NY REV: An Interview with Richard Kauffman

New York is transforming its energy systems. Meet the “czar” in charge.

Vox, November 20, 2015. Image credit: aitoff

New York is in the midst of a comprehensive, wildly ambitious plan to reform its energy systems, aiming to make them more resilient, cleaner, and more affordable. By 2030, the state aims to reduce its carbon emissions by 40 percent (from 1990 levels) and draw 50 percent of its electricity from renewable sources.

Behind those broad goals is an enormous range of programs, primarily focused on electricity, from research to financing to utility reform. Under the state’s Reforming the Energy Vision (REV) program, its electric utilities will be restructured to allow for more market competition and more distributed energy resources like rooftop solar panels, batteries, and home energy management systems.

I recently called Kauffman to geek out over energy, getting his thoughts on the state’s energy strategy, the politics around it, and the mechanics of utility reform. What follows is a transcript of our conversation, edited for length and clarity.

DR: The New York state renewable energy and efficiency mandates are expiring soon. There’s a large-scale renewables track proceeding right now to figure out how to replace them. Where does that stand?

RK: A proposal has been put in front of the [New York Public Service] Commission. It has a few elements we’re calling design principles, things we think are really critical from a policy standpoint.

One is we believe that the market would like to have power purchase agreements, and we’ve had a REC-only approach. Developers, in order to get the most efficient form of financing, need to attract project debt. Given the economics of renewable energy — which is that the costs are very predictable, because the fuel is free — the most efficient capital structure is one that has certainty with respect to revenues.

DR: In states that have undergone retail deregulation, where customers have been given the choice of power providers, some commercial and industrial customers have adopted alternate providers, but the residential uptake has been almost nothing. What’s the evidence that customers care enough about electricity to sustain these markets?

RK: Right, [with electricity] you’re talking about what is essentially a commodity, and a commodity that is not a very big percentage of most people’s budgets. So why would we really care?

When we talk about stimulating voluntary markets, it may not be that you and I, household customers, are necessarily going to be active in the market ourselves. It may be that service providers are offering things that aren’t true wholesale electricity price.

With these utility platform providers, what we’re trying to set up is relationships with third parties that are going to offer stuff to customers that customers value. We have said that we don’t want utilities to own distributed resources because we need competitive markets — we need the innovation of the markets, not only to find the projects, but to find out what customers are going to care about. What products? How are they going to buy them? What will their motivations be?

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