June 20, 2013
Electricity is a crucial commodity that we all take for granted. It powers our lives, businesses, medical services and entertainment. Government action that will result in an increase in the cost of electricity should be extensively scrutinized. Marginal increases in the cost of electricity manifest themselves in a cumulative way as increases in electric rates results in increases in the cost of food, heating, taxes, and production.
The Business Council does not support this legislation; the members of the Business Council oppose any efforts that will result in increased electric bills in the interest of subsidizing the renewable power of the week. The current version of this legislation should be amended to address three critical issues.
- The legislation purports to be a statewide solar program but can all be paid for by customers of Public Service Commission regulated utilities.
- This version of the legislation provides no incentive for the development of a New York solar manufacturing industry.
- The legislation does not restrict future increase in the renewable energy assessments.
- This legislation would require the PSC to conduct a modification of its proceedings by September 1, 2014 to include minimum of $150 M solar statewide program for 10 years. There is some language that references the ongoing LIPA solar programs should be considered but it is unclear what functional impact that would have. The legislation does not allow the PSC to lower the assessment consistent with LIPA's expenditures. Additionally, the definition of "Qualified Solar Photovoltaic System" only includes systems connected to the IOUs (not LIPA). If this legislation intends to be the New York State solar program the sponsor should amend the legislation to address this technical issue and reduce by a third the burden of paying for this program by the IOU customer. Amending this section alone has the potential of reducing the increased assessment by $380M.
- Unlike the A-print (which The Business Council did not oppose) this draft removes the manufacturing tax credit to expand solar photovoltaic generation systems and energy storage manufacturing in the state. The credits contained in the A-print are vitally important to ensure that New York manufactures have an opportunity to capitalize on solar mandates.
There is little doubt that the world solar market has been flood with underpriced state supported solar panels. One country at this time controls 80% of the global solar manufacturing market. Due to China's dominance of the market, projected economic gains from solar mandate were misleading. Additionally, there was little opportunity to establish US solar manufacturing. This may have changed in recent times as China's policies on solar manufacturing have been amended. If New York is going to require the purchase of solar equipment, the State should also strive to reduce the barriers to New York manufacturing of solar panels.
As important as the development of a solar manufacturing sector in New York is the development of an energy storage equipment manufacturing is just as important. Commercial, cost-effective energy storage technology is poised to be a game-changer for two of the world's largest and most essential industries: electricity and transportation. Reliable energy storage will change how vehicles are powered and how the entire electricity grid functions. Energy storage products are key to hybrid and electric vehicles and will make possible the effective widespread use of wind and solar energy.
New York has an opportunity to be a leader in the research and manufacturing of energy storage equipment now is the time to provide a sensible incentive.
- There is no agreement that this solar assessment will replace current or future solar or renewable assessments developed by the Public Service Commission. This assessment is not codifying current practice it is a new tax.
Currently, various New York State entities collect and spend $1.4 billion per year on renewables and energy efficiency. New York needs to be spending the current fees and assessments in a wiser manner not adding new assessments. Contrary, to others claims this legislation will not replace or supplant or ban current assessments.
New York State thus far has failed to build an integrated state approach to clean energy investment and innovation that hold taxpayers harmless while encouraging more vibrant private market activity in clean energy. This legislation will do nothing to coordinate the state approach to renewables and energy efficiency.
A 2010 report by the Public Policy Institute (PPI), the research affiliate of The Business Council of New York State, entitled "Short-Circuiting New York's Recovery-How Energy Taxes Contribute to High Electric Rates in New York,"1 demonstrates that State and local gross receipt taxes, sales taxes, assessments, income taxes, taxes on capital and, above all, property taxes help make New York's electricity prices the third highest in the US.
These staggering energy taxes create a host of negative consequences. Energy is one of the major cost factors that make New York State one of the least favorable locations in which to start or locate a business. As a result, New York loses essential jobs, opportunities for entrepreneurship and the ability to attract major new investments.2 Some will argue that the modest increases projected in this legislation will amount to less than a "cup of coffee," that most New Yorker's will not even feel it. They could not be more wrong.
14.9 percent of New Yorker's live below the official poverty line, and they are struggling to pay their rent, keep current with utility payments, cover the cost of health care, and put food on the table. A "cup a coffee" is often a luxury they would not indulge themselves.
Due to the mandate that this legislation will impose, those living below the poverty line may be paying more than a "cup of coffee." When they pay the subway fair, they are going to pay again, because last year the MTA spent over $700M to keep the trains on time and the lights on. When they pay their rent, it is going to be a little more as property taxes will inch up ever so slightly to pay for the lights, heat, and hot water at the schools, libraries, and municipal buildings. Unfortunately, they are not done paying as the job that they once had could be in jeopardy because the cost of manufacturing will increase in New York State (it takes a lot of cups of coffee to make something [in 2010 $13.7B was spent by businesses on electricity]).
The New York State Energy and Research Development Authority (NYSERDA), in consultation with the Public Service Commission (PSC), recently completed a cost benefits study of installing 2,500 MW of PV by 2020, and/or 5,000 MW by 2025.
The NYSERDA study confirms that a significant solar mandate will cost the people of New York jobs and will increase rates. The NYSERDA study is not a surprise. The U.S. Energy Information Administration (EIA) uses a comprehensive system of levelized cost to determine the cost of electric generation. Levelized cost reflects the cost of capital, fuel, operations, maintenance and financing, as well as an assumed utilization rate.
Using levelized cost, the EIA has determined that the cost of solar is four times that of conventional means of generation, and twice the cost of other renewables. Solar power is expensive, in part, due to its utilization rate — it does not work at night, when demand is at its peak — and solar has a high capital cost.
Some have argued that New York needs to keep pace with the surrounding states. They say look to New Jersey or even Europe they have so much solar installed. New Jersey has paid a significant price to have the second most installed PV. The Center for Energy, Economic and Environmental Policy and the Rutgers Economic Advisory Service concluded that the State program will cost 3,637 jobs and $451M in State GDP. The majority of the new solar employment is projected to go away when the "goal" has been reached.
Germany, which once prided itself on being the "photovoltaic world champion," has cut its solar subsidies. Germans using generous subsidies doubled projected solar installations, resulting in a $260 hike in the average consumer's annual power bill. Additionally, at night and on some cloudy days, Germany must import considerable amounts of electricity from nuclear power plants in France and the Czech Republic.
The German experience is not unusual — France, Italy, Spain and the United Kingdom are also reducing their subsidies to control unsustainable costs.
As a national leader in renewable energy, New York has already made a significant commitment to the development of renewable energy. Current New York policies require that 30 percent of the state's electricity come from renewable sources by 2015.
It may be easy for some to forget but New York State already has an aggressive goal of obtaining 30 percent of its electricity from renewable sources by 2015. New York ratepayers have committed to pay $2.998 billion to obtain this goal through the establishment of the Renewable Portfolio Standard (RPS). All forms of renewable generation — wind, solar, hydroelectric, biomass, tidal/ocean and fuel cell generation — currently compete fairly for the RPS funds.
The State should instead look to adopt and promote the adoption of solar in a manner that is both flexible and responsive. The current suite of PV incentive policies has created a stable and growing PV market in New York. By developing a comprehensive and steady PV incentive funding strategy, New York has avoided the boom and bust market cycles that have created uncertainty on other places.
As result of the incontrovertible data regarding the cost of solar, this legislation has been amended to reduce the size of the mandate. Regardless of the reduction of the size it will still have a negative effect on the economy as the legislation proposes to take a basic resource from the many and transfer it to the few. The supporters of this legislation want people to forget that, they asking for lawmakers to deprive taxpayers of their resources in the interest of meeting an arbitrary solar mandate.
The Business Council does not support statutory solar quantity obligation approaches adopted in neighboring states, as these approaches have resulted in broad and long-lasting obligation for the State's to procure an increasing amount of solar renewable energy credits.
2 Recent enactment of Chapter 97 of the Laws of 2011 (Enacts major components of legislation relating to real property tax levies, rent regulation, exemption from local taxation and mandate relief) and other steps have been taken to curtail energy taxes.