February 27, 2015

By Scott Waldman and David Giambusso; Original story here

ALBANY—The plan adopted by the Public Service Commission on Thursday sets in motion the Cuomo administration’s attempt to modernize the state’s energy grid.

The Reforming Energy Vision plan will encourage the growth of wind and solar power to make the state’s electrical grid more reliant on technology and reward customers for reducing energy usage. It will also allow utility companies to distribute, but not own, renewable power sources.

It’s an ambitious plan that could dramatically alter the state’s energy markets, with the aim of making them more competitive, cleaner and ultimately cheaper for customers. It is being watched nationally, as other states seek to upend the traditional utility model to accommodate the growth of solar, wind and other renewable sources in the energy grid.

Currently, the New York electrical grid is set up to handle periods of peak demand, which generally occur on the hottest days of summer when people turn on their air conditioners. Demand here is typically 18,000 megawatts, and can spike to more than 26,000 megawatts in July. That means some power plants run only about 40 hours a year to meet those periods of high demand, but utility customers still pay to keep them operating.

That’s an inefficient system and costly for consumers, P.S.C. chairwoman Audrey Zibelman said. Reducing some peak hours could save consumers up to $2 billion a year simply by operating the system more efficiently, she said.

“What drives price in this industry is demand. We manage demand, we manage price,” she said.

Much of the focus of the R.E.V. plan will be on reducing that period of peak demand. Customers will be given financial incentives to reduce demand, for example, by granting utility companies the ability to remotely turn down air conditioners. Customers who install their own power sources, such as wind or solar, will receive incentives so that they can sell electricity into the grid during periods of peak demand.

“As we move to a system more dependent on renewable resources … what we want is a market that values these resources and a grid that’s more flexible,” Zibelman said.

Significant challenges remain, such as getting the utilities on board with the increased emphasis on renewables, convincing a critical mass of homeowners and business to invest in clean energy, and building larger-scale solar and wind projects that are needed to replace fossil-fuel burning plants.

The P.S.C., recognizing some of those issues, will give utilities more opportunity to earn revenue by helping distribute power generated from smaller providers. The P.S.C. also announced that it would begin a separate initiative to address the challenges of building large scale renewable projects.

State regulators have yet to answer some key questions about how plan will affect consumers—most notably, how much it will cost. P.S.C. officials said those details will be hammered out later this year.

Technology will become increasingly important in the new scheme. Customers will be incentivized to use internet-enabled devices to manage their energy usage to save money. The state will also increase the number of standalone power sources for apartment buildings or hospitals that can operate independently of the grid during peak periods of high demand or during outtages.

New York will be left behind if it doesn’t incorporate more of today’s technological advances in to the power grid, commissioner Patricia Acampora said. Just a year into the process, New York is already viewed by other states as establishing the next generation of power grid, she said.

“This is something every state is looking at, this is something that will be looked at internationally moving forward,” she said.

Renewable advocates see Reforming Energy Vision as the beginning of the state’s shift from fossil fuel sources, and pressed for the public hearings held earlier this year. Activist-actor Mark Ruffalo, a prominent Cuomo critic before the state banned fracking, issued a statement praising the governor shortly after the P.S.C. decision.

(“I’m hopeful that the plan, as part of New York’s Reforming the Energy Vision, begins to lay the groundwork for utility companies to change their business model to embrace solar, energy efficiency and solutions that give people and communities more choice and control instead of more dirty fossil fuels such as coal, oil and gas and nuclear,” Ruffalo said.)

One of the changes that will come with ruling is more attention to low-income customers. Zibelman said repeatedly they won’t be financially harmed by the R.E.V. process, but did not reveal specific protections.

Still, incentiving energy efficiency and reduction in air emissions will protect low-income and minority consumers, who live in disproportionate numbers near power sources that produce air pollution, said Conor Bambrick, air and energy director at Environmental Advocates of New York.

“They’re experiencing the air pollution, they’re experiencing the high asthma rates, they’re experiencing the haze that goes along with climate change,” he said.

Utilities argued they should be allowed to own their own renewable power generation as well as be the traffic cops in the new grid. Since the R.E.V. was first rolled out last April, the private generation market expressed deep misgivings about that set up, saying utilities would favor their own power sources and stifle free market competition. After the state’s energy markets were deregulated in the late 1990s, utilities in New York were barred from owning their own power generators.

The P.S.C. ruled that while utilities like Con Edison and National Grid should be the grid dispatchers, there would be strict limitations on what power they could own themselves.

Essentially utility ownership of power sources would be limited to demonstration projects for new technology, energy storage and large scale batteries, and power sources dedicated to low-income customers.

Some leaders in the private industry Thursday said they were pleased with the ruling.

“It seems to me like they’ve taken a pretty strong position on having generators or the private sector have the first bite of the apple in terms of generation,” said Gavin Donohue, president of the Independent Power Producers of New York, a state trade organization of private power generators. “I think they recognized the value of competition and at the end of the day getting the best prices for consumers.”