NY's proposed Canadian hydropower subsidy draws concerns from all sides

Politico

New York City is pinning many of its hopes to cut energy emissions on imported Canadian hydropower, but the fate of the long-delayed project may rest on a new state subsidy that has drawn significant opposition.

The Public Service Commission is expected to act this month on a sweeping revision of subsidies, paid for by utility customers, that bolster new onshore renewables and offshore wind. Part of the proposal is a whole new subsidy for power injected directly into New York City — clearly tailored to support the long-stalled Champlain Hudson Power Express transmission line that would run 330 miles from Canada to New York City and carry 1,000 megawatts of power from Hydro‑Québec.

But environmental advocates, in-state fossil fuel generators, renewable developers, ratepayer advocates, real estate groups and even New York City Hall have raised concerns about moving the new subsidy forward before it is fleshed out. Almost unanimously, groups have asked for more analysis and details before any program is approved.

Some warn supporting imported hydropower will weaken the market for new in-state renewables and ultimately fail to achieve the state’s and city’s emission reduction goals.

“We support an additional subsidy to get clean power to New York City,” said the Sierra Club’s Shay O’Reilly. “We have specific concerns about the Champlain Hudson Power Express and with HydroQuebec … about whether Canadian hydro can actually provide incremental greenhouse gas emission reductions.”

The transmission line is one of those mega-projects that seems to plod forward with grim determination. It’s been in the works for more than a decade. It is fully permitted but lacks one key ingredient: a firm buyer for all the electricity and capacity it can offer.

Negotiations with the city and state have dragged on for years.

New York City and real estate interests are supportive of the concept but want more details. Mayor Bill De Blasio’s spokesperson Julia Arredondo said the administration is “actively pursuing” the hydropower line but wants more details before it moves forward, which could be done on an “accelerated timeframe.”

The line was identified by the Cuomo administration as a likely replacement for Indian Point’s zero-emissions energy when the deal to close the plant was struck in 2017. And city building owners may ultimately be able to buy electricity off the line to avoid making efficiency upgrades otherwise required by a sweeping city climate law.

But the final pieces of the $3 billion project have yet to fall into place. A decision by the PSC, which Gov. Andrew Cuomo effectively controls, could seal the deal and developer Transmission Developers Inc. could reap the windfall they’ve been working toward.

The Covid-19 pandemic slowed talks with New York City, said Hydro‑Québec spokesperson Gary Sutherland. The pending decision by the PSC also has big implications on how those talks move forward.

“Of course it’s got an impact on how contracts are going to be signed,” he said. “There’s an urgency factor here to move as fast as we can to get the energy flowing and to get the emissions reductions and local air quality improvements.”

A new “tier”

The Department of Public Service and NYSERDA staff have proposed a new tier of subsidies, Tier 4, to incentivize renewable electricity directly injected into the city. Ratepayers across the state would foot the bill, much like the subsidies for nuclear plants and offshore wind.

The need to bring renewables to New York City, the state’s center of commerce, is well recognized: the downstate energy mix is far dirtier than upstate where big hydroelectric and nuclear plants provide as much as 90 percent zero-emissions power. It will get even dirtier when Indian Point closes, going from 67 percent fossil fuels in 2018 to 86 percent in 2022.

Building large-scale renewables in a city with minimal open space, high real estate costs and a dense population is a losing proposition. While distributed solar and offshore wind could provide a boost in the coming decades, New York City’s energy officials worry that lulls in wind would impact most of the resources serving the city, jeopardizing reliability.

So transmission to import more zero-emissions electricity is seen as essential to meeting the state’s and city’s goals to slash greenhouse gas emissions and close older fossil fuel plants. But should big dams in Canada be eligible for subsidies from New York state electric ratepayers?

Several environmental groups say no. They want strict requirements that new or expanded dams will not be eligible and the power getting subsidies will be in addition to what is already sold into the state.

Eligibility restrictions

DPS staff proposed some guardrails aimed at ensuring imported hydropower is not being backfilled by fossil fuels in other markets. The state proposed to achieve this by doing a three-year look-back at the imports into New York and the emissions of suppliers to ensure only increased renewable generation would be eligible.

For opponents of the new line, that’s not stringent enough.

“Whoever the supplier is needs to prove and verify … that the resources they’re putting on the line are renewable,” said Gavin Donohue, CEO of the Independent Power Producers of New York, which represents in-state generators including gas, nuclear and renewables. The group has opposed the line since it was first proposed. 

IPPNY and environmental groups have proposed more stringent requirements for Canadian hydropower imports including using a baseline of the most recent year or doing a unit-by-unit analysis. That would help ensure the renewables coming into the state on the line are “additive” above and beyond what Hydro‑Québec already sells into New York. 

“The PSC has a very serious decision on its hands," Donohue said. "We are going to hold their feet to the fire to ensure that New York’s jobs and taxes aren’t given up or forfeited for Canadian jobs or taxes." 

A coalition of environmental groups including Sierra Club, Alliance for a Green Economy and Food and Water Watch submitted comments calling for Canadian hydropower to be excluded from the new subsidy because of concerns about potential negative impacts of new impoundments — or expanded reservoirs for hydroelectric dams, which can damage forests and dull the impact of carbon reductions. 

“The Commission must put the brakes on Canadian hydropower contracts until the environmental impacts are fully understood and a need for the power is adequately demonstrated,” the groups wrote. 

Meanwhile, the backers of the transmission line have also said the current subsidy proposal fails to provide needed revenue certainty and would hamstring the flexibility of hydropower from Canada to provide electricity when it is actually needed. The proposed design would require Hydro‑Québec to sell a fixed amount of power into New York even if prices are negative and renewables are producing at high levels, Hydro‑Québec argues, and it would be better from an emissions standpoint if the company could hold back that power until it would be used to displace fossil fuel units.

They envision the 1,000 MW line serving as a plug to the “battery” of dispatchable Canadian hydropower providing spot power as well as capacity. 

“We see ourselves as being an enabler rather than a competitor,” said Martin Imbleau, an executive at Hydro‑Québec, during a Climate Week panel last month.

Sutherland said the company already sells about 8 terawatt-hours, or about 5 percent of the state’s annual electric demand, into upstate New York, via existing lines. 

“Not only does this hurt New York (by displacing domestic New York clean generation), but it also harms the Northeast region since [Hydro Quebec] could have otherwise stored the energy for a later period or sold it into an alternative market to displace fossil fuels and reduce emissions,” the company wrote. 

It proposes some alternatives that would increase the flexibility of how much and when Hydro‑Québec has to sell into the state.

In-state competition 

A new subsidy could also limit procurements of new, in-state renewables. That interplay is a concern for developers of new renewables and owners of existing renewables who are pressing for their own subsidy.

The Alliance for Clean Energy New York and other industry groups suggested existing in-state renewables should also be eligible for the subsidy if they’re delivered into New York City and that the amount and price of imports be capped. 

The city of New York opposes limiting the sources of energy delivered through the new subsidy, arguing resources of all types are all needed to meet emissions reduction goals. 

“The Commission should not erect barriers to delivering renewable resources into New York City,” the city wrote in comments on the DPS proposal. 

One major concern for the in-state renewable industry is the question raised by DPS staff of whether the new tier procurements should reduce the amount of new, in-state renewables receiving support.

“It has the potential to chill future development if people say, 'Maybe we’re going to buy a whole lot of new in-state renewables or maybe we’re not,'” said ACE executive director Anne Reynolds. 

Many in-state generators including LS Power — which owns the large Ravenswood fossil fuel plant and has proposed battery storage to replace some retiring peaker plants — oppose the transmission line. 

Jamil Khan, director of development at Ravenswood, argued during the panel that money spent to import Canadian hydropower would be better invested into New York’s clean energy industry.

“We can meet all the greenhouse gas emissions reduction goals while we do it,” he said.

IPPNY and ACE also oppose a proposal by DPS staff that would allow the state to directly negotiate with developers of the Canadian transmission line, or other projects, to set prices with the new subsidy — a departure from the formalized competitive process for new in-state renewables and offshore wind.

“They were giving themselves maximum flexibility to make deals with particular projects," Reynolds said. "It doesn’t work that way for other programs.” 

Transmission Developers, Inc., which could begin building the line in 2021, argues the state should have as much flexibility as possible to speed along the process. Direct negotiation could allow projects to deliver energy one year sooner than a traditional competitive process, TDI wrote in its comments. It cites an "urgent need to expeditiously reduce emissions in NYC and also rapidly stimulate the New York economy in the wake of the COVID-19 pandemic." 

Real estate heavy hitters

One key potential market for energy off the Champlain Hudson Power Express is building owners in New York City, required under Local Law 97 to either make costly energy efficiency retrofits or purchase clean electricity. 

The proposed subsidy includes an option for the state to sell the renewable attributes and energy from the line to other parties — including New York City itself. The Real Estate Board of New York supports the Tier 4 proposal but has called for more details and discussion.

REBNY pointed to Local Law 97’s requirements that go into effect in 2024 and increase in stringency until 2030.

“There is currently no meaningful supply of [renewable energy credits] available to purchase in large part due to the" state's inability to sell them to voluntary purchasers, the group wrote. Giving the state that option would increase supply, the group argues. 

REBNY President James Whelan told POLITICO there must be a focus on investments in clean energy and transmission at a time when building owners must meet the new emissions requirements while also prioritizing public health upgrades.

“Building owners are facing a historic crisis, and many are prioritizing investments in improvements that keep their tenants safe from Covid, but are also energy-intensive,” he said. “The solution to healthy buildings and a healthy planet must prioritize cleaning up our electric grid as fast as we can.”

Danielle Muoio contributed to this report.

 

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  • Sandi Howard
    published this page in News 2020-10-05 09:25:07 -0400