To reach Gov. Andrew Cuomo’s clean power goals, which call for the state to get half its electricity from clean sources by 2030, utilities will have to ink binding long-term deals to buy power from large wind or solar farms, according to a recent report by the state Public Service Commission.
Cuomo wants to nearly double the amount of clean power currently available, and such mandatory purchases might have to cover up to half of that goal to make it happen, according to alternative energy advocates like Anne Reynolds, executive director for the Alliance for Clean Energy New York, who spoke Tuesday to the Albany Times Union editorial board.
“We are enthusiastic about the goal and we are looking for the details that would make the program work. And it won’t work unless it attracts developers to build in New York. And that is why we need the long-term contract,” Reynolds said.
But utilities are leery of being forced to buy so much power over the long haul, saying it could raise costs and drive away customers unless the state takes on some of the financial risk. Cuomo, who in December directed the PSC to come up with a plan to achieve the goal in his Clean Energy Standard, wants the roadmap issued by June.
Should the state decide to go with mandatory purchases, utility companies, which got out of the power-generating business when the state’s electricity market was deregulated, also want a chance to own – and potentially profit from – alternative energy projects. Such a step troubles the state’s power plant owners, who fear that deep-pocketed utilities could drive out smaller competitors.
Last Thursday, the commission issued a 70-page report on what should be done to promote Cuomo’s vision for the rapid growth of so-called “large scale renewables,” like wind turbine farms, both land-based and offshore. Currently, the state is getting only about 26 percent of its electricity from renewables, which also include hydro-electric, solar and biomass.
The state has been adding onshore wind farms for years. Last month, the state hit a record when wind delivered 9 percent of the state’s electricity. That is up from about 7 percent last March.
To speed that growth and hit Cuomo’s mark, according to the PSC report, it will be “necessary” to give alternative energy companies long-term contracts – which could run up to 20 years – that ensure buyers for their power, which will satisfy potential investors that loans for massive projects will be repaid. Such contracts are called power purchase agreements, or PPAs.
And to make the plan acceptable to the utilities, which would ultimately have to take that power, it would also be necessary for the state to put up financial assurances that “incent a fully functioning self-initiated and competitive renewable energy market,” the PSC report continued. Long-term purchase contracts are an “obvious solution for developers.”
Such mandatory purchase systems are already used by other states to promote alternative energy, including Massachusetts, Connecticut and Rhode Island.
A lack of mandatory PPAs helped doom the state’s last two efforts this decade to develop off-shore wind projects – the Great Lakes Off-Shore Wind project developed by the New York Power Authority, which was yanked in 2011, and a more recent plan off the coast of Long Island by the Long Island Power Authority that was dropped in December 2014.
In both cases, the agencies cited excessive costs of such power among the reasons for pulling the plug.
Last fall, two major upstate utilities – New York State Electric and Gas, and Rochester Gas and Electric – outlined their objections to mandatory power purchases, saying that multiyear deals expose the utilities to too much risk. If such purchases are to be done, there also must be a “cost recovery” system in place to protect against fiscal impacts or lost customers.
Utilities “cannot support PPAs unless the many serious risks are adequately addressed,” wrote Noelle Kinsch, a deputy general counsel for Iberdrola USA, the parent company of both upstate utilities, in a letter to the PSC.
The PSC is apparently aware of where potential roadblocks lie. As the agency prepares its report, it will seek comments “on the percentage” of power to be covered by PPA agreements and on “specific incentive mechanisms for the utilities to minimize ratepayer costs,” according to last week’s report.
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