New York’s Climate Leadership and Community Protection Act

Clean energy goals and the Scoping Plan

The Climate Leadership and Community Protection Act (the “Climate Act”) was passed in July 2019 to address climate change and reach net-zero emissions in New York State (the “State”). The Climate Act’s targets are among the most rigorous of any major economy in the world. The Climate Act requires that:

• by 2030, 70% of State-wide electricity comes from renewable energy sources;
• by 2030, there is a 40% reduction in State-wide greenhouse gas (GHG) emissions compared to 1990 levels;

• by 2040, the State achieves a zero-emission electricity system;

• by 2050, there is an 85% reduction in State-wide GHG emissions compared to 1990 levels; and
• by 2050, the State achieves net-zero emissions.

These goals are ambitious when compared to the State’s existing sources of electricity generation, given that in 2021, renewable resources accounted for approximately 27% of the State’s electricity generation, nuclear resources accounted for approximately 24% of the State’s electricity generation, and fossil fuels accounted for approximately 47% of the State’s electricity generation.

The Climate Act created the Climate Action Council (the “Council”), which was tasked with developing a Scoping Plan to establish the initial framework for how the State will meet the Climate Act’s various requirements. The Council modified the initial Scoping Plan based on public comments received and released a final Scoping Plan on 1 January 2023.

Solar, wind, hydroelectric and other renewable energy will power New York

According to the Scoping Plan, to achieve the Climate Act’s requirements and goals, New York must deploy clean energy resources, such as land-based wind and solar, offshore wind, hydropower, fuel cells that use renewable fuels, and energy storage. The Climate Act requires that the State install 6 GW of distributed solar by 2025 (and 10 GW of distributed solar by 2030), and 9 GW of offshore wind by 2035. The plan finds that by 2050, the State will install over 60 GW of solar capacity (both utility-scale and distributed resources), between 16 GW and 17 GW of new land-based wind capacity (including imported wind from neighbouring independent system operators), and between 16 GW and 19 GW of offshore wind resources. The development of offshore wind in the State is discussed further below.

On fuel cells, the Scoping Plan recommends that the State should replace existing vehicles that run on gasoline or diesel fuel with battery electric, hydrogen fuel cell, or other future zero-emission propulsion technologies. In addition, the State should place an emphasis on fuel cells in the use of biogas in the waste transportation sector, electric co-location, and co-generation opportunities for energy- and heat-intensive industries and challenging-to-electrify users.

Green hydrogen and energy storage will ensure grid reliability

The Scoping Plan recognises that, given the large amount of renewable energy that must be procured and developed, the State will need to incorporate load flexibility to create a more manageable system. This will be achieved by investing in other zero-emission resources, such as green hydrogen and energy storage. For example, on 15 March 2024, the State governor announced more than USD16 million in funding opportunities to accelerate innovative solutions in clean hydrogen to decarbonise hard-to-electrify sectors, such as industrial process heat, microgrids and grid support services, and fuel cell electric vehicles.

As for energy storage, the Climate Act requires that the State install 6 GW of energy storage by 2030. This goal is currently being revised, as a 2021 study by the New York State Department of Public Service and the New York State Energy Research and Development Authority (NYSERDA) identified a need for more than 15 GW of energy storage. Accordingly, the Scoping Plan finds that “one technology focus is long duration energy storage”, and that the State should leverage federal resources in commercialising long-duration storage solutions and focus programmes and funding on research and demonstrations for the development of large-scale and longer-duration storage.

Geothermal and nuclear energy as emerging resources

The Scoping Plan recognises the potential of developing utility thermal energy networks across the State’s utility service territories and enhanced geothermal systems (EGS). The drafters note that the State will be able to benefit from progress made at a national level, including through the US Department of Energy’s Enhanced Geothermal Shot, a department-wide effort to dramatically reduce the cost of EGS by 90%, to USD45 per megawatt-hour (MWh) by 2035. The drafters find that, as commercial geothermal installations and thermal energy storage systems gain benefit from federal tax credits (discussed below), such emerging resources have the potential to help establish a major transition strategy for gas utilities.

On nuclear energy, although the drafters accept advanced small modular reactors as another emerging resource that could contribute to the State’s achievement of 100% zero-emissions electricity by 2040, they find that key issues pertaining to waste management and storage still need to be resolved before advanced nuclear can be adopted at scale. Nonetheless, they appreciate that nuclear generation provides a significant amount of baseload resources and is zero-emission and, therefore, analysis should be conducted prior to the end of 2029 to determine whether subsidising any of the State’s remaining nuclear reactors will be necessary to achieve the State’s goal of having a zero-emission electricity system by 2040. They further note that, with considerable new federal tax credit incentives, along with other federal funding, the prospects of economically competitive advanced nuclear energy have grown substantially.

Transmission infrastructure investments

New York has taken significant steps towards the transmission system investments that are expected to be required to deliver energy from facilities upstate and offshore to where load demand exists and to facilitate the Climate Act’s goals. 

In implementing the Climate Act, the New York State Public Service Commission (PSC) established a new tier of renewable energy certificates to increase the role of renewable resources and decrease the reliance on fossil-fueled generation within New York City. Following a competitive solicitation administered by NYSERDA, two proposals were selected in 2021.

One of the selected projects, Clean Path New York, includes a planned 1,300 MW transmission line from a withdrawal point in Delaware County, New York to an injection point in Queens, New York. The other selected project, Champlain Hudson Power Express, includes a planned 1,250 MW transmission line from a withdrawal point in Quebec, Canada to an injection point in Queens, New York. The Champlain Hudson Power Express and Clean Path New York projects each entered into contracts with NYSERDA, which were approved by the PSC in April 2022. The Champlain Hudson Power Express announced financial close in November 2022, has started construction and is targeting commercial operation in 2026. The Clean Path New York transmission line is currently pursuing the necessary permits and interconnection and is targeting commercial operation in 2027.

In addition, the State has taken steps to develop the transmission necessary to deliver offshore generation. The New York Independent System Operator, Inc (NYISO) Public Policy Transmission Planning Process is the primary mechanism ensuring that the high-voltage transmission grid can support the State’s climate policies. The PSC previously identified several public policy transmission needs through this process. One of these projects, Empire State Line, completed construction in 2022. The second project, A/C Transmission, was completed in 2023. The third project – which is being developed by Propel NY to meet the identified need of delivering at least 3 GW of energy from offshore wind projects connected to Long Island and which will add three new underground cables connecting Long Island to the rest of the State via a 345 kV transmission line across western and central Long Island – is currently pursuing the necessary permits and is required to be in service by May 2030.

Anticipating significant additional offshore wind generation in the coming years, the PSC announced on 22 June 2023 the additional public policy transmission need to interconnect and deliver at least 4.77 GW of offshore wind energy into New York City, including interconnection facilities and necessary local system upgrades. On 4 April 2023, NYISO issued a solicitation for transmission projects to meet this identified need, with proposals due by 3 June 2024. It is expected that the evaluation and selection process will be completed in 2025.

Offshore Wind

As noted, offshore wind will be one of the State’s main sources of electricity as the State progresses towards its goal of having at least 70% of State-wide electricity come from renewable energy sources by 2030. NYSERDA is the State authority charged with implementing the State’s goal of 9 GW of offshore wind energy by 2035. According to NYSERDA, there is vast wind-energy potential off the Atlantic coast, particularly an area south of Long Island and southeast of New York City called the New York Bight. At the time of writing this article (July 2024), the State has five offshore wind projects in active development: Empire Wind 1 Project (816 MW), Sunrise Wind (924 MW), Empire Wind 2 Project (1,260 MW), Beacon Wind Project (1,230 MW), and South Fork Wind Farm (130 MW), for a total of approximately 4,300 MW of wind energy. One of them (South Fork Wind Farm) completed construction in March 2024.

In addition, on 23 February 2022, the Bureau of Ocean Energy Management (BOEM) held a competitive auction for six areas within the New York Bight lease area. The lease sale drew competitive winning bids from six companies totaling approximately USD4.37 billion. BOEM executed the leases with the six companies around April 2022. All six projects are now in the early planning and development phase with construction and operation dates estimated for 2029 to 2031.

Offshore Wind Renewable Energy Certificates (ORECs)

NYSERDA manages the delivery of offshore wind energy to the State through competitive solicitations. Competitively selected projects will enter into contracts to sell Offshore Wind Renewable Energy Certificates (ORECs) to NYSERDA on behalf of the State’s electricity ratepayers State-wide. To be eligible to bid, developers must agree to and meet certain requirements, including obtaining an offshore lease from the federal government, committing to deliver the offshore wind energy to the State’s electricity grid, and committing to certain economic benefit initiatives and programmes that benefit the people of New York and its workforce. 

ORECs represent the positive environmental attributes associated with 1 MWh of electricity generated by offshore wind resources and consumed in the State. ORECs constitute an important source of revenue to enable offshore wind development, as the State’s electricity markets do not directly value such attributes associated with clean electricity generation. In NYSERDA’s contracts with offshore wind developers, NYSERDA will purchase ORECs from project developers as renewable energy is delivered to the grid. Accordingly, the price of the OREC is an important consideration for NYSERDA, as it evaluates bids from project developers. NYSERDA will then sell ORECs to utilities and other load-serving entities that are required to purchase clean energy credits to meet the State’s clean energy goals.

On 24 October 2023, NYSERDA provisionally awarded ORECs to three offshore wind projects: Attentive Energy, developed by TotalEnergies Renewables USA, Rise Light and Power and Corio Generation; Community Offshore, developed by RWE Offshore Renewables and National Grid Ventures; and Excelsior Wind, developed by Vineyard Offshore. Associated with the awarded projects, NYSERDA also provisionally awarded USD300 million of State grant funding to GE Vernova and LM Wind Power for nacelle and blade manufacturing in the State’s Capital Region (ie, in the region surrounding Albany, New York). In April 2024, NYSERDA announced that it was concluding the solicitation with no final awards, due to “technical and commercial complexities” that resulted in “material modifications to projects bid” into the solicitation, resulting in the “inability to come to terms”.

On 29 February 2024, as part of NYSERDA’s fourth OREC solicitation, NYSERDA provisionally awarded ORECs to two offshore wind projects: Empire Wind 1, developed by Equinor, and Sunrise Wind, developed by Orsted and Eversource. Both Empire Wind 1 and Sunrise Wind were previously awarded ORECs by NYSERDA in 2019 as part of NYSERDA’s first offshore wind solicitation. Both projects, as well as others, petitioned the PSC, seeking price adjustments to the OREC agreements to address inflationary pressure and supply chain disruptions that impact the projects’ economics, but the PSC denied the petitions. As part of these awards, the Empire Wind 1 and Sunrise Wind projects are required to execute new contracts with NYSERDA because NYSERDA had allowed them to compete in the solicitation only if they agreed to conditionally terminate their existing OREC agreements.

On 17 July 2024, NYSERDA launched its fifth OREC solicitation. As part of this solicitation, NYSERDA has included key provisions from the latest rounds of renewable energy procurements such as inflation indexing, Disadvantaged Community commitments, and related priorities to maintain the policy objectives introduced in prior solicitations intended to ensure an equitable energy transition for all New Yorkers. The submission deadline for offer pricing is due on 18 October 2024.

The Inflation Reduction Act – Key Incentive in Meeting the Climate Act’s Clean Energy Goals

With respect to financing the Climate Act’s clean energy goals, the Scoping Plan makes several recommendations in providing targeted financial assistance to businesses and local governments to improve their energy efficiency. The Scoping Plan also recognises that the new and expanded federal tax credits will do the heavy lifting in attracting investment to the State. It is expected that the State should leverage federal tax credits, grants, and financing for infrastructure reuse to deploy clean energy options that support the State’s future energy mix, and that federal resources should be prioritised to assist the State in making needed grid infrastructure investments. According to the Scoping Plan, the incentives provided in the Inflation Reduction Act (IRA), signed into law in August 2022, could amount to a USD41–69 billion reduction in costs in meeting the Climate Act’s goals.

Investment tax credits (ITCs) and production tax credits (PTCs)

The IRA has extended and expanded the federal income tax incentives for a wide range of alternative energy projects. The existing investment tax credit (ITC) or production tax credit (PTC) for wind projects, the existing ITC or newly available PTC for solar and geothermal projects, and the new ITC for standalone energy storage can now be claimed for projects beginning construction by 31 December 2024. For projects placed in service after 31 December 2024 with a GHG emissions rate of zero or less, a technology-neutral ITC/PTC is available that phases down, beginning in the later of 2032 or the year in which annual GHG emissions from US electricity production drop to 25% of 2022 emissions. In both cases, the ITC is based on 30% of the basis of the energy property and the PTC is generally based on 1.5 cents per kilowatt hour of electricity produced by the taxpayer and sold to an unrelated party, as adjusted for inflation and subject to a phase-out for reference prices above 8 cents per kilowatt hour.

The full ITC/PTC is available only if the following wage and apprenticeship requirements are met:

• labourers and mechanics employed by the taxpayer or any contractor or subcontractor are paid a prevailing wage for the locality and character of work, as determined by the Secretary of Labor, for constructing the facility or energy property, as well as for altering or repairing the facility or energy property during the first ten years (for PTC) or five years (for ITC) post-completion; and
• 10–15% (depending on when the project began construction) of the labour hours of construction, alteration or repair work (including work performed by a contractor or subcontractor) are performed by qualified apprentices from a registered apprenticeship programme, and each taxpayer, contractor or subcontractor employing four or more individuals to perform such work employs at least one qualified apprentice to perform such work, subject to an exception for good faith efforts by the taxpayer to employ apprentices.

The rate of the ITC/PTC can increase up to 10% (for production tax credits) or ten percentage points (for investment tax credits) for projects that are located in certain “energy communities” (ie, specified areas associated with the fossil fuel industry or brownfield sites), meet certain US-manufactured content thresholds, and/or are located in specified low-income communities.

The Inflation Reduction Act also institutes a new ITC/PTC for hydrogen production, a new PTC for zero-emission nuclear power production from certain existing nuclear facilities, and a significant rate increase for the existing carbon capture credit, all of which are also subject to the prevailing wage and apprenticeship requirements noted above.

Implementation of the Climate Act

The New York Department of Environmental Conservation (DEC) had until 1 January 2024 to draft and promulgate enforceable regulations to ensure the State meets the Climate Act’s State-wide GHG emission limits outlined in the Scoping Plan (ie, a 40% reduction in State-wide GHG emissions by 2030 and an 85% reduction by 2050, both from 1990 levels). At the time of writing this article (July 2024), the DEC had not promulgated a single set of regulations, but continues to do so piecemeal. In December 2023, the DEC proposed new standards and reporting requirements for hydrofluorocarbons (HFCs) to reduce their use and emissions. Two public comment hearings were held on 13 March 2024. Final regulations have not yet been issued. In addition, the DEC is proposing standards and reporting requirements for sulfur hexafluoride (SF6), a potent greenhouse gas used in the electricity sector. Two public comment hearings were held on 14 March 2024. Final regulations have not yet been issued."

Then, this whole new paragraph should be titled, "DEC Regulations" and moved after the sub-section titled "The Action Plan".

The Action Plan

In October 2023, Governor Hochul reaffirmed the State’s commitment to achieving the Climate Act goals by releasing a new 10-Point Action Plan (the “Action Plan”) that outlines a comprehensive set of actions being taken to expand the State’s renewable energy sector. This has been the cornerstone of many of the State’s recent initiatives covered throughout this article. While the Action Plan itself does not mention any concrete targets, it provides a series of overarching goals and initiatives set for the near future that lay the foundation for how the State intends to combat the recent macroeconomic and inflationary pressures affecting the renewable energy industry. The ten components of the Action Plan are as follows:

• NYSERDA will announce a historic award of offshore and onshore renewable energy projects along with major supply chain investments;
• NYSERDA will address the directives issued in the October 2023 PSC order and will assess the impacts on its large-scale renewables contracted portfolio in an expedited manner;
• NYSERDA will launch an accelerated renewable energy procurement process for both offshore wind and onshore renewables;
• the State will continue to actively engage with the federal government to bring forward market solutions, including signing a memorandum of understanding with the US Department of Energy Loan Programs Office to access low-cost financing for large-scale renewable projects, advocating for updated guidance on clean energy tax credits, and a federal-State revenue-sharing programme;
• the State will be engaging in a historic development of transmission infrastructure across the State;
• the State will actively support the establishment and growth of a supply chain ecosystem, with a focus on making key investments in offshore wind supply chain infrastructure;
• the State will continue to invest and expand its clean energy workforce, with NYSERDA already committing more than USD170 million for workforce development and training initiatives;
• the State launched the Offshore Wind Master Plan 2.0 in 2022, which will provide a plan for the future of offshore wind development as available lease areas are expected to be located increasingly deeper and further from north Atlantic shores;
• the State will actively engage with industry stakeholders; and
• the State will commit to fostering public engagement and outreach, transparency and collaboration.

Cap-and-Invest Program and Mandatory Greenhouse Gas Reporting Programs

In December 2023, as part of a second round of pre-proposal stakeholder outreach, the DEC and NYSERDA released a pre-proposal outline on the development of the State’s economy-wide Cap-and-Invest Program and Mandatory Greenhouse Gas Reporting Programs. Under the Cap-and-Invest Program, the State will set a cap on the total amount of GHG emissions allowed across the economy (which will decrease each year), and businesses will be required to purchase allowances at auction based on their GHG emissions. In addition, the DEC and NYSERDA contemplate an Auction Rule, which would describe the operation of the allowance auctions and mechanisms to protect the overall integrity of the allowance market, prevent market manipulation, and provide cost containment and programme stability. Under the Mandatory Greenhouse Gas Reporting Program, the DEC would identify the types of GHG emissions sources that would be required to report their GHG emissions to the DEC, at which emissions or activity threshold a source would be required to comply with the regulations, and how the source would be required to report its emissions. 

6 GW Energy Storage Roadmap

On 20 June 2024, the State Governor Kathy Hochul announced that the PSC approved the State’s 6 GW Energy Storage Roadmap (the “Roadmap”) – a new framework for the State to achieve 6 GW of energy storage by 2030. The Roadmap is a comprehensive set of recommendations to expand the State’s energy storage programmes, as summarised below:

• 3 GW of new bulk storage to be procured through a new competitive Index Storage Credit mechanism, which is anticipated to provide long-term certainty to projects while maximising savings for consumers;
• 1.5 GW of new retail storage and 200 MW of new residential storage to be supported through an expansion of NYSERDA’s existing region-specific block incentive programmes;
• utilisation of at least 35% of programme funding to support projects that deliver benefits to disadvantaged communities and that target fossil fuel peaker plant emissions reductions (with programme carve-outs for projects sited in the downstate region);
• requiring electric utilities to study the potential of high-value energy storage projects towards providing cost-effective transmission and distribution services not currently available through existing markets;
• continued prioritisation by existing programmes on investing in research and development related to reliable long-duration energy storage technologies; and
• payment of the prevailing wage as a programmatic requirement for energy storage projects with a capacity of 1 MW and above.

State Comptroller Audit of PSC's and NYSERDA's Plans to Achieve the Climate Act's Goals

On 17 July 2024, the State Comptroller released an audit of the PSC's and NYSERDA's planning to achieve the Climate Act's goals. Among others, the auditors found that the PSC sometimes used outdated data and wrong calculations to determine if the State could reach 70% renewably sourced electricity by 2030, the PSC did not plan properly for the historical project cancellation rate or expiring contracts, and the PSC did not reasonably estimate or verify other entities' estimates of the cost of the transition to renewable energy. In response, the PSC did not agree with several of the audit's findings, including that it uses outdated or incorrect calculations for planning purposes.

The auditors recommended that the PSC begin a comprehensive review of the Climate Act, analyse and address existing and emerging risks and known issues on a continual basis, provide a more accurate representation of the likelihood of meeting targets, and perform a detailed analysis of cost estimates and periodically report the results to the public. The auditors also recommended that NYSERDA take steps to ensure that proposals are evaluated consistently and contracts are awarded to the most qualified proposers.

Next Steps

Pursuant to the Scoping Plan, the following actions are required to implement the Climate Act.

• As noted above, the DEC is required to draft and promulgate enforceable regulations to ensure the State meets the Climate Act’s State-wide GHG emission limits outlined in the Scoping Plan, which it has not yet completed. The DEC is required to publish a report on the implementation of the GHG-emission-reduction measures every four years.
• By 1 July 2024 and every two years thereafter, the New York PSC is required to issue a comprehensive review of the renewable energy programme, including progress in meeting the overall targets for 70% renewable electricity by 2030 and 100% zero-emission electricity by 2040. This review will also include a progress update on the programmes the PSC has established to require procurement of 9 GW of offshore wind by 2035, 6 GW of solar by 2025, and 6 GW of energy storage by 2030. At the time of writing this article (July 2024), the PSC had not issued such review.
• Every five years, the Council will update the Scoping Plan as part of the ongoing process to meet the Climate Act targets and GHG emission reduction limits.