The New York Public Service Commission’s (PSC) Clean Energy Standard (CES), adopted in August, includes a new emissions credit—the ZEC. The ZEC, or zero-emissions credit, is the first emissions credit created exclusively for nuclear power.

The ZEC is the result of a highly politicized effort to support New York’s struggling nuclear power plants. New York’s four nuclear plants account for 31 percent of the state’s total electric generation mix. According to the PSC, “losing the carbon-free attributes of this generation before the development of new renewable resources between now and 2030 would undoubtedly result in significantly increased air emissions due to heavier reliance on existing fossil-fueled plants or the construction of new gas plants to replace the supplanted energy.” The ZEC Program is intended to keep the state’s nuclear plants open until 2029 and provide an emissions-free bridge to renewable energy.

New York’s CES

The ZEC Program is one component of New York’s new Clean Energy Standard. The goal of the CES is to ensure 50 percent of electricity consumed in New York by 2030 is generated from renewable sources. In addition to the ZEC Program, the CES contains a new Renewable Energy Standard (RES), which requires load-serving entities to invest in new renewable generation resources through the purchase of renewable energy credits. This component of the CES will be explored in a future post.

The ZEC Program

Basic Structure

The CES requires the owners of eligible nuclear power plants to enter into long-term contracts with the New York State Energy Research and Development Authority (NYSERDA) under which the owners sell the zero-emissions attributes associated with the electricity produced by the plants. Beginning in April 2017, the state’s load-serving entities (LSE) are required to periodically purchase from NYSERDA an amount of ZECs per year of the total amount of ZECS purchased by NYSERDA equal to the proportion of load served by the LSE in relation to statewide load served by all LSEs. ZECs themselves are not tradable except between NYSERDA and LSEs during an annual balancing process. But LSEs and self-supply customers can seek permission from the PSC to meet ZEC obligations by entering into combined ZEC plus energy and/or capacity contracts directly with nuclear facilities. LSEs will be required to report their compliance with the ZEC program annually.

Price

NYSERDA’s contract term with the nuclear facilities is 12 years, but prices for ZECs will be adjusted every two years. The ZECs are priced according to the US Environmental Protection Agency’s Social Cost of Carbon (SCC) minus a portion of the cost already captured in market revenues due to the Regional Greenhouse Gas Initiative program. After 2018 the price will be reduced by the amount NYISO Zone A energy prices combined with Rest of State capacity prices exceed $39/MWh.

Eligibility

Eligibility for the ZEC program is dependent on the PSC’s finding of public necessity. The PSC offered five criteria: (a) the historical contribution of the facility to New York’s clean energy resource mix; (b) the degree to which projected revenues at the facility are insufficient to provide compensation to preserve the facility’s environmental attributes; (c) a cost-benefit analysis of the payments in relation to other clean energy alternatives; (d) the impact on ratepayers; and (e) the public interest. The PSC analyzed all five criteria with respect to the FitzPatrick, Ginna, and Nine Mile facilities in its August 1 Order and deemed all three eligible for participation. The PSC excluded New York’s fourth nuclear facility, Indian Point, which has avoided the economic struggles facing the three upstate facilities due to its location in southern New York where energy prices are higher.

Scope and Limits

Several aspects of the ZEC program are dependent upon the continued operation of the FitzPatrick, Ginna, and Nine Mile facilities. While the program term has a 12-year term, continuance of the program after the first two years is conditional upon a buyer purchasing and taking title to the FitzPatrick facility by September 1, 2018 (the current owner, Entergy, has stated that it is not willing to keep the facility open). In addition, NYSERDA is required to ensure that contracts for all qualifying facilities are in place before any contracts become effective.

The PSC capped the total amount of amount of ZECs to be purchased at 27,618,000 MWh, reflecting the historical production of the three facilities. If any plant closes, the cap will be reduced by one-third. The PSC further imposed a performance standard on the facilities, mandating that if production falls below 85 percent of historic production levels for any two-year period, ZEC purchase obligations will be reduced for the next two-year period by 333,333 MWh per facility (plants under common ownership were permitted to consider performance as a group).

The ZEC Program has both opponents and supporters and multiple petitions for rehearing have been filed.