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Here’s How Zero Emission Credits Will Affect Your Revenues and Profits

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As per the New York Clean Energy Standard, 50 percent of the state’s electricity has to come from only renewable sources by 2030. To achieve this ambitious goal, the government has been taking many steps regarding energy supply and one of them is Zero Emission Credits (ZECs). From April 1, 2017, it was made mandatory for all energy suppliers to purchase ZECs.

What exactly are Zero Emission Credits?

Zero Emission Credits constitute Tier 3 of the Clean Energy Standard adopted recently by the state of New York. It provides credit to qualified nuclear power plants for their zero-emissions environmental or “green” attributes. Like Renewable Energy Credits (RECs) prove that energy comes from renewable sources like wind or solar, Zero Emission Credits (ZECs) prove that nuclear energy power plants who buy them do not contribute to the pollution of the environment.
ZECs are calculated using the social cost of carbon, making them the first step to be taken to develop a carbon tax. New York State Energy Research and Development Authority (NYSERDA) will be in charge of conducting ZEC procurement from nuclear facilities. Prices of ZECs will be changed after a period of every two years. For the first two years, prices have been set at $17.48 per megawatt hour (mWh).


Zero Emission Credits are only produced by nuclear power plants in New York. There are only four of these upstate which are owned by two companies, namely Entergy and Exelon. ZECs have the potential to save these struggling nuclear power plants which experienced major difficulties in recent years in the market and were even on the verge of shutting down.

 

How ZECs can affect business

With advancements in technology, drilling natural gas has been made cheap and easy like never before, which has led to a major drop in its price. Especially in the Northeast, natural gas price is at a historic low. As a result, natural gas is now the major generator of power in the US.
Nuclear energy has been under a lot of pressure because of the decreasing prices of power and gas. As mentioned before, nuclear power plants like Fitzpatrick belonging to Entergy were even announcing that they would have to shut down as it was uneconomical for them to continue operations without any government aid. Exelon Corporation, a company worth $32 billion which is headquartered in Illinois, said that it would buy Fitzpatrick and continue to run it, but only with subsidies from the New York government.New York Green EnergyThen in August last year, New York Governor Andrew Cuomo announced that the state would provide subsidies, which was more than the cost of power, not only to Fitzpatrick but three other nuclear plants under Exelon. This agreement between the state and Exelon Corporation is estimated to be worth $7.8 to $10 billion during its duration of 12 years. This means that in New York, utility customers will have to pay almost $500 million every year to help maintain these struggling nuclear plants and keep them operating.
Chairwoman of the New York State Public Service Commission (NYPSC), Audrey Zibelman, said that if these nuclear reactors were to shut down, electricity distributors in New York would have to rely heavily on power fueled by coal and natural gas power plants. This is in stark contrast to the state’s Clean Energy Standard as it would result in more emission of harmful greenhouse gases.

 

Implementing the agreement

In order to execute the state’s agreement with Exelon Corporation, an Order Adopting a Clean Energy Standard was issued by the NYPSC in August 2016.  One of the requirements of this order is that it is obligatory for every utility and energy service company (ESCOs) which supplies electricity in New York to purchase Zero Emission Credits (ZECs) from the state starting from April 1, 2017. 
The state of New York will purchase these ZECs from nuclear plants belonging to Exelon. This payment made will make up the subsidy payments agreed on.  As such, from April 1 onward, the utilities, as well as ESCOs, will start collecting an amount for ZECs from customers of their supply of electricity in support of the New York State Clean Energy Standard. Customers, whether households or businesses, who receive power through such utilities cannot opt out or evade ZEC charges regardless of whether they are under direct supply service from the utility or with an ESCO.
For the initial year, which will start from April 1, the charges for Zero Emission Credits is estimated to result in an increase of about 5 to 8 percent in the total cost to supply an upstate New York customer. Therefore, it is important for customers in New York, especially businesses, to determine if ZEC costs are included in the proposed prices or later passed through while shopping for electric supply. This will ensure a fair comparison of available supply options.

 

Criticisms of ZECs

As beneficial as they may seem, ZECs do not come without criticisms from opponents. These mostly include people who pay more for their electricity or those who oppose nuclear energy in general. The state of New York has even been sued for its Clean Energy Standard on the basis that this standard violates the Federal Energy Regulatory Commission's (FERC) regulations. But the FERC has already decided previously that Renewable Energy Credits are under the jurisdiction of the state.
Despite the harsh criticisms, the state of New York, by sticking to its Clean Energy Standard, proves that it is seriously committed toward building a sustainable and renewable future. Supporters maintain that adding an extra requirement for boosting renewable sources for energy is a positive start to implementing changes that will benefit the environment – something that a majority of New Yorkers have been waiting to see. The millennials, especially, are avid advocates of clean energy. The government, as well as the businesses, would definitely earn their support by going the green way!

 

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