ALBANY, N.Y. — New York is eager to move away from fossil fuels. Customers, though, will feel the switch in their wallets.
The state has largely funded the recent investments in clean energy, electric vehicle chargers, heat pumps and new transmission lines incrementally through piecemeal decisions by the quasi-independent Public Service Commission, which regulates utilities.
But larger bills for the aggressive transition are increasingly coming due, and it has the potential for sticker shock for ratepayers — a byproduct of the tremendous complexity of shifting from from fossil fuels to heat and power homes and businesses.
Some of the costs are already impacting utility bills, but more are set to hit in the coming years as projects come online.
“Financing them exclusively through rates, particularly on residential, is the least progressive mechanism for financing anything. We make no judgment whether you have the money to pay or you don’t have the money to pay,” John Howard, a commissioner on the Public Service Commission, said at last month’s meeting.
While lawmakers’ concerns are growing over the impact on consumers, they have few levers to shift course on the already-approved costs.
A wholesale transition of the state’s energy system is not optional: It is mandated under a sweeping 2019 law requiring 70 percent renewable electricity by 2030 and an emissions free grid by 2040, alongside overall reductions in planet-warming gasses. So it requires a wholesale electrification of the state’s economy if New York is to meet the statutory targets.
The nation-leading initiative won’t come cheap, even though the changeover represents just a small fraction of the state’s economy. Total costs are a small percentage — less than 1 percent in 2030 and 1.3 percent in 2050 — of the state’s total economic output, according to the state’s analysis. Incorporating the value of avoided emissions along with health benefits shows an overall benefit from the shift, the analysis shows.
Paying for renewables
In this June 15, 2021 photo, smart inverters made by Chint Power Systems are seen at the Sugar Hill Solar Site in Clifton Park, N.Y. The site is owned by Standard Solar Inc., and Developed by US Light Energy of Latham, N.Y. Solar farms, wind turbines and hydro dams are producing more renewable power for the state, but it can be difficult to deliver that power south to the massive New York City market. Chip Somodevilla/Getty Images)
Ratepayers have already paid about $3 billion to keep the upstate nuclear power plants online since 2017 and are poised to also support new onshore wind and solar projects once they are completed. Offshore wind contract costs will also be divvied up statewide.
A 2020 analysis of those programs found that bill impacts for onshore renewable subsidies would be 0.5 percent and offshore wind would be 1.1 percent over the lifetime of the projects.
The costs were outweighed by the benefits of reducing carbon emissions, according to the state analysis. That didn’t incorporate the health benefits of reducing co-pollutants that contribute to higher asthma rates and premature deaths.
Two transmission lines to deliver electricity from upstate renewables and Canadian hydropower to New York City were estimated to potentially increase bills for National Grid customers either 3.7 percent or 8.8 percent in 2028, depending on a key decision about revenues earned by one of the lines at the state’s independent grid operator.
But that impact is expected to be lowered by New York City government and private buildings purchasing some of the electricity from the lines to comply with local emissions reduction rules instead of all the costs getting allocated statewide.
A portion of the potentially multi-billion transmission projects to integrate offshore wind plugging in on Long Island will also be shared statewide. Upstate ratepayers will see higher percentage impacts from those costs, as well.
Other costs that are hitting utility bills over the coming years include, according to decisions by the Public Service Commission:
$700 million to subsidize electric vehicle chargers
$454 million for heat pump subsidies
$1 billion to subsidize small-scale solar projects and more.
Some of the costs of utility investments to support the state’s climate law are difficult to parse out, because they are included in rate hike proposals from utilities. That includes utility investments in electric vehicle chargers, storage projects, transmission upgrades to integrate renewables and other programs.The state is trying to provide some help and ensure low-income customers aren’t hit too hard.
The Public Service Commission has a stated goal of keeping utility bills at 6 percent or less of household income and has approved programs to eliminate unpaid bills accrued during the pandemic. Hochul also proposed $200 million in additional utility bill assistance for state households with income below the median, but ineligible for other programs.
Regulators appear to be moving toward better accounting over the expenses that will be passed on to consumers.
The Public Service Commission last year kicked off a proceeding to more closely track annual spending to support the state’s climate law. The Department of Public Service staff is required to make an annual presentation about costs and benefits of spending related to the climate law over the previous year. Nonetheless, it is not required to evaluate the future impacts of all the approved programs on utility bills.
Supporters of the state’s climate efforts point out that additional investments would need to be made in New York’s aging electricity grid anyway. The transition to cleaner energy sources and investments in energy efficiency will ultimately have benefits for residents, they said.
In particular, there are benefits to reducing co-pollutants in disadvantaged communities that are disproportionately impacted by these emissions and suffer harmful health effects, said Chris Casey, a senior attorney for the Natural Resources Defense Council.
“State policies that are spurring New York’s clean energy transition are essentially addressing externalities of the energy system that have devastating impacts on human health and environment and that have really tangible costs for New Yorkers, but costs that have not been reflected in the cost of utility service,” Casey said.
“Energy prices should become significantly more predictable and stable in the future under the clean energy transition, which will make managing costs a whole lot easier for New Yorkers and businesses alike.”