New York State announces second offshore wind solicitation for up to 2,500 MW of projects

Author: Val Stori, Clean Energy Group | Project: Offshore Wind Accelerator Project

New York State issued its second offshore wind solicitation for 1,700 MW up to 2,500 MW—the largest such solicitation in the United States. The state’s first offshore wind solicitation in 2017 resulted in contracts for 1,700 MW of wind energy.

Offshore wind is positioned to help New York achieve its goal of 50% renewable generation resources by 2030. The New York State Energy Research and Development Authority (NYSERDA), which leads the coordination of offshore wind activities in New York, developed an Offshore Wind Master Plan in 2018 that envisioned 2,400 MW of offshore wind by 2030. In 2019, Governor Cuomo increased the states target from 2,400 MW by 2030 to 9,000 MW by 2035. New York’s Climate Leadership and Community Protection Act mandates the development of these 9,000 MW.

The recently issued solicitation includes not only the procurement of offshore wind power, but also requirements for developers to invest in and partner with local ports. New York is offering a separate complimentary funding opportunity for offshore wind port infrastructure upgrades. New York has chosen 11 suitable locations for which it is soliciting investment. Locations are competing for $200 million in development grants from NYSERDA. In total, New York’s commitment to port infrastructure will exceed $400 million, the largest in the nation.

Special provisions in the solicitation include:

  • Prevailing wage requirements – Developers are required to pay wages and benefits that are not lower than the Prevailing Rates, even though this solicitation is not a public work as defined in NYS Department of Labor’s Article 8.
  • Benefits for undeserved communities – The goal is to provide these communities with 40% of the benefits of spending on clean energy. The benefits will be used for workforce development, low income energy assistance, housing, and other investments and projects.
  • Prioritizing jobs for residents in environmental justice areas – Developers are encouraged to recruit and train residents of disadvantaged communities so residents will have opportunities to be employed in offshore wind jobs.
  • Specific funding requirements for wildlife and commercial fisheries – NYSERDA will contribute a minimum of $10,000 per MW of installed capacity to monitor wildlife and commercial fish stocks.
  • Labor and union contracts – NYSERDA’s RFP includes a Project Labor Agreement, a collective bargaining agreement, which covers both the project contractors and the trade labor organization representing craft workers. The PLA applies to contractors as well as subcontractors.
  • Full data transparency – Contract awardees must make public environmental and wildlife data as well as the impacts of the project on the environment and wildlife areas. This data is necessary to adequately assess the effect of the project on the environmental characteristics of the project area.

By 2028, New York expects to have created 5,000 new jobs from offshore wind activities and in-state expenditures are forecast to be $6 billion.

Read more here and here.

Clean Energy Group Proposes 20 Federal Strategies to Advance Battery Storage Markets

Author: Lewis Milford, Clean Energy Group | Projects: Energy Storage Policy, Resilient Power Project, Phase Out Peakers

Clean Energy Group has proposed a comprehensive series of new policy actions the federal government could take to accelerate the battery storage market. These policy recommendations are contained in comments CEG filed in response to the Energy Storage Grand Challenge Draft Roadmap (Storage Roadmap) and an accompanying Request for Information (RFI) the U.S. Department of Energy (DOE) released in late July 2020.

The Draft Roadmap proposes that the federal government pursue a long-term federal strategy to expand the storage market along the lines of the successful federal SunShot Initiative. The SunShot program adopted hard cost reduction targets for solar adoption, and provided grants to communities, states and NGOs to support new policies and actions at the state and local level to drive down solar costs through market activity.

A well funded, comprehensive and long-term federal program to support the scale-up of energy storage in the US could revolutionize the battery storage market. The Roadmap is a promising first step in the right direction. If strengthened with commitments to real cost reduction targets, with dedicated long-term funding, with strategies to provide more customer resilience, with serious efforts  to reach low-income populations and people of color and with new creative financing tools, the Roadmap could set the stage for an aggressive, next generation federal storage policy over the next several years.

In comments filed with DOE, CEG makes 21 recommendations to strengthen the draft Roadmap. Among the suggested strategic improvements to the Roadmap are the following:

  • It should articulate a clear path forward to specific, time-bound, targeted cost reductions for battery storage technologies.
  • It should call for committed federal funding for the initiative over the next 10 years, like the successful SunShot Initiative.
  • It should develop specific strategies to support behind-the-meter (BTM) battery storage markets, as that is where the greatest innovations can produce the most immediate benefits to energy consumers. Focus there should be on an emerging “virtual power plant” model of aggregated, distributed storage systems that serve the needs of both individual battery owners and regional electric grids. Bringing this model to scale will require both federal- and state-level support for resilient solar and storage efforts, to provide more protection for customers suffering from power outages and to offer greater support for challenging markets like affordable housing and critical public facilities.
  • It should adopt a host of new federal policy roles for DOE and other federal agencies, including the national laboratories. This multi-agency federal effort should address the need for greater market analysis, support for federal-state partnerships, and other policies to coordinate and support advances in battery storage policy, regulation and programs throughout all levels of government (federal, regional, state and local).
  • It should especially address a noteworthy omission in the current draft, which does not materially focus on the need to get these new cost-saving and resilient energy technologies into the hands of low- and moderate-income (LMI) customers and environmental justice communities. In various equity sectors, LMI customers and environmental justice communities are most in need of the many economic, public health, and environmental benefits the pairing of solar and battery storage can provide.
  • It should develop new financing platforms that help reduce the financing risk of early stage battery storage technologies, such as “risk reduction” financing gap programs and new ways for utilities to provide incentives for customer-sited storage, again especially in hard to reach LMI markets.

These strategies are now more needed than ever. As the CEG comments note, “the negative effects of COVID-19 and climate change have come together to make these technologies even more important than ever. That is, there are new market uses of battery storage technologies in making homes, which are now serving triple duty as offices, schools, and housing, more resilient. Energy resilience provides a safety net for people with electricity-dependent, home health care equipment, making them less at risk from power outages due to storms or other causes. Resilient power systems can make entire communities more secure from extreme weather, wildfires, and the accompanying power outages. Our disaster-prone ‘new normal’ means that battery storage technologies are now essential tools to save lives, reduce physical and economic harm, and preserve communities from disruptions due to power outages.”

Storage technologies unquestionably are critical to facilitate and accelerate the clean energy transition and to enable greater energy democracy for all communities. However, this transition can and should be accelerated by smart federal, state, and community-level storage policies.

Links to the US DOE Draft Roadmap and Request for Information are here and here. A copy of the CEG comments is here. A list of the specific recommendations CEG proposed is here.

With More Massive Power Outages Last Week, Let’s Spend More Utility Funds to Protect Customers with Resilient Power Where They Live

Authors: Marriele Mango and Lew Milford, Clean Energy Group| Projects: Resilient Power Project, Energy Storage and Health

Buildings in Harlem sit dark during a power outage early, Friday, Aug. 7, 2020, in New York. (AP Photo/Candice Choi)

Last week, the East Coast of the country suffered through another damaging round of power outages from another hurricane, this one Isaias. Millions of people lost power, the most since Superstorm Sandy, causing untold misery and disruption.

Those who work from home, school their children, and deal with other pressures during COVID-19 were forced to juggle these responsibilities without electricity. This is another indignity that makes people question why their lives resemble some uncontrolled decline from what once was a developed economy.

Perhaps the most disappointing response was the predictable political reaction to the outages. Like a repeat of a Groundhog Day episode, public officials of various states lambasted the utilities for failures and blamed them for only focusing on “grid upgrades and utility hardening”, measures that obviously have not improved reliability.

As this article explains, there are better ways to spend utility money on new ways to finance resilient power – solar and storage (solar+storage) systems that can provide backup power during outages – in homes and critical facilities. Isaias was a reminder that all states and utilities need to explore more innovative solutions to protect their residents from damaging power outages. While some – primarily, New England and California – have developed pilot programs that offer customer sited solar+storage, much more must be done to make solar+storage technologies the main driver behind storm related resiliency.

It’s time to end the wishful thinking that only utility “grid upgrades and utility hardening” programs will solve this problem going forward. They won’t, especially in the new world of COVID 19 and the shift that has occurred in work and school.

Reliable electricity has always been a necessity, but it is now more than ever a critical lifeline to our basic existence. This point is made clear each and every time severe weather strikes: the impact power outages have on our livelihood and public health can be severe. Hurricane Isaias left over three million people without electricity, including those reliant on electricity for critical medical equipment. As of this writing, a week after the storm hit, many people are still without power.

This long duration outage highlights the health disparities faced by low-income, medically vulnerable populations during an outage.

After an apartment complex in Connecticut with 100 older and disabled residents lost power for days, electricity-dependent residents were left with few solutions. When asked about one man’s living conditions without electricity, he stated that, without access to air conditioning, he was living in a “sweatbox, you can’t breathe, that’s how hot it is in there.” Another resident reported that her husband was “suffocating” without electricity to power the medical devices required to treat his throat cancer. As residents waited and listened to Con Edison’s assurances that power would be restored shortly, one man noted “I don’t know what to do anymore.”

Solar+storage can provide clean and reliable emergency power to high-risk households and critical facilities in the event of an outage, while also saving money on electric bills to places like affordable housing and senior centers.

Residential solar+storage systems can support some types of electricity-dependent home medical equipment through an outage or provide enough backup power to safely wait until support can safely arrive. Solar+storage at critical community facilities, such as senior centers and schools and in community spaces of affordable housing complexes, can provide back-up power resources for residents to access WIFI, lighting, refrigeration for perishables and temperature-sensitive medications, and outlets to charge medical equipment and cell phones.

The big questions is how to pay for these systems – here is where utilities could play a much smarter role to ensure grid stability and avoid power outages.

Perhaps rather than invest all their resiliency funds in multi-billion-dollar grid upgrades, utilities should provide subsidized battery storage programs to their customers through their existing energy efficiency programs.

These types of programs can improve health outcomes by providing backup power to vulnerable populations, while also reducing the energy burden of low-income households and providing value to the grid—which could lower electricity costs for all utility customers.

There are many good examples of innovative policy and programs to provide customers with resilient, clean backup power at little or no cost. These include:

  • California utility PG&E of California now is offering its critical health and low-income customers free batteries to protect them from fire-related grid outages, using the state’s SGIP battery rebate;
  • Cape Light Compact, an electric co-op is providing free or low-cost solar+storage+heat pump systems to low-income customers on Cape Cod;
  • Green Mountain Power, which has provided more than 2,000 residential customers in Vermont with batteries through its Resilient Home program, is giving free batteries to low-income and health critical customers;
  • And now, through an innovative utility program in New England, several utilities in Massachusetts, Rhode Island, Connecticut and New Hampshire have adopted the ConnectedSolutions program model to offer batteries to residential and commercial customers through their state energy efficiency programs.

The key to all these programs is that the utilities involved contract with their customers to use customer-owned batteries as a “virtual power plant” to meet grid needs. This saves money for all ratepayers while providing clean backup power to the customer hosting the battery. It’s a cost-effective way to get backup power to individuals and communities that need it – but to make this possible, states must offer support in the form of incentives, low-cost financing, or simply regulatory approval for programs like ConnectedSolutions.

It’s clear from the damage done last week that resilient power technologies remain largely inaccessible. Not enough has been done to fund programs that incentivize solar+storage for low-income and high-risk populations. The result: the most vulnerable residents do not have a reliable backup power resource to rely on in the event of an outage.

It’s time for state officials to realize that these programs are the future of resiliency. Let’s stop assuming that only utility hardening programs work. Let’s take a hard look at the multi-billion dollar utility grid programs and see if a more balanced budget that invests in customer sited resilient power makes more sense.

Let’s move towards more reliable, customer sited, resilient power and create a 21st power system that protects everyone in need now.

 

The Mass Solar Loan Program: Bringing Solar Ownership to Low-Income Homeowners

Author: Maria Blais Costello, Clean Energy Group | Project: Clean Energy States Alliance

The Mass Solar Loan Program, launched by the Massachusetts Clean Energy Center (MassCEC) and the Massachusetts Department of Energy Resources (DOER) in 2015, combines strategic incentives and partnerships with local banks and credit unions to increase access to solar PV financing, while creating a robust solar lending market. Most recently, its incentives have focused exclusively on supporting low-income homeowners who want to own solar PV systems, addressing challenges such as limited ability to utilize the federal tax credits and lower credit scores.  

To date, 77 percent of program funding awarded has been to income-qualified residents. Since December 2015, over 5,400 loans totaling approximately $173 million have been closed, activating 46 megawatts of residential solar PV in 342 of 351 Massachusetts municipalities. Loan requirements, such as fixed-rate terms, capped closing fees, and capped interest rates, ensure customers have a consumer-friendly option, while lenders gain greater experience with solar. This approach has fostered a durable and competitive market for residential solar lending, even as program incentives phase out over time. 

Mass Solar Loan Program Background 

Over the past five years, the Mass Solar Loan program has allowed a broad range of customers to access solar ownership’s economic benefits, despite income or credit score limitations. This has been done through a combination of increased financing options and thoughtfully targeted incentives. Increasing the number of capital providers for solar has helped create and maintain a competitive marketplace. Incentives were designed to be more generous at the beginning of the programto jump-start the market and reduce risk for lenders—and then they were stepped down over time while continuing to support income-qualified customers.  

MassCEC and DOER developed the Mass Solar Loan program following a 2013 study commissioned by DOER to evaluate solar financing models. The study found that the financial benefits to PV system owners and the local economy are greater when a solar project is owned by the customer instead of by a third party. Backed by the study’s findings, the Mass Solar Loan program was designed to encourage direct ownership of residential solar through the creation of a low upfront-cost financing option that would be competitive with leases and provide more economic benefits than Power Purchase Agreements (PPAs).  

In 2014 and 2015, MassCEC and DOER developed the detailed program design and structure through significant stakeholder outreach to the solar industry, local banks and credit unions, and local industry associations. The program enables customers who previously may have had no options to install solar PV to take advantage of the full benefits of owning a PV system (such as production incentives, energy savings, and tax credits). As the solar market strengthened and matured, the program focused its incentives exclusively on income-qualified customers.  

Current Program Incentives 

The Mass Solar Loan program was originally a $30 million program, but an additional $15 million was allotted over time to support continued incentives for income-qualified customers. Mass Solar Loan now offers three incentive types to help expand access and reduce the costs of financing for low-income customers. These incentives have tiered down over time to focus funding most effectively on customers most in need:  

  • Interest Rate Buy Down, which currently reduces the lender’s market rate by 1.5 percent for income-eligible customers.  
  • Income-Based Principal Reduction, which currently is a 30 percent buy down of the loan principal (capped at $10,500) for income-eligible customers.  
  • Loan Loss Reserve, which acts as an added security to lenders for lending to income-qualified customers with lower credit scores. A Loan Loss Reserve account is created for each lender, reserving funds for recovery of a portion of a qualified customer’s loan balance in the event the loan defaults. Any unused funds are returned to the program.  

The program incentives are paid directly to the lender and then applied to the customer account, vastly reducing administrative payment efforts. In addition, the program offers ancillary benefits to participating lenders that ease the burden of launching a new loan product in a market that may be unfamiliar to them. These benefits include a built-in program loan structure (disbursements, required timelines), technical requirements, installer vetting and oversight, quality assurance efforts, technical review and approval of each application, and final review of each application to confirm installed details. 

Program Goals to Expand Financing 

Since the start of the program, the Mass Solar Loan program has achieved important program goals:  

  1. Supporting growth of a competitive marketplace and financing options. Mass Solar Loan has partnered with 17 local banks and credit unions, which offered solar loan products through the program. Some of these lenders have since launched their own solar loan products, signaling that lenders intend to continue solar loan offerings beyond program timelines. MassCEC has also leveraged lessons learned, program materials, and data to educate many additional lenders considering independent solar financing products.  
  1. Expanding financing access to broader ranges of customer incomes and credit scores. Over 50 percent of loans closed have been to income-qualified customers (2,814 loans), and 16 percent have gone to customers with lower-than-preferred credit scores (866 loans). Participating installers have consistently indicated that the reduced costs for income-qualified customers has enabled them to reach new markets and provide attractive solar ownership options to customers, whom they were previously unable to serve. Similarly, participating lenders have indicated that the Solar Loan program’s incentives have enabled lending to customers who might have been otherwise denied. 
  1. Creating a financial benefit to the customer while supporting the Massachusetts economy. Through the lender partnerships, Mass Solar Loan has provided a low up-frontcost ownership option to homeowners. Most participating installers and lenders are local companies, indicating the $173 million in total loan amount is being largely invested in the state’s local economy.  

Growing the Solar Lending Market 

The Mass Solar Loan program was one of the first state-supported loan programs in the country to focus specifically on developing partnerships with local banks and credit unions, as opposed to a partnership with a single capital provider. The program educates the local Massachusetts lending industry and gives lenders an opportunity to engage with the rapidly growing clean energy industry. The program also leverages local lenders’ networks and experience in underwriting and origination. This approach has reduced program operating costs and allows funding to focus on project awards. The innovative program design also allows lenders to build a product with longevity beyond the program timeline.  

Some participating lenders have embraced this engagement with clean energy and gone on to offer commercial solar loans or expand offerings to other clean energy technologies. Experience with the solar loan program has demonstrated to lenders the viability of a solar loan product, and the high-quality nature of borrowers choosing to pursue a solar project that is designed to be financially beneficial. Another key benefit involves encouraging inclusivity and equitability within the Massachusetts solar market by expanding access to a wider range of borrowers, specifically those with lower incomes. 

Finally, the program has demonstrated the ability of a solar loan product to facilitate new and positive customer relationships with lenders. In a post-installation survey of the solar loan borrowers, 89 percent of respondents indicated that they did not have a prior relationship with the lending bank or cred-it union, and 93 percent indicated they were likely to recommend their lender to a friend or colleague. These new relationships have brought additional business opportunities to Massachusetts lending institutions and have helped some participating banks and credit unions achieve community goals. As of January 2020, $39 million of the award funding had been reserved for projects, leveraging $176 million in total private spending. 

Adjusting to Market Conditions 

The Mass Solar Loan program has adjusted to market conditions. The Interest Rate Buy Down was originally offered at 3 percent to all customers, but it was gradually adjusted and is now offered at 1.5 percent to income-qualified customers only. The Income Based Principal Reduction stepped down over time from 20 percent, to 10 percent, to 0 percent for moderate-income-qualified customers, but it has remained at 30 percent for low-income customers, as this level has proven successful in enabling that market segment to access financially beneficial solar PV ownership.  

Eligibility for the Loan Loss Reserve incentive is only for loans made to customers with qualifying credit scores, and it has been adjusted over time to support only low-income customers. This incentive acts as a security for lenders to recover part of an eligible defaulted balance. This loan loss reserve also provides an additional opportunity to leverage funding. If default rates remain low (current default rate under the program is 0.3 percent), much of this funding will not be expended and could become available for reinvestment in state clean energy programs. Non-income-qualified customers can still participate in the program with a non-incentivized, market rate loan.  

Partnerships Lead to a Successful, Innovative Program 

MassCEC engaged extensively with stakeholders and partners long before the program launched. Without this early collaboration, the program would have had many fewer loans, lending institutions, and installer partners, and would have been less successful in targeting support for the low- and moderate-income markets. This strategic planning helped inform loan parameters, disbursement schedules, and other key components of the loan product that were critical to the unique design of the program. Beyond the three targeted incentives noted above, the Solar Loan program also features the following innovations: 

  • Loan disbursement schedule: At loan closing, 35 percent of the loan is disbursed to cover the deposit and starting construction costs. Once installed, the remaining 65 percent is disbursed.  
  • Interest-only period: Once the loan has closed, the customer pays interest-only monthly payments until the system has been completed. This reduces the financial burden prior to receiving energy savings and system revenues.  
  • Loan re-amortization option: Lenders offer one free re-amortization within 18 months of loan closing. This allows customers to reduce their monthly payment following receipt of the principal buydown or tax credits.  

The Mass Solar Loan program offers a replicable incentive program structure for state agencies or other organizations across the country. The program design could be modified to best solve a state’s or locality’s unique hurdles to developing a residential solar financing market. 

 

The Mass Solar Loan Program was awarded a 2020 State Leadership in Clean Energy Award by the Clean Energy States Alliance. The Massachusetts Clean Energy Center presented on the Mass Solar Loan program in a CESA webinar on July 23, 2020 – watch the webinar recording here