|SAME AS||SAME AS S05549-A|
|Relates to maintaining the continued viability of the state's existing large-scale, renewable energy resources.|
|04/17/2017||referred to energy|
|04/28/2017||amend (t) and recommit to energy|
|04/28/2017||print number 7275a|
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NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7275A SPONSOR: Jenne
TITLE OF BILL: An act in relation to maintaining the continued viability of the state's existing large-scale, renewable energy resources   PURPOSE: New York State has been a leader in renewable energy, beginning with the hydroelectric power plant at Niagara Falls in 1895. The Clean Energy Standard mandates that by 2030, 50% of electricity consumed in the state will come from renewables and establishes programs to develop new capac- ity. However, economic factors threaten NY's existing large-scale renew- able generators, in many cases the most cost-effective sources of clean power. This bill establishes utility support for these facilities to protect critical infrastructure and ensure that the 50 by 30 goal is achieved as economically as possible. New York recognizes the social cost of greenhouse gas (GHG) emissions and the value of clean power sources. This is reflected in the compen- sation provided to nuclear generators through the Zero Emission Credit program. Legacy large-scale renewables (LSRs), however, are compensated at the same rates as natural gas or coal generators despite their carbon benefits. Low fuel prices have brought these rates below the long-term viability threshold of many legacy renewable resources. Approximately 10% of New York's electricity currently comes from inde- pendently owned hydroelectric facilities, which also provide flood control and water levels management to support communities and the envi- ronment. Biomass plants are a critical economic component of the fores- try industry in Northern NY and power the US Army installation at Fort Drum. These facilities face an uncertain future and may be compelled ultimately to retire or export from the state. This would not only endanger their community and economic benefits, it would also undermine the cost-effective achievement of the state's GHG targets. The current Maintenance Tier program does not adequately address these issues. Through the Renewable Portfolio Standard, New York ratepayers have invested heavily in the development of wind, solar, and biomass facili- ties. Without fair compensation going forward, at the expiration of the RPS contracts these generators will likely export into neighboring ener- gy markets or terminate operations. This will mean that despite being located in NY, these resources will not contribute to the 50 by 30 goal, depriving NY ratepayers of continuing benefit from their investment. New capacity will need to be built at a higher cost to achieve the same target. This bill provides compensation for the clean energy attributes of lega- cy large-scale renewable generators at a variable per-kWh rate equal to 75% of the cost of new renewables. This ensures that it will save rate- payers money in the achievement of the CES goal by preserving existing renewable producers at 25% less than the cost of new. This does not place any additional burden on ratepayers to purchase renewable energy, rather, it ensures that NY will first look to purchase electricity from existing, cheaper resources before paying a high price for new renewa- bles to achieve the mandate already established by the CES.   SUMMARY OF PROVISIONS: Section one of the bill provides the Legislative findings and intent of the bill. Section two defines various terms. Sections three and four provide a framework for the program including deliverability, annual targets, load serving entities' obligations, the establishment of a Tier 2 Renewable Energy Credit (REC) priced at a level of 75% the cost of new renewables, the enabling of a process to show financial hardship in specific cases of need, and provision of an outline of procedures to implement the Tier 2 REC program at the PSC and NYSERDA. Section five provides the effective date.   JUSTIFICATION: It is often noted that ratepayers in NY face some of the highest elec- tricity costs in the nation. This is largely due to utility costs, fees, and taxes, and conceals wholesale prices at historic lows. The low price of natural gas, above-market support for new renewables, proliferation of residential solar, and low demand growth have all contributed to a decline in compensation for baseload electricity generators. Recognizing this, in its draft CES, Department of Public Service Staff recommended a "Tier 2" REC program to provide support for legacy renewables. This program was eliminated without warning when the CES was released. The North Country alone contains over 500 MW of independent hydro. These facilities are long-lived and low impact, and are core infrastruc- ture, often located at the center of towns and managing water levels for lakes and reservoirs. Direct competition with natural gas, which has lower costs and no such responsibilities, is proving unsustainable. The RPS established a Maintenance Tier program for a subset of renewable generators that predated the RPS. The program does not apply to all vintage renewable resources and, even where it does has had mixed results, allowing biomass and hydro plants to close. This bill takes lessons from recent closure and provides improvements to the program to streamline the application process and fix support at a level sufficient to maintain viability. Wind facilities developed under the RPS between 2003 and 2016 were given ten-year support contracts. With electricity rates low, at the expira- tion of those contracts they must seek additional revenue. Though the NY CES does not allow existing generators to participate in procure- ments, RPS programs in neighboring states do. The location of a genera- tor does not determine where its energy is consumed or which state gets to count its production toward clean energy goals. This export threat is imminent, with many states already seeking to procure this generation and transmission lines already being sited across Lake Champlain specif- ically to deliver wind power into the ISO-NE. This bill follows the model for Tier 2 established by DPS Staff in the original CES draft, and will be available to all legacy large scale renewable generators. The compensation for Tier 2 RECs will be 75% of Tier 1. The Tier 1 price for new renewables is established by compet- itive bidding through NYSERDA-managed procurements, and reflects the additional compensation needed above available wholesale rates to make a renewable project viable. As wholesale rates rise, REC prices fall. This ensures that ratepayers will not overpay for LSRs, and will never pay to develop new generators while existing ones can be kept online for less.   LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS: None to the state.   EFFECTIVE DATE: Immediately.
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STATE OF NEW YORK ________________________________________________________________________ 7275--A 2017-2018 Regular Sessions IN ASSEMBLY April 17, 2017 ___________ Introduced by M. of A. JENNE, HUNTER -- read once and referred to the Committee on Energy -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT in relation to maintaining the continued viability of the state's existing large-scale, renewable energy resources The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Legislative findings and intent. The legislature hereby 2 finds and determines: 3 1. New York is a national leader in developing and implementing policy 4 to promote the development of renewable energy resources, the growth of 5 which has significantly benefited the state in numerous ways, including 6 through reductions in pollutants that contribute to climate change, 7 associated reductions in adverse impacts on public health, and substan- 8 tial job growth in the clean energy sector. 9 2. In 2016, more than twenty percent of the state's electric load 10 (representing 2,354 gigawatt hours) was supplied by renewable resources 11 - solar, wind, hydroelectric, biomass, fuel cells and similar resources. 12 To further promote and incentivize the development of renewable energy, 13 the New York state public service commission recently established a 14 clean energy standard requiring, among other things, that fifty percent 15 of the electric load in the state be served entirely by renewable 16 resources by the year 2030 (i.e., 50 by 30 target). 17 3. A recent study shows that New York's clean energy sector now 18 employs more than 85,000 workers at more than 7,500 business establish- 19 ments spread out across the state, in both the renewable energy and 20 energy efficiency sectors. With implementation of the clean energy stan- 21 dard, clean energy jobs are anticipated to grow by more than six percent 22 per year or double the growth rate of the entire United States economy 23 in 2016. Proper implementation of the clean energy standard will ensure 24 that the state meets these job growth projections. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10514-02-7A. 7275--A 2 1 4. To promote achievement of the clean energy standard, and to ensure 2 the continued job growth and other benefits attendant to a clean energy 3 economy, New York needs to assure that its existing large-scale, renewa- 4 ble energy sector is provided with adequate price signals and financial 5 incentives to remain in operation and to sell their renewable energy 6 attributes in New York, allowing the state to count the resources toward 7 the 50 by 30 target and retain the jobs and tax payments supported by 8 these generators. Absent these assurances, it would be difficult if not 9 impossible for the state to meet the recently established target. 10 5. New York's ability to meet the clean energy standard will be 11 hampered if such existing resources provide their wholesale energy 12 products for delivery to adjacent states, some of which have enacted 13 laws that provide for a robust market that provides a stronger opportu- 14 nity to sell renewable energy attributes than is currently available in 15 New York. There is a real and present danger that a significant portion 16 of New York's existing fleet of large-scale, renewable energy resources 17 will participate in the programs offered by these other states and thus 18 will not be available for consideration in terms of meeting the 50 by 30 19 target, and compete effectively with other renewable classes in the 20 clean energy standard. 21 6. It also is of paramount importance to ensure the fuel diversity of 22 the state's energy sector for the purposes of providing energy security, 23 system reliability and protection of consumers from potential price 24 spikes or shortages. For this same reason, it is important for the state 25 to take measures to ensure the continued viability and competitive posi- 26 tion of a wide variety of large-scale, renewable energy resources in the 27 state. 28 7. Accordingly, the overlying intent of this act is to provide exist- 29 ing large-scale, renewable energy resources in New York state with 30 appropriate financial incentives to continue operations for the foresee- 31 able future. 32 § 2. Definitions. 1. "Large-scale, renewable energy resource" means 33 an electric generating facility that: (a) sells its energy in the 34 wholesale markets operated by the New York independent system operator; 35 (b) is deemed an eligible technology type pursuant to Appendix A of the 36 "Order Adopting a Clean Energy Standard" and, in the case of hydropower, 37 has a generating capacity less than 50 megawatts; (c) is physically 38 located within the jurisdiction of the New York independent system oper- 39 ator; and (d) the associated energy is delivered in accordance with a 40 New York delivery requirement as described in section three of this act. 41 2. "Eligible large-scale, renewable energy resource" means an existing 42 large-scale, renewable energy resource that: (a) at the time in question 43 is not under a contract for the sale of renewable energy credits with 44 the New York state energy research and development authority pursuant to 45 the renewable portfolio standard main tier or maintenance tier program 46 or clean energy standard tier 1 program implemented by such authority; 47 (b) is not under an existing contract for sale of renewable energy cred- 48 its with a load serving entity; and (c) is otherwise found by the New 49 York state energy research and development authority to meet delivera- 50 bility requirements specified in section three of this act, and other 51 eligibility requirements specified in subdivision one of this section. 52 3. "Load serving entity" or "load serving entities" means and includes 53 all investor-owned distribution utilities (in their capacity as commod- 54 ity suppliers), energy service companies, community choice aggregation 55 programs not served by energy service companies, municipal utilities 56 under the jurisdiction of the public service commission, and retailA. 7275--A 3 1 customers that self-supply with electricity through the New York inde- 2 pendent system operator. 3 4. "Renewable energy credit" means a tradable, non-tangible energy 4 commodity that represents proof that 1 megawatt-hour (MWh) of electric- 5 ity was generated from a renewable energy resource. To be eligible for 6 sale in New York state and to meet the procurement obligations of load 7 serving entities, each renewable energy credit must be registered with 8 the New York generation attribute tracking systems. 9 5. "Tier 1" means the program designated as tier 1 pursuant to the 10 clean energy standard order. 11 6. "Tier 2 renewable energy credit" refers to a renewable energy cred- 12 it generated by an eligible large-scale, renewable energy resource. 13 7. "Order adopting a clean energy standard" means the public service 14 commission order dated August 1, 2016, and entered in case number 15-E- 15 0302 et seq. 16 § 3. Deliverability. Energy from an eligible large-scale, renewable 17 energy resource shall be deemed to comply with the New York deliverabil- 18 ity requirement if either it is: (a) delivered into a market adminis- 19 tered by the New York independent system operator for end-use in New 20 York state; (b) delivered through a wholesale meter under the control of 21 a utility, public authority or municipal electric company such that it 22 can be measured, and such that consumption within New York state can be 23 tracked and verified by such entity or by the New York independent 24 system operator; or (c) delivered through a renewable energy resource 25 dedicated generation meter, approved by and subject to independent 26 verification by the New York state energy research and development 27 authority, to a customer in New York state. 28 § 4. Program for eligible large-scale, renewable energy resources. 29 Notwithstanding any other provision of law to the contrary, including, 30 but not limited to, any order, rule or regulation promulgated pursuant 31 to the public service law, the public authorities law, and/or the state 32 administrative procedure act, the public service commission, in consul- 33 tation with the New York state energy research and development authori- 34 ty, shall adopt a program within 120 days of the effective date of this 35 act, to provide support to and for eligible large-scale, renewable ener- 36 gy resources through a market for tier 2 renewable energy credits as 37 defined herein to ensure the continued viability of eligible large-sca- 38 le, renewable energy resources for the purpose of meeting the state's 50 39 by 30 target. In developing such program, the public service commission 40 shall create an obligation on load serving entities to purchase tier 2 41 renewable energy credits from eligible large-scale, renewable energy 42 resources through a process and requirements as fully described below: 43 1. Annual targets for tier 2 renewable energy credits. The public 44 service commission shall provide annual targets and mandates for the 45 acquisition of tier 2 renewable energy credits by load serving entities 46 for the years 2017 to 2030 that ensures market demand for tier 2 renewa- 47 ble energy credits for all resources that become eligible large-scale, 48 renewable energy resources during such timeframe for purposes of achiev- 49 ing the 50 by 30 target. The targets to be established by the public 50 service commission should reflect the quantity of renewable energy 51 generation that is serving total electric load in New York state, 52 excluding generation from facilities owned by the power authority of the 53 state of New York and excluding hydropower from generators with a capac- 54 ity greater than 50 megawatts. 55 2. Load serving entities' tier 2 renewable energy credit obligation. 56 Each load serving entity shall be responsible for acquiring a definedA. 7275--A 4 1 quantity of tier 2 renewable energy credits based upon the total tier 2 2 load serving entity obligation target allocated to all load serving 3 entities proportional to the load each serves; i.e., determined by 4 multiplying each load serving entity's actual load for the prior year by 5 the percentage GWh target for that year. The New York state energy 6 research and development authority shall publish each load serving enti- 7 ty's annual obligation for each annual compliance period on its website 8 or by other appropriate means by December 1 of the year prior to the 9 year such published annual obligation shall apply. 10 3. Tier 2 renewable energy credit price. By each December 1 prior to 11 the annual compliance period, the public service commission shall estab- 12 lish a tier 2 renewable energy credit price to be set at 75 percent of 13 the weighted average cost per renewable energy credit that the New York 14 state energy research and development authority paid to acquire renewa- 15 ble energy credits from resources under the clean energy standard tier 1 16 program in the prior calendar year. 17 4. Financial hardship. Those eligible large-scale, renewable energy 18 resources for which the tier 2 renewable energy credit price is insuffi- 19 cient may seek additional financial assistance from the New York state 20 energy research and development authority through contracts having a 21 minimum duration of ten years for the purpose of ensuring the continued 22 viability and availability of such resources toward meeting the 50 by 30 23 target. The New York state energy research and development authority 24 shall apply the following criteria in determining the eligibility of 25 such eligible large-scale, renewable energy resources to receive such 26 financial assistance, which shall be paid as an increment above the tier 27 2 renewable energy credit price determined pursuant to subdivision three 28 of this section: 29 (a) A showing of financial hardship; 30 (b) The basis for and reasonableness of expected operating and capital 31 costs. This evaluation may include, among other things, a comparison to 32 prior years' costs and a comparison to costs of like generation; 33 (c) The existence of any other cash sources available to the large- 34 scale, renewable energy resource, such as: (i) tax benefits; (ii) subsi- 35 dies; (iii) contracts; and (iv) other sources, including restructuring 36 financing; 37 (d) Whether market rules are increasing the costs of the large-scale, 38 renewable energy resource and, if so, whether any steps can be taken to 39 reduce such costs; 40 (e) Whether the large-scale, renewable energy resource's real property 41 tax assessment is consistent with the assessments imposed in similarly 42 situated facilities elsewhere, and if not, what action has been taken to 43 address such assessment; 44 (f) Whether the large-scale, renewable energy resource is required to 45 operate as part of a package of assets that is financially viable as a 46 whole; 47 (g) Whether the large-scale, renewable energy resource generates 48 enough revenue, based on expected output, to cover its operating costs 49 and enjoy a reasonable return; 50 (h) Whether the generation facility generates enough revenue to make 51 necessary capital improvements; 52 (i) Whether the large-scale, renewable energy resource generates 53 enough revenue to cover its fixed costs, including: (i) debt service; 54 (ii) property taxes; (iii) security costs; and (iv) other costs;A. 7275--A 5 1 (j) Whether the large-scale, renewable energy resource has attempted 2 to make use of other renewables programs available to it, such as volun- 3 tary green markets; and 4 (k) The regional economic importance of the resource. This evaluation 5 may include job creation and retention, regional spending for fuel and 6 other goods and services, contribution to local tax base, fuel diversi- 7 ty, greenhouse gas reduction, enhanced forest health, flood control, 8 municipal water supply, ecological stewardship and other non-economic 9 factors on a region-specific basis. Any contract entered into with an 10 eligible large-scale, renewable energy resource pursuant to this subdi- 11 vision shall include a reasonable return, and take the form of a fixed 12 price increment to the tier 2 renewable energy credit price that the 13 generator is receiving from a load serving entity or a financial 14 contract for differences to adjust based on fluctuations in the tier 2 15 renewable energy credit price. The totality of all increments provided 16 to resources pursuant to this subdivision shall be recovered from deliv- 17 ery customers in the same manner as in the renewable portfolio standard 18 program maintenance tier. 19 5. Procedures. To implement the tier 2 renewable energy credit 20 program, the public service commission shall also adopt within 120 days 21 of the effective date of this act the following procedures and related 22 requirements: 23 (a) The public service commission shall establish procedures consist- 24 ent with the procedures developed under the clean energy standard tier 1 25 program to determine the eligibility of large-scale, renewable energy 26 resources to participate in the program adopted pursuant to this act and 27 to certify such eligible large-scale, renewable energy resources. All 28 resources that have previously been found by the New York state energy 29 research and development authority to meet the eligibility and delivera- 30 bility requirements in force under the renewable portfolio standard or 31 clean energy standard programs shall be deemed to meet eligibility and 32 deliverability requirements of this act. 33 (b) The public service commission, with the assistance of the New York 34 state energy research and development authority, shall develop an equi- 35 table process by which load serving entities acquire tier 2 renewable 36 energy credits from eligible large-scale, renewable energy resources, 37 which may include the designation of the New York state energy research 38 and development authority as the central procurement entity for tier 2 39 renewable energy credits, whereby the New York state energy research and 40 development authority would ensure the registration of all tier 2 renew- 41 able energy resources from generators in New York generation attribute 42 tracking systems, purchase the required targeted amount of tier 2 renew- 43 able energy credits, and re-sell the tier 2 renewable energy credits to 44 load serving entities on an annual basis in order to facilitate their 45 collective efficient compliance. The public service commission, with the 46 assistance of the New York state energy research and development author- 47 ity, shall also develop and implement protocols in the event that there 48 is an oversupply or undersupply of tier 2 renewable energy credits 49 offered for sale, relative to the tier 2 renewable energy credit obli- 50 gation applied to the load serving entities, provided that the protocols 51 should recognize and prioritize the realization of economic benefits in 52 New York from generators located in New York. 53 (c) The public service commission shall develop procedures by which 54 eligible large-scale, renewable energy resources may obtain contracts 55 from the New York state energy research and development authority under 56 subdivision four of this section in accordance with the requirements ofA. 7275--A 6 1 the state administrative procedure act. Such procedures shall, on a 2 case-by-case basis, authorize eligible large-scale, renewable energy 3 resources to petition the public service commission for a finding of 4 financial hardship, which finding shall be based upon a determination 5 that the established tier 2 renewable energy credits determined in 6 accordance with subdivision three of this section are insufficient to 7 ensure the viability of the resource. The public service commission 8 shall make a final decision with respect to such contract within 120 9 days after a hardship petition is received. 10 (d) Each load serving entity shall demonstrate compliance with the 11 requirements of this section through an annual compliance filing pursu- 12 ant to a process established by the public service commission that is 13 consistent with the compliance filing requirements established pursuant 14 to the tier 1 program. 15 § 5. This act shall take effect immediately.