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Rate impact of LIPA's green energy transition remains unclear

A view of wind turbines from Block Island,

A view of wind turbines from Block Island, Rhode Island in 2017. Credit: Newsday / Mark Harrington

As LIPA prepares a road map to transition to all-green energy by 2040, ratepayers have been left with only a scattering of clues about how the state-mandated renewable revolution will affect their wallets.

LIPA, PSEG and outside experts are embarking on a yearlong study of energy resources to determine how best to transition to a mostly green energy grid by 2030 — just over nine years away. As LIPA chief Tom Falcone recently noted, many of the green-energy sources are either already awarded or soon will be.

New York State, on LIPA's behalf, has awarded two offshore wind farm contracts for 2,140 megawatts of power to supply the bulk of the power to Long Island over the next decade. LIPA has its own separate agreement for 130 megawatts for the South Fork by 2023.

LIPA is also in the midst of requesting bids for 175 megawatts of new battery storage power — more than 15 times the battery power that's currently installed. And LIPA has issued dozens of contracts for large commercial solar arrays to increase the roughly 700 megawatts of solar that are already installed or soon will be on Long Island.

One megawatt of offshore wind power can provide enough energy for around 320 homes, while a megawatt of solar energy can power 125 homes.

Yet when asked this month to detail its expectations for how the influx of new sources would impact customer bills in the coming decade, LIPA balked.

"We are solving for the decisions in the next five to seven years that will be the most cost-effective, not trying to make long-term technological projections (which thus impacts cost)," the utility said in a statement. "One could solve for the cost using today’s technologies and costs, but that would tremendously overestimate the cost."

Asked to clarify, LIPA said its plan will "consist of actions to take under a range of potential scenarios that may develop, not a forecast," and that "competitive procurements among developers will determine any particular projects and technologies that are built." LIPA said it has "and always will disclose costs to customers" of those procurements. Rate impacts generally are provided just prior to board of trustee votes on projects.

LIPA said the dollar impact on customer bills was "something we'll examine" in the study, but that doesn't mean customers will be told the results. And if history is a guide, don't bank on it.

In 2017, the last time it released an integrated resource plan conducted by PSEG, LIPA declined to report or even discuss how the onslaught of renewables would impact customer bills, even though it cited specific cost factors for deciding against upgrading old fossil-fuel plants or building new ones.

In a 2017 story about the release of that Integrated Resource Plan, Newsday reported, "Neither the LIPA summary of the full (and unreleased) PSEG study nor LIPA officials who briefed Newsday … gave any indication of the ratepayer cost of those new green-energy power sources. A senior LIPA official said any such calculation 'becomes too speculative' given declining turbine costs and the state's plan to procure renewables for utilities."

Market watchers say this time around it's crucial for LIPA to fully air the costs to customers to get buy-in from rate-weary Long Islanders.

"You can rack up all the impacts whether technical or environmental, but you cannot avoid disclosing economic impacts, it’s impossible," said William Miller, an energy consultant at ClearView Group, who has been involved in the Long Island energy sector for decade. "If you want customers to line up and support these programs, you darn well better disclose [those economic impacts] to customers."

In presentations to its trustees in recent months, LIPA has detailed both its plans for additional green-energy projects and its prospects to retire older fossil-fuel plants that could free up hundreds of millions of dollars. In all, LIPA has committed or soon will to around 3,420 megawatts of new green energy by 2030. Two of the largest power projects slated for Long Island are Sunrise Wind off Massachusetts at 880 megawatts and Empire Wind 2 off Jones Beach at 1,260 megawatts.

Asked Thursday how much Sunrise Wind would increase customer bills, Meagan Wims, a spokeswoman for developers Orsted and Eversource, pointed to a 2019 New York State estimate that said both Sunrise Wind and Empire Wind 1 would cost average ratepayers "less than $1 a month on their electric bills."

Lauren Shane, a spokeswoman for Equinor, said the Empire 2 project, which is expected to connect at Long Beach when it's finished by late 2027, referred to the state figure of "less than $1 per month," and noted that ratepayer costs for Empire Wind 2 will be available "upon execution of the [offshore wind renewable energy credit] contracts" between Equinor and the state. While she wouldn't say how much Empire Wind 2 will cost, she did note that "A typical offshore wind project is estimated to cost $3 billion." Wims of Orsted declined to release Sunrise's cost, calling it "competitive information."

Whether the final integrated resource plan details specific bill impacts, there are hints about how much customers will be paying for renewables and how much they'll save once older plants are retired.

LIPA has already reported that the $2 billion South Fork Wind Farm, a 130-megawatt project to be paid for by LIPA customers over 20 years, would impact customer bills between $1.39 and $1.57 a month by the time it is producing power in 2023 or beyond. That's on top of the $2.48 a month all ratepayers will pay for grid upgrades for the South Fork.

A database of LIPA's annual payments to power producers provides an indicator of their impact on LIPA's $3.5 billion annual budget, and on ratepayer wallets. One recently completed large solar project called Shoreham Solar Commons cost ratepayers $8.5 million for the facility in 2020. The $177 million, 20-year contract expires in December of 2038. One of LIPA's oldest solar purchases, the Brookhaven Lab-based Long Island Solar Farm cost ratepayers $14.8 million last year. Costs for solar technology have declined significantly since then.

LIPA has plans to request 175 megawatts of new large battery storage units by 2025. That's nearly 20 times the amount of battery storage LIPA has installed on Long Island. Two units, co-owned by NextEra and National Grid, operate in Montauk and East Hampton. Last year, LIPA paid the companies $2.45 million for the Montauk battery, and $2.2 million for the East Hampton unit. Both can store 5 megawatts of energy each. For both batteries over their 20-year contracts, LIPA customers will have paid $109 million for the contract.

LIPA's request for proposals for energy storage likely will seek a lower price for that storage than the roughly $10.9 million per megawatt it is paying now. New York State recently approved construction of a 100-megawatt battery storage unit in Queens that has a construction cost of $132 million — or $1.3 million a megawatt.

But it’s not just the cost of new green-energy sources that will determine how bills are impacted in the next decade. LIPA also has huge opportunities for cost savings as power plant contracts expire, and older plants are retired. LIPA has indicated that all fossil-fuel plants will be retired by 2040, when the mandate says no carbon-based generation will be in operation on the grid.

In a presentation earlier this year, LIPA and PSEG estimated that between 400 megawatts and 800 megawatts of fossil-fuel plants could be retired from 2023 to 2027. That includes between 188 and 376 megawatts at both the E.F. Barrett and the Port Jefferson Power Stations. Last year, LIPA paid National Grid $11 million for power from the Port Jefferson plant alone. LIPA also expects to retire one of four steam units at Northport in that same 2024-27 time frame. LIPA's total contract with National Grid of more $5 billion included a payment last year of $458.8 million, not including gas transport costs of more than $12.6 million, according to LIPA data.

The savings from plant wind-downs and retirements will be substantial. For instance, a contract due to expire by 2027 is the Covanta Babylon waste-to-energy generator. LIPA paid $9 million for the plant last year, and $74.1 million will be expended over the life of the contract. LIPA in 2020 paid $50.4 million for the Covanta Hempstead plant; the $607 million contract also expires in 2027.

A business group that has applauded LIPA's move to green energy also is urging the utility to keep costs in mind as it moves ahead.

"Long Island's carbon-free grid recipe must include one part renewable-energy generation and two parts sensible costs to the ratepayer," said Kyle Strober, executive director of the Association for a Better Long Island, a developers' group. "If cost is not considered in LIPA's green energy plan, then Long Islanders might associate the word green with all the dollars leaving their wallets, rather than all the environmental good."


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