By Rich Heidorn Jr.

ALBANY, N.Y. — New York’s proposed Clean Energy Standard was the main topic of discussion at the Independent Power Producers of New York’s annual spring conference last week, with speakers debating the program’s costs, the role of nuclear and Canadian hydropower, and whether the goal of 50% renewable power by 2030 will be met through markets or power purchase agreements.

Former EPA Deputy Administrator Bob Perciasepe, now president of the Center for Climate and Energy Solutions, said the CES (Case 15-E-0302) “has the potential to be much more comprehensive than a renewable portfolio standard.”

“This is a profoundly more efficient approach in the long haul,” he said.

Cost Concerns

But Couch White attorney Kevin Lang, who represents industrial customers, said New York can’t afford a program that would increase the state’s already high utility rates.

“We don’t really think very highly of the Clean Energy Standard,” he said. “We’re extremely concerned about it.”

According to the Energy Information Administration, New York’s electric rates are 10th highest among U.S. states, at 13.63 cents/kWh in February.

Lang said large industrial customers with high load factors are already paying more in system benefit charges to fund public policy initiatives than for their power. He noted that CES cost estimates released last month by the Public Service Commission — which suggested the program would increase residential bills by no more than 1% and large commercial and industrials by no more than 1.4% — don’t include the cost of transmission. (See NYPSC: Minimal Cost to Meet 50% Renewable Goal.)

“What we’re doing is we’re driving business out of New York,” he said.

Lang said the program threatens to undo the benefits of retail competition. “Utilities divested generation so that [consumers] didn’t carry the risk. … Now we’re coming back with the [zero emission credits] and we’re saying, now all the risk is back on consumers.”

The PSC, he said, failed to learn from its mistakes decades ago when it signed long-term power contracts based on the assumption that oil would hit $100/barrel. “Customers paid billions and billions of dollars of above-market costs. One utility [Niagara Mohawk] almost went bankrupt.”

The current CES cost projections, he said, “are no better than any other cost projections.”

State Sen. Joseph Griffo, chairman of the Senate Committee on Energy and Telecommunications, also said he found the cost of the program “particularly concerning.”

Role of Canadian Hydro

“I support a market-based approach that correctly and fairly values carbon-free generation in all asset classes,” Griffo said. “I do not support energy policy that ultimately leaves us overly reliant on Canadian government-owned and subsidized hydro at the expense of New York’s generating assets and jobs.”

But NYISO CEO Brad Jones said the state may need 1,000 to 2,000 MW of additional Canadian hydro to meet the target because of limits on the grid’s ability to absorb wind power.

Jones said it would take 15,000 MW of wind alone to meet the CES goal — more than double the 8,000 MW a 2010 ISO study said the state’s grid could reliably handle. Jones said the study would be updated.

“Unless that [maximum wind] number changes, we’ve got a gap to fill, and that gap is rather significant,” he said. “We believe you must have some hydro in that overall mix to meet 50[%] by [20]30.”

Indian Point

Speakers also discussed the state’s “nuclear bridge,” a proposal that would allow nuclear plants to generate revenue through zero emission credits (ZECs), similar to renewable energy credits (RECs) earned by wind and solar generators.

Gov. Andrew Cuomo would exclude Entergy’s Indian Point nuclear plant in Westchester County — which he wants to see closed because of its proximity to New York City — from the program. (See Plan Would Pay NY Nuclear Plants for Zero Emissions.)

But Assemblywoman Amy Paulin, chairman of the Assembly Committee on Energy and a Westchester resident, said she doesn’t support closing the plant, noting that it provides 25% of the electricity in the Hudson Valley. “I don’t think that a proposal that excluded Indian Point will prevail,” she said.

She and Perciasepe said the loss of Indian Point also would set back efforts to reduce carbon emissions.

“We cannot achieve the deep mid-century reductions we’re going to need to make globally or in the United States without continuing to rely on all the zero-emitting sources for electricity we can conjure up, including the ones we currently have,” Perciasepe said. “So that includes hydro. That includes nuclear. We must nurture and keep those things going; otherwise we just dig a deeper hole.”

Susan Tierney, senior advisor for the Analysis Group, also voiced her support for Indian Point, saying energy prices would rise without the plant’s 2,069 MW.

Compensation for Heat Rate Improvements

Tierney, who was hired by Entergy to review the CES plan, described changes she said would make it “more efficient, cost-effective and fair.”

In addition to insisting on a role for Indian Point, Tierney’s program would create a “clean energy credit” that would provide a revenue stream for generators tied inversely to their carbon intensity. That means fossil fuel plants could earn credits by improving their emissions profile through heat-rate enhancements. Because removing a pound of CO₂ now is equivalent to doing so later, she says, CECs could be banked, providing stability in CEC pricing.

Transmission Needs

Jones said any resource mix that achieves the CES goal will require substantial new transmission. Most solar developers he has spoken to are planning on siting in western New York, far from the largest loads in New York City and Long Island, he said.

“It is a daunting challenge. Not only do we have to address the resource side, but we have to add the ability to move the power around our system. And we have to do so quicker than we’ve done in the past.”

One positive: “The environmentalists want the renewables so much they’re OK with … not opposing the transmission,” he said.

FERC Chairman Norman Bay, who gave the keynote speech, pledged his support in that effort. “If transmission is needed for economic, reliability or public policy reasons, it should be built,” he said. “I would be pleased to work with NYISO and its stakeholders to provide any assistance that I can to help build out transmission within NYISO.”

Markets or PPAs?

One recurring flashpoint was whether the CES will be market-driven or be accomplished through power purchase agreements. Another is whether utilities will be permitted to own generation resources to take advantage of their lower costs of capital.

Scott Weiner, the Department of Public Service’s deputy for markets and innovation, assured the audience that the PSC and its staff support competitive markets but acknowledged that a staff white paper “left open the door a crack” for utility ownership. Staff said it “disagreed with IPPNY and others who suggest that allowing any level of utility ownership at all will necessarily expose consumers to greater price risk or chill the development of competitive markets.”

“There may be situations where utility-owned generation would be appropriate,” Weiner said, adding, “I can assure you there is no conclusion yet, certainly not at the commission level and not at the staff level.”

Jones noted that the ISO has filed comments opposing both PPAs and utility-owned generation.

“You have my commitment, you have my staff’s commitment, that we will be the supporters of markets. You will see us stand up for markets,” he said.

“Our position on PPAs is similar to our position on utility-owned generation: We don’t think we should head down that pathway.”