For Renewables, 2030 is Just Around the Corner — New York as an Example

What’s the issue?

Many states have set aggressive targets for renewable energy production. For example, New York has stated that it intends to generate 70% of its electricity from renewable sources by 2030.

Why does it matter?

While 2030 may seem like the distant future, with respect to energy policy planning, it is really just around the corner. These aggressive goals will require extraordinary growth in both electric generation and transmission. The speed and size of that growth will impact the need for traditional fuels for power generation and, in particular, for natural gas.

What’s our view?

New York’s goal is very aggressive and given the recent retirement of a major nuclear facility in the New York City region, the use of natural gas as a fuel is likely to continue much longer than the state is currently anticipating.

Many states have set aggressive targets for renewable energy production. For example, New York has stated that it intends to generate 70% of its electricity from renewable sources by 2030. While 2030 may seem like the distant future, with respect to energy policy planning, it is really just around the corner. These aggressive goals will require extraordinary growth in both electric generation and transmission. The speed and size of that growth will impact the need for traditional fuels for power generation and, in particular, for natural gas.

New York’s goal is very aggressive and given the recent retirement of a major nuclear facility in the New York City region, the use of natural gas as a fuel is likely to continue much longer than the state is currently anticipating.

New York’s Electric Generation Goals

In 2019, New York enacted the Climate Leadership and Community Protection Act (CLCPA). The CLCPA directs the New York Public Service Commission (PSC) to establish programs that will “ensure” that there are sufficient amounts of renewable energy resources to serve at least 70% of the state’s electric demand by 2030. In addition, the CLCPA also sets goals for specific technologies, including the deployment of six gigawatts (GW) of photovoltaic solar generation by 2025 and at least nine GW of offshore wind by 2035. To understand how aggressive these goals truly are, it is helpful to take a look at where New York currently stands on each one.

According to the Energy Information Administration, in 2020, over 70% of the electricity generated in the state came from either fossil fuels or nuclear, neither of which are considered renewable under the CLCPA. Over 85% of New York’s “renewable” generation is hydroelectric, which, at least from in-state sources, is not expected to grow that much over the coming decade, which means that this massive shift from currently over 70% being non-renewable to over 70% being renewable will need to come from wind and solar.

The growth of those two sources has not been very spectacular over the last five years and would need to accelerate at an astronomical rate comparatively to meet that goal. The six GW goal for solar by 2025 is particularly interesting given the state’s recent history with that source of energy.

As seen above, EIA data shows that installed solar in the state has grown from only 81 MW in 2015 to slightly more than 673 MW in 2020. While that is an 800% increase in just five years, the growth would have to be almost 900% between 2020 and 2025, while starting from a much higher base. As seen above, the actual and planned solar for the state are simply nowhere near the growth rates needed to meet that goal.

Goal for 2030

To determine exactly what would need to occur between now and 2030 to meet the requirements of CLCPA, the New York State Energy Research and Development Authority and the staff of the New York State Department of Public Service prepared a white paper (White Paper) to identify steps the PSC could take to reach the goal. The state is currently using about 156,000 GWh of electricity each year. The White Paper notes that it is assuming that electrification of other sectors will lead to an increase in demand of 10,000 GWh of additional load associated with new demand from air- and ground-source heat pumps and another 9,000 GWh of additional load from electric vehicles by 2030. Yet it also assumes that there will be over 40,000 GWh of demand reduction from energy efficiency and so assumes that New York will consume less electricity in 2030 than it did in 2019. Thus, it sets the target for renewable generation at 70% of 151,000 GWh of electricity.

As seen above, wind energy is currently a much bigger piece of the energy picture in New York than is solar. However, the real growth in wind is expected to be in the offshore areas along the East Coast. The White Paper assumes that three projects that state agencies have already contracted with for offshore wind will be in-service by 2030: the 130 MW South Fork Offshore Wind Farm, the 816 MW Empire Wind Project and the 880 MW Sunrise Wind Project.

The White Paper proposes that the PSC begin procuring additional offshore wind at a pace of one GW per year each year between now and 2027. The White Paper asserts that at that pace, it “conservatively estimates” an additional four GW of offshore wind will be in-service by 2030. That would mean that the last of that four GW would not be procured until the end of 2024. In Which States Will Fail to Meet Their Offshore Wind Goals?, we wrote about the long timeline for offshore wind projects and how, on average, they are taking close to eleven years to construct. We clearly would not agree that it is “conservative” to assume that a project will be completed within six years after it is first awarded.

Transmission is Also a Problem

The White Paper also notes that New York is really a state with two power grids, one that serves the upstate regions and one that serves New York City and Long Island. It also points out that the need to reduce New York City’s reliance on fossil fuels is a “central challenge” to achieving the CLCPA’s goal for 2030. In 2019, New York City consumed 52,003 GWh of electricity, roughly a third of the statewide total of 155,832 GWh. During that year, nearly all of the roughly 22,500 GWh of electricity generated within New York City was from fossil fuel-fired generation. The White Paper also cautioned against exclusive reliance on the offshore wind to solve this problem, because it is not known how much offshore wind will be delivered to the city and Long Island. Therefore, the PSC directed that there be a solicitation for additional transmission designed to bring renewable energy to the city and Long Island.

Just last week, the PSC announced the winners of that solicitation, which were two projects. The first project, the Champlain Hudson Power Express, is designed to bring renewable energy from Canada, mainly hydropower from Quebec down the Hudson River to New York City. However, that project demonstrates just how difficult it is to get the required approvals to build such lines. That project was first proposed in 2010 and has yet to be constructed. The PSC first approved the project in 2013, and in 2020 approved certain amendments to the route, but did not modify the condition in its approval that requires the project to obtain required approvals in Canada before it can begin construction in the U.S. In a report filed in October of this year, the project developer indicated it intended to file the application for the last of those approvals in March of 2022 and stated that it anticipates being operational by December 15, 2025, a full fifteen years after it was first proposed.

The second transmission project selected by New York late last month, Clean Path NY, is not nearly as far along in the process. It is designed to connect renewable sources of energy in upstate New York to the New York City area, but has yet to file for approval of the project from the PSC. It also presents a chicken-and-egg problem for upstate solar and wind projects because until such projects know that the transmission will be there, the wind and solar projects will not likely be built. This makes the solar goal for 2025 even more difficult to achieve, since this transmission line is unlikely to be in commercial operation by then.

The contracts between the state and these two projects have been issued for public comment for a period that ends in February 2022. We expect there to be substantial opposition to both projects and thus the expected benefit from them is likely much further down the road than the 2025 date projected for the Champlain Hudson Power Express. It is far from certain that either one of them will be available by 2030.

Impact on Gas Demand

Currently the largest single source of energy for electric generation in the state of New York is natural gas.

As seen above, natural gas accounts for more than half of the installed generating capacity within the state. That share will likely be even higher at the end of 2021 because a very large nuclear power plant, Indian Point, was retired this year. As seen above, since 2015, natural gas has grown more than any other source of electric generation, including wind and solar combined. If New York is wrong about either the total demand in 2030 or the amount of power that can be met with renewable sources, natural gas will likely be the only source of fuel for electricity that can bridge any gap.

If you would like to discuss the growth of renewables in another state, please contact us.