LL97 & Renewable Energy Credits
Posted on August 18th, 2021
For New York City building owners and managers, Local Law 97 (LL97) looms as a costly potential problem. For many buildings over 25,000 square feet, fines for being out of compliance with LL97 will commence on January 1, 2024. There was hope that the State’s 2022 budget might make it easier for building owners to comply with LL97 by purchasing Renewable Energy Credits (RECs), but that option did not materialize. The following takes a closer look at the current status of RECs and LL97 requirements.
About RECs
Renewable Energy Credits or Certificates (RECs) are simply market-based instruments that prove one megawatt-hour (MWh) of electricity
from a renewable source has been delivered to the electrical grid. The purchase of an unbundled REC is entirely separate from the delivery and purchase of electricity and is in addition to the electricity bill. The voluntary purchase of RECs is frequently done to show support for renewable energy while the mandatory purchase of RECs is most often the result of state policies such as Renewable Portfolio Standards (RPS).
RECs are offered for sale in a renewable energy market. The price of a REC is driven by supply and demand as well as factors such as non-compliance penalties, generating source location, quantities, purchase timing, etc. Furthermore, the price for a REC is generally much higher when the purchase is mandatory as opposed to the purchase being voluntary. Theoretically, revenue generated from the sale of RECs goes to support and expand the generation of electricity from renewable sources.
LL97
LL97 allows building owners to purchase RECs to offset annual calculated building emissions. However, there is a catch. LL97 only recognizes RECs produced by renewable generating sources located in or delivering electricity directly into NYSIO Zone J (New York City). Unfortunately, for building owners and operators subject to LL97, the NYISO Gold Book for 2021 says there were exactly zero GWh of electricity generated by renewable sources in Zone J in 2020. In fact, NYISO reports that wind and solar generated less than 4% of all electricity for New York State in 2020.
Language proposed by the former Governor in his 2022 budget might have allowed building owners and managers in New York City to utilize RECs from renewable electricity sources outside of the city to offset LL97 penalties. EnergyWatch reported, “They [environmental lobbyists] felt that the REC “loophole” would undermine LL97’s original intent: Make buildings more sustainable via physical upgrades like new insulation, windows, and HVAC systems while driving new investments in renewable energy in New York City.” Ultimately, the language was removed from the budget prior to passage leaving city building owners and managers to contend with the original concept of RECs in LL97.
While New York City is a less than ideal location for massive solar and wind farms to produce RECs for sale, there is some hope on the horizon. Under the New York Climate Leadership and Community Protection Act (CLCPA) enacted in June 2019, 9 gigawatts of offshore wind capacity is planned to be installed by 2035. It is possible that much of this generating capacity could be delivered to the city and produce appropriate RECs for building owners. The only problem is this generation is not expected to be available until the LL97 emissions targets have substantially tightened in 2030.
Trystate
There are no cookie-cutter solutions for compliance with LL97. RECs might have been a potential solution, but there is no sign they will be available anytime soon. In addition to offering LL97 solutions, Trystate combines resiliency and energy cost improvements for commercial, healthcare and hospitality along with most other types of facilities.
Contact Trystate to discuss your situation relative to LL97.
For more information see our LL97 and New York energy website…