The New York State Public Service Commission ("Commission") adopted a renewable portfolio standard ("RPS") on September 22, 2004. The Commission's decision implements a policy set out by Governor George Pataki to obtain 25 percent of electricity used in New York State from renewable resources.
The percentage of electricity used in New York State that is derived from renewable resources has steadily decreased from approximately 29 percent in 1963, to just over 19 percent today. The majority of existing renewable energy sources are hydroelectric facilities. The Commission will require the procurement of 5 percent (approximately 3,000 megawatts ("MW")) more renewable capacity secured through a Request for Proposal process administered by another State agency, the New York State Energy Research and Development Authority ("NYSERDA"). NYSERDA is expected to enter into long-term contracts for the purchase of Renewable Energy Credits ("RECs"), but would not purchase the associated electricity. The Commission assumes that an additional 1 percent (approximately 700 MW) will be derived from the State's existing, voluntary green marketing program, which brings the renewable electricity total to the 25 percent goal.
The Commission cited the numerous benefits of its RPS, including meeting New York State's growing demand for electricity, increasing fuel diversity, reducing exposure to fossil fuel price spikes and supply interruptions, increasing economic development activity, and improving the environment. The Commission calculated that the RPS will reduce statewide air emissions of nitrogen oxide by 6.8 percent, sulfur dioxide by 5.9 percent, and carbon dioxide by 7.7 percent, with the greatest air quality improvements in the New York metropolitan and Long Island areas.
Range of Customer Bill Impacts
- Residential -.09 to 1.68
- Commercial -0.78 to 1.79
- Industrial -1.54 to 2.2
The RPS will be funded by a non-bypassable wires charge on all retail customers beginning in the fourth quarter of 2005. The Commission estimates that the cost of the RPS will be negligible and could even provide a net bill reduction for ratepayers. The expected customer bill impacts range from a reduction of 0.9 percent to an increase of 2.2 percent. Cost reductions would result from the addition of capacity, which should effect a reduction market prices for electricity.
Wind projects will be eligible for the New York RPS. In general, a generating facility must be new to qualify for the RPS. More specifically, the facility must have been developed after Governor Pataki's policy was announced in January 2003. New projects located outside New York State will be eligible to participate in the RPS, however, the RPS will require that the electricity associated with any qualifying REC be delivered to the New York grid, with monthly reconciliation. In other words, a generator will be required to demonstrate on a monthly basis that an amount of energy equivalent to its REC supply obligations was delivered into New York.
The first year of RPS implementation (2006) requires approximately 500 MW
1 of new wind energy capacity to be installed, followed by similar increases in capacity over the following years. The majority of renewable resources developed to meet the RPS target are expected to be wind energy facilities. According to the New York Independent System Operator, the agency charged with operating New York State's electric grid, wind projects totaling over 1,200 MW exist in its queue of interconnection requests. Most are slated to be in service for the first year of the RPS, but it is unclear how many of these projects will be built, or how many will be available in 2006. The recent extension of the federal production tax credit, in combination with the additional revenues from NYSERDA create a likelihood that wind projects will be successfully developed in New York. New York's RPS is expected to facilitate the development of approximately 3,700 MW of renewable resources over the next several years.
YEAR MEGAWATT HOURS REQUIRED TO MEET TARGET
2006 1,360,000
2008 4,306,000
2010 7,302,000
2013 11,989,000
The competitive selection of REC suppliers by NYSERDA was not detailed in the Commission's order adopting the RPS. Instead, an implementation plan will be developed and issued for public comment before final Commission approval, expected in the first half of 2005.
The Commission may reconsider and revise its RPS program on at least two occasions. First, the second phase of a reliability study is expected to be completed at the beginning of 2005 and the results may prompt the Commission to adjust aspects of the program. Second, the Commission will evaluate the RPS as a whole in 2009. Some parties to the Commission's proceeding were concerned that a re-opener would create difficulties for financing wind projects, and the Commission addressed this concern by asserting that the 2009 review would not change the contracts or other requirements applicable to RPS resources developed before the re-opener.