Offshore

NY regulators say state can’t ease financial pressures for renewables developers

NY regulators say state can’t ease financial pressures for renewables developers
(Photo Credit: steve docwra/Bigstock.com)

The New York State Public Service Commission denied petitions filed by a group of offshore wind developers and a state renewable energy trade association seeking billions of dollars in additional funding from consumers for four proposed offshore wind projects and 86 land-based renewable projects.

In denying financial relief, the Commission said it opted to preserve the bidding process that provides renewable energy resources to New York in the fairest and most cost-effective manner.

“The requested amendments to the contracts would have provided adjustments outside of the competitive procurement process; such relief is fundamentally inconsistent with long-standing Commission policy,” said Commission Chair Rory M. Christian. “The Commission has repeatedly stated that competition in the procurement process is necessary to protect ratepayers and provides the soundest approach to mobilize the industry to achieve our critical State goals dependably and cost effectively, and we do so again through today’s action.”

The petitions denied were submitted by Empire Offshore Wind LLC and Beacon Wind LLC, Sunrise Wind LLC, and the Alliance for Clean Energy New York, Inc. (ACENY). The petitions were seeking an adjustment to Renewable Energy Credit (REC) and Offshore Wind REC (OREC) purchase and sales agreements entered with NYSERDA to address recent inflationary pressures that are impacting project economics.

Similar pressures have doomed some of the first offshore wind power purchase agreements in the US.

Rhode Island Energy recently pulled out of its PPA with Ørsted and Eversource for the Revolution Wind 2 offshore project, citing higher interest rates, increased expenses, and questionable federal tax credits, concluding that the project had become uneconomical.

In July, Avangrid agreed to pay $48 million to pull out of a PPA with Eversource Energy, National Grid, and Unitil for another offshore wind project, the 1,223 MW Commonwealth Wind located 20 miles south of Martha’s Vineyard. Rhode Island Energy, meanwhile, terminated its PPA with Ørsted and Eversource for the offshore wind farm Revolution Wind 2.

Upon consideration, the Commission found that the contract amendments sought by the Empire/Beacon, Sunrise, and ACENY petitions were not in the best interest of the State’s ratepayers. On a monthly bill basis, the Commission said granting the request to amend the executed contracts outside the competitive procurement process would have resulted in as high as 6.7% increases for residential customers and as high as 10.5% for commercial or industrial customers on monthly bills depending on service territory and the level of relief provided.

New York Governor Kathy Hochul also announced that the state will undertake a 10-point action plan to expand the growth of the state’s renewable energy industry. Steps include “one of the largest-ever renewable energy procurements by any state;” more than $8 billion in transmission projects and upgrades; investing $700 million in offshore wind supply chain infrastructure; and more.

The Commission also said it remains fully supportive of the Climate Leadership and Community Protection Act, which codifies decarbonization requirements for various sectors of the economy and adopts renewable energy deployment targets, and it will continue to adhere to Climate Act requirements in a manner that preserves competitive procurement processes and ensures utility rates are just and reasonable.

The Commission said that the decision reaffirms that competitive procurement is the best, most efficient way to help New York reach its goal of having at least 70% of its electric load served by renewable energy by 2030, development of 9,000 MW of offshore wind energy by 2035 and meeting statewide demand with zero emissions resources by 2040.

All three petitions requested an order from the Commission that would have directed NYSERDA to incorporate an adjustment mechanism into existing REC and OREC purchase and sales agreements to account for inflation and other economic impacts cited by the developers.

The petitions generally stated that the effects of the COVID-19 pandemic have exposed the projects
to unprecedented global and regional supply chain bottlenecks, high inflation, and increases in the cost of capital, driven by rising interest rates. Further, the petitions identified impacts associated with the war in Ukraine, including increased demand for renewable energy and resulting shortages and price increases for key components and equipment.

Petitions making similar requests as the offshore wind developers submitted by Clean Path New York LLC for the Clean Path New York project and by H.Q. Energy Services (U.S.) Inc. for the Champlain Hudson Power Express Project remain under review by the Commission.