Infra investors victorious as New York renewables auction draws high prices

At the start of December, the New York State Energy and Research Development Authority (NYSERDA) awarded contracts for 23 large-scale land-based renewable projects. Collectively, the projects are expected to add 2.3GW worth of clean energy to the state’s electric grid.

The lion’s share of the contracts were awarded to CPP Investments-owned Cordelio Power. The Canadian pension’s developer will build nine solar facilities across the state. An additional four solar projects were awarded to Greenbacker. Blackstone Infrastructure Partners and CDPQ backed Invenergy will build two onshore wind plants, while a mixture of other renewable projects will see involvement from portfolio companies of EQT and Ares Management.

“We are delivering on our commitment to make New York more prosperous by harnessing the benefits of a growing clean energy economy, increasing family sustaining jobs and spurring private investment within communities across the state, while remaining focused on keeping energy affordable for all New Yorkers,” the state’s governor Kathy Hochul said.

Invenergy renewable development senior vice-president James J Murphy touted the $14.8 million in annual economic investment from the Alle-Catt Wind and Canisteo Wind projects. Murphy also praised the state’s process, saying: “As we work to achieve cleaner, more reliable energy for New York it is essential to advance additional renewable projects through the Climate Act, from development to construction and operations.”

A statement from the New York Executive chamber celebrated 2,500 near-term jobs, $4.7 billion in private investment and millions of metric tons of CO2 the projects will prevent.

Yet that release did not highlight one of the most striking figures pertaining to the projects: the strike price. The projects have a calculated weighted average strike price of $94.73 per MWh, a sharp increase from the $80.96 per MWh that the 2022 solicitation saw.

“Competitive pricing that results in just and reasonable rates remains a core component of the procurements authorised by the New York State Public Service Commission,” a NYSERDA spokesperson told Infrastructure Investo. “NYSERDA’s solicitations for large-scale renewables are structured to procure the highest value renewable energy projects at the lowest cost for New York consumers.”

Striking a balance

So did NYSERDA do right by the state’s ratepayers?

“That increase in strike price I think reflects multiple things, including higher overall project costs from various factors such as inflation and rising development costs,” Lauren Bachtel, a senior counsel at Linklater’s in New York and a member of the law firm’s energy and infrastructure team, told Infrastructure Investor.

In her view, the higher price not only reflects the state’s efforts to stick to a commitment to source 70 percent of its electricity from renewables by 2030, but also the realities of renewable development.

“I think it’s definitely justified to make sure the projects are economically viable as we’re seeing market conditions somewhat in turmoil.”

Bachtel indicated that those cost increases were largely tied to “supply-chain complexities” but noted that New York also seemed confident in the benefits from the $249 million in commitments to disadvantaged communities.

“The developers were really bolstering their economic commitments in these proposals because of the extra weight that NYSERDA was giving to the economic benefits in the solicitation,” said Bachtel.

“One other thing important to note was this solicitation had a larger pool of funding, so you had about the same amount of projects competing for more money.”

That higher ratio of funding to projects meant developers did not need to price quite as competitively. Likewise, according to Bachtel, NYSERDA may have decided that a higher strike price was worth avoiding the delays and renegotiations that held up 11.7GW of renewables in 2023.

Bachtel framed the increase as also responding to changing megatrends.

“If you go back a few years, we had more competitive prices, not understanding that the market can change so much. Now that we’ve seen the market change in terms of inflation, in terms of supply, and in terms of politics, we’re seeing projects bid a little more conservative because they understand the need to be able to survive and keep that price through most of the market changes,” Bachtel said.

“To me it’s a positive thing that they’re being very thoughtful, and we know that we have projects that can go the distance with the prices that they’re being awarded.”