Introduction and Background
Planning for Summer 2011
Supply and Demand of Electricity Capacity 2005-2010
The Outlook for Added Electricity Capacity in New York City 2011-2015
NYISO Forecasts for 2011-2021
Forecasting for the Important Summer Peak Demand
Assessing New York's Economy and the NYISO Forecasts
Looking Ahead to 2030
The new NYISO forecasts for New York City through 2021 need to be considered for the assumptions and risks affecting both supply and demand. On the demand side, the significant assumptions are for slow growth in the City's economy, particularly in the first five years of the forecast period, and that substantial targets to achieve energy efficiency can be met. On the supply side, the significant risk to the forecast lies with the potential retirement of the two Indian Point Energy Center reactors when their licenses expire in 2013 and 2015. The NYISO forecasts assume that these licenses will be renewed. Furthermore, there is the risk of unplanned retirements of older generating plants as a result of expected new environmental regulations under discussion at both the Federal and State level.
Risk # 1: NYISO Foresees Moderate Economic
Recovery in 2011-2016
In the latest NYISO forecast report, annual growth rates for New York City total energy usage, including the assumptions for energy efficiency, are expected to increase only 0.5 percent per year to 2021. This forecast has been lowered from the 0.83 percent rate carried in the 10-year forecast presented in 2010. NYISO reports that its outlook to 2021 has been dampened by the effects of the significant recession of 2007-2009 and by the slow recovery underway.13
This forecast of low growth in electricity demand for the next 10 years is for less than half the annual rate of growth in the past decade. Between 2000-2010, annual electricity usage grew at a rate of 1.2 percent per year. The pattern was uneven as the New York City economy was buffeted by two severe recessions, beginning first with the recession of 2000-2001, followed by the long downturn after the terrorist attacks of September 11, 2001. Job levels in the City fell by five percent between 2000 and 2004, and it was not until mid-2007 that job levels surpassed the 2000 peak. Growth in total annual energy usage in New York City weakened in those years, but did not decline from 2000 levels. Usage bounced back in 2004 increasing 2.4 percent over the previous year, and again in 2005, increasing by 3.7 percent. With the onset of the "Great Recession" in late 2007, total annual usage again dropped off, falling 3.2 percent between 2008 and 2009.
However, despite the severe impact throughout the U.S. economy, New York's economy has fared better during this most recent recession than during the one experienced in the early years of the decade. Job levels in 2009 fell by 2.7 percent, but recovered with a slight 0.4 percent growth in 2010. Total energy usage in the City grew by 3.8 percent between 2009 and 2010.
Source: U. S. Bureau of Labor Statistics.
Based on the recovery patterns of New York City's economy this past decade, as well as the two previous decades, the City's economy has consistently recovered at a stronger pace than anticipated and reached new heights in employment, output, income and population levels. With the notable upturn evident since early 2010, and with major new construction projects underway at the World Trade Center and Atlantic Yards sites, there are ample reasons to expect that this recovery also will be more robust than previously expected.
Risk # 2: The Importance of Energy Efficiency
in the NYISO Forecast
The NYISO unconstrained forecast for the 2011-2021 period suggests that annual energy usage in New York City would increase by 6,203 GWh over the actual level in 2010, a growth rate of 2.1 percent per year.
With the assumption of energy efficiency savings (a major effort spurred by New York State14 to encourage utilities, businesses, and residential users to adopt more energy-efficient appliances and energy-efficient building codes), annual usage in New York City is forecast to increase by 1,929 GWh, an increase of 0.3 percent per year over the actual level in 2010.
With new "smart grid" technologies, energy-saving appliances, and attention to energy efficiency in building construction and retrofits, it is now possible to achieve far greater energy conservation than in years past.
However, the volume of energy efficiency assumed in the NYISO forecast is a pivotal assumption and potential risk, underlying the NYISO statement that "no new capacity is needed" before 2019 or 2020.
Risk # 3: The Outlook for Continuing Supply
from the Indian Point Energy Center
Similarly, the outlook for the supply and demand of electricity in the decade ahead as outlined in the NYISO forecast is dependent on the relicensing of the two Indian Point nuclear reactors. Indian Point's 2,060 MW of baseload power provides 30 percent of New York City's annual energy supply.
The NRC operating license for Indian Point 2 expires in September 2013, and the license for Indian Point 3 expires in December 2015. The New York State Department of Environmental Conservation has denied a water quality certificate to both units, which is a requirement for the plants' relicensing, on the basis of the long-term adverse impact of the plants' cooling system on aquatic life in the Hudson River. The Energy Center's operator, Entergy, has applied for a 20-year extension from the Nuclear Regulatory Commission.
In its October 2010 Comprehensive Reliability Plan, NYISO notes that if Indian Point is not relicensed, the forecast of adequate reliability and available power supply would be adversely affected. It further notes that the "voltage performance on the bulk power system without the Indian Point plants would be degraded."15
In its Power Trends 2011 report issued in April 2011, NYISO notes that "Increasing public concern about nuclear safely in light of the crisis at a Japanese nuclear facility [following the massive earthquake and tsunami of March 11, 2011] will intensify the debate over the future of nuclear power." 16 NYISO points out that "adequate replacement generation" would be needed for downstate New York and New York City should the Indian Point system be shut down if the licenses to continue operating are not renewed.
Governor Andrew M. Cuomo, as reported in The New York Times on June 29, 2011, indicated that he is determined to close the Indian Point Energy Center.
Consequently, there is considerable risk in the outlook for adequate electricity capacity for the New York City area from 2014-2016 due to the uncertainty of continued operation of the Indian Point plants. This raises the need for immediate contingency planning for replacement generating and/or transmission capacity, in addition to the concern of probable pressure on electricity prices.
Risk # 4: Potential Impact of Plant Retirements
Left unstated in either the NYISO or Con Edison outlook is the potential number of plant retirements that could occur in New York City in the next two decades. NYISO's 2011 Gold Book recognizes only the proposed retirement of part of NRG's Astoria plant by 2015, which would reduce interim capability by almost 107 MW for the New York City market in the forecast, unless the proposed new plant is readied by the same period. 17
In addition, NYISO recognizes that pending environmental legislation at both the state and federal levels to limit emissions of nitrogen oxides and other hazardous air pollutants, together with a requirement for closed cycle cooling systems, "are estimated to impact more than half the installed generating capacity in New York State . . . " and " . . . could result in unplanned plant retirements."18
As decisions are made on the various legislative measures pending adoption, more scrutiny is needed to assess potential plant retirements in New York City, particularly before the critical 2014-2016 threshold.
13— Load & Capacity Data Report, The Gold Book, New York ISO, April 2011, p. 5.
14 — New York State introduced a plan "45 x 15" in 2008, to achieve long-term efficiency and
renewable deployment in electricity consumption. The plan hopes to decrease electricity usage by 15% and
meet 30% of the State's electricity demand through renewables by 2015. Source: New York State Energy
Planning Board, "2009 State Energy Plan", December 2009.
15 — NYISO 2010 Comprehensive Reliability Plan, Draft 3.2, October 27, 2010, p.19.
16 — Power Trends 2011, NYISO, April 2011, p. 15.
17 — Certainly, aging plants must be a consideration in this forecast period. The New York Building
Congress 2006 Electricity Outlook report noted that generating plants in New York City producing the
equivalent of 3,500 MW will be 60 years old or more by 2025.
18 — Power Trends 2011, NYISO, April 2011, p. 40-41.