NYSERDA Given Broad Discretion on Crafting Offshore Wind Solicitation—Comments on Developing the RFP Due August 10th

Moving forward on New York Governor Cuomo’s goal to procure 2.4 GW of offshore wind capacity by 2030, the New York State Energy Research and Development Authority (NYSERDA) has launched a Request for Information (RFI) to solicit input to inform the development of a Request for Proposals (RFP) for procuring Offshore Wind Renewable Energy Credits, colloquially known as ORECs. The RFI was developed pursuant to the Public Service Commission’s Order Establishing Offshore Wind Standard and Framework for Phase I Procurement released on July 12th. The Order establishes the foundation for quickly procuring 800 MW of offshore wind energy as recommended in NYSERDA’s Offshore Wind Policy Options Paper. The Options Paper recommended two phases for procuring ORECs. The Phase I procurement of ORECs will be held by NYSERDA, the New York Power Authority (NYPA), and/or the Long Island Power Authority (LIPA) for 800 MW by 2019, with the first solicitation released no later than the end of 2018. This first phase procurement aims to jumpstart the development of the offshore wind industry and to capture the myriad environmental and economic benefits of offshore wind.

Last week, NYSERDA held a technical conference at the Department of Public Service to discuss the topics on which it is seeking feedback. NYSERDA also gave an overview of the PSC Order, reaffirming the state’s commitment to investing in the supply chain and encouraging competition to lower costs. NYSERDA, as the procurement agent, has flexibility crafting the solicitation and implementing the 800 MW goal. At its discretion are technical and implementation issues such as: solicitation schedule; procurement quantity; price; interconnection and deliverability; OREC options; project viability; marine, environmental, and fishing impacts; and eligibility. These subject areas were explained in detail and followed by topical questions on which NYSERDA is seeking specific feedback. These can be found at https://www.nyserda.ny.gov/All-Programs/Programs/Offshore-Wind/Offshore-Wind-in-New-York-State/Offshore-WInd-Request-for-Information.

NYSERDA may contract for more than 800 MW in Phase I, but it may also procure less than 800 MW if NYPA and LIPA procure their own offshore wind capacity. [1] NYSERDA may choose to award more than 800 MW in Phase I to capture the economic benefits resulting from larger scale projects or to attract lower bid prices resulting from the expiring federal Production Tax Credit. If NYSERDA chooses to procure more than 800 MW, it would need PSC approval to hold a second procurement in 2019.

For Phase I, NYSERDA will take a hybrid procurement approach—it will develop a solicitation requiring two separate bids from each bidder: one bid for a fixed OREC price and another bid with an adjustable OREC price that nets periodically against a reference price in the market index. [2] Pursuant to the PSC Order, NYSERDA will review each bid and score it by the following weighted criteria:

• Bid price—70% weighting
• Economic benefit—20% weighting [3]
• Project viability-10% weighting

The winning bid will be chosen based on a combined overall ranking. [4] NYSERDA will determine whether to award the contract on the fixed or adjustable index OREC price, as well as on a contract length of 20-25 years. The adjustable index contract would include a provision with triggers for a reversion to a fixed OREC method and price. The PSC also expects NYSERDA to include local content provisions in its evaluation criteria, as well as compensation and mitigation measures for fisheries. A NYSERDA Commercial and Recreational Fishing Technical Working Group will work on the development of best management practices that could prevent or reduce potential impacts associated with offshore wind development; each bidder will be required to participate in the fishing working group and may include any best practices in its mitigation or compensation plan. [5]

In the Phase I procurement, a developer can propose any kind of agreement to build its offshore transmission infrastructure. However, a project’s transmission approach may be evaluated under the weighted “project viability” criteria. It is expected that developers will choose to build their own generator lead lines (“direct radial”) from the offshore project to the mainland, but they are free to present in their bids transmission arrangements with an independent developer. The PSC recognizes the potential economic benefits of a shared offshore transmission system and has directed the Department of Public Service and NYSERDA to convene a technical conference to explore options for offshore transmission in the Phase II solicitation.

The PSC recognizes the multiple benefits of developing offshore wind and the significant role offshore wind could play in meeting New York’s Clean Energy Standard (CES) targets. Therefore, to maximize offshore wind’s value potential, the Phase I solicitation is focused on quick and responsible development. For Phase II, lessons learned from Phase I and from procurements in other states (or from independent procurements by LIPA and NYPA) will be incorporated into the solicitation. Technical Working Group best practices and recommendations may also be incorporated into Phase II solicitation requirements. In addition, shared transmission configurations, options for transmission ownership and planning, and integrated offshore wind + storage proposals may be considered. Furthermore, NYSERDA may consider direct procurement mechanisms such as PPAs, when structuring the Phase II solicitation. Additional requirements to stimulate cost reductions and competition are expected in Phase II.

Feedback on the RFI is due by 5pm on August 10th. NYSERDA requests that respondents limit their comments to 30 pages and encourages respondents to focus on areas in which they have particular expertise or interest. All subject areas and all questions in the RFI do not need to be answered. The RFI can be found here: https://www.nyserda.ny.gov/-/media/Files/Programs/offshore-wind/2018-07-19-Offshore-Wind-PhaseI-RFI.pdf

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[1] NY load serving entities are required to procure ORECs proportional to their load by March 31, 2019. LIPA and NYPA procurements, however, do not need to be proportional to their load. They may conduct their own solicitations and their own OREC procurement methodologies.

[2] The reference price includes energy and capacity prices. (In this case, the energy price will be from NY-ISO Zones J & K.) The market index structure is based on the weighted average commodity market price from the previous month.

[3] NYSERDA has a Benefit Cost Analysis Framework set forth in the Reforming the Energy Vision and has flexibility applying or refining it in the RFP. As part of its RFI, NYSERDA is seeking feedback on what it can include in the RFP to promote economic development benefits.

[4] See the illustrative example in Appendix B of the PSC Order. http://documents.dps.ny.gov/public/MatterManagement/MatterFilingItem.aspx?FilingSeq=210670&MatterSeq=55709

[5] The compensation and mitigation plans will be considered and weighted under the “economic benefit” criteria.