Introduction
Despite
an economic downturn and the destruction of the World Trade
Center complex, there remains an urgent need for 2,000-3,000
megawatts (MW) of new electric capacity in New York City over
the next five years. This additional power is needed to meet
projected growth in demand through 2006, to replace aging
plants with cleaner, more efficient ones, and to provide a
cushion of supply that will prevent dramatic increases in
consumer costs for electricity. Furthermore, while the need
before and after the tragic events of September 11 remains
largely unchanged, conditions for the financing, construction
and completion of new generating facilities have worsened
due to the financial uncertainties created by the collapse
of the Enron Corporation. Electricity Outlook: A Call To Action
follows the January 2001 edition of Electricity Outlook: A Matter of Urgency, and provides current evaluations of the
City’s electricity demand forecasts and prospects for
new sources of supply. This report also reviews additions
to the City’s electric supply for the summer of 2001
and the subsequent surge in demand during the heat wave in
August, which left the City with only a narrow margin of supply
to prevent service disruptions. Even if peak load demand in
2002 just matches last year’s historic high levels, the
summer of 2002 will require aggressive conservation measures
to help reduce demand, especially during peak demand periods.
As New York City rebuilds, and recovers from a lingering
recession, electricity demand will continue to grow. Additional
energy efficiency and clean distributed technologies could
yield 500 MW in the next five years, but will not supply enough
reliable power to meet the City’s needs. New generating
facilities must be proposed, constructed and built ‘in-city’
within the five boroughs. This is especially challenging since
some generating plant proposals are currently being reconsidered,
postponed or withdrawn.
The perception at present appears to be that both the California
and New York City crises of 2001, over insufficient electric
supply and rising prices, have subsided. Yet, the situation
facing New York City in early 2002 has not improved, and the
urgent need for additional electric capacity still exists.
Consequently,
this report is a call to action to alert political and business
leaders in both the City and State to the continuing need
for energy efficiency, clean distributed generation, and new
generating capacity, and the need to expedite the approval
of proposed generating facilities through New York State’s
Article X process.
Factors Affecting Electricity Demand and
Supply in NYC During 2001
Spurred by concern over the reliability and cost of electricity
in New York City, as well as by the lessons learned from the
power crisis in California, several important actions were
taken by both the public and privatesectors to ensure sufficient
electric supply in New York City during 2001.
- 709 MW of new generating capacity was added for the summer
of 2001, which helped to meet unprecedented demands from
New York City
residents and businesses. The new supply included: ten natural
gas
turbines installed by the New York Power Authority at various
locations throughout the City; restoration of various generators
by Con Edison and Orion Power; and, a station upgrade at
the Linden Cogeneration Plant. - Voluntary conservation efforts and energy efficiency measures
helped maintain the reliability of the electrical system
during the August heat wave when consumption soared to the
record-breaking level of 10,650 MW.
Summer 2001 Experience
Given the traumatic events of September 11 and America’s
subsequent
war on terror both home and abroad, it is easy to lose sight
of the electricity
crisis that New York City faced just one month prior to the
attack. For five consecutive business days during the week
of August 6, 2001, New York experienced temperatures in the
90’s F., with high humidity. The resulting surge in electricity
demand exceeded the peak load forecast by 115 MW and created
the widespread and well-founded concern that the City would
not have enough electricity to avoid power outages.
In response, the New York State Independent System Operator
(NYISO) declared a series of power emergencies. Residents
and businesses were strongly urged to conserve wherever possible,
and, through a joint initiative of the New York City Partnership
and the Real Estate Board of New York, many of the City’s
building owners shut down 25-30 percent of their elevators
and escalators and trimmed perimeter and lobby lighting. All
of these
measures reduced electricity demand by 160 MW when the power
system was under the most strain.
Price Changes in 2001:
Wholesale power prices in the NYISO market were similar but
somewhat less volatile during the summer of 2001 than during
the highly volatile situation of the previous summer, but
prices in 2001 continued to be higher than in 1999 (see Chart).
Additional supplies of power, if available, would put downward
pressure on market prices in both the spot and forward markets.
1.
Renewed Growth in Demand
By 2003, it is expected that New York City’s economy
will follow the national economy into recovery from the present
recession, so that electricity demand will once again increase.
By the summer of 2003, we expect that peak load demand will
reach 10,900 MW, and rise to a level of almost 11,400 MW by
2006 (see Chart). To match this increase in demand, New York
City needs approximately 600 MW of new generation to meet
the in-city installed capacity requirement of 80 percent.
This forecast rate of growth would be slightly below the
average gain of 170 MW per year experienced between 1995 and
2000, a period when the City was experiencing very strong
growth in its economy and in population, which grew by 685,700
or 9.4 percent over the 1990 Census.
2. Need to Replace Aging Power Plants
Part of the need for new electric generating facilities stems
from the necessity to replace aging plants with newer, more
efficient generation. Older units had to be restored to meet
the 2001 demand, resulting in over 700 MW of generation that
will be over 45 years old in 2002. Unless new electric generation
is constructed to replace some of these aging units, the amount
of generation that is over 45 years old will double in two
years and continue to grow to almost 1,800 MW by 2006.
Therefore,
between 700-1,800 MW of new plant is vitally needed during
these next five years to replace some of this aging capacity.
New, clean-burning natural gas-fired plants using efficient
technology will also bring significant environmental benefits.
3. Need to Assure Market Stability
We
estimate that at least 800-1,000 MW of additional capacity
above what is required to meet the growth in demand and to
replace aging plants is needed in the next five years to assure
market stability and avoid wide swings in the price of electricity
in the newly deregulated power generation market.
Basic Deficit in New Supply
Some progress has been made over the past year in achieving
approvals
for new plants, with three new City-based generating projects
approved by the New York State Siting Board under the Article
X permit process. However, no new supply is scheduled to come
on line during 2002, nor are any new generating facilities
presently under construction in New York City. Importing of
power is constrained, as transmission capacity into the City
is limited to approximately 5,000 MW.
- The earliest expected commercial operation for the first
two of these
projects, Ravenswood and East River Repowering, with a combined
total of 538 MW, was the summer of 2003. However, Ravenswood
has recently announced a delay to 2004 due to delays in
obtaining
construction permits. Furthermore, the East River Repowering
Project has also been delayed to 2004.
A decision on a fourth project, the proposed Poletti plant
that would provide 500 MW of power, is expected by the end
of April 2002. The construction phase is expected to take
at least two years, and consequently, this capacity would
not be available until midsummer of 2004 at the earliest.
In addition to these projects, thirteen other new generating
facilities have been proposed and are in varying stages of
the approval process. All of these projects have the potential
for adding approximately 7,500 MW of capacity for the New
York City area (see Map). Several projects have target dates
of 2003 and 2004, but in reality, unless early approval is
received and the market for the proposed plants is once again
favorable, few of these projects can be expected to be in
service prior to the summer of 2005, or even 2006.
One consequence of the failure of the Enron Corporation and
the decreasing willingness of the financial community to underwrite
proposed projects is that a number of proposed power plant
projects in the US are being delayed or postponed. This has
already begun affecting proposed New York City projects, including
those that have successfully passed through the approval process.
- Reliant Resources (formerly Orion Power) Astoria Generating
Facility
stated that the collapse of Enron has made it difficult
for energy
companies such as Reliant to secure financing, delaying
the project’s completion until as late as 2007. However,
Reliant stated it is still committed to the repowering project.
We believe that not all projects that are approved will be
built, which exacerbates our concerns over the City’s
required needs by 2006.
The Terrorist Attack on New York City
The
attack of September 11, 2001 destroyed the World Trade Center
complex of 13.4 million square feet, 4 percent of Manhattan’s
total office space, and severely damaged another 15 million
square feet of office space in the buildings immediately adjacent
to the WTC complex. The peak electricity usage of all of these
buildings totaled approximately 140 MW, or about 1.3 percent
of the City’s peak load in the summer of 2001.
Temporary Impact on Projected Electricity
Demand
While the aftermath of the attack of September 11 sent shock
waves throughout the City’s economy, about 75 percent
of businesses that were in the World Trade Center and adjacent
area have subsequently relocated within the City, thus shifting,
but not significantly lowering, overall electricity demand.
The net loss of the demand load at this time is approximately
20 MW.
The reduced demands for electricity from the direct and indirect
effects of the terrorist attack and recession will be temporary.
Peak load demand in 2002 is expected to be 10,665 MW, similar
to the level reached during the summer heat wave of 2001.
Preliminary indications from January and February 2002 show
that, for similar weather, demand has been in line with that
of the early months of 2001. The 2002 forecast is based upon
normal weather conditions, and another record heat wave could
drive 2002 peak load higher than now expected.
Con Edison did a superb job in restoring electricity supply
to the downtownarea following the September 11 attack, and
still faces considerable challenges in restoring electric
cables and rebuilding the downtown sub-stations. As the permanent
restoration work proceeds, Con Edison needs to closely co-ordinate
their ongoing work projects with the business community, as
well as with the City and other infrastructure providers,
to ease the burdens on businesses and residents.
Over the next five to ten years, construction of previously
planned buildings, now being expedited throughout the City,
and the restoration and rebuilding of Downtown Manhattan,
now in the planning process, will help to assure the City’s
economic recovery and to increase demand for electricity by
both businesses and consumers.
Projected Electricity Needs for the Next
Five Years
New York City still faces a critical need for 2,000-3,000
MW of new electric capacity by 2006 in order to meet demand,
to replace aging power plants and improve the environment,
and to maintain market stability. Continued conservation efforts
and customer demand reduction programs will help ease peak
load demand, but construction of new facilities is still necessary
to provide sufficient reliable power.
Recommended Actions
Create
New Generating Facilities
To assure that between 2,000-3,000 MW of additional electric
capacity is available by 2006, it is necessary that:
- New York State officials immediately act to help expedite
the approval process for at least some of the proposed new
plants. Considering the present concerns over securing financing
for new plants, approval of additional plants may be prudent.
- New York State officials must reauthorize the Article
X legislation, which guides the approval process, prior
to its sunset date of December 31, 2002, to ensure adequate
and timely approval of sufficient new capacity.
These actions must be taken primarily at the State level,
but local officials and business leaders can urge State lawmakers
to take action. In addition, local officials can help ease
the burdens on City businesses and residents by ensuring improved
communications and coordination between electric, telecommunications
and other infrastructure providers to smooth the construction
process during the Downtown rebuilding phase.
Emphasize and Encourage Ongoing Energy
Efficiency Measures
The need for additional generating capacity notwithstanding,
additional energy efficiency efforts and the use of clean
distributed technologies on the part of consumers and businesses
could, over the next five years, yield the equivalent of 500
MW capacity and contribute to alleviating the pressure on
additional in-city electric capacity needs. These efforts
would include: residential installation of more efficient
air conditioners, refrigerators, or windows, and commercial
use of more efficient lighting and improved HVAC equipment;
adoption of new distributed generation technologies; and construction
of highly efficient ‘green buildings’.
However, while demand side efforts have increased with additional
New York State programs and through voluntary commitments
to reduce demand during peak load emergencies, additional
opportunities will remain untapped until business and residential
customers are able to access ‘real-time pricing’
information, and until the introduction of such technologies
as ‘interval meters’ enables customers to respond
to real-time changes in electricity prices.
Create Additional Natural Gas Pipeline
Capacity
Additional natural gas pipeline capacity into New York City
and Long Island will be required to assure adequate long term
supply for new generating facilities and growth in customer
demand, as well as to assure future reliability of supply
and price stability of natural gas. Substantial progress was
made during 2001 in advancing several new proposed pipeline
projects, which, if successful, could increase the capacity
of natural gas delivery into downstate New York by over 50
percent. But the risk remains of delays in the review and
approval process, which could jeopardize planned completion
schedules or even realization of all of the proposed systems.
Furthermore, since financing of pipeline expansions and development
relies on financial commitments from large users, uncertainties
in generation project financing could represent a large risk
for pipeline investors.
Create New Transmission Capacity
While New York City is required to provide 80 percent of
peak load capacity at in-city generating facilities, transmission
capacity into the City and downstate area is essential to
assure the remaining volume.
With projected growth in demand, and with the necessity of
providing adequate accessibility to external supply in the
case of peak load or other emergencies, we recommend that
serious proposals to increase capacity be readily encouraged
and supported through the necessary approval process.
We endorse the recognition given in New York State’s
new draft energy plan of the need for “some local transmission
reinforcement” in the New York City and Long Island areas.
In addition, the Federal Energy Regulatory Commission (FERC)
is encouraging the full integration of regional transmission
systems in the Northeast and eastern Canada into a new Regional
Transmission Organization (RTO), to enhance market efficiency,
as well as full distribution of available electricity supplies.
Such interconnections between major systems will require adequate
and reliable transmission.
Several potential projects are being proposed, but at present
there is no construction underway for any new transmission
capacity. And recent experience such as the proposed transmission
tie between Connecticut and Long Island has shown that siting
new transmission can be as difficult, if not more so, than
siting new electric generation.
Accelerate Introduction of Clean Distributed
Technologies
Business and residential consumers in New York City are expected
to benefit from use of clean distributed technologies, particularly
co-generation, natural gas chillers, solar, fuel cells, or
gas-powered reciprocating engines. For the most part, the
high cost for these technologies poses a barrier to widespread
application, but it is also recognized that new guidance from
State regulators is necessary to assure full access to the
local power grid distribution networks.
Conclusion
The overall health of New York City’s economy is dependent
on immediate action to increase the supply of electric generating
capacity, encourage conservation, and begin pursuing increased
capacity of transmission systems and natural gas pipelines.
As New York City rebuilds and recovers, growing electricity
demand must be met. As was the case in last year’s Electricity
Outlook, the City needs between 2,000-3,000 MW of additional
electric capacity over the next five years, but securing that
supply has been made more difficult by the failure of Enron
and the lingering recession. Additional conservation, transmission
and use of clean distributed technologies will certainly help
but without new generating facilities the City will not be
able to meet its power needs, improve the environment, and
ensure stable electricity prices.
