August 13, 2015
New York

Energy groups wary of NYSERDA proposal to allow utilities to own wind and solar farms

By Larry Rulison | Times Union | Wednesday, August 12, 2015 |

A coalition of power plant owners and energy groups is opposing utility ownership of large-scale renewable energy projects such as wind farms that would help the state achieve its renewable energy goals.

The group, led by the Independent Power Producers of New York, asserts the proposal would lead to higher bills for consumers.

New Yorkers spend about $22 billion a year on electricity, according to the U.S. Energy Information Administration.

“Reverting back to the old monopolistic way of doing business would not only undermine future renewables investment by sending a signal to private investors that New York is not a level playing field, but also would slow power sector innovation and harken back to the days where ratepayers funded utility projects through their monthly electricity bills,” IPPNY CEO Gavin Donohue said in a statement Wednesday.

Donohue’s comments, which also were supported by the Alliance for a Clean Energy New York, were in reaction to an idea floated by the Cuomo administration to allow utilities like National Grid to develop large-scale solar or wind farms.

New York state banned utility-owned generation back in the 1990s as part of the deregulation of the state’s energy markets. But in a report submitted to regulators in June, the state’s energy development agency, NYSERDA, says utility-owned wind or solar farms could be used as a new device to help the state reach its ambitious renewable energy goals. The state wants 50 percent of its wholesale electric supply to come from renewable energy sources by 2030, which would mean doubling its clean energy output within 15 years.

The report “provides a number of options and explicitly cites utility ownership as an important issue for further consideration through public comment,” NYSERDA spokeswoman Kate Muller said in response to Donohue’s comments. “To characterize NYSERDA’s proposal as an endorsement of utility ownership is incorrect.”

NYSERDA currently supports the development of large-scale renewable energy projects by paying developers a premium for the amount of clean electricity they generate. The subsidies, which are paid for with a state surcharge on utility bills that typically amounts to several dollars a month, pay for renewable energy credits, or RECs, that wind farms and other projects generate. The RECs have value and can be sold on the open market to help companies comply with environmental regulations. Last year, NYSERDA offered $206 million in subsidies to two wind farms in Chautauqua and Franklin counties and two smaller hydro plants through the program. Another round is expected to be announced soon.

As part of a broader effort to overhaul the state’s energy markets, NYSERDA has laid out scenarios that it says would make that process run better, including buying the electricity from the projects in addition to the RECs through a separate entity such as the New York Power Authority. Under other proposals, utilities would buy power from developers, or develop their own projects.

Utilities would pass on project costs to ratepayers, but NYSERDA contends that over the long run the cost would be lower than the current subsidy program.

“Utility-owned generation can reduce the cost of electricity by $6 (per megawatt hour),” the NYSERDA report says of its cost comparisons with the current subsidy program.

The state Public Service Commission is considering the NYSERDA proposals. Initial written comments were due Wednesday.

Utilities in the state already are involved in the renewable energy business through non-regulated subsidies. One example is Iberdrola, which owns the RG&E and NYSEG utilities and also owns a company called Iberdrola Renewables LLC that owns the 74 megawatt Hardscrabble Wind Farm in Herkimer County and part of the 321-megawatt Maple Ridge Wind Farm in Lewis County. And as part of its overhaul of the state’s energy markets, the PSC has considered the idea of utilities being involved in small-scale renewable energy projects.

Still, even advocates for the renewable energy markets are worried about utility-owned generation.

“Independent developers of wind energy and other technologies have proven their ability to bring clean energy to market most efficiently and cost effectively,” Anne Reynolds, executive director for the Alliance for a Clean Energy New York, said Wednesday. “Allowing utilities to own and rate-base renewable generation would chill competition and discourage cost-effective investment. ”

And the North Greenbush entity that oversees the state’s wholesale electric markets is also wary of NYSERDA’s proposal, saying the subsidy program has worked well enough so far.

“The NYISO’s competitive wholesale market design, together with the state’s current policies for spurring the development of renewable generation, has a proven track record of success,” NYISO wrote in its filing with the PSC on Wednesday.

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