ENERGY COMMITTEE UPDATE
Business Council’s 2004 Budget Testimony
The Business Council submitted formal budget testimony on the Governor’s proposed 2004-2005 budget on February 10th. The testimony, as delivered by Council Vice President Edward Reinfurt, discussed a few energy related items. The state should extend Power for Jobs contracts for businesses whose allocations will expire in 2004. Power for Jobs offers reduced-rate power to employers that pledge to use it to create or retain jobs. The concerns that prompted creation of this program-high costs and inadequate supply of electricity-remain paramount, Reinfurt said. What's more, recent regulatory initiatives in New York - new acid rain regulation, the state's $150 million annual system benefit charge added to electricity bills, and ongoing efforts to require customers to buy some of their power from costly renewable sources - are further increasing electricity costs in New York. The full testimony can be found here.
Renewable Portfolio Case's Phase One Transmission Reliability Study Released
The PSC initiated the Renewable Portfolio Standard (RPS) proceeding after the Governor proposed the program in his 2003 State of the State message. Specifically, he directed the PSC to develop a standard that would require New York's businesses and consumers to buy at least 25 percent of their electricity from "renewable energy resources" (i.e. solar, wind, etc.) by 2013. The Business Council has been an active party in this case and has stated that no recommended decision on the RPS should be issued by the PSC staff before critical studies are completed with respect to cost, feasibility, and reliability. These matters are far too important to be treated as mere ancillary elements of the deliberations. Instead of a rush to judgment that presents the commission with a single up-or-down plan, the DPS staff should give the commission a range of options on what standard should be adopted, when, and whether it should be mandatory or voluntary and at what costs to consumers. Based on the potential considerations, it was decided that the RPS be a top priority of The Business Council in 2004.
The Draft Report on Phase One of The Effects of Integrating Wind Power on Transmission System Planning, Reliability, and Operations was released on January 8, 2004. This report is one of several that will be used in the RPS case to determine the scope and model of an RPS for the State of New York. The Phase One reliability report was jointly commissioned by the New York State Independent System Operator (ISO) and the New York State Energy and Research Development Authority (NYSERDA). The study is divided into 2 phases: the preliminary overall reliability assessment (phase one) and the system performance evaluation (phase two). Phase one's preliminary report concentrated on the impact of large-scale wind generation on the reliability of the New York State Bulk Power System (NYSBPS).
The Phase One portion of the report studied the world experience with wind generation, fatal flaw analysis (the study of the maximum output of wind generation on existing lines), reliability analysis, and a review of current planning and operation practices by regulators (i.e. the ISO, New York State Reliability Council (NYSRC), and North-American Electric Reliability Council (NERC), Northeast Power Coordinating Council (NPCC)). Phase Two will concentrate on a system performance evaluation and where any modifications need to be made on the existing guidelines and procedures to accommodate integration of large-scale wind generation into the NYSBPS. Phase Two will not be completed and released until the fall of 2004.
The Phase One report studied 101 potential wind sites in New York. The total possible output of these sights was assessed at 10,026 MWs. The potential sites were largely in upstate New York ISO zones in the central and western parts of the state. The report found no sites for wind potential in the H, I, and J ISO zones (Westchester and New York City) and limited wind potential (154 MWs) in the lower Hudson Valley. Long Island estimated wind output is 600 MWs according to the report. The report claimed that 3,300MWs of wind generation, from these varies sites, could be added to the system. This equates to at least 10% of system peak load.
However, there are limits to the availability of wind generation at certain times of the day and year. Wind generation output, according to the study, dips between the months of May and October when New York State experiences its high peaks (above 30,000MWs) and likewise, peak production for wind generation is typically in the morning hours when market demand is lightest. Wind generation output, according to the study, drops significantly in the afternoon hours when New York's demand usually hits its peak (typically between the hours of 1pm to 6pm). In a related vein, since most of the wind prospecting points to viable sites in upstate and western New York, areas where there exist adequate supplies of electricity generation, the supply dilemma of load pockets remains -- how is the power shipped to areas that need it most (i.e New York City, Long Island). Additionally, if large wind projects come on-line in areas that have surplus generation, will a proposed RPS standard mandate the replacement of other baseload generation sources by wind sources. Thus an RPS mandate could run the risk of forcing the purchase of more expensive wind energy in certain parts of the state at higher prices than the power it replaces. The interconnection of these wind projects have not been pinpointed at this time thus the transmission owners are not able to assess the cost of the interconnections. The report does not address the timing of the wind additions to the system. These, and other cost issues, are not addressed in the Phase One report and need to be thoroughly explored before final decisions are made on the RPS.
The report makes several recommendations that may involve the alteration of rules and governing practices established by a number of regulating authorities such as the ISO, NYSRC and others. There also needs to be the development of several universal rules required to govern the addition of wind power to the grid and markets to deal with wind's unique production cycle (i.e. its intermittent output, proper forecasting, etc.). These concerns cannot be properly addressed without the findings and further study needed in Phase Two of the report. Additionally, the cost concern remains one of the greatest factors in the RPS process.
The Phase One report will be submitted to NYSERDA on February 2, 2004. It will then be delivered to the DPS where it will be studied in conjunction with on-going DPS staff cost studies. The Business Council and its members will continue to actively participate in the RPS case and plan on attending any technical conferences and working groups on the RPS Case. After the studies are transmitted to DPS further on-the-record conferences to discuss the RPS studies should be held. Any members with concerns regarding the RPS should contact The Business Council.
PSC Approves Neptune Transmission Line
On January 21, the New York State Public Service Commission (PSC) voted to issue, with conditions, a Certificate of Environmental Compatibility and Public Need to Neptune Regional Transmission System, LLC (Neptune) to construct a 37-mile long, 600 MW direct current electric transmission line that will serve as a new source of electricity for Long Island. The line will deliver electricity from a substation owned by Jersey Central Power and Light in Sayreville, New Jersey, to a converter station and then to a Long Island Power Authority (LIPA) substation in Hempstead, Nassau County.
The Commission voted to approve a joint proposal governing the construction of the line that was developed by the Office of Parks, Recreation and Historic Preservation, the staffs of the Departments of Environmental Conservation and Public Service, and the applicant. No comments in opposition to the proposal were filed during the public comment period. Neptune will need to acquire other permits from the federal government, as well as from New Jersey authorities for the section in that state.
The line will serve the Long Island electricity market by providing an additional source of supply and by increasing the Island's ties with regional markets. The proposed route of the transmission line is consistent with the most recent State Energy
Plan, LIPA's draft energy plan, and the Independent System Operator's (ISO) transmission planning for the NYS Bulk Power System.
The submarine portion of the route will be located in an existing transportation corridor, and is not expected to affect wildlife. It will be installed alongside navigation channels and in previously disturbed areas.
New York City Energy Report - City Needs 2,600 MWs
New York City Mayor Michael Bloomberg announced on January 22nd the findings of an energy report he commissioned in July 2003 to study the electricity supply situation in New York City. The Energy Policy Task Force report concluded that the City will need 2,600 megawatts of new electricity resources by 2008 to ensure continued reliability, promote economic growth and address environmental issues. The recommendations by the New York City Energy Policy Task Force are outlined in the report New York City Energy Policy: An Electricity Resource Roadmap. The recommendations are split into four principal areas: energy supply, distributed resources, energy delivery, and initiatives for New York City agencies.
Just this past week New York Independent System Operator (NYISO), the entity charged with administering the wholesale bulk electricity markets and overseeing the state's transmission grid, reported an all-time record high of 25,262 MWs for winter electricity consumption. Peak electricity demand for New York City in 2003 reached 10,960 megawatts. While the mayor's report claims that New York City currently has adequate generation to satisfy current demand, more resources will be needed in the very near future. The NYISO, as recently as May 2003, has stated that New York State must add at least 5,000-7,000 MWs by 2008. Similarly, The Business Council has also called for the addition of at least 9,000 MWs over the next five years in order to insure reliability and competitive pricing in New York's electricity markets.
The Energy Policy Task Force was chaired by the New York City Economic Development Corporation (EDC) and had sixteen members consisting of leading energy experts in the private, public and nonprofit sectors, as well as representatives of community groups. The mayor reported that the working groups of the Task Force will immediately begin implementing the report's action plan of 28 specific recommendations to ensure future energy needs. The major recommendations of the report include:
- Promote increased investment in energy efficiency by supporting policies that enhance overall electric system reliability, lower consumer costs and protect the environment.
- Support innovative financing for appropriate electricity projects, including the use of long-term power purchase agreements as a vehicle for reducing project risk.
- Advocate in Albany for the immediate passage of an amended Article X power plant siting law and facilitate appropriate siting of power plants and other energy facilities.
- Establish a formal planning process to coordinate the major infrastructure projects for the City, State and local distribution utilities.
- Enhance and expand the City's energy efficiency programs, such as the Energy Cost Reduction Program (ENCORE), and incorporate cost-effective, high-performance design strategies into City-led projects for long-term value.
For the full report access the New York City Mayor's web site at: http://home.nyc.gov/html/om/pdf/energy_task_force.pdf
Assembly votes to renew plant-siting law; Council opposes this bill
The state Assembly has approved a bill that would renew, with substantial changes, Article X of the state Public Service Law, which governs how power plants are sited. The Council opposes this bill.
The Assembly’s plan would modify the lapsed Article X law. It includes a proposal to reduce the size of proposed power plants that must be cleared through Article X.
The proposal would also require the siting board to add several new steps to the process, including studies of the impact of emissions on the area’s environment and public health, as well as a study of the concentration of power plants in minority neighborhoods.
The Council has filed a memo of opposition to the bill, arguing that the proposal would discourage private investment in New York’s electricity markets and add new impediments for developers.
The proposal would result in fewer power plants sited, discourage developers from entering the market place, and lengthen the process for developers that do attempt to site plants, the memo said.
"With New York struggling to provide more electricity and build additional generation, this proposal sends a clear and distinct regulatory message: New York is not a favorable place to build a power plant," the memo concluded.
Energy Memo Update
The Business Council has also issued memos in opposition to the following bills. The memos have been posted on our web site.