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The Business Council of New York State, Inc. is concerned that this legislation will provide ratepayer funds to electric generators that do not need financial assistance, thus adding an additional burden to all energy consumers. The large scale renewable program was never intended to provide perpetual funding for electric generators. At some point the electric generators need to stop demanding that electric customers continue to subsidize their operations.
While we understands the sponsor’s interest, this issue was given a proper hearing by the Public Service Commission, which resulted in the development of the Tier 2 Maintenance Program.
To be eligible for Tier 2 Maintenance Resource support, renewable generators must:
- have entered commercial operation prior to January 1, 2015;
- have had their output originally included in New York State’s baseline of renewable resources as of January 1, 2015; and
- demonstrate that the renewable energy attributes of these resources are at financial risk.
The Business Council believes that last requirement is paramount. According to the Tier 2 Maintenance program, renewable generators must clearly demonstrate that they are at financial risk, but this legislation guarantees all owners of eligible resource receive at least 75% of the current REC value. Additionally, this legislation directs NYSERDA to provide a direct payment to those owners who can’t make the 75% bailout work.
The Business Council has previously expressed concern with the cost of the Tier 1 Clean Energy Standard (CES). Until Tier 1 has been reformed to address the concerns of energy intensive industries, the Business Council can’t support codifying the Public Service Commission’s proceeding.
The Business Council has expressed the following concerns:
- the CES did not consider energy intensive businesses and their unique needs
- the CES will require the build out of additional transmission to meet the demands of remotely located renewable projects
- the CES does not ensure a reduction in GHG and will lead to an energy price differential with other states and nations resulting in carbon leakage.
Strikingly, if the Commission had committed to the “Energy Highway,” the economic conditions of the legacy renewable energy resources might be healthier.
Everyone should understand that energy costs are vital to the competitiveness of energy-intensive industries. A 2014 European Commission staff report on the link between energy prices, energy efficiency and industrial competitiveness (as measured by extra-EU exports), confirms the IEA finding. Specifically, the report “shows that the increasing electricity costs had a negative impact on export competitiveness. Moreover, the high heterogeneity within sectors suggests that energy-intensive industries are most heavily affected. The results show that, since energy savings in most cases were not large enough to fully compensate for energy price increases, energy represents a growing share of total production costs. Therefore caution is called for when adopting policies that determine a further increase of energy prices, since this creates a real burden that some European firms cannot fully compensate for.”
A report analyzing the effect of power prices on German industry competitiveness issued by the Fraunhofer Institute for Systems and Innovation Research, under contract with the German Ministry of Economic Affairs and Energy, found that exemptions from levies and taxes on electricity prices for energy intensive manufacturers were critical to “support the competitiveness of the industry and have positive macroeconomic effects.” Put another way, if energy intensive industries had to pay the full levies to fund renewable technologies in Germany via electricity prices, it would have a devastating effect on the German economy. In fact, Germany provides a number of exemptions or other mechanisms to mitigate energy cost for energy intensive companies including: reduced or exclusion of taxes (electricity tax), fees (concession fee), and network charges and levies (EEG surcharge, CHP surcharge).
Many nations that have implemented climate constraints or significant renewable subsidies have taken affirmative steps to protect incumbent businesses. The Business Council is very concerned that the new Tier 2 CES requirements would be extended to New York Power Authority (NYPA) customers.
NYPA administers one of not the most successful economic development programs in New York State. Through the ReCharge NY (RNY), the Western New York (WNY) Hydropower and Preservation Power program’s qualifying businesses and nonprofits can lower their energy costs by using clean hydropower from NYPA’s Niagara and St. Lawrence-Franklin D. Roosevelt power projects. Companies that receive electricity through NYPA’s power programs have made commitments to remain in the state; retain or create jobs; and/or make significant local capital investments to maintain and/or expand their operations. These programs are assisting 763 businesses who employ 374,000 New Yorkers and have invested $30.3 billion in New York.
However, the value of the economic development programs are being eroded in some markets because of low wholesale costs, and new NYPA contracts that require assessments to cover CES obligations. The State should be very concerned that in the interest of potentially a few jobs, few hundred thousand jobs will be put at risk.
For these reasons, the Business Council is strongly opposed to this legislation.