The New York State Public Service Commission (“PSC”) recently kicked off a proceeding to ensure that, by the year 2040, 100 percent of the state’s electricity grid is powered by zero-carbon energy. This proceeding will likely be phased and layered in terms of its topic areas and analyses, but the commencement of this regulatory effort – nearly four years after the requirement was codified in the 2019 Climate Leadership and Community Protection Act (“CLCPA”)– is a major step forward.  Moreover, the proceeding will provide a platform for discussion and consideration of many of the stickiest of problems facing the effort to broadly decarbonize our economy, including maintaining reliability while transitioning energy sources, construction of sufficient transmission and distribution infrastructure to serve skyrocketing electrification, and incorporating into regulatory planning innovative clean energy technologies sources that are only now reaching commercial.

Since it was passed in 2019, the CLCPA has catalyzed significant changes within the State to help achieve its goals, which include a 40% reduction in emissions (from a 1990 baseline) by 2030 and 100% clean, carbon-free electricity by 2040 (“100 by 40”).  Indeed, since its enactment, the energy landscape in New York has changed significantly, due to following initiatives and processes (among others):

• The PSC’s revisions to the Clean Energy Standard to establish a “Tier 4”, which provides attributes for energy that is directly injectable into NYISO Zone J (e. New York City), as well as the subsequent solicitation and selection of two projects for Tier 4 awards, which will help unbottle upstate renewables and transport them to downstate load centers;
• The NYISO’s conducting of two public policy transmission planning processes – one of which just reached transmission solution selection phase, and one of which is still in its preliminary stages – which will provide additional transmission capacity for renewable resources;
• The issuance of the 10 GW Distributed Solar Roadmap: Policy Options for Continued Growth in Distributed Solar, which provides recommendations for achieving 10 GW of distributed solar installations by 2030;
• The Climate Action Council’s release of the Scoping Plan, which establishes a framework for how New York will reduce greenhouse gas emissions and achieve net-zero emissions; and
• Governor Hochul’s 2022 State-of-the-State announcement that she would direct the PSC, Department of Environmental Conservation (“DEC”), and NYSERDA to create a blueprint to guide the retirement and redevelopment of New York’s oldest and most polluting fossil fuel facilities by 2030.

These efforts, and others, have driven significant levels of increased renewable energy and transmission development in the State, positioning the state well to achieve 100 by 40.  However, as New York reaches these goals, there is a growing concern regarding the ability of New York to maintain a safe and reliable grid as its fossil-fuel baseload facilities retire and the generation mix moves to heavier reliance on intermittent resources.

The issue of reliability in the face of a greater proliferation of renewable resources has been a focus of the NYISO for several years and was also raised in a 2021 petition filed by the Independent Power Producers of New York, New York State Building & Construction Trades Council and New York State AFL-CIO requesting that the PSC establish a program to “encourage the development of zero emissions dispatchable energy systems.”

In recognition of this issue, at its May 2023 Session, the PSC commenced a process within its existing Clean Energy Standard (“CES”) proceeding to examine the potential role of zero emissions technologies in maintaining a reliable grid as New York moves toward 100 by 40.  In the Order, the PSC acknowledged that simply increasing the level of renewable resources and transmission will be insufficient to maintain reliability and other resources are needed to “close the gap.”  The PSC’s order poses a list of questions on which it is soliciting feedback to help ascertain whether a zero emissions program is needed to help achieve 100 by 40 and if so, what that program should look like.  This process, which may well result in a new CES Tier and subsequent solicitations, will likely provide significant market opportunities for certain types of dispatchable, emissions-free resources.  For example:

• Storage: Long-duration (e. 8+ hours) can play a significant role in this effort, and the PSC’s questions provide opportunity to showcase their value. Moreover, the currently under consideration energy storage roadmap (link above) does not propose a new program for such resources.  Specifically, the questions solicit feedback about whether certain characteristics, such as ramp rates and operational availability, should be taken into account when identifying qualifying zero emissions technologies.
• Transmission: While the Order largely focuses on the role of generation resources to resolve reliability issues related to 100 by 40, there is a role for transmission as well. The PSC asks for feedback on whether the new process should focus exclusively on generation or whether it should encompass a “broader set of technologies,” which could include transmission and transmission-technologies.
• Nuclear: In its questions regarding how to define “zero emissions” for purposes of this initiative, the PSC specifically questioned whether nuclear resources should be included, and if so, whether the definition should be limited to specific types of nuclear energy. Significant questions exist as to whether new nuclear resources would actually be constructed in New York (no new nuclear facilities have been constructed in New York since the 1970’s, and the failures — and concomitant expenses — of Shoreham are still fresh in the minds of Long Islanders), and the Order seems to have intentionally cast doubt on the potential for new nuclear facilities by saying that the status and cost of new nuclear technologies are uncertain.  It is also unclear how the inclusion of nuclear facilities would intersect with the existing Zero Emissions Credit (“ZEC”) program in New York, which supports existing nuclear resources.  The ZEC program expires in March 2029, and may need to be extended in some form to keep the existing facilities and their 3.4 gigawatts of zero-emission electricity online through at least 2040.
• Other technologies: The PSC also indicated a willingness to explore the role that other technologies, such as hydrogen, renewable natural gas, biomass, and carbon capture and sequestration may play in the road to 100 x 40.

Other questions in the Order focus on NYISO market rules that may be needed to support this effort and how this initiative can be carried out in a manner that delivers substantial benefits to disadvantaged communities and can prioritize a just transition (as required by the CLCPA).

We expect this round of comments to be the first of several that will likely take at least a year, if not more, and will likely involve several phases.  After this initial round of comments, we might anticipate a DPS Staff/NYSERDA Whitepaper to further set the course toward a final order or set of orders, followed by another round of comments.  It is also unclear at this time whether the PSC will establish a new CES Tier to incent the development of these resources.

As a corollary, a few days prior to the PSC’s Order, the Department of Energy released its On the Path to 100% Clean Energy Report, which outlined ten steps that need to be taken to ensure reliability with a 100% emissions free grid – which the federal government is targeting by 2050.  Among those recommended steps are increasing deployment of dispatchable emissions-free resources, such as “advanced nuclear, fossil and biomass with [carbon capture and sequestration technologies], geothermal, hydropower, and/or long-duration storage options.”  The Report has no direct action items or procurement opportunities associated with it (as of today’s date), but rather is meant to help guide stakeholders and decisionmakers as they map out efforts to decarbonize the grid.https://www.rawpixel.com/image/3286547/free-photo-image-electric-energy-electricity-power-grid

While it is too soon to tell exactly how the PSC proceeding or DOE Report may play out, one thing is clear – New York is leading the way with respect to defining significant market opportunities in the near- and long-terms for DEFRs, both in NY and nationwide.