NYC to Cap Renewable Energy Credits for Building Owners

Barely a month after issuing guidelines for compliance with Local Law 97 (LL97)—which mandates that property owners start reducing carbon emissions from buildings in 2024—NYC officials say they have to close a loophole that could weaken the impact of the law.

Under the heading “Cap the Credits,” a statement posted on his website Monday by City Comptroller Brad Lander said that an “unanticipated supply” of projects offering Renewable Energy Credits (RECs) to building owners could moot the impact of LL97 as owners choose to purchase RECs to avoid costly retrofits.

According to Lander, LL97 needs to be adjusted to reflect the impact of a state law—known as the NYS Climate Leadership and Community Protection Act (CLCPA)—that was enacted after LL97 in 2019 and commits the Empire State to have 70% of its electricity generated by renewables by 2030.

NYC officials are now concerned that the rapid “grid decarbonization” that will take place over the next eight years in New York State may induce some building owners to avoid carbon-reducing retrofits in the near-term.

Lander is proposing to cap RECs to no more than 30% of a building’s electricity emissions above its limit. Under NYC’s original guidelines for LL97 compliance, application of RECs was limited to emissions generated by electric power, but no cap was specified.

“RECs should be structured with appropriate guardrails that enable building owners to reap their benefits without weakening the implementation of LL97 or undercutting its emissions reductions goals,” Lander said.

The NYC Comptroller also said that incentives, costs and penalties associated with the enforcement of LL97—including RECs—should be structured to make building retrofits more economically attractive than the alternatives.

“Deductions, such as RECs, should be either costly or limited. The rules should incentivize early electrification. If needed, penalties and incentives should be adjusted over time,” Lander said.

The most ambitious city-wide building energy law in the country, LL97 mandates the reduction of greenhouse gas emissions from NYC’s building sector—it applies to all buildings encompassing more than 25K SF—by 40 percent by 2030 and 80 percent by 2050 from the 2005 baseline.

RECs are credits for each megawatt of renewable energy delivered to the grid. The NY State Energy Research and Development Authority (NYSERDA) is charged with pricing, selling, and tracking RECs.

RECs used for LL97 compliance must be “Tier 4 RECs,” derived from renewable energy projects either located in the New York City region or that deliver power to the New York City electrical grid.