New York Must Integrate Public Policy Goals into Competitive Wholesale Electricity Markets
IPPNY Urges FERC to Authorize Internalization of Value of Carbon in Energy Prices
Albany, NY, 5/1/17 – The Independent Power Producers of New York, Inc. (IPPNY) has submitted testimony to the Federal Energy Regulatory Commission (FERC) outlining solutions to resolve the long-standing tension between state clean energy public policies and the competitive wholesale markets.
IPPNY President & CEO Gavin J. Donohue said, “While New York has established aggressive clean energy goals through the Clean Energy Standard (CES) and other programs, the implementation strategies used to meet those goals conflict with the competitive market principles that have produced unparalleled reliability and record low electricity prices. IPPNY has long supported clean energy goals to reduce carbon dioxide (carbon) emissions, which have decreased significantly thanks to the competitive markets. However, the State’s goals and our energy markets have reached a crossroads.
“The markets are designed to meet energy needs by incenting resources to produce electricity at the lowest cost – with little value assigned to environmental benefits – putting them at odds with the State’s clean energy programs that incent resources to produce carbon-free electricity. Until recently, this tension has not had a significant market impact. But given the size and scope of New York’s CES, the ability of the wholesale market to meet system needs at the least cost is threatened, potentially causing energy prices to increase dramatically. It’s time we consider whether the State’s clean energy goals can be integrated into competitive markets to ensure their continued efficient operation.”
In New York, retail electricity customers are required to pay for renewable energy credits (RECs) to support new large-scale renewable resources, as well as zero-emissions credits (ZECs) to support nuclear facilities which might otherwise retire from the market – both of which are out-of-market valuations for environmental attributes.
IPPNY has proposed that the NYISO adopt a market-based approach that would integrate state public policy goals to value low-carbon emissions resources in a consistent manner. This would be achieved by internalizing a consistent value for carbon into wholesale energy prices or by incorporating the State’s clean energy goals into the wholesale market as an additional constraint generators must satisfy.
“Taking these steps would allow for the integration of policy goals in the markets in a consistent, cost-effective, and non-discriminatory way,” said Mr. Donohue. “Having a one-state ISO gives us the structure to make these goals more attainable, and when the market functions as intended there are benefits to all New Yorkers.”
The REC and ZEC charges come at a time when the State’s power generators are selling their electricity at record lows. Despite all-time low wholesale prices, a recent analysis found that consumers do not see a decrease in their rates because roughly 70 percent of a typical residential electric bill is made up of state taxes, public policy fees, and transmission and distribution charges – a number that has grown over the years.
“Consumer electric bills continue to rise, and pricing resources outside of the marketplace raises rates further. These policies will lead to reduced market participation and therefore less competition, ultimately resulting in pricing inefficiencies and increased costs to consumers,” Mr. Donohue said.
IPPNY’s full comments to FERC are available here: http://bit.ly/IPPNYFERC
###
IPPNY is an Albany-based trade association representing the competitive power supply industry in New York State. IPPNY Members generate over 75 percent of New York's electricity using a wide variety of generating technologies and fuels including hydro, nuclear, wind, coal, oil, natural gas and biomass. They have invested over $10 billion in their facilities and employ over 10,000 people. Annually, they pay over $600 million in taxes and invest more than $55 million in their communities.
