New York's Energy Czar: We Need Clean Energy Markets, Not Programs or Mandates

In the wake of an election season that pitted climate warriors against coal defenders, mostly along partisan lines, progressives on energy policy were disappointed after Republicans gained control of the U.S. Senate earlier this month.

But not everyone working on climate and clean energy policy feels a sense of dismay about inaction or partisanship.

“Even before the election results, we all knew that states were the laboratories of energy policy. All this does is show once again how much they matter,” said Richard Kauffman, the “czar” tasked with making New York the most advanced energy market in the country.

Kauffman, who is officially called New York’s chairman of energy and finance, was brought into the governor’s office in early 2013 to help modernize the state’s energy market. After nearly two years in office, he has become even more acutely aware of the local nature of energy policy. 

“Individuals are interested in having more control over their energy, and states have the most to say in this area,” said Kauffman. 

Federal energy policy is often boxed in by very clear partisan boundaries. But on the state and local level, the line between conservative and progressive policy is starting to blur — particularly as distributed renewables get cheaper and give consumers more choice in how they get electricity.

That’s why a state like New York, which is one of the most politically liberal in the country, can propose a clean energy-centric system that some people on the far right support enthusiastically.

Kauffman is one of the architects of the Reforming the Energy Vision (REV) plan, which seeks to completely change the way New York’s distribution utilities are regulated in order to implement more renewables and efficiency. The word “market” is an important one, as he doesn’t want to simply create more mandates or programs with top-down funding and little flexibility.

“Markets move more quickly. Markets bring more innovation,” said Kauffman.

Most people can rally around that sentiment. But what does that mean exactly in the context of what New York is doing?

In Kauffman’s first week on the job, he met with power companies in the state and discussed the changing electricity business. He made his intentions of establishing a new regulatory structure clear, but he also knew he needed to do it in the right way in order to get everyone on board.

“I’ve been around long enough to know that when government steps in too deeply, that’s not a good thing for the private sector,” said Kauffman. “So we talked about market participation.”

Historically, clean energy policy has been based on prescriptive targets and rebates. Those were important for building demand for renewables and efficiency in the U.S. when they were less competitive. But now that those resources can compete on a cost basis, Kauffman says it’s time to start thinking about their deployment in a different context.

In many cases, alternative resources are shut out not because of their cost, but because they don’t fit neatly into the rate-of-return regulation that encourages utilities to build more centralized infrastructure. 

“We’re treating the symptoms and not the disease,” he said.

Instead of setting yet another siloed target for utilities to meet, New York is starting from scratch and creating an entirely new framework for regulation. Utility rate plans will extend to eight years; profits will be based on system efficiency and performance goals rather than capital expenditures; new time-of-use rates will provide price transparency; and third-party energy providers will be encouraged to compete with traditional utilities.

“We want utilities to have the economic incentive to run their systems more efficiently. We give them price signals. We will free up the date to encourage competitive markets,” said Kauffman.

The details are still being worked out. When asked whether there’s a chance that REV won’t fully materialize as planned, Kauffman was blunt: “No.”

“Everyone is committed to the objectives of REV,” he said.

New York is unique compared to other states. It has a deregulated electricity market, it is facing slowing demand, it has above-average rates, its infrastructure is in dire need of repair and it has extremely strong support for clean energy across government.

But the majority of U.S. states have one thing in common: distributed generation is starting to rival traditional resources in cost. And that’s threatening utilities, boosting advocates of consumer choice and forcing regulators to think differently about how the system operates.

“There are a growing number of people across political boundaries that seriously looking at these issues. We need to get to that system not by creating more programs, but by animating markets,” said Kauffman.

That’s a message that even members of the Tea Party can get behind.

Photo Credit: New York and Energ Markets/shutterstock

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