Price subsidies instead of mandate -- New York goes for centralised control

The New York Public Service Commission (PSC) unanimously approved the policy framework for what it is calling a renewables portfolio standard (RPS) that on the surface looks like the nation's most ambitious state mandate. It calls for 25% of electricity sales to come from renewable resources by 2013, exceeding by a fifth California's RPS of 20% by 2017.

A closer look at the so-called RPS, however, reveals that after 19 months of public testimony and debate, the PSC in September adopted a plan that directs its staff and the New York Energy Research and Development Authority (NYSERDA) to set up a centralised system to procure renewable energy, not a renewables mandate on New York's utilities as directed by New York governor George Pataki.

The state's renewables supply is already at 19.3%, mostly from hydroelectric. New York will need to add about 3700 MW of renewables to reach the 25% target, but continuing to qualify as renewable are run of river hydro projects less than 30 MW, as well as wind, solar, ocean or tidal and biomass resources. New York has 49 MW of wind capacity and over 500 MW in the pipeline that could be completed in the next two years. The PSC decision follows a report earlier this year that determined the New York grid system is capable of absorbing at least 3300 MW of wind with little economic impact (Windpower Monthly, April 2004).

While the PSC's policy framework refers to a RPS, the plan includes few elements of a true RPS designed to create a competitive renewables market. The New York model fails to place an obligation on utilities to buy renewable energy, has not introduced tradable renewable energy credits and has no penalties for non-compliance.

generating interest

The PSC, along with NYSERDA, plans to run a government operated program that will generate interest among developers through a centralised procurement process that provides an incentive to build projects and sell the renewable generated electricity into the wholesale market, says David Flanagan of the PSC. Rather than place an obligation on utilities as other state RPS mandates do, the commissioners chose to place the responsibility to meet the 25% target on NYSERDA and on renewable resource developers, he says. The price tag for the incentives run $570 to $750 million, but that would be partially offset by about $360 million in wholesale price decreases, according to PSC figures.

After months of public testimony in which mandates were strongly opposed, Flanagan says the commission decided it "wanted to do this with incentives for the construction and operation of renewables, not with the penalties found in other mandates." He insists that NYSERDA will reach its 25% target. Despite its support for the PSC's plan, the American Wind Energy Association wants the state eventually to move to an RPS that places the mandate on New York utilities. "While this is an important and innovative program that we fully support, we also hope to see a transition from state procurement to procurement directly by utilities and energy service companies," says Douglas Ward of AWEA's WindPower NY project.

The PSC plan includes two tiers of eligible resources. The main tier is for commercial sized installations. The "customer-sited" tier consists of small solar, wind and fuel cells metered at homes and businesses. Up to 2% of the 3700 MW are allowed in this tier. The commission also wants the state's voluntary green power programs to contribute 1% of the overall 25% goal.

NYSERDA and the PSC staff have until December 31 to work through the plan's details before releasing solicitations in 2005 targeting roughly 1.3 million megawatt hours to be delivered in 2006. That will increase to nearly 12 million megawatt hours in 2013. Flanagan says a 2009 check-in could result in the program's redesign if sufficient progress is not being made.