s landmark climate law requires 70 percent of electricity in 2030 to come from renewable resources.
The projects seeking higher payments — four offshore wind and 86 land-based renewable projects — represent 25 percent of the forecast electricity demand in 2030. The increases, if approved, would have totaled about $12 billion net present value, doubling the costs to ratepayers of the existing contracts as Hochul has warned about the stress that higher rates would have on residents.
Hochul said in a statement the decision by the PSC was necessary to maintain affordability and preserve the competitive process.
“Make no mistake: my commitment to building a clean energy economy is as strong as ever,” she said. “New York will continue to advance an affordable clean energy future, and I have directed state agencies to undertake an accelerated process to procure renewable energy as affordably and quickly as possible.”
Environmental advocates, labor unions and the companies have said New York will not be able to meet its environmental goals if the commission rejects the higher subsidies. The offshore wind developers expressed disappointment.
Molly Morris, president of Equinor Renewables Americas, said the company and its partner BP would evaluate the impacts of the decision.”These projects must be financially sustainable to proceed,” she said in a statement.
But PSC Chair Rory Christian pushed back on that claim during the commission’s highly anticipated meeting. He said the state would continue to move forward with investments in clean energy. It’s also a decision of the developers to cancel their contracts, he emphasized.
“These projects are not everything. They do not represent the entirety of our efforts to fight climate change,” Christian said. “They’re one part of our portfolio, and as with any portfolio, different assets produce different results.”
Christian said providing increased payments would break the precedent of competitive procurement — meaning the commission needed to hold companies to the contracts and the conditions they were granted.
“By rejecting this relief, we signal to every vendor that our contracts, our commitments are worth the paper they are written on,” he said. “We signal that ratepayer funds are not an unlimited piggy bank for anyone’s disposal.”
The commission voted unanimously to approve the order that denied the petitions. The “inflation adjustment” was sought by the Alliance for Clean Energy New York on behalf of companies including EDF Renewables, NextEra, ConnectGen and Invenergy.
“The decision is short-sighted,” said ACE NY executive director Anne Reynolds in a statement. “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.”
Offshore wind developers for New York’s first NYSERDA-contracted projects also sought higher payments. Equinor and BP requested increases for their Empire Wind 1 and 2 and Beacon Wind. Orsted and Eversource asked for a smaller hike for the Sunrise Wind projects.
The decision is a blow for the nascent industry in the U.S. and the Biden administration’s offshore wind goals. Developers have canceled contracts for offshore wind projects elsewhere when states rejected requests for higher payments, while New Jersey lawmakers approved relief to share federal tax credits with Orsted for its Ocean Wind 1 project.
Developers told the PSC that high inflation and supply chain issues driven by the pandemic and Russia’s invasion of Ukraine had made the projects difficult to finance without more support from ratepayers.
But the PSC was unswayed.
“To the developers: We have a deal,” Christian said. “We expect all developers, no matter how large, to abide by their commitments.”
Those commitments include support for offshore wind ports and supply chain investments in New York, including at the Port of Albany and the South Brooklyn Marine Terminal. It’s not clear whether developers will continue their investments and efforts for those New York projects without the contractual commitment to provide economic benefits in the state.
“Sunrise Wind’s viability and therefore ability to be constructed are extremely challenged without this adjustment,” said Orsted Group EVP and CEO Americas Dave Hardy about the Long Island project. He said next steps would be evaluated and communicated as soon as possible.
The decision puts the offshore wind projects in “serious jeopardy and deals a potentially fatal blow to the progress these projects have made to localize clean energy manufacturing, reinvigorate New York’s ports and harbors, train and deploy New York’s skilled union workers, and revitalize environmental justice communities,” said New York Offshore Wind Alliance Director Fred Zalcman.
The order Thursday partly relies on the commission’s longstanding preference for competitive electric generation markets. The potential costs were also significant.
“The relief sought is inconsistent with commission policy favoring competition in electric generation procurement to ensure just and reasonable rates,” Marco Padula, the director of markets and innovation at the Department of Public Service, told the commission before the vote on the order.
DPS staff estimated the bill increases would be as high as 6.7 percent for residential customers and as high as 10.5 percent for commercial or industrial customers, depending on the utility.
A formulaic approach to increase payments to developers across the board would not be “just and reasonable,” Padula said when explaining the draft order.
Padula said the order indicates it could lead to overpaying for the renewable energy credits, would be unfair to bidders that did not secure contracts and doesn’t account for developers’ varied efforts to deal with inflation.
A formula could also lead to some developers still canceling their projects if they see the relief as insufficient, he said.
Commissioner Diane Burman, a Republican and often a dissenting vote on the commission, supported the order. She raised concerns about NYSERDA not taking a definitive position on the request from developers and ACE submitting the request on behalf of some members.
NYSERDA president and CEO Doreen Harris said the authority remains committed to the state’s renewable goals. She said the process for its most recent offshore wind and renewables procurements had concluded and awards would be announced “in the near future.”
“NYSERDA will assess impacts on the contracted portfolio, and with input from the Department of Public Service and the renewable energy industry, proceed swiftly with an accelerated procurement process that prioritizes competition, simplifies bid requirements, incorporates inflation indexing, all while coordinating with transmission planning initiatives,” she said in a statement.
Burman, meanwhile, noted how many meetings that developers and their lobbyists asked for with her in the days leading up to the decision, but she said she based her decision solely on the information in the public record.
Normally, the PSC would likely have delayed a decision, but petitioners wanted a decision this month, Burman said. She said the order shows the commission supports competitive markets: “full stop.”
“The level of relief being requested here in these petitions is jaw dropping,” Burman said when she cast her vote supporting the order. “This is the moment… for us to be more open and transparent on the real challenges ahead.”
Commissioner Jim Alesi, a Republican, said approving the inflation adjustment would be “corrupting” the procurement process.
Commissioner Tracey Edwards, a Democrat, placed the blame for the offshore wind projects not going forward on developers. She said none of the developers said the billions of additional dollars were going to pay workers more or otherwise provide relief.
“We are not stopping this from going forward. We are not. The developers have a contract,” Edwards said. “Live up to your contract or say that you can’t.”
Commissioner John Howard, a Democrat, warned of continued increasing costs as the state moves to meet its climate law mandates. He noted that offshore wind costs would also be paid by ratepayers statewide, not just in New York City and Long Island where the bulk of the projects are based
Howard said he hoped the commission moved forward with “eyes wide open and pocketbooks shut.”
Commissioner David Valesky, who is not registered in a party, emphasized the commission’s obligation to ensure safe and reliable service at just and reasonable rates.
Commissioner John Maggiore, a Democrat, made the point that there’s no guarantee the projects will go forward if the relief is granted. Maggiore said he agreed with the position of Gov. Kathy Hochul’s administration, represented in the staff recommendation, to reject the petitions.
The order raises the possibility of an “expedited rebid” if developers choose to cancel their contracts. Christian acknowledged this could be a challenging task for NYSERDA and other state agencies.
“Should these developers fail in their ability to … comply with their contractual obligations, it is through your efforts that we will seek out new alternatives; alternatives we must seek with haste,” he said.
ACE’s Reynolds raised concern about the lack of detail and timing of a rebid, noting NYSERDA is already six months behind in issuing a 2023 solicitation for large-scale onshore renewables and hasn’t announced 2022 awards or the latest winners for the 2023 offshore wind project.
She predicted some developers would cancel their projects and withdraw from the New York market.
“Unfortunately, today’s action by New York is not a sign that our state is really committed to the climate change action mandates that exist in law, and it is not a day that has moved us forward in giving future generations of New Yorkers a healthier and safer environment,” she said.