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January 22, 2020

PSC to NYSERDA: Offer Renewable Developers REC Bidding Flexibility to Meet Governor's Clean Energy Standard

On January 16, 2020, the New York State Public Service Commission (PSC) issued an order directing the New York State Energy Research and Development Authority (NYSERDA) to offer renewable energy developers increased bid flexibility in its solicitations for renewable energy credits (RECs). Specifically, the Order requires that NYSERDA offer indexed RECs in addition to traditional fixed-price RECs.

The Order adopts the request made by the American Wind Energy Association (AWEA) and the Alliance for Clean Energy New York (ACE-NY) in a March 12, 2019, petition to allow for the use of indexed REC contracts for Tier 1 of New York State’s Renewable Energy Standard (RES) program, which would mirror the option provided in NYSERDA’s offshore wind REC solicitations.

The Order requires NYSERDA to offer both fixed-price RECs and indexed RECs as options in its 2020 request for proposals (RFP) for Tier 1 RECs, anticipated in April, and in all future Tier 1 REC solicitations. An indexed REC price is based on a reference market index that will change monthly over the life of a REC contract; in contrast, fixed-price RECs provide a fixed as-bid REC price throughout the contract lifetime.

Under the Order, NYSERDA and the Department of Public Service staff must file a proposed implementation plan for PSC action within 90 days that will propose a number of implementation changes to the RES program.

As the PSC stated in the Order, providing the indexed price option will “give developers more flexibility to adapt their bidding behavior to their financing and operational needs” and “should also reduce the risk premiums that developers account for in their bids to accommodate for uncertainty in power market revenues, thereby lowering ratepayer costs on a per-REC basis.” The PSC expects the indexed pricing option will likely expand the pool of bidders in future procurements and provide a boost to competition as well as additional downward pricing pressure on REC bids.

Barclay Damon’s regulatory and project development attorneys have significant experience guiding and supporting renewable energy clients through all stages of New York State’s permitting processes, including both Article 10 and the State Environmental Quality Review Act (SEQRA), as well as guiding and advising clients at all stages of project development and related transactions. If you have questions on how the above-referenced Order may affect your business or project, contact Ivan Zajicek, associate, at izajicek@barclaydamon.com; Ekin Senlet, partner, at esenlet@barclaydamon.com; or another a member of our Regulatory or Project Development Practice Areas.

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