Why It’s Important: New York’s green energy objectives may face obstacles.
Governor Kathy Hochul has made a strong commitment to reduce New York’s reliance on fossil fuels. According to state law, renewable sources such as solar and wind power must make up 70 percent of the state’s electricity consumption by 2030. Additionally, by 2035, offshore wind farms are expected to generate up to nine gigawatts of energy, enough to power over six million homes.
Nearly half of this offshore wind energy will come from four proposed wind farms, including Sunrise Wind, Beacon Wind, and Empire Wind I and II, located in the Atlantic Ocean near Long Island, under contracts with the state. However, the developers of these wind farms have expressed concerns about rising costs and disruptions in the supply chain, making the terms of their contracts unworkable.
These developers, along with those of 86 land-based renewable energy projects, have requested increased subsidies from state utility regulators. These 90 projects were initially projected to cost about $10 billion for the state’s utility ratepayers. The New York Department of Public Service estimates that granting these requests would lead to an additional $12 billion in costs for ratepayers.
The subsidies had strong advocates and opponents.
State officials faced a difficult situation when requests were made. Influential labor leaders advocated for subsidies to protect the jobs that these projects could generate. On the other hand, advocates for low-income utility customers argued that many of them were already struggling to pay their increasing monthly bills.
“The issue at hand is that we have commendable goals, but the real question is: who will bear the financial burden?” questioned Bill Ferris, a legislative representative for AARP, which opposed the requests. “If everyone stands to benefit, the cost shouldn’t solely fall on ratepayers.”
The contracts for each of these projects were awarded through competitive bidding processes. Rory Christian, the chairman of the Public Service Commission, the state’s utility regulator, voiced concerns about setting a problematic precedent by offering relief to the winning bidders. “Granting exceptions today almost guarantees that we’ll be asked to do the same in the future,” he warned.
Mr. Christian emphasized that the state’s ratepayers, who would ultimately shoulder the costs, could not be an “endless source of funding” for companies. “We made a commitment,” he reminded the developers, urging them to uphold the terms they agreed upon.
His fellow commissioners unanimously supported this stance, rejecting the petitions.
Governor Hochul endorsed this decision, stating it was essential “to maintain affordability” in an uncertain global economy and ensure that New Yorkers “receive the best possible deal.”
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What Comes Next: A few projects might get canceled.
The developers of these projects, after being denied extra subsidies, must now make a tough decision. They can either bear the unexpectedly higher costs or opt to terminate their contracts with the state.
If they choose to pull out, the state’s Energy Research and Development Authority may quickly open up these project contracts for bidding again to maintain progress toward clean energy goals. However, due to the cost increases since the initial contract awards, new deals are likely to come with significantly higher price tags.
Fred Zalcman, director of the New York Offshore Wind Alliance, expressed concern about the commission’s decision, stating that it places these projects at serious risk and could deal a severe blow to their efforts to promote local clean energy manufacturing, revitalize New York’s ports and harbors, train and employ skilled union workers in New York, and support environmental justice communities.
Molly Morris, the president of Equinor Renewables Americas, which is involved in the Beacon and Empire wind farms, mentioned that the developers would evaluate the denial’s impact on the projects. David Hardy, the CEO of the Americas region for Orsted, the Danish company behind Sunrise Wind, stated that the project would face significant challenges without the requested adjustment. He noted that the company’s board and partners would consider their next steps.
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