New York State Rate Increase: Nuclear Subsidization

August 24, 2016

KEY POINTS

  • To help reduce CO2 emissions, New York will subsidize struggling nuclear power plants
  • Your supply budget will likely increase ~5% ($4/MWh) starting in April, 2017
  • To help mitigate the impact of the price increase, Hospital Energy can recommend energy efficiency and on-site generation projects before the regulations take effect

 

BACKGROUND

On August 1st, Governor Cuomo announced that the New York Public Service Commission approved a new Clean Energy Standard (CES) that includes a target called “50 by 30”. This requires 50% of the state’s electricity to come from renewable sources by 2030. This 50 by 30 target is intended to help the state achieve an existing goal to reduce the state’s greenhouse gas emissions by 40% by 2030 – and 80% by 2050 – compared to 1990 levels. The previous renewable target, set in 2010, had been 30% by 2015, which NY slightly missed. In 2017, the state expects to get 26% of its electricity from renewable sources.

 

FUTURE IMPACT

As a part of the new CES, New York has created Zero Emission Credits (ZECs) which will serve to subsidize upstate New York nuclear plants. These ZECs are similar to Renewable Energy Credits (RECs) already in place around the country for technologies like solar and wind. ZECs and RECs are awarded to generators on a per-MW-generated basis. The CES requires electricity suppliers to obtain a certain amount of ZECs and RECs, typically by generating the power themselves or by purchasing these credits from other generators.  The ZECs will not count toward the 50% renewable target.

 

The ZEC’s will increase in costs every two years, starting in April 2017 and ending in May 2029. The impact of the first tranche will be approximately $4/MWh and are expected to be roughly double that by tranche six. The price for the first tranche represents approximately 5% to 7% of your energy supply budget.

 

NEXT STEPS

One of the best ways to respond to these increased costs is to reduce your electricity consumption. Hospital Energy offers services that can help before the regulations take effect, including analyzing the benefit of on-site generation projects such as solar or co-generation (also called combined heat and power or CHP); evaluating opportunities for load reduction through equipment upgrades; and increasing site efficiency through continuous commissioning of current equipment. Please contact your account manager, Courtney Duell at cduell@hospitalenergy.com for further information. 

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