Earlier this year, the New York State Senate passed the Climate Leadership and Community Protection Act, which outlines strict goals for New York State’s electricity mix and emissions by 2050. The bill essentially attempts to make carbon-emitting sources of electricity obsolete by 2040. Today’s Energy Market Commentary will focus on the feasibility of these goals and the potential headwinds to meeting them, as well as the potential upside for natural gas plants in the interim.
As a brief primer on the bill: 70% of the state’s electricity mix must be renewables by 2030 and 100% must come from “emissions free” sources by 2040. These requirements also apply to imported electricity. Additionally, New York will reduce emissions by 85% compared to 1990 levels by 2050. After 2050, the final 15% of emissions must be directly offset by the emitting source, but electric generators are not eligible for offsetting programs. This implies that all carbon-emitting sources of electricity could be extinct in New York by 2040. In their place, the bill mandates that 9,000 MW of offshore wind capacity and 6,000 MW of solar capacity must be installed to serve New Yorkers by 2035.
The first headwind to meeting the bill’s goals is that capacity and generation are not created equal, as no electricity source runs at 100% efficiency. Onshore wind power utilization in New York in 2019 was about 26% and solar power utilization was about 19%. Offshore wind installations run at higher capacity factors than onshore wind; US offshore wind utilization was 45% in 2018 compared to 31% for onshore wind. The chart below shows utilization by fuel type in New York.
In 2019, solar accounted for just 0.5% of New York’s generation, while onshore wind made up about 3.3% of total generation. In total this year, 60% of New York’s generation came from carbon free sources, including hydropower and nuclear.
Wind and solar installations in the planning process, in addition to the installations required by the bill, would increase wind and solar’s share of generation to 42% of total generation (assuming no other changes to the energy mix and 45% utilization of offshore wind). Adding 2019 hydropower generation would bring renewable generation to 65% of the electricity mix (assuming demand does not change relative to 2019). Even with hydropower added, this is lower than the 70% of electricity from renewables goal set by the bill. The bill includes goals for improving energy efficiency, however, based on the above calculations, total demand would need to fall by 7% to meet the 70% from all renewables goal. These gaps present an upside to natural gas fired generation.
The second headwind to meeting the bill’s goals is that the mandates also apply to imported electricity. The difficulty here is that electrons are fungible: once an electron from a renewable source enters the grid, it cannot be differentiated from an electron generated from a carbon emitting source. In November, New York imported about 20% of its electricity from neighboring ISOs. 75% of imported electricity was from Hydro Quebec and 35% was from PJM. The chart below shows imported electricity compared to internally generated electricity in November. Requiring neighboring ISOs to follow New York’s strict generation guidelines for transmission of electricity into New York likely complicates the interface between NYISO and neighboring ISOs.
Most of New York’s electricity demand is in the New York City area while most of the currently planned solar and wind installations are in Upstate New York. The map below shows planned wind and solar installations, planned natural gas plants, and population by county. Installing wind and solar far away from population centers could lead to congestion on transmission lines through New York, which could create additional challenges for meeting renewable energy goals. Installing offshore wind capacity off the coast will bypass the constraint between Upstate New York and New York City, which could help New York meet the bill’s goals without exacerbating transmission constraints and could put offshore wind in competition with natural gas as New York progresses towards the 70% from renewable energy benchmark.
There are two transmission expansions planned from Utica and Albany to New York City. Both are 1,000 MW projects, which could help relieve constraints. There are also transmission lines planned to connect offshore wind projects to the mainland grid. When transmission lines across the state are congested, this could present an upside to natural gas power plants near population centers to serve demand that physically cannot be met by renewable sources on the other side of the state.
A final headwind to meeting these goals would be the role of nuclear in New York’s generation mix. This year, nuclear made up about 33% of New York’s generation. Indian Point currently makes up about 40% of New York’s nuclear generation. However, Indian Point is set to be retired in 2021, removing a significant amount of emissions-free generation from New York’s generation mix. With no new nuclear projects planned in New York, meeting the state’s 100% emissions-free generation goal by 2040 will require significant build-out of solar and wind capacity beyond what is already planned. While New York appears to be making progress towards the strict goals outlined in the bill, natural gas will still play a necessary role in the generation mix to bridge the gap between renewable generation and New York’s electricity demand.