ADEQUACY OF NEW YORK CITY ELECTRICITY SUPPLY AT RISK BY MID-DECADE, ACCORDING TO NEW YORK BUILDING CONGRESS

NEW YORK, October 19, 2011 – Absent new sources of generating capacity, New York City’s electricity supply could fall below the thresholds needed to ensure reliability and prevent price spikes starting in 2016, according to Electricity Outlook: Powering New York City through 2030, a report issued today by the New York Building Congress.

While concluding that in-City generation and transmission capacity is adequate to meet the City’s electricity needs through 2015, the Building Congress found that it will be necessary to add an additional 1,000 MW of capacity, in addition to projects currently in the pipeline, between 2014 and 2016.  The additional capacity is required as a hedge against such potential risks as the closure of the Indian Point Energy Center or a strong economic recovery. 

The Building Congress analysis calls for more immediate action than an April 2011 forecast released by the New York Independent System Operator (NYISO), which concluded, “If demand grows as currently forecasted, it will take at least 10 years for a capacity need to occur, assuming planned additions occur and there are no unplanned retirements.”

New York Building Congress Energy Committee Chairman John Gilbert noted, “The NYISO forecast, while highly professional, relies on a set of assumptions that presents somewhat of a best case scenario, in terms of future generating needs.” Mr. Gilbert, who also is C.O.O. at Rudin Management continued, “Rather than allowing ourselves to be lulled into a false sense of security, we need to be prepared in advance should Indian Point be shut down or should we be fortunate enough to experience stronger economic growth than predicted over the next five years.  Such scenarios are a distinct possibility and must be factored into any discussion of future energy needs.”

Added Building Congress President Richard T. Anderson, sponsor of the study, “Complacency is not an option.  We must ensure that New York City maintains enough power in reserve to prevent the potential for blackouts or severe price volatility in consumer and business costs during periods of peak demand.  Given the amount of time it takes to move a new power plant or transmission line through the regulatory, financing and construction process, we need to start now.”

The Building Congress cited the following four risks to the City’s electricity outlook:

Risk #1:  Modest Economic Growth Estimates
The April 2011 NYISO forecast projects electricity demand in New York City to rise by less than half the annual rate of growth witnessed over the past decade.  NYISO cites the recession of 2007-2009 and the slow pace of recovery as the reason for its somewhat grim assessment. 

Despite two severe recessions, electricity demand in New York City grew at a rate of 1.2 percent per year between 2000 and 2010.  In its latest forecast, however, NYISO has dropped its projected growth rate to 0.5 percent per year over the next decade.  Such an anemic pace of recovery, while possible, would run counter to historic patterns, which have shown that New York City’s economy usually bounces back strong after a recession.

Risk #2:  Possible Indian Point Energy Center Closure
The NYISO forecast assumes that the licenses for two Indian Point nuclear reactors will be renewed in advance of their expiration in 2013 and 2015.  Together, these reactors, which generate 2,060 MW of power, provide 30 percent of New York City’s energy supply.

“First as a private citizen, then as a candidate and now as Governor of the State of New York, Andrew Cuomo has consistently voiced his determination to close Indian Point,” Mr. Anderson added.  “Whether you agree with his viewpoint or not, his intentions must be taken seriously.  At the same time, no one should fall under the illusion that Indian Point can be shut down prior to the creation of new generating sources. New York simply cannot absorb a 30 percent loss in generating capacity without harming its overall reliability or causing huge spikes in consumer costs.”

Risk #3:  Energy Efficiency Targets
NYISO projects that, absent the adoption of a wide range of energy efficiency measures, New York City’s overall energy usage will grow at a rate of 2.1 percent per year between now and 2021.  However, NYISO also projects that enhanced energy efficiency measures will reduce the actual rate of increase by 69 percent, for an annual yearly increase of just 0.3 percent. 

Thanks to new ‘smart grid’ technologies, energy-saving appliances, greater attention to energy efficiency in new building construction and retrofits, as well as consumer and business programs, energy conservation will continue to play an important role in the coming years.  If the ambitious targets set forth by NYISO prove unreachable, however the need for new generating capacity will intensify.

Risk #4:  Plant Retirements
The NYISO report estimates that just one current power plant – NRG’s 107MW Astoria Plant will be retired in the next two decades.  However, NYISO recognized in its report that pending State and Federal environmental legislation, which would limit certain emissions and pollutants, could impact more than half of New York’s generating capacity and force unplanned plant retirements. 

“By 2025, 9 New York City generating units, which collectively produce about 3,700 MW of electricity, will be 60 years old or more,” said Caswell F. Holloway, the City’s Deputy Mayor for Operations.  “In order to ensure reliability and improve the environment, we need to begin the process of replacing these aging power plants with cleaner, more efficient forms of generation.”

Progress Achieved
The Building Congress report notes that 1,320MW of generating and transmission capacity has been added since its last analysis made in 2005.  In addition, 1,100 MW of electric generating capacity will come on stream within the next year, with 700 MW more likely to be added by 2015.   Two new transmission facilities also have been completed since 2005.  Another line, running under the Hudson River, is slated for completion in 2013.  Combined, these three facilities will add 1,310 MW to the available in-City supply. 

“The City and State of New York, working with Con Edison, NYPA and independent power producers, deserve a great deal of credit for successfully bolstering the region’s electricity generating capacity in these past five years and implementing innovative conservation measures,” Mr. Gilbert said. “These efforts, along with the negative demand implications of the recent recession, have put us on much more solid footing than we envisioned five years ago.” 

Concluded Mr. Gilbert, “Rather than let our guard down, we must approach the coming years with the same sense of urgency as we did the previous five years.  Now is the time to be preparing for a stronger economy while also seeking to contain electricity costs and pave the way for the eventual replacement of New York’s aging and highly-polluting power plants.”

Electricity Outlook was prepared with the assistance of Rosemary Scanlon, a leading consultant on urban affairs and regional economics.  Spearheaded by the Energy Committee of the New York Building Congress, today’s report marks the fourth installment in the series.  To see the report in its entirety or request a copy, please visit the New York Building Congress website at www.buildingcongress.com or call 212.481.9230.

The New York Building Congress is a membership coalition of business, labor, association and government organizations promoting the design, construction and real estate industry in New York City.