Regarding yesterday’s Politico, below, discussing Clean Path’s request for additional funding because other projects were also requesting more, Clean Path was already an $11 billion project for 3,400 MW of intermittent solar and wind generation. See the following link: A giant clean-energy transmission line to New York City is now underway
POLITICOPRO
NY & NJ ENERGY
by Marie J. French
newsletter@email.politicopro.com
CLEAN PATH DEBATE: The ask for increased payments from developers of the Clean Path transmission project, which would bring upstate renewables into New York City, faced opposition from a competing developer. Rise Light and Power, an LS Power subsidiary that owns the Ravenswood power plant and has pitched a range of options requiring state support to transition off fossil fuels, also opposed the inflation adjustment requests from offshore wind developers and onshore renewables.
The company had proposed its own transmission line in NYSERDA’s Tier 4 solicitation but lost out to Champlain Hudson Power Express and Clean Path. Clean Path is being developed by NYPA, Invenergy and energyRe. Unsurprisingly, Rise calls for a new solicitation instead of a price adjustment for Clean Path. The Clean Path developers should have been aware of cost increases when the contract was finalized in 2022. “An open and transparent procurement, rather than an ex-post-facto price increase insulated from market competition would better serve both procedural transparency and cost-containment,” Rise’s response states.The company also calls for Clean Path to be forced to provide more information about the amount of additional relief the transmission developer has requested and the basis for it. Rise takes a jab at the Champlain Hudson Power Express ask as well, calling it a “me too” petition exemplifying the potential for granting these adjustments to “distort market expectations and introduce moral hazard.”
In somewhat supportive but cautious comments on the various requests for more subsidies, the Natural Resources Defense Council gave a brief shoutout to the Clean Path request, noting “offshore wind and renewable resources underlying [that project] are particularly important for addressing the disproportionate reliance on fossil fuels downstate and for enabling the retirement of highly polluting peaker plants in disadvantaged communities.” New York City in its comments also indicated Clean Path should receive relief similar to the onshore renewables.
Clean Path’s request, filed shortly after the offshore wind and onshore renewables petitions, focused on the component of the project involving new planned renewables that were part of the Tier 4 agreement. The transmission project plans to make payments to those renewable projects based on what NYSERDA pays developers of other renewables. They’re not asking for more money for the transmission component of the project. Contrast that with Champlain Hudson Power Express, which is asking only for an increase on the transmission component of the project. — Marie J. French
However, the article also states that CHPE is a $4.5 billion project and on the CHPE Website, it says that the cost is approximately $6 billion. See the following link. All of the number on these projects are all over the place and the NY State taxpayers and ratepayers are going to be footing the bill. If I ran my business this way, it wouldn’t survive a year. However, NY State seems to believe that its utility ratepayers are a bottomless piggy bank: Champlain Hudson Power Express Announces Financial Close
Taken from page 83 of the NYSERDA document (page 70), you will see the following:
Clean Path New York is bidding a projected annual quantity of 7,496,113 MWh with the potential to add an additional 374,753 MWh (for a total of 7,870,865 MWh) if selected for award inclusive of storage utilizing NYPA’s pumped storage facility at Blenheim-Gilboa. Between projects owned by Invenergy and projects retained through executed indicative term sheets with third-party generators, Clean Path New York holds 3,354 MW of generation (1,924 MW of wind, 1,430 MW of solar1). This portfolio represents 87% of the expected generation capacity (MW) and 92% of the expected generation (MWh). Clean Path New York is confident that, if selected, it will be able to round out the portfolio necessary to meet the projected annual quantity, as evidenced by list of additional resources listed in Section 4.25.
In the caption, it states that there will be 7,496,113 MWh annually available through the 3,4000 MW cable using 1,924 MW of onshore wind and 1,430 MW of solar. There will potentially be more if the pumped storage plant is attached. However, if you actually calculate the capacity factors of onshore wind and solar in NY State, those figures result in about 5,941,000 MWh, 21% less than what is being stated. I find it very troubling when projects have to overstate their outputs to justify their existence. That also includes the CLCPA. That generally means that they can’t stand on their merits and they are hoping that no one will notice.
To put that amount of energy into perspective, Crickett Valley Energy Center, an 1,100 Megawatt Combined Cycle Generating plant cost about $1.58 billion to build 3 years ago. With inflation, it would cost in the range of $2 billion now and generate about 8,000,000 MWh annually using only an 83% Capacity Factor. That is 33% more energy than Clean Path will deliver for 18% of the price of just the transmission line, excluding the cost of the renewables. That is prior to the Clean Path request for additional funding. Additionally, according to this caption from page 82 of the pdf (page 69 of the document), all of the renewable projects did not yet have approval when the document was released and still don’t two years later, so they might not achieve that energy level for many years, if ever.
More than 45% of Clean Path’s portfolio (by capacity) currently holds a NYSERDA Tier 1 REC contract and more than 30% holds a Certificate of Environmental Compatibility and Public Need pursuant to Article 10. In addition to Invenergy, the Clean Path portfolio includes projects from Northland Power, RWE, Apex, Terra-Gen, and Boralex, all of whom are experienced developers with track records of being able to deliver projects. These developers have all signed letters of support with Clean Path New York, which are provided as Appendix 4. Finally, the portfolio is zonally diversified, with no more than 30% of capacity in any one zone. This will help to reduce overall basis risk to Clean Path and will also provide resource diversity to the portfolio.
Based upon the line in the caption above,“Northland Power, RWE, Apex, Terra-Gen, and Boralex, all of whom are experienced developers with track records of being able to deliver projects”, they are implying that the developers have historically completed their projects. But anyone that has ever read a financial prospectus has seen this disclaimer, “Past Performance is Not Indicative of Future Results.” It is a mandatory requirement from the SEC that all financial houses have to put that disclaimer on their offerings. Just in the past two weeks, several Democrats have raised objections to certain solar projects in NY State. In this litigious environment, there is no guarantee that any particular project will be completed until it is actually under construction with transmission capacity in place, so the numbers in the Clean Path document are a goal but are far from a guarantee. The only guarantee is that the cost of the project will be at least $11 billion, and based upon the recent requests probably substantially more.
Further, regarding increased funding for renewable projects in NY State, attached is an investment article discussing Orsted and Offshore Wind. Orsted’s Stock dropped 25% in one day last week because they are having difficulty getting the raw materials needed to implement the projects they have contracted for. The article discusses the fundamentals of the wind industry.
In today’s Politico, there is a discussion of the filing of the Multiple Intervenors regarding the cost of the increases requested by the various renewable projects, in italics below. This is the cost of the increased subsidy, not the entire project.
CLEAN ENERGY INFLATION ADJUSTMENT COSTS ESTIMATED: Dissatisfied with NYSERDA’s evaluation of the potential costs of an increased subsidy for clean energy projects, the state’s large energy users say the price tag of the asks is more than $48 billion. Multiple Intervenors, a group that includes manufacturers, retailers and colleges, and the Municipal Electric Utilities Association of New York State filed the estimate in supplemental comments on Wednesday. They oppose increasing the subsidies. “The Commission should not lose sight of the primary issue before it, which is not how much incremental compensation would appease the numerous petitioning developers but, rather, whether the competitive solicitation process should be abandoned, and what is fair, just, and reasonable for customers (who, at the end of the day, are left footing the bill for each of these long-term contracts),” the groups wrote.
The figure includes the total value, not discounted to the present, for the increases requested by the offshore wind developers ($37.7 billion) and the onshore renewables ($10.69 billion). The offshore wind estimate is based on NYSERDA contracts and information the authority filed about the requested increases last week.
How anyone can use this approach to build an energy system is beyond belief and runs contrary to what any sane engineer would ever do. Had I tried to operate a project at Bell Labs in this manner, I would have been unemployed in short order. NY State is essentially pushing its energy system out of a plane with no parachute and hoping that it can figure something out to break its fall before it hits the ground.
I am pro renewable but the lack of cost containment on these projects is going to break the backs of the NY State ratepayers and the fact that there is a blind rush to do this without framing it in the bigger picture of what is economically achievable is going to cause economic and political upheaval in NY State and diminish the prospects of these projects being completed. The NY State government can’t act as a rubber stamp for what has become a money grab. The entire process is going off the rails and the state has to step back and think about what it is doing. Keep in mind that none of this will affect global carbon emissions beyond a small fraction of a percent under the best case scenario which they will not come close to achieving. In reality, the restrictive nature of NY State’s energy policies is going to force unworkable solutions that are actually going to result in carbon increases.
While it is too late to do anything about the current situation, the question has to be asked, could more environmental benefits be achieved with the extra $11 billion spent on other projects. The answer is yes.
Additionally, the lie that renewables are cheaper than other forms of generation is being exposed by recent events and explains why Germany’s energy costs after 33 years of pursuing the same policy are double those of France next door. Viewed myopically, renewables are less expensive, however if all of the ancillary costs resulting from their low energy density and intermittency are figured in, the answer is that they cost far more per KWh and last for a far shorter period of time than other generating methods.
Rich
Response from GK:
We need to be careful using the generalization “the lie that renewables are cheaper than other forms of generation.” Renewable generation costs are very site specific and often time of day/seasonally variable. In many locations, they are the lowest cost source of electricity, but like hydro generation, most of the low cost sites have already been used.Our goal should be to get a portfolio of different energy sources with different characteristics, in order to deal with the complexities involved in meeting variable demand, particularly for electricity, where users require a high level of reliability and supply needs to be equal to and/or greater than demand. Unfortunately, LCOE does not adequately measure the real value of firm and dispatchable energy/electrical sources relative to the value of intermittent renewables. To obtain the optimal or lowest “system costs”, there will be a role for renewables and storage. It will just be significantly smaller than many “environmental” groups and policymakers are using in their current projections.
Jesse Jenkins at Princeton has done a very good job of explaining why a portfolio of energy sources that includes firm dispatchable technologies like nuclear, coupled with renewables and storage, is most likely to produce the lowest system costs for a low/zero GHG future. Just as many advocates for renewables incorrectly reject nuclear, we should try to avoid making the same mistake in reverse. It adversely impacts our credibility to overgeneralize and say that renewables are always or often more expensive.
There is also little advantage to alienating advocates of renewables. Our goal should be to work with them and help them to understand the advantages of a portfolio that includes significant amounts of firm and dispatchable energy technologies, in addition to intermittent renewables. The biggest problem with advocates of renewables is that some believe that future energy needs can be met solely from renewables and storage (e.g., Mark Jacobson from Stanford). To be effective advocates for firm energy technologies, we need to be as accurate as we can be when dealing with people that don’t fully appreciate the complexities of energy economics and physics. Persuading people to change their opinions on the need for energy sources like nuclear is very difficult, and psychology needs to be factored in.
Response to GK:
I’m not using generalizations. I’m using averages and history.
If you stick solar panels on people’s roofs or over commercial parking lots where the energy will be used, they are cost effective but it is not cost effective the way that NY State is pursuing this effort. If you find a large open field next to a large transmission line, that will work but those locations are few and far between and the number of solar project cancellations in NY State over the past few years because of transmission line costs is indicative of that. While borrowing costs and commodity costs were lower a few years ago, there were possible workarounds for the issues. That is no longer the case.
Almost every place that has invoked a large renewable portfolio has seen their energy costs go up dramatically and had their energy supply negatively impacted. Ontario, Canada, Germany, California, and now the predictions for NY. Texas could be an exception regarding costs except their large renewable portfolio is resulting in numerous other issues. The high costs will become even more apparent as batteries are added, the supply chain shortages get worse, and the higher cost of capital persists that is expected to last for an extended period. Beyond making the actual projects more expensive, the high capital costs are going to make it more difficult to fix the supply chain issues by limiting the amount of investments corporations can make towards capital equipment. In 2016, I could borrow at 2.8%. Last year, that had increased to 5.4%. Now, it is 7% – 8%. On a $1 million investment in equipment, that’s an extra $50,000 in financing costs annually so any commodity made will have to cover those additional costs.
California’s energy price increases are occurring with a solar capacity factor almost double that of NY State’s and with far more available land to site renewables. The problem is that the renewables have a low energy density, take up enormous amounts of area, and have to be located far from where the energy is used which adds enormous costs to the energy, as I am sure you are aware. Beyond the cost, it engenders resentment from the residents that have to look at the installations but don’t use the energy. It might be great for the person that owns the land being rented for the renewables, but the neighbors won’t be happy.
The Clean Path cable will be able to transport 3400 MW of solar and wind energy, but how often will it actually be used for that amount of power? Certainly not at night. However, if it was connecting a 2,000 MW nuclear plant to NY City, it could be built 30% smaller for relatively less money and carry 2.7 times as much energy every year. 74% less cost per KWh transmitted. Transmission lines for renewables have to be designed for their peaks in order to minimize curtailment or the systems have to have batteries co-located which significantly increases the cost of the installation and will reduce the net system energy output. For solar, that peak lasts for a few minutes per day and the transmission asset sits idle the rest of the time. Whether it is because of under utilization of transmission resources or high battery costs, the cost per KWh is far higher.
CHPE makes more sense because in theory, hydro-power has a much higher capacity factor. However, that will not be true if the Montreal Economic Institute’s analysis is correct and Quebec needs all of its energy internally after 10 years.
I have been and still am an advocate for renewables used in a manner that is justified by science and math. I decarbonized my home and business before Al Gore was even thinking about the issue. He was still Vice President when the planning was being done. I have tried to be politic with the renewable advocates for five years. They refuse to listen to limitations upon the applications based upon math, science, economics, supply chain issues, labor issues or regulatory issues. They are either driven by a blind ideology that is impossible to shake even though that ideology is going to raise atmospheric carbon levels, or they are driven by money because they are selling the products.
How many places have to fail at this process before people start to question the technique? Are the Germans that incompetent and New Yorkers so far superior that we can accomplish something in 7 years or 17 years that they haven’t achieved in 33 years? Talk about Hubris.
Good luck with psychology. The only thing that will change their minds is when (not if) the whole thing comes down on their heads, and our heads by association. By that time, it will be too late for the rest of us because it will take years to fix the mess that is being created.
If the proponents were using rational thought, the recent price increases would give them pause and they would start to rethink their positions. Instead, the proponents of this want to double down and rubber stamp the increases while all of the pigs are running to the trough for fear that one of the other pigs might get a little more than they do, whether they are well fed or not. It’s like listening to young children. “Their slice of cake was larger than mine.”
These cost increases are being thrown onto the backs of many people that either can’t pay or can barely pay their utility bills now. What is going to happen in two years? The 1.2 million rate payers $1.8 billion in arrears will become 3 million rate payers $4.5 billion in arrears.
That’s a great way to run a utility system.
Rich