United States: NYSERDA Previews Sweeping Updates To Forthcoming Large-Scale Renewables REC Solicitation

On July 7, 2022, the New York State Energy Research and Development Authority (NYSERDA) released two detailed Requests for Information (RFI) that preview sweeping updates to its large-scale renewable energy certificate (REC) purchase and sale programs. The changes reflect both NYSERDA's efforts to keep up with changes in applicable law and fast-evolving market rules and its continuing endeavor to increase the maturity of projects proposed. Turnaround for responses to the RFIs is fast - NYSERDA seeks replies from stakeholders by July 28 at 3 PM. The program design changes will come in the form of new requirements for the forthcoming Tier 1 Large-Scale Renewables Solicitation, RESRFP22-1 and offshore wind REC (OREC) RFPs. In the RFIs, NYSERDA describes in detail these updates and solicits reactions regarding their potential effects on bid prices, economic development, domestic supply chain for components, and a range of related matters.

Many of the anticipated updates to NYSERDA's REC procurements derive from recent or forthcoming changes in New York law, including the incorporation of Buy-American provisions, Labor Peace Agreements, and heightened standards for wetland and waterbody delineations. Other anticipated changes are a result of the Federal Energy Regulatory Commission's recent acceptance of proposed changes to the New York Independent System Operator's tariff (specifically, updates to the capacity accreditation rules, for which NYSERDA issued a standalone RFI); federal actions, such as President Biden's invocation of the Defense Production Act to spur a domestic industry for solar modules and module components; and anticipated regulatory actions, such as final recommendations from the Farmland Protection Working Group, the state's ongoing coordination of transmission planning efforts, the New York State Department of Environmental Conservation's final criteria for defining Disadvantaged Communities, and the Climate Action Council's Scoping Plan.

The RFI indicates that the Tier 1 RFP may be released in July or August 2022. Step one and step two proposals will likely be due in 60-day intervals after that, with bids to be evaluated in the first quarter of next year and awards announced in the spring. While some of the considerations outlined in the RFIs may not make their way into the RESRFP22-1 solicitation, and the capacity accreditation rules updates will also be infused into the forthcoming OREC RFP, the RFIs highlight numerous topics that proposers will need to account for in their bid responses.

Of the myriad issues raised in NYSERDA's RFIs, we note a few of particular import here.

• Inflation Adjustment to Bid Proposals - NYSERDA is considering giving awardees flexibility to adjust their bid for inflation. NYSERDA wonders whether the proposed approach would reduce ratepayer costs, whether there are other approaches NYSERDA should consider to counter inflation uncertainty in the interest of ratepayers, and whether the proposed formula for an adjusted REC price appropriately considers value inputs.
• Increased Minimum Threshold Requirements - Since the first Renewable Energy Standard solicitation, NYSERDA has steadily increased the Minimum Threshold Requirements to be eligible for evaluation under Step Two (Bid Proposal). NYSERDA is again considering increasing several Minimum Threshold Requirements related to interconnection, permitting, energy deliverability, resource assessment/energy production estimate, and agricultural land, and seeks information regarding these considerations.
• Labor Provisions - NYSERDA notes that proposers will be subject to the New York State Labor Law 224-d prevailing wage and Public Service Law § 66-r Labor Peace Agreement requirements, and asks what further detail or clarification stakeholders need to better understand these requirements.
• Capacity Accreditation - NYSERDA intends to modify its Index REC settlement formula to include a new Capacity Accreditation Factor to implement the NYISO's recently approved changes in that respect. NYSERDA issued a second RFI specific to the Capacity Accreditation mechanism for future agreements that use the Index REC structure. Such changes appear to ensure that the index REC structure will accommodate any loss of revenue that would have occurred because of the changes in such rules, and, longer-term, may have significant impacts on the resource mix proposed, perhaps foreshadowing updates in state support for emerging energy storage technologies.
• Incremental Economic Benefit Categories - NYSERDA seeks responses regarding consideration of cost categorizations, distinctions between electrical energy storage and the proposed inclusion of New Storage Technologies, and the incremental economic benefit commitments afforded to Disadvantaged Communities.
• S. Iron and Steel (Buy-American) - NYSERDA has made a preliminary determination that Buy-American requirements for iron and steel would not be in the public interest as applied to the forthcoming RFPs. However, NYSERDA proposes to establish a minimum dollar requirement for U.S. iron and steel in the construction of renewable energy projects awarded contracts under RESRFP22-1. NYSERDA seeks feedback on its consultant's study of Buy American requirements and to what extent these requirements may increase bid prices.
• Project Viability and Operational Flexibility and Peak Coincidence Evaluation - NYSERDA proposes to modify the evaluation subcategories for which proposers may receive up to 20 non-price points, including by adding a new subcategory related to expected impacts to agricultural land and Mineral Soil Groups 1-4. NYSERDA proposes to more favorably score proposals for bid facilities that have a more feasible pathway to securing necessary permits; that complement the existing portfolio of operating/under development projects; and that include co-located or separately located energy storage facilities. In addition to seeking feedback on these considerations, NYSERDA inquires whether there are additional related factors that NYSERDA should consider.
• Committed Local Transmission Upgrade Bid Proposals - NYSERDA is considering allowing proposers to submit alternative bid proposals that include local elective electrical infrastructure upgrades that would enable the facility to deliver a greater amount of its generated electricity. Proposers would be required to commit to elective upgrades as part of the bid proposal, which would be codified in any resulting award agreements.
• Headroom Data - NYSERDA intends to publish data augmenting the Utilities' Revised Headroom Calculation filings to guide proposers in assessing the viability of their proposed bid facilities. NYSERDA seeks feedback on how proposers can use this data, what other data would be useful in developing bid proposals, and other considerations relevant to facilities that are proposed to be sited in areas with insufficient headroom. Relatedly, NYSERDA is considering requiring energy deliverability studies for facilities that intend to interconnect in an area indicated by the utilities' February 1 2022 Headroom Data Filing to have either zero or negative headroom.
• Agricultural Mitigation Payments - NYSERDA is considering allowing for a partial or full deferral of a proposer's Agricultural Mitigation Payment until three-years after the bid facility reaches Commercial Operation if the proposer implements agricultural co-utilization measures. NYSERDA is considering waiving the mitigation payment upon receipt of a final report detailing the proposer's effort to implement the proposed co-utilization measures.
• Consideration of U.S. Department of Commerce Auxin Antidumping/Countervailing Duty Investigation - NYSERDA seeks responses regarding how stakeholders have conducted risk assessments of strategies for purchasing equipment and entering into module supply agreements. NYSERDA is also interested in understanding how Biden's Presidential Determination providing for a limited ability to source modules and cells from Cambodia, Malaysia, Thailand, and Vietnam for 24 months provides relief, if at all, for potential proposers.
• Defense Production Act (DPA) - NYSERDA is interested in how the Defense Production Act provides potential relief for NYS developers, how Biden's invocation of the DPA may stimulate domestic markets, and how NYSERDA can encourage domestic solar equipment manufacturing in NY.

To view Foley Hoag's Energy & Cleantech Counsel blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.