For Release — Monday, June 18, 2001
COUNCIL: NEW STATE ENERGY PLAN SHOULD EMPHASIZE
ADDING AT LEAST 10,000 MEGAWATTS OF GENERATING CAPACITY WITHIN FIVE YEARS
ALBANYNew York should add at least 10,000 megawatts of new, more efficient, and environmentally friendly electricity-generating capacity within five years, and that priority should be the focus of the state's revised Energy Plan, The Business Council has told the state's Energy Planning Board.
Only by adding this capacity can New York sustain economic growth and foster the robust competition in energy markets that will drive energy costs down, Daniel B. Walsh, president and CEO of The Business Council, wrote to the board. The 24-page letter detailed a range of energy-policy recommendations which The Council thinks should be considered as the state revises its Energy Plan.
Background on the State Energy Plan: The state published its energy plan in 1994 and required that it be updated every four years. The State Energy Planning Board is overseeing the next revision, and today is the deadline for public comments on the existing plan. A draft revision is to be released this fall; statewide public hearings are to be conducted before the final revision is adopted next spring.
The Energy Plan is an influential policy document, Walsh told the Energy Board. For this reason, the board should use the new plan to emphasize critical policy issues, especially the need for more generating capacity. Walsh outlined a number of specific policy recommendations, including:
Increasing generating capacity: New York's peak demand in 2000 was 30,200 megawatts, and the state should increase that by as much as 15,000 megawatts within five years to avoid California-like problems, ensure reliability, and foster cost-cutting competition, Walsh said.
- Assuming a five-year growth rate of 9.82 percent (the same, relatively modest growth rate New York experienced from 1995-2000), peak demands will grow by 2,965 megawatts.
- Preserving the 18 percent margin needed for reliability (a level recommended by the New York State Reliability Council) will require 5,969 megawatts of additional capacity.
- Adding another 15 percent of capacity to foster competition (a level recommended by the New York Independent System Operator based on New York's actual market experience) would make an additional 5,870 megawatts necessary.
That would bring the total projected shortfall to 9,658 megawatts, Walsh noted. To "err on the safe side," The Council believes New York would do well to add as much as 15,000 megawatts within five to seven years, Walsh noted.
Warnings from California's experience: Although New York has not replicated California's errors in restructuring its power markets, "the two states share this fundamental similarity: demand for electricity has been growing, without new capacity being developed to meet it," Walsh wrote.
Moreover, Walsh wrote, demand is outpacing supply in New York, just as it in California, he added.
From 1980-2000, New York's annual peak demand for electricity grew 5.1 times as much as the population, and 2.1 times as much as the state's employment base, the letter said. During the same 20-year period, peak demand grew by roughly 1,000 more megawatts than the state added in new generating capacity. From 1995-2000, demand grew by 2,700 megawatts, but the state added only 293 megawatts of new capacity.
"Left unchanged, the situation is a disaster waiting to happen," Walsh said.
Streamlining and accelerating the Article X siting process: There are already 72 proposals for new or expanded plans with a total new capacity of about 27,000 megawatts, all of which is supposed to be online by 2005 at the latest, Walsh noted.
But few of these plants will be built by 2005 under the state's current Article X siting process, Walsh said, because the process, which was conceived as a "fast-track" approach, is, in practice, too slow.
The Council urged the Energy Planning Board to join The Council and others in advocating reforms to streamline and accelerate the process. The law that created this process is due to expire at the end of 2002.
Upgrading electricity transmission systems: The Council said the revised Energy Plan should also emphasize the need for expanding and upgrading New York's electricity transmission structure. Power lines near Utica, New York City, and Long Island, for example, already carry the most possible electricity, Walsh wrote. This creates bottlenecks that expose customers to the effects of possible power shortages and price spikes, the letter noted.
Transmission limitations intensify pressure on the siting process, he added, since new plants in most cases must be sited near the region that will use the power.
The state's new energy plan should include a comprehensive transmission planning process that involves New York's market participants and appropriate state agencies. It should also emphasize the need for specific new transmission projects to move power from areas that have plants to areas where supply is short.
Upgrading natural gas pipelines: New York must upgrade its natural gas pipelines to meet increasing demand for this clean-burning fuel, Walsh wrote. Demand for this fuel has been increasing, and all major proposals for new generating plants call for natural gas-fired plants.
Fuel diversity: In 1985, natural gas was used to produce 12.6 percent of New York's power; by 1991, that figure was up to 37.1 percent. This trend toward generating plants powered by a single fuel, natural gas, leaves New Yorkers and New York businesses vulnerable to significant hardships should that source become scarce or expensive, Walsh said.
Power plants powered by a range of fuels, including natural gas, coal, oil, and nuclear power, are needed to protect consumers and businesses from volatility in natural gas markets.
Energy efficiency and energy conservation: The Council said the revised State Energy Plan should preserve New York's commitment to energy conservation and energy efficiency, but that neither should be counted as an energy source "that will somehow obviate the need for additional amounts of real, genuine energy supplies."
"Energy efficiency, like all forms of efficiency, is a tool for economic progress, and New York businesses have saved, literally, billions of dollars through energy efficiencies just over the last decade," Walsh noted.
"Since the Stone Age, humans have steadily been getting more and more efficient in our use of energy. Yet our consumption of energy has gone up and up. In the last half century, the overall energy efficiency of the U.S. economy has improved by 47 percent, yet per capita energy consumption has increased by 65 percent. This is going to continue."
Tracking energy data: The Council said the revised State Energy Plan should include updated and expanded statistical tables that are part of the current plan that illustrate the factors that contribute to New York's high energy costs. The Council said additional information should be provided on the effect of federal, state, and local taxes and fees on energy costs.
In addition, to help users of future energy plans put energy projections in perspective, future energy plans should include annual updates of short-term projections as well as detailed comparisons of previous projections to what actually happened.
To view the full text of the letter, visit www.bcnys.org/inside/energy/engyplan01.htm.