Full Title: Understanding the impact of the Inflation Reduction Act on NYISO prices
Author(s): Ananya Chaurey, and Ankit Sinha, ICF
Publication Date: May 15, 2023
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The IRA is expected to spur development of clean energy technologies across the country by providing lucrative tax credits and helping developers lower their levelized cost of electricity (LCOE). However, in New York, lower LCOE will be accompanied by falling Index REC payments from the state. Consequently, while some projects will see appreciable gains in net profitability, a majority will see only marginal impacts. We find that developers of onshore wind upstate, and well-sited solar downstate and Long Island, stand to benefit the most from the IRA. After ITC and PTC, some projects—under certain scenarios—may find merchant revenues more than sufficient to cover their LCOE.
However, they will need to be aware of several conditions. Capital and labor costs have escalated and may persist if investment in supply chain and skilled labor continues to lag demand. Challenges such as budget and timeline overruns and diminishing energy market revenues may emerge due to transmission bottlenecks. These costs will offset the IRA impact and developers will need to include associated risk premiums in their project LCOE.