The state Public Service Commission (PSC) on Thursday rejected a request by developers of wind and solar for a financial boost. The decision by the commission, which regulates utilities and oversees rates, raises questions over whether the key clean energy projects — planned around the state and in the Atlantic Ocean — will move forward as planned.
Renewable developers had asked to more than double the billions already promised in subsidies to make their projects viable in the wake of increased costs, mostly from inflation. But the commission said that paying the companies more would ultimately hit ratepayers with higher electric bills and that the original deal they struck should be honored.
“By rejecting this relief, we signal to every vendor that our contracts, our commitments, are worth the paper they are written on,” said PSC Chair Rory Christian. “We signal that ratepayer funds are not an unlimited piggybank just at anyone’s disposal.”
Now it’s up to the developers to decide whether they’ll move forward with the projects — or pull out of their agreements with the state.
The stakes are high as New York moves to build out renewable energy to power the grid. Offshore wind and solar are key pieces of New York’s plans to move away from burning gas, as required by the state climate law.
If the 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’re scrambling for every megawatt of clean power,” Gerrard said. “I don’t know whether the companies’ demands for more money represent a genuinely bad financial situation, a bargaining tactic or some combination.”
Replacing fossil fuels with renewable resources like wind and solar would result in improved air quality, reduce greenhouse gas emissions and boost power reliability. New York City — where gas generates the vast majority of the electricity now powering the boroughs — stands to benefit in particular.
In a statement, Gov. Kathy Hochul called the PSC’s decision “necessary to maintain affordability in the wake of global economic pressures and to preserve the competitive process that ensures New York consumers are getting the best deal” and reiterated her commitment to “building a clean energy economy.” Her administration on Thursday released a plan for how to accelerate renewables development and grow the clean energy sector in the wake of economic challenges.
Projects at Risk
When making their case to PSC, developers had warned that solar and wind projects may not come to fruition without increased subsidies. It’s unclear what they will do next.
Danish multinational energy company Ørsted is reevaluating whether it will continue an offshore wind project in partnership with Eversource Energy, planned for the waters southeast of Montauk.
“Sunrise Wind’s viability and therefore ability to be constructed are extremely challenged without this adjustment,” said David Hardy, Americas region CEO of Ørsted, in a statement.
Molly Morris, president of offshore wind developer Equinor, in a statement said the company would “assess the impact of the state’s decision” but did not indicate how it would proceed. Equinor and BP won contracts from the state to develop three offshore wind projects, two south of western Long Island and one south of Massachusetts.
Taken together, the increased subsidies requested were worth 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 a nearly 7% increase on their electric bills if the PSC approved the full requests. (That could translate to an increase of about $5 on electric bills, as per an analysis by the New York State Energy Research and Development Authority.)
The ask for increased subsidies put the state in a pickle.
On one hand, New York has been touting the renewable projects as proof of its commitment to cleaner, greener energy and the associated activities that would spur an economic bonanza. Any delays could jeopardize those benefits.
On the other hand, it’s an unsavory move to further financially burden ratepayers who already shoulder some costs for the energy transition and who have to contend with inflation themselves.
The subsidy boost was backed by many 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 rate increases. If developers cancel contracts, the state could have to restart the whole procurement process, significantly slowing down the transition to renewables and leading to higher costs to ratepayers down the line, they said.
But the PSC was willing to see what happens.
“Taking exception today almost guarantees that we will be asked again to do this in the future. So as important as offshore wind and land based renewable energy is towards achieving our goals, even more important is the manner in which we pursue those goals,” Christian said. “To the developers, we have a deal. We expect all developers, no matter how large, to abide by their commitments.”
Anne Reynolds, executive director of the Alliance for Clean Energy New York, said she was disappointed by the decision and had hoped the PSC would have at least granted some relief given NYSERDA’s acknowledgement of increased prices.
“I believe it would be cheaper for New York ratepayers than what they [the PSC] chose to do,” she said. “I do believe that many of these projects are uneconomic.”
Ripple Effects
The state Climate Leadership and Community Protection Act requires New York to source 70% of its electricity from renewables by 2030. The four offshore wind projects along with 86 other renewable projects — solar and land-based wind — that requested increased subsidies represent about a quarter of the projected 2030 electric needs.
Patrick McClellan, policy director for the New York League of Conservation Voters, said the lack of increased support for the renewable projects could threaten progress toward climate goals.
He painted a “worst case” scenario: “At the same time we’re putting more electric vehicles on the road, more buildings have electric heat … and demand is going up and we’re in a scenario where we’re still relying on a lot of peaker plants that are located in environmental justice communities,” he said.
Highly polluting gas-powered peaker plants, which fire in times of high energy demand, are overwhelmingly in and around low-income, non-white communities that already bear higher pollution burdens.
Slow progress to green the grid could have other ripple effects in New York City, too. Offshore wind in particular is an emerging industry that holds promise for creating jobs and revitalizing old industrial areas in the boroughs, as THE CITY previously reported.
Plus, buildings in the city that must comply with the emissions caps imposed by Local Law 97 may have a harder, costlier time adhering to the law the longer it takes to transition to a greener grid, one 2021 study found.
The law counts emissions as not only direct exhaust from any fuels used by occupants’ stoves, heaters or boilers, but also the byproduct of what’s connected to the electricity the building uses, wherever it was generated. Plus, building owners can purchase renewable energy credits that support the transmission projects in order to partially comply with emissions caps.
Following their offshore wind industry peers, developers of a transmission line slated to carry wind, solar and hydropower from Delaware County to Astoria, Queens, also requested increased funding. Later, so did developers of another line that would bring Canadian hydropower into the city. The PSC will decide on those requests at a later date. Their decision on Thursday does not bode well on future rulings to grant hikes.