On January 2016, the New York Public Service Commission (PUC) approved $5 billion Clean Energy Fund (CEF) as a successor to the New York’s Energy Efficiency Portfolio Standard (EEPS) and Renewable Portfolio Standard (RPS) fund, which both expired at the end of 2015. The Clean Energy Fund emerged from the regulatory proceedings of the Reforming the Energy Vision (REV) initiative*. The ratepayer funded clean energy programs in New York are administered by the New York State Energy Research and Development’s (NYSERDA). NYSERDA will administer the CEF to fund all the state sponsored clean energy activities in the state. The CEF will work in conjunction with the State’s Clean Energy Standard (currently being developed by the Commission).
NYSERDA will continue its existing programs until they expire in 2016. While CEF will focus primarily on market development, NYSERDA will still continue to provide incentive based programs for certain technologies to fill in market gaps. NYSERDA’s Resource Acquisition Transition filing provides how NYSERDA will transition its previous legacy programs without disrupting the progress achieved.
Instead of rigid annual targets, the CEF has adopted flexible 10 year minimum goal from 2016 to 2025 to achieve i) 88 million MW of renewable energy, ii) 133 million tons of CO2e reductions, iii) $39 billion in customer bill savings, and iv) stimulate $29 billion in private investment.
The CEF goals are in align with the state targets set in the State Energy Plan (SEP) of i) achieving 40% reduction in Greenhouse Gas (GHG) emission by 2030 in the energy sector, ii) meeting 50% of electricity demand by renewable energy by 2030, iii) and realizing 600 TBtu of energy efficiency by 2030 (equivalent to 23% reduction in energy consumption by buildings compared to 2012). The energy goals included in the State Energy Plan (SEP) are aspirational goals without any legal mandate or authority. The CEF targets are designed to achieve the goals set forth in the SEP plan. Unlike the SEP goals, the CEF targets are enforced by the NY Public Service Commission (PSC).
The success of the programs will be evaluated based on its progress of accomplishing the 10 year targets. The initial review will take place in 2017, after which the review occurs in a 3 year cycle (starting 2020). NYSERDA will work with the Clean Energy Advisory Council (CEAC) to develop an online dashboard what will allow tracking of the key CEF performance metrics. Until the dashboard is developed NYSERDA will continue to provide quarterly reports on the status of each of the four portfolios. NYSERDA will also file Investment Plan and Performance Report (IRPR) annually, which will include 3 year budget projections, progress report of the programs, key CEF metrics, and financial reports.
NYSERDA is authorized to use the CEF fund to invest in any initiative or technology on a fuel neutral basis that constitutes clean energy or energy efficiency. These include but not limited to, large scale and on-site renewable energy resource (hydro, solar, wind, and other carbon free solutions), energy efficiency, energy storage, smart grid, demand response, distributed generation, renewable thermal and other low carbon technologies** including combined heat and power and co-generation.
CEF programs will be focused on the service territories of Investor Owned Utilities (IOUs). Other areas including LIPA and NYPA will provide their own CEF type incentives in their territories. The funds for the CEF will be collected solely through an electric surcharge on all IOU customers. The utilities will eliminate previous RPS, EEPS and T&MD collection and be replaced by a single System Benefit Charge tariff.
In designing the CEF fund, considerable effort has been put into to shift State agencies traditional top-down approach of providing rebates and grants to a more market based approach to eliminate market barriers and incentivize flow of private capital, innovation, and entrepreneurship. The CEF includes four major portfolios that each work in their complementary roles towards reaching the state’s objective:
- Market Development ($2.7 billion) portfolio will focus on facilitating clean energy market for on-site, behind the meter clean energy technologies by addressing a variety monetary and non-monetary market barriers. While the previous EEPS programs were designed primarily to make clean energy technologies cost effective through grants and rebates, the market development program will focus more reducing soft costs and other inherent non-monetary market barriers. These barriers include burdensome permitting, lack of consumer awareness, access to financing of clean energy technologies. NYSERDA will address these barriers with education and awareness programs, providing technical assistance, quality assurance, pilot and demonstration programs, and enable aggregation for provide economics of scale. $234.5 million of the market development fund will be reserved for Low-to-Moderate (LMI) initiatives over the initial three year period (2016-2019) of the program.
- Innovation and Research ($717 million) division supports energy related environmental research and business innovation areas in i) smart grid systems, ii) renewables and Distributed Energy Resources (DER), iii) building innovations, iv) transportation, and v) innovation capacity and business development. NYSERDA will address key barriers for commercialization of new innovative technologies.
- NY-Sun ($961 million) is a comprehensive effort to promote sustainable and subsidy-free solar electric industry in the State. NY-Sun program was authorized by the PUC on 2012. Its initiatives include providing incentives for solar through MW block approach, promoting solar for LMI households through Community Solar, and K-solar for providing support to solar in state educational facilities. MW block program provides rebates for residential, and commercial solar projects based on the pre-established incentives designated to the specific region. These incentives scale down over time in a pre-determined about as solar installation targets are reached.
- NY Green Bank functions as a state sponsored finance entity which was previously authorized by the PUC in 2015. The CEF allocated $717 million for the NYGB which completes its $1 billion capitalization goal. NYGB focuses on providing support to overcome market barriers and financial gaps in the current financial market to leverage private sector investment.
Large scale renewables: The Commission in its CEF order also authorized $150 million from the CEF for large scale renewable programs under RPS Main tier solicitation for 2016. The large scale renewables Main Tier program, administered by NYSERDA will include i) development of voluntary market for purchase of renewable energy, ii) reduction soft costs through technical and pre-development assistance for large scale renewable projects iii) development of market mechanism and connections that support financing and appropriate valuing of renewables, iv) provide support for offshore wind. The large scale renewable program will eventually be categorized as a part of the State's Clean Energy Standard program when it is finalized.
System Benefit Charge: The costs associated with the clean energy activities are recovered by system benefit charge collected from the electric and gas utility bills. Beginning March 2016, the Clean Energy Fund (CEF) surcharge on the customer bill will be collected to fund clean energy programs associated with NYSERDA including RPS, EEPS, SBC IV, and CEF. The surchage rate will be collected by dividing necessary collections by projected sales. Beginning January 2016, costs for utility run energy efficiency programs will be recovered through energy efficiency (EE) tracker surchage.
*The PUC initiated the REV proceedings on April 2015 following Governor Cuomo’s vision towards a comprehensive reform in the State’s power industry with a broad goal to align electric utility practice and the regulatory paradigm with the technological advances. The REV initiative seeks to create next generation of utility business models that is customer centric and is driven by technological innovation and private investments to provide resilient, affordable, and clean energy in the State. Other initiatives that are part of the REV include the Green Bank, NY Sun, and BuidSmart NY.
** Investments in to support biomass electric energy generation are not eligible for REC funding unless projects supported will comply with the guidelines provided in the Biomass Power Guide published by NYSERDA.