For the New York power grid, investment opportunity abounds
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- Oct 20, 2020 9:35 pm GMTOct 20, 2020 4:42 pm GMT
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Driven by the need to replace aging infrastructure and the development of new clean grid technologies to meet clean energy goals, New York regulators and private developers are on a fast track to build green. Representing one of the world’s largest economies, the planned build-out of New York’s carbon-free power grid represents a tremendous investment opportunity for renewable and grid development companies, including investments in everything from clean generation to new and upgraded transmission. Along with this growing grid investment opportunity in New York, companies offering services and programs like demand-side management, energy efficiency, and transportation electrification will result in even more investment opportunities. New York’s grid will include significantly higher onshore and offshore wind, utility-scale solar, energy storage, and distributed generation resources. Driving the growth are a series of ambitious goals set out in several state policies.
State’s climate plan
The comprehensive Climate Leadership and Community Protection Act (CLCPA), signed into law on July 18, 2019, is the driving policy behind the dramatic targeted carbon reductions planned for the next two decades. The CLCPA is augmented by several existing state and regional policies, including the state’s Renewable Portfolio Standard (RPS), Reforming the Energy Vision (REV), Clean Energy Standard (CES), and participation in the Regional Greenhouse Gas Initiative (RGGI). All have contributed to new programs and expanded goals to further green-up the state’s grid. New York’s participation in the RGGI regulations stipulates carbon-dioxide emissions be capped at 21 million tons by 2030. New York is well along to meeting the RGGI goals. During 2019, the state’s grid manager, the New York Independent Service Operator (NYISO), reported 24.6 million tons of CO2 emissions. These supportive programs and policies are necessary to reach the CLCPA goal of 70% of all power resources from renewable energy by 2030 and reaching 100% carbon-free electricity production by 2040.
Along with the ambitious goals outlined above, the CLCPA calls for 6.0 GW of distributed solar by 2025, 185 trillion BTU reduction in total energy consumption by buildings through electrification by 2025. In addition, the policy calls for up to 3.0 GW of energy storage installed by 2030, and 9.0 GW of offshore wind installations by 2035. The CLCPA plan also calls for a 22-member Climate Action Council (CAC) to create a roadmap to achieve the set goals with a draft plan by the end of 2022 and a final plan delivered to the Governor and Legislature by the end of 2023.
New York’s Climate Leadership and Community Protection Act (CLCPA)
Source: New York ISO Annual Grid & Markets Report, Power Trends 2020 published June 10, 2020
New York’s current fuel mix
Today, natural gas and nuclear power plants generate most electricity produced in New York. During 2019, the 120 operating natural gas facilities generated 36.2% (47.6 million MWh) of the state’s electricity, while the four active nuclear power plants accounted for 34.1% (44.9 million MWh). The state’s 196 hydroelectric power plants accounted for 23% (30.3 million MWh) of the state’s electricity production, while the combination of oil (0.4%), wind (3.4%), solar (0.4%), and various other renewable energy sources (2.5%) including wood byproducts, landfill gas, and municipal waste rounding out the total.
New York electricity production by fuel, MWh
In 2019, electricity production from zero-carbon resources, including nuclear, hydro, wind, and solar, accounted for a robust 60.1% (80.1 million MWh) of all electricity produced by state power plants.
New York ISO makes it happen
The NYISO’s primary mission is to maintain system reliability. The grid manager makes that happen by carefully balancing the supply and demand of electric power. NYISO operates more than 11,000 miles of high-voltage transmission, thousands of generating units, and is responsible for market design and preparing system plans. The NYISO’s Summer 2020 forecast was for load to peak at 32.3 GW with 38.5 GW of in-state resources. Additionally, the market has about 1.3 GW of demand response (DR) capability and the ability to import about 1.6 GW, for a total supply potential of 41.4 GW.
Looking to the future, on June 10, 2020, NYISO released their Power Trends 2020 report outlining the market manager’s latest plans for decarbonizing the state’s electric grid.
Highlights and key points from Power Trends 2020
Published annually, the Power Trends 2020 (The Vision for a Greener Grid) report summarizes key elements of the 2020 NYISO Load and Capacity Data Report (aka The Gold Book), including an assessment of existing and proposed transmission and generation facilities.
The plan’s primary driver has been a laser focus on the advancement and adoption of clean energy technologies, driven by the newly enacted CLCPA policy act. The CLCPA stipulated several state milestones, including carbon emission reduction goals and the addition of energy storage capacity, energy efficiency, and electrification technologies with the ultimate goal of reducing statewide greenhouse gas emissions by 85% by 2050.
By 2026, energy storage is expected to top 1.0 GW with a potential annual net electricity consumption of about 200 GWh. By 2030, storage resources are projected at about 2.8 GW with consumption above 300 GWh annually, and by 2040 the plan calls for 5.2 GW and 540 GWh. Energy storage includes batteries, flywheels, pumped hydro, and compressed air resources, all capable of helping grid operators meet demand and manage non-dispatchable resources’ variability.
In the report, NYISO identifies the need for more than 46.4 GW of new capacity with wind power accounting for 46.4% (21.5 GW), solar 21.6% (10.0 GW), energy storage 18.4% (8.5 GW), natural gas 10.1% (5.1 GW), and all other fuels 2.6% (1.2 GW) by 2040.
New York ISO’s generation pipeline by fuel type, by region, MW
Source: New York ISO Annual Grid & Markets Report, Power Trends 2020 published June 10, 2020
In 2019, 88% of the electricity produced in upstate NY was from zero-emission resources. The electricity generated in downstate NY included only 29% from zero-emission resources, with fossil fuels including natural gas, oil, and some remnants of coal that shut down for good during 2019, accounting for nearly 70% of the electricity production.
The long summer of grid supporting news
On March 13, 2020, New York Governor Andrew M. Cuomo unveiled the details supporting the rapid development of 21 utility-scale solar, wind, and energy storage projects across the state. The development and construction of over 1.2 GW of new capacity are expected to spur over $2.5 billion in direct and private investment across the state. The March announcement was the third in a series of annual land-based renewable procurement announcements. The projects are expected to provide up to 12% of the state’s annual energy needs by 2030. The procurement came at a relatively low cost of $18.59/MWh over the life of each 20-year contract.
Driven by CLCPA goals, on July 21, 2020 – Governor Andrew M. Cuomo announced the largest combined clean energy solicitations ever issued in the U.S., seeking up to 4,000 MW of renewable capacity to combat climate change. The plan includes New York’s second offshore wind solicitation seeking up to 2,500 MWs of project capacity. This request for proposals is in addition to the 1,700 MW awarded in 2019. The solicitation includes a Multi-Port strategy and requirements for offshore wind generators to partner with any of the 11 prequalified New York ports, to stage, construct, and manufacture key components and conduct operations and maintenance of the growing fleet of offshore wind projects which could potentially reach 9,000 MW by 2035.
August 26, 2020 – NYISO Q2 results reveal that driven by lower power demands associated with the ongoing pandemic, the organized market reported the lowest load and average fuel prices in more than 10-years. Power sector sourced carbon-dioxide emissions have declined by 55% since NYISO’s inception 20-years ago. Average wholesale energy prices in the NYISO market reached a record low of $32.59/MWh in 2019.
September 9, 2020 – In an effort to meet the state’s ambitious climate goals, NYISO approved full participation for energy storage technologies in wholesale power markets. The new rules will help strengthen grid resilience and improve resource flexibility by allowing storage systems to charge during periods of low demand and low prices, and supply energy to the grid during periods of high demand when prices are usually higher. Additionally, the approved participation supports the development of hybrid resources in wholesale power markets by improving the grid performance of renewable resources currently operating or in development.
September 18, 2020 – Siena College Research Institute poll shows 47% support for NYISO’s implementation of adding a ‘social cost’ of carbon dioxide emissions into competitive energy markets – 17% of respondents had no opinion or don’t know, while the remaining 36% oppose the policy.
Permitting being streamlined including critical siting reforms
Driven by the New York State Renewable Energy Growth and Community Benefit Act, enacted in April 2020, the Office of Renewable Energy Siting (ORES) is now providing an accelerated path for permitting and construction of renewable energy projects that includes an expedited study of the most cost-effective distribution and high-voltage upgrades to support climate goals stipulated within other policy initiatives. The results include a comprehensive report to be delivered to the Public Service Commission (PSC) by December 29, 2020.
To realize the opportunity, there are key challenges ahead
Topping the list of challenges is the complexity and difficulty of balancing the load and generation across the grid, given an ever-growing portfolio of non-dispatchable renewable energy resources. The introduction of massive amounts of wind and solar capacity has the potential for significant power curtailments in the future. The NYISO recently projected that 20% to 30% of solar capacity and 5% to 8% of wind capacity could be curtailed in the future.
Another challenge facing NYISO’s plan to develop more renewable energy includes compliance to the state’s capacity market rules, which involves the buyer-side mitigation rule (BSM) that can have a deleterious impact on public policy resources. This could make it harder for renewable and clean technologies to compete at a time when the state seeks all the carbon-free power possible to meet the new clean energy policies and standards. For example, offshore wind projects are projected not to clear the state’s capacity auction due to the BSM rule.
Indian Point nuclear plant closure
While the state is aggressively pursuing new stimulus to incent investment in clean grid technologies, the 45-year-old Indian Point Nuclear Energy Center in Buchanan, NY, which is the state’s second-largest baseload energy resource, is closing. Indian Point generated almost one-fifth (16.7 million MWh) of the state’s power supply in 2019. The plant deactivated reactor 2 (1,371 MW) on April 30, 2020, and reactor 3 (1,074 MW) is scheduled to shutter in April of 2021. During 2019, power production from nuclear reactors in New York accounted for 56% of all zero-emission generation.
Coal and residual oil resources on the way out
The last coal plant, the 655 MW AES Somerset (aka Kintigh Generating Station), was retired earlier this year, and driven by New York City’s residual oil elimination rules set in December of 2017, limiting the combustion of fuel oil 6 and 4 in 2020 and 2025 respectively, nearly 3.0 GW of oil capable generating capacity has already or will likely be shut down in the near future. AES Somerset’s closure will have little impact since coal accounted for only three-tenths of one percent of the state’s total electric output in 2019.
In addition, the New York State Department of Environmental Conservation (DEC) rolled out the “NOx Peaker Rule” in December of 2019, which will impact about 3.3 GW of peaking capacity as plants must comply with limiting ozone season oxides of nitrogen by 2023 and 2025. The NOx Peaker Rule, which impacts simple-cycle and regenerative combustion turbines larger than 15 MW, will result in roughly 650 MW of closures by 2025 and about 850 MW of resources not able to generate during the peak summer season unless the resources are deemed necessary to meet reliability standards.
One of the key drivers behind the potential build-out of a carbon-free grid is the proposed introduction of Carbon Pricing to reflect a “social cost” of carbon emissions into the wholesale power market. The NYISO Power Trends 2020 report suggests carbon pricing as the most effective means to achieve public policy goals.
Carbon pricing essentially adds a cost per ton of carbon dioxide emissions to wholesale electricity sales, creating a price signal to developers to invest in clean energy technologies and a signal to existing generators to reduce their carbon footprint to avoid expensive charges. The road ahead to implement carbon pricing involves the approval by the Federal Energy Regulatory Commission (FERC), which regulates wholesale power markets when interstate trade is involved. The state would then need to establish the “social cost” of carbon, which has been proposed to be around $50/ton.
New York ISO plays a critical role in encouraging investment
NYISO plays a critical role in planning and encouraging investment in the grid. The process is market-oriented, involving the identification of congested areas and driving public policy to add renewables. The market encourages market-based solutions driven by private-sector investment in new and upgraded infrastructure projects. The planning process evaluates proposed solutions, planned projects, and interconnection feasibility, focusing on creating the cleanest, most reliable system possible.
Looking at statewide resource load and supply
According to detailed project data compiled by the Hitachi ABB Power Grids’ Velocity Suite research team, there is only 852 MW of capacity currently under construction or testing across the state, and there are 4.4 GW of capacity either holding permits or have applications pending. Most of the future development projects, including a robust 35.9 GW, are in early-stage development and have not yet started construction.
New York capacity additions and retirements through time, MW
Note: 2020 and beyond additions include all projects currently under construction, permitted, pending permits, and proposed
Major wind projects currently under construction include:
- Canisteo Wind (291 MW), Steuben County – Invenergy LLC, expected online in June 2021
- Horseshoe Solar Energy (180 MW), Livingston County – Invenergy LLC, expected online in December 2021
- Cassadaga Wind (126 MW), Chautauqua County – RWE Group, expected online in December 2020
- Roaring Brook Wind Farm (78 MW), Lewis County – Iberdrola SA, expected online in December 2020
Significant natural gas plants in development:
- Danskammer Repower (575 MW) expected to incorporate Mitsubishi Power Systems hybrid-fuel gas turbine technology capable of burning natural gas and/or hydrogen, 2022-23
- Bowline Point (775 MW) application pending, 2022
- Luyster Creek Energy Project, (410 MW) Application pending, 2021
Since January 2019, there have been just over 1,400 MW of new power generating capacity to come online. Most of that, roughly 1,100 MW, can be attributed to the start-up of the Cricket Valley Energy Center in Dover, NY. The state-of-the-art combined cycle gas turbine (CCGT) power plant came fully online in April 2020. The only other power resource of size to enter service was the Copenhagen Wind Farm (80 MW) in upstate New York – online in early 2019. Along with these projects, and a few small hydropower facilities, there have been 78 small solar projects added to the grid totaling roughly 320 MW
Transmission projects on the move
The replacement and upgrade of transmission and substations, including distribution systems across New York, is an ongoing process and is necessary to realize the full benefits of the clean power build-out. According to data compiled by NYISO, currently, more than 84% of the state’s high-voltage transmission is more than 40 years old.
Along with the need to develop and build new clean technologies, a number of high-voltage transmission and distribution level investments need to be made in order to transport renewable electricity from upstate to downstate and enable potential hydropower from Canada and offshore wind power into major load centers.
New York state public policy transmission needs, constraints in hash marks
Source: New York ISO Annual Grid & Markets Report, Power Trends 2020 published June 10, 2020
To enable more north-south power transfers, there are two projects (350 MW and 900 MW) expected in service by December 2023, and to enable additional west-east transmission capability, including transfers from the Niagara hydro projects, power imports from Ontario, and increase power transmission from planned renewable projects in western New York to eastern state load centers, there is a project, known as the Empire State Line, that is being developed by NextEra Energy. Once the power line gets all permits, construction can begin with an expected online date in June 2022. Add to these efforts, transmission projects needed to connect the currently nascent offshore wind industry targeting 4.5 GW by 2030 and, ultimately, 9.0 GW by 2040.
In early August, the New York Public Service Commission approved new plans for the development of the Champlain Hudson Power Express, a 330-mile high-voltage direct-current (HVDC) proposed project that could move more than 1,000 MW of power from the Canadian border to New York City via under-water cable through Lake Champlain and the Hudson River. If all goes to plan, the project will enable additional hydropower imports from Quebec and is expected to enter service by January 1, 2025.
The tremendous need to develop and build new carbon-free generation and new and upgraded transmission makes New York a great state to focus on grid infrastructure investment. Driven primarily by the state’s ambitious clean energy goals, which include achieving 70% renewable power by 2030 and 100% carbon-free power by 2040, there will need to be a massive build-out of clean grid projects in a very short time. This includes developing offshore wind farms, ports to support that growth, onshore wind, utility-scale and distributed solar capacity, energy storage, and new and upgraded transmission and distribution systems. Though there are significant challenges ahead, the opportunity to invest in New York’s power grid has never been brighter.