New York — New York Independent System Operator stakeholders are at odds over whether certain power suppliers receiving renewable energy credits should be excluded from obtaining payments that would be generated by the state's proposed carbon pricing plan.
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NYISO proposed at a July 16 committee meeting that wholesale power market suppliers with active REC contracts dated prior to January 1, 2020, should be ineligible for the carbon pricing portion of wholesale market energy prices.
Exempting that class of generators "is an appropriate mechanism to prevent the potential that customers could overpay for these resources," utilities Con Edison and Orange & Rockland Utilities said in jointly filed comments posted on the NYISO website Wednesday.
However, the potential goals and considerations associated with pricing carbon emissions in New York's power markets go beyond customer bill impacts, according to a presentation by the Alliance for Clean Energy New York's Mark Reeder that is scheduled to be made at an August 20 Integrated Public Policy Task Force meeting.
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"It would be a mistake for the NYISO to deny the market price to one class of sellers" and doing so would create a "flawed market design," Reeder said. The goal of avoiding excessive customer impacts caused by pricing carbon "is a legitimate one" and much work should be done on it, but improving the financial motivation of market players to take emissions-reducing actions is also an important goal, he said.
Maintaining a favorable investment climate is another important objective and New York's carbon pricing initiative should strike a balance among these goals, Reeder said.
NYISO has been working on developing a system to price carbon into its wholesale power markets since 2017 and released a carbon pricing straw proposal in late April to guide the process. The second quarter of 2021 is the earliest carbon pricing would be implemented, NYISO said in July.
The concern from the utilities' perspective is that customers could be "double charged" for resources that receive state subsidies and could potentially benefit from increased revenues as a result of carbon pricing.
According to Reeder's presentation, ACE NY believes no one should be denied carbon prices, including nuclear power plant owners currently receiving zero-emissions credits (ZECs). New York passed legislation - currently being fought in court - that provides compensation to nuclear generators for the carbon-free attributes of the electricity they produce by including a charge on all utility customer bills across the state. But Con Edison and O&R believe that system does not benefit all customers equally. Downstate customers already pay for RECs and ZECs without full benefits to local air quality, reduced location-based marginal prices or economic and tax benefits, "they should not be required to bear an undue burden with carbon pricing," the utilities said. The nuclear plants currently receiving ZECs are located in the north of the state. UNFAIR RULE CHANGE
The clean energy advocates, however, argue the disadvantages of excluding existing REC contract holders from receiving payments under a carbon pricing regime "far outweigh the advantages." They say changing the rules of the game at halftime would chill the state's energy investment climate.
Denying a part of the market price to REC contract holders would send a "very bad signal" to potential future green energy investors in New York. "It will demonstrate a regulatory willingness to, in essence, go back on the assumed contractual deal," Reeder said, noting it would also be the first time NYISO has taken an action that goes against existing contracts.
In addition, renewable energy investors agreed to take on market risk like any other generator and many lost money because natural gas prices turned out to be much lower than forecast at the time many REC contracts were signed, he said. But one potential upside from investing in clean energy has always been the possibility that a carbon price would increase market prices.
"It would be wrong to, years after the fact, pick out a piece of the upside risk and take it away," Reeder said.
--Jared Anderson, firstname.lastname@example.org
--Edited by Keiron Greenhalgh, email@example.com