Renewable developers, pinched by inflation, to ask for more subsidies

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The developers’ request challenges the state’s pipeline of renewable energy projects, which state officials have pointed to as evidence that New York is on track to achieve 70 percent renewable energy by 2030.

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While I can’t confirm exactly what our strategy will be, it is true that inflation is affecting all renewable energy projects in NYC and everywhere, and our goal is to get projects through construction, so there is an even cadence of construction work and movement towards targets, said Anne Reynolds, executive director of the industry group.

Our biggest concern is that if there is a significant pause in project construction, not only will renewable energy projects not be built, but also a large amount of projects later will cause many logistical problems and will be difficult to manage and will be more expensive .

The 70 percent mandate was established in the state’s climate law passed in 2019, and the state began awarding contracts for new large-scale solar and wind developments even earlier. But projects they faced significant hurdles to be built including permits and connections to the electricity grid.

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A petition to the PSC for a price adjustment would spark a heated debate about the state’s renewable energy targets and costs for consumers.

Renewable energy developers say they face rising costs for the materials and services they rely on and are being squeezed by higher interest rates as they go to finance projects.

Steel and transformer costs have increased more than 60% since 2018, according to federal data. Various reports have demonstrated that the costs of solar AND wind projects have increased recently, mainly driven by inflation and high input prices.

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Higher interest rates also make it harder for developers to finance projects, increasing the yield they need to generate to turn a profit.

State policymakers are aware of the risks posed by inflation to New York’s goals.

Inflation remains stubbornly high. Inflation associated with clean energy is especially problematic, John O’Leary, Governor Kathy Hochuls’ assistant secretary for energy and the environment, said at a city and state electrification conference earlier this week. .

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OLeary sued the fed Inflation Reduction Act AND Bipartisan Infrastructure Act as a tailwind against those worries. But while those measures have ensured long-term certainty for renewable energy tax credits and some bonuses for home contents and other considerations, the industry is still concerned about rising costs.

The industry foreshadowed its concerns in a mid-December letter, reported exclusively by POLITICO, requesting an inflation adjustment from NYSERDA. The authority has not followed up on this request and addressing the PSC would aggravate the matter. It also signals that developers may not move forward with contracted projects without some level of relief.

Offshore wind projects in the northeast also faced inflationary pressures and pushing for revised contracts with higher payments. Tory Mazzola, a spokeswoman for Orsted, which has a contract with NYSERDA for a 924 MW offshore wind project off Long Island, said discussions about macroeconomic factors continued.

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Sunrise Wind was particularly affected because it was agreed in 2019 just before high inflation, rising interest rates and rising supply chain costs took shape, she said. We will continue to seek initiatives and approaches to help address these challenges as we continue to build America’s offshore wind industry and enable investment and job creation throughout New York State.

The move will likely reinvigorate supporters of a measure to authorize the New York Power Authority to finance and build large-scale renewable energy, which has raised concerns about the ability of the private sector to meet the state’s climate goals. That proposal was included in the state budget deal approved earlier this year.

There’s no way New York State and the Public Service Commission should be giving more incentives to private developers, said Aaron Eisenberg, spokesman for Public Power NY, the coalition that pushed for NYPA’s role in renewable energy. . It’s ridiculous that they even asked. Now that the New York Power Authority can and will build renewable energy, private developers can no longer hold us hostage.

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Utilities seeking the ability to build new taxpayer-funded renewables could also be galvanized by industry demand.

Under NYSERDA contracts, developers get renewable energy credits for the energy they generate. They earn other income from the electricity market. NYSERDA requires utilities and other entities that service the cargo to purchase the credits generated, passing the costs on to customers.

Renewable energy developers have already been insulated from the risks of falling energy prices, with changes to the original contract structure from a fixed price to an indexed price linked to energy markets. Consumers are also protected to some extent because the subsidy decreases if energy prices are higher than expected.

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NYSERDA was mandated by the PSC to begin awarding competitive contracts for new renewable energy in 2016 under the Clean Energy Standard, which had a goal of 50 percent renewables by 2030. The target set by law.

But only about a dozen of those are currently operational. Despite this, the state has consistently stated that New York’s existing and contracted projects are sufficient to reach 66 percent renewables by 2030.

Developers who return to demand higher prices than those awarded in recent years question the feasibility of such projects.

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NYSERDA spokeswoman Kate Muller said the authority would review any petitions filed with the PSC related to her work. The authority noted that it has provided some flexibility to developers regarding the security they are required to publish under the terms of the agreement.

Due to the contractual nature of NYSERDA’s relationship with developers, NYSERDA has regularly disclosed the economic pressures they and their supply chain partners are facing considering inflation, raw material prices, financing costs, and supply chain, he said.

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