New York renewable plan rejected by generators

OREANDA-NEWS. August 14, 2015. New York's merchant generators are opposing a proposal to give utilities the right to own and operate large-scale renewable energy projects, citing the potential for market power and price distortions in the state's competitive electricity market.

Power generators including NRG Energy, Brookfield Renewable Energy Group, Exelon and NextEra Energy Resources say the Public Service Commission should reject a proposal from the New York State Energy Research and Development Agency (NYSERDA) to give electric distribution companies, or retail utilities, the right to own large-scale renewable capacity and associated renewable energy credits (RECs).

The companies in comments filed with the commission yesterday said they are concerned that utilities could own and operate large renewable generation facilities without participating in the state's competitive wholesale market, thereby compromising the split between ownership of generation and distribution assets in the state implemented through deregulation in 2000.

"Reverting back to the old monopolistic way of doing business would undermine future renewables investment by sending a signal to private investors that New York is not a level playing field," Independent Power Producer of New York chief executive Gavin Donohue said.

NRG, Brookfield, Exelon and NextEra, all members of the association, echoed the group's views and said utility ownership of large-scale projects could result in power contract price distortions that might not account for the premium on private investment in renewables compared to conventional generation.

The merchant generators advocated bundled power contracts, which would effectively allow associated RECs to be traded through the wholesale power market or for trading unbundled RECs in the secondary market. This would be a shift from the current system in which RECs are retired outright through a NYSERDA procurement clearinghouse. Bundled deals could be made directly with utilities, or remain tied to the NYDERDA renewable portfolio standard procurement system, the companies said.

Exelon and NRG suggested that REC prices could be expressed as contracts between conventional and renewable generation, if the state continues retiring RECs through NYSERDA or another state agency. But such an approach, which is an arrangement in a futures contract to account for a change in the value of the underlying asset, could be subject to regulation as a swap trade under the Dodd-Frank federal financial reform law, Brookfield said.

Some comments recommended the state adopt a solar carve-out that would require a certain percentage of utility-scale solar.

The state's major utilities, ConEdison and National Grid, view the NYSERDA proposal as a way to meet RPS targets of up to 50pc by 2030 without passing on costs to ratepayers. They said utility-owned generation would bolster competition among developers under joint solicitations for new renewables capacity and would improve financing options.

NYSERDA said its proposed strategies for renewables can help diversify the state's energy resources "to benefit customers and protect the environment," while advancing the state's main energy policy goals.