Is New York Electric Reliability Being Put at Risk by an Overreliance on Offshore Wind?

Originally published for customers March 9, 2022.

What’s the issue?

New York has set some aggressive goals for reducing carbon emissions from its electric generation fleet, while at the same time closing down a critical nuclear power plant that fed power to the constrained area around New York City.

Why does it matter?

The Biden administration recently concluded a very successful auction for offshore wind leases near New York. However, the timeline for offshore wind projects from the signing of the lease with the federal government to commercial operation is typically about ten years. Yet, the New York ISO is already warning of reliability issues, especially in New York City and Long Island.

What’s our view?

The state’s future supply of electricity from offshore wind is heavily reliant on a reliable federal regulatory review process. But as pipelines recently discovered, administration changes in a polarized federal government can dash expectations of a reliable regulatory process. While currently directed at fossil fuels by a Democratic government, such regulatory delays could just as easily arise from a Republican government for sources of renewable power like offshore wind. Maybe it is time for all infrastructure companies to band together and insist that agencies apply the law and not be driven by political agendas.

 


 

New York has set some aggressive goals for reducing carbon emissions from its electric generation fleet, while at the same time closing down a critical nuclear power plant that fed power to the constrained area around New York City. The Biden administration recently concluded a very successful auction for offshore wind leases near New York. However, the timeline for offshore wind projects from the signing of the lease with the federal government to commercial operation is typically about ten years. Yet, the New York ISO is already warning of reliability issues, especially in New York City and Long Island.

The state’s future supply of electricity from offshore wind will be heavily reliant on a reliable federal regulatory review process. But as pipelines recently discovered, administration changes in a polarized federal government can dash expectations of a reliable regulatory process. While currently directed at fossil fuels by a Democratic-controlled FERC, such regulatory delays could just as easily arise from a Republican-controlled administration for sources of renewable power, such as offshore wind. Maybe it is time for all infrastructure companies to band together and insist that agencies apply the law and not be driven by political agendas.

 

New York Goes All-in on Offshore Wind

The New York State Energy Research and Development Authority (NYSERDA), is the state agency that is charged with leading the state’s efforts to achieve the goals set forth in New York’s Climate Leadership and Community Protection Act (CLCPA), which was enacted in July of 2019. The CLCPA sets goals of having at least 70% of New York’s electricity generated from renewable sources by 2030 and 100% zero-emission electricity by 2040.

However, the New York ISO, which is the entity responsible for ensuring that the power stays on, noted in a report issued last December that its baseline analysis of “normal weather and limited generation outages shows a positive but narrowing transmission security margin across the ten-year period. However, heatwave conditions combined with the impact of additional forced generation outages would result in deficiencies to serve demand in New York City in many of the years. A heatwave with a statewide average maximum temperature of 95 degrees Fahrenheit (1-in-10-year event) may result in very thin margins in 2023 and significant deficiencies beginning in 2025, while an extreme 98-degree Fahrenheit sustained heatwave (1-in-100-year event) would test the system limits today and exceed grid abilities beginning in 2023.”

The report notes that this reliability threat is the result of a number of decisions made by the state, including significant changes in the last two years with the retirements of 1,000 MW of coal and 2,000 MW of nuclear. Then in 2020, the New York State Department of Environmental Conservation adopted a regulation to limit nitrogen oxides emissions from simple-cycle combustion turbines. This new rule is expected to force over 1,500 MW of these peaker plants to retire or not operate during the summer ozone season, mostly in New York City. All of these deactivations add up to almost 5,000 MW generation. To meet the targets in the CLCPA, an additional 25,000 MW of fossil fuel generation will need to deactivate over time.

NYSERDA acknowledges that offshore wind is the cornerstone of New York’s ability to meet the goals of the CLCPA and that it expects to have in place 9,000 MW of offshore wind by 2035. So far, NYSERDA has initiated agreements with five offshore wind farms to meet about half of that goal or 4,362 MW of wind power.

 

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Earlier this year, the federal Bureau of Ocean Energy Management (BOEM) announced a joint vision with New York and New Jersey to develop offshore wind power along the Eastern Seaboard. According to the announcement of that shared vision, BOEM plans to hold up to seven new offshore wind lease sales by 2025. The first of those auctions, for an area referred to as the New York Bight, concluded at the end of last month, and the BOEM estimates the areas that were auctioned could provide 5,600 to 7,000 MW of additional wind energy for the two states.

 

Operational Risks Create Reliability Risks

However, NYISO points out that the addition of offshore wind energy does not exactly solve the reliability risks for the New York grid. It notes that most renewable generation is intermittent and the location of these resources is dictated by where the wind is most constant for wind resources or by where there is sufficient land for solar resources. In addition, the variability of meteorological conditions that govern the output from wind and solar resources “presents a fundamental challenge to relying solely on those resources to meet electricity demand. Solar resources will have little to no output during the evening and nighttime hours and reduced output due to cloud cover, while wind resources can experience significant and sustained wind lulls.” It cautions that sufficient resources to address all conditions will be necessary to provide continued reliability and that zero-emission dispatchable sources with the combination of attributes sufficient to replace fossil fuel plants simply are “not commercially available at this time but will be critical to future grid reliability.”

 

Political Risks Are Not Factored In at All

As seen in the chart above, the timeline from when a lease is executed to the commercial operation date for an offshore wind farm is typically about ten years. That development period, from when the lease payment is made to the federal government to when cash from operations starts to flow, is based on the required regulatory reviews proceeding without interruption over that ten-year period and there being no court challenges to the final decisions by the regulators. But as natural gas pipelines recently experienced when a Democratic chairman took control at FERC, regulatory changes can extend timelines beyond all historical norms.

At a recent Senate hearing about FERC’s recently announced pipeline policies, which we discussed in Arview Alert: Senate Holds Oversight Hearing on New FERC Policy Statements, Senator Cassidy asked Chairman Glick whether anyone in the Biden administration had ever spoken to him about “slow walking or otherwise impeding . . . the development of natural gas pipelines.” While Chairman Glick denied any conversations ever took place, the fact of the matter is that his actions as chairman over the last year had just that effect on all pending projects. In many ways, this can be a bigger problem for a project developer than an outright denial because there is no decision that can even be challenged in court.

In his opening statement before the Senate, Commissioner Christie stated his belief that the new policies are not at all about legal durability of FERC’s decisions as the Democratic-majority professes. He said he expects the majority to vote on a handful of pipeline approvals which he ascribed as being a Potemkin village designed to hide how damaging the new policies are. A Potemkin village describes what is essentially a false facade designed to hide the true intent of a policy or decision — which is a pretty damning allegation by someone with inside knowledge of how FERC is currently operating.

While the slow-walking of FERC certificates is currently being applauded by the environmental purists, the developers of offshore wind projects should already be building regulatory delays into their timelines to commercial operation. For the winners of the recent auction that just concluded, their projects will likely be under review by two additional presidential administrations. If Republicans gain control in either of those elections, one can certainly see the possibility of a statement like that made by Chairman Glick being made by a future Republican Secretary of the Interior:

“During times like this, it is impossible to ignore the role that energy security plays around the world, including the geostrategic significance of [wind energy]. That is all the more reason why we must not cut corners in permitting decisions and risk further disruption should the courts reject our decision making. Instead, we need to do things right the first time.”

The delays that result from such professed well-intended efforts can be substantial.

 

All Infrastructure is at Risk from Polarization

In Energy Security with the Energy Evolution - The Path to 2050 Will (Hopefully) be More Inclusive, we wrote about how important regulatory certainty is to all forms of infrastructure. Perhaps the time is now for non-pipeline trade associations like American Clean Power, which advocates for wind developers, and Wires, which advocates for transmission line developers, to join forces with pipeline associations, like INGAA, and urge Congress to rein in the administrative agencies so that the polarization does not inhibit all future infrastructure projects through the guise of “regulatory certainty.” If the agencies are given broad authority to flip flop from one political extreme to the other based on who wins an election, no projects will get built and reliability risks will spread way beyond New York.

If you would like information on BOEM leases, please contact us.

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