The levelized cost of building a solar project in New York far exceeds expected revenues from solar sales, an NYPA plan says, with the project’s success potentially depending on the sale of renewable energy credits at a satisfactory price.
The New York Power Authority, which has begun investing in renewable energy projects and bringing them to completion, said in a renewable energy strategic plan that the levelized cost of energy (LCOE) for new solar projects is twice as high as sellers’ expected sales, and discussed how sales of renewable energy credits (RECs) could make up the difference.
The LCOE for new solar projects “has increased to at least $100/MWh,” the plan says, while “based on modeling of merchant revenue streams (energy, capacity and ancillary services) projects can expect to see less than $50/MWh on an annual basis for the foreseeable future.”
The strategic plan says that Tier 1 RECs, which NYPA may sell to the New York State Energy Research and Development Authority, could generate revenue “that will help NYPA obtain the necessary financing and revenue to achieve greater build-out of renewable energy sources.”
NYSERDA purchases RECs from renewable energy projects that offer the lowest bids, typically using multi-year contracts, and then retires the RECs to help the state achieve its renewable energy goals. To purchase the RECs, NYSERDA uses money collected by utilities from customers through a levy on utility bills.
NYPA’s plan presents a hypothetical example in which NYPA offers a price of $90/MWh for an “indexed REC” for a given project and earns $50/MWh from seller revenues, with NYSERDA paying NYPA $90/MWh minus monthly average zonal energy and capacity prices. In that example, total revenue of $90/MWh would fall below NYPA’s projected solar LCOE of $100/MWh.
For regular, non-indexed Tier 1 RECs, NYSERDA has paid sustainable producers on average ranging from $22 to $36 per MWh over five recent quarters. These REC values, when added to $50/MWh of commercial revenue, would also fall short of NYPA’s projected solar LCOE.
S&P Global reported in August, however, that as New York aims for a 70% renewable electricity grid, REC prices “should increase.”
Occasion set
NYPAs “President and CEO Reportshows that NYPA screening has identified an opportunity set totaling 5.5 GW of renewable energy and storage projects in the state in which NYPA could invest, including 3.5 GW of solar.
The citizen group Public Power NY has called on NYPA to do so Add 15 GW of renewable energy sources by 2030. The group said that to reach its renewable energy goal, New York will need between 7 and 21 GW of onshore renewable energy, depending largely on future electricity demand, a range based on analysis of data in a consulting firm’s report.
NYPA currently has time-limited exclusive agreements with renewable energy project developers to pursue 350 MW of projects, an NYPA spokesperson said.
To date, NYPA has announced three projects:
- A 20 MW solar project in Fort Edward, NY that is wholly owned by NYPA
- A 1.5 MW agrivoltaic project, supported by a $750,000 NYSERDA demonstration grant, at the State University of New York College of Agriculture and Technology in Cobleskill, NY
- A 1.5 MW closed landfill solar project in Albany developed in partnership with the City of Albany.
New York’s 2023-2024 state budget authorized NYPA to promote renewable energy in the state, support worker training for renewable energy jobs, and subsidize the energy bills of low- and middle-income customers.
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