Energy Provisions of New York’s 2023-24 Budget Explained

Jul 13, 2023 | Legal Update, News

Energy Provisions of New York’s 2023-24 Budget Explained

In May of 2023, Governor Kathy Hochul announced New York’s FY 2024 budget, including investments in sustainable buildings, affordability, and clean energy development. This represents an extensive climate package and makes transformative investments in clean energy. 

The recently passed budget also mandates that new construction projects be designed to be powered by electricity starting in 2026. It authorizes the New York Power Authority (NYPA) to build renewable energy projects and ensures renewables power the state’s largest buildings and campuses. Depending upon location and eligibility criteria, it may also provide opportunities for certain New York businesses to become involved with workforce expansion and building and infrastructure projects. 

Building Decarbonization

In New York State, aging buildings account for over 30% of state greenhouse gas emissions. Governor Hochul’s FY 2024 budget makes New York the first state in the nation to advance comprehensive legislation mandating the construction of modern zero-emission new homes and buildings..

Zero-emission construction in new buildings seven stories or lower, except large commercial and industrial buildings, will now be the standard by December 31, 2025. All other new buildings must meet this standard by December 31, 2028. The FY 2024 budget requires certain exemptions for things like emergency backup and standby power, manufacturing facilities, commercial food establishments, laboratories, car washes, laundromats, hospitals, crematoriums, agricultural buildings, and critical infrastructure. New York State announced that it leads by example by calling for NYPA to enact decarbonization action plans for 15 of the highest carbon-emitting state facilities. Affordable Energy Investments

All New Yorkers are facing rising costs. he FY 2024 budget prioritizes energy affordability even as it focuses on clean energy. The budget allocates $400 million for relief to New Yorkers experiencing high electric bills and lower energy burdens through electrifications and retrofits. $200 million of the budget is allocated to provide direct relief to New Yorkers who are experiencing high electric bills. The Department of Public Service (DPS) will provide a monthly discount to nearly one million electric utility customers who are not eligible for the State’s utility discount program. $200 million will go to the state’s retrofitting program, which will help 20,000 low-income families retrofit their homes by adding insulation, installing energy-efficient appliances, and switching to clean energy.

Cap-and-Invest

The FY 2024 budget advances one of Governor Hochul’s priorities: to create an affordable and effective cap-and-invest program that accelerates climate action, creates high-quality jobs, and protects and invests in disadvantaged communities. 

What Is Cap-and-Invest?

A cap-and-invest program is where a source of pollution is allowed a certain amount of emissions each year (the “cap”). The state, or a program administrator, auctions off allowances under the cap and invests the proceeds. Over time, the cap decreases in efforts to reduce emissions. 

Opportunities Under the FY 2024 Budget

The budget creates the financial foundation required to support an economy-wide cap-and-invest program, which will help New York reach its ambitious climate goals  established by the 2019 Climate Act. The budget also establishes a new Climate Investment Account, which will direct two-thirds of future proceeds to support the transition to a less carbon-intensive economy. The Climate Investment Account supports clean energy programs, policies, and emission-reduction measures. It focuses on disadvantaged and low-income communities, accompanied by strong labor standards.

Renewable Building

State agencies have already made a number of strong steps to ensure the development of clean energy and clean transmission infrastructure. Importantly, NYPA has supported building transmission lines to bring clean, reliable energy to where it is needed most, including by partnering extensively with the private sector. This means ample opportunities exist for private companies to get involved with state building projects under this new budget. 

Building on its success with transmission development, the FY 2024 budget provides NYPA with resources to expand its renewable energy portfolio by working independently and with private sector renewable energy developers. The goal is to build new renewable generation projects to support New York’s clean energy goals and create jobs while reducing consumer costs.

The new budget also directs NYPA to provide the state with a plan for the phase-out of its “peaker” plants by 2030. Peaker plants are typically older and less efficient than other types of power plants, meaning they emit more greenhouse gases and other pollutants.

Additionally, NYPA is to contribute up to $25 million annually to the Department of Labor to support a Just Transition for energy workers and to establish the “Renewable Energy Access and Community Help Program” (REACH). This initiative will allow customers in disadvantaged communities to benefit from renewables by receiving bill credits from renewable energy projects that are owned, developed, or contracted for by NYPA to support REACH. 

All these projects provide many opportunities for private companies, where eligible, to participate in interesting and lucrative renewable energy building projects. 

Water Infrastructure Investments

Clean Water Funding

The new budget includes $500 million in clean water funding. This investment brings New York’s total clean water infrastructure investment to $5 billion since 2017.

Improving Water Infrastructure in Suffolk County

If you are familiar with the eastern part of New York State, particularly Long Island, you may know that much of Suffolk County is burdened with failing septic systems and cesspools. The FY 2024 budget authorizes Suffolk County voters to put wastewater change to a ballot referendum. This vote would authorize necessary investment in infrastructure. These changes would also address water quality needs by incentivizing homeowners and businesses to upgrade failing or inadequate septic systems and providing an opportunity to invest in new sewer systems.

If your company provides wastewater, septic, or sewage services, these potential changes in Suffolk County are something to watch. These FY 2024 budget allocations and authorizations could provide many opportunities for your firm on Long Island in 2023 and 2024.

Investing in Our Workforce to Implement the Environmental Bond Act

The first environmental bond in New York since 1996, the Clean Water, Clean Air, and Green Jobs Environmental Bond Act is also the largest environmental bond in state history. This Bond Act will provide $4.2 billion to support programs across the state, such as those to protect drinking water sources, reduce pollution, and protect communities and natural resources from the impacts of climate change. To support the implementation of this initiative, the budget includes 265 additional staff for state agencies. 

While this Bond Act may not directly impact your business, the additional state personnel and funding may make your application process for grants or contracts run significantly smoother.

The information provided in this blog entry does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this blog entry is for general informational purposes only. Information in this blog entry may not constitute the most up-to-date legal or other information. Reading or using the information in this blog entry does not create an attorney-client relationship with Kavinoky Cook LLP.