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{{#Wiki_filter:March2012PotentialEnergyandEnvironmentalImpactsof DenyingIndianPointsLicense RenewalApplications ENT000481 Submitted: March 30, 2012 United States Nuclear Regulatory Commission Official Hearing Exhibit In the Matter of | |||
: Entergy Nuclear Operations, Inc. (Indian Point Nuclear Generating Units 2 and 3) | |||
ASLBP #:07-858-03-LR-BD01 Docket #:05000247 l 05000286 Exhibit #: | |||
Identified: | |||
Admitted: Withdrawn: | |||
Rejected: Stricken: Other: ENT000481-00-BD01 10/15/2012 10/15/2012 ProjectTeamDavidHarrison,Jr.,Ph.D.EugeneMeehanAlbertL.Nichols,Ph.D.AndrewFossNicholasHodgesNERAEconomicConsulting200ClarendonStreet,11thFloorBoston,Massachusetts02116Tel:+16179274500 Fax:+16179274501 www.nera.com NERAEconomicConsulting i ContentsExecutiveSummary................................................................................................................E-1I.IntroductionandBackground...................................................................................................1A.NRCsFinalSupplemental EnvironmentalImpactStatement..........................................1B.NewYorkStatesContention37.....................................................................................4C.Objectivesof ThisReport................................................................................................6D.Organizationof ThisReport............................................................................................6II.NewYorkStates ElectricitySystemandImplicationsforthe Energyand EnvironmentalImpactsoftheNo-ActionAlternative..............................................................................7A.OverviewofNewYorkStates ElectricitySystem...........................................................7 B.GovernmentSupportfor ExistingRenewablesandEnergyEfficiencyPrograms.............9C.CostsofAdditionalGenerationinNo-ActionAlternative..............................................14D.ImplicationsofRelativeCostsonthe MixofReplacement EnergyinNo-ActionAlternative.................................................................................................................... | |||
23E.Adverse EnvironmentalImpactsofGenerationAlternatives..........................................25 F.ConclusionsRegardingthe LikelyAdverse EnvironmentalImpactsoftheNo-ActionAlternative.................................................................................................................... | |||
33III.QuantitativeModelingofthePotential EnergyandAdverse EnvironmentalImpactsoftheNo-ActionAlternative.............................................................................................35A.OverviewofNEMS.......................................................................................................35B.BaselineConditions.......................................................................................................36C.Projected EnergyMarketImpactsofNo-ActionAlternative..........................................37 D.ProjectedAdverse EnvironmentalImpactsofNo-ActionAlternative.............................39IV.EvaluationofNewYorkStateContention37......................................................................41A.OverviewofMajorFlawsinNYS-37............................................................................41B.ConflationofBaselineandNo-ActionAlternative.........................................................42C.FailuretoAccountfortheIndirect EffectsofaModifiedBaselineonthe EnergyandEnvironmentalImpactsUndertheNo-ActionAlternative..............................................53D.Summary Evaluationofthe Energyand EnvironmentalClaimsofNYS-37...................59V.Conclusions..........................................................................................................................61References................................................................................................................................62AppendixA:InformationonRecent EnergyDevelopmentsinNewYorkState.........................68AppendixB: TheNationalEnergyModelingSystem................................................................93 AppendixC:InformationonPotentialCanadianHydroandAssociated Transmission............101 NERAEconomicConsulting iiListofFiguresFigure1.U.S.WindCapacityAdditionsandAvailabilityofFederalRenewable EnergySubsidies.........................................................................................................................9Figure2.RenewablePortfolioStandardBudgets...................................................................... | |||
12Figure3.NYSERDAAnalysisofPotentialContributionstoMeeting15x15ConservationGoal......................................................................................................................................13Figure4. EnergyEfficiencyPortfolioStandardBudgets...........................................................14Figure5.HypotheticalAnalysisofChangeinGenerationfromBaselinetoNo-ActionAlternative.................................................................................................................... | |||
16Figure6.EIA's EstimatesofLevelizedCostsforNewCapacity, ExclusiveofGovernment Support..........................................................................................................................17Figure7.ImpactofAdditionalRenewablesonSubsidyRatesperMWh...................................19Figure8.EEPS Energy EfficiencySupplyCurveCost$perMWhVersusCumulativeGWh....22 Figure9.HeightComparisonofWind TurbineandOtherStructures.........................................29Figure10.LocationofCurrentandProposedWindFarmsinNewYork...................................30Figure11.HypotheticalIllustrationofChangeinBaselineGeneration......................................43Figure12.HypotheticalAnalysisofImpactofNo-ActionAlternativewithRevisedBaseline...44Figure13.NYISOProjectionsofNewYorkStateElectricitySales...........................................47Figure14.AnnualGenerationCapacityAdditions(MW)..........................................................49Figure15.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW)....................50Figure16.ImpactofMoreBaselineRenewablesontheMarginalCostofAdditionalRenewables......................................................................................................................................55Figure17.ImpactofReducedDemandinBaselineonMarginalCostofFossilGenerationtoReplaceIPEC................................................................................................................57FigureA-1.PotentialContributionstowardEnergy EfficiencyGoalBasedonNYSERDAAnalysis........................................................................................................................73FigureA-2.HistoricalandNYISOs ExpectationofSavingsfrom EnergyEfficiencyPrograms74 FigureA-3.NYISOProjectionsofNewYorkState ElectricitySales........................................77FigureA-4.NYISOZones........................................................................................................78FigureA-5.NYISOProjectionsofDownstate(ZonesG-K)ElectricitySales............................79FigureA-6.AnnualGenerationCapacityAdditions(MW)........................................................81FigureA-7.CumulativeGenerationCapacityAdditionsSince2000(MW)...............................82FigureA-8.GeographicDistributionofCumulativeGenerationCapacityAdditionsSince2000(MW)............................................................................................................................83FigureA-9.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW)..................84FigureA-10.GeographicDistributionofProjectsinCurrentInterconnectionQueue(MW)......85FigureA-11.AEOProjectionsofHenryHubNaturalGasPrices..............................................87FigureA-12.AEOProjectionsofDeliveredNaturalGasPricestoElectricityGeneratorsinNewYorkState.....................................................................................................................8 8FigureB-1.StructureofNEMS................................................................................................94 NERAEconomicConsultingiiiListofTablesTable1. EstimatesofMarginalCostsofGeneration..................................................................23Table2.AirPollutantsbyGenerationPlant Type......................................................................25Table3.AverageEmissionRates..............................................................................................26Table4.DirectAirEmissionsfromWoodResidueBiomassFacilities(lbs/MWh)....................31Table5.ProjectedU.S.BaselineGenerationbyFuelType........................................................37Table6.IPECsLostOutputandProjectedU.S.MarketResponsesinNo-ActionAlternative (2016-2025)..................................................................................................................38Table7.ProjectedChangesinGenerationinNo-ActionAlternative(2016-2025).....................39Table8.ProjectedIncreasesinAverageAnnualU.S.Air EmissionsinNo-ActionAlternative (2016-2025)..................................................................................................................40TableA-1.NewYorks30x15Renewable EnergyGoal(million MWh)..............................69 TableA-2.ProductionSubsidiesforMainTierGenerators.......................................................71 TableA-3.ImplicitSubsidiesfromNewYorksRPS................................................................71TableA-4.OriginalandCurrentIn-ServiceDatesforProjectsinInterconnectionQueue(MW)86TableC-1.ContaminantsprojectedtobereleasedduringconstructionoftheLowerChurchillfacilitiesandtheirassociatedlocaltransmissionlines..................................................103 NERAEconomicConsulting ivListofAcronymsAEO:Annual EnergyOutlookARRA:AmericanRecoveryandReinvestmentActof2009CHP:CombinedHeatandPowerDOE:U.S.Departmentof EnergyEEPS:EnergyEfficiencyPortfolioStandardEIA:EnergyInformationAdministration FSEIS:FinalSupplemental EnvironmentalImpactStatementIPEC:IndianPoint EnergyCenterIP2:IPECUnit2IP3:IPECUnit3NEMS:National EnergyModelingSystemNGCC:NaturalGasCombinedCyclegeneratingunitNRC:NuclearRegulatoryCommissionNYS-37:Contention37filedbyNewYorkStateNYSERDA:NewYorkStateEnergyResearchandDevelopmentAuthority PTC:Production TaxCreditRGGI:RegionalGreenhouseGasInitiativeRPS:RenewablePortfolioStandardSBC:SystemBenefitsChargeSEIS:Supplemental EnvironmentalImpactStatement NERAEconomicConsulting E-1ExecutiveSummaryAcentralissueaddressedintheFinalSupplementalEnvironmentalImpactStatement(FSEIS)regardingthelicenserenewalforIndianPoint EnergyCenter(IPEC)isthecomparativeenvironmentalimpactsbetweenrenewalofIPECsoperatinglicensesbytheNuclearRegulatoryCommission(NRC)andtheno-actionalternativeinwhichtheIPEC licenseswouldnotberenewed.Inordertoevaluatethedifferencesinenvironmentalimpactsbetweenthesetwoscenarios,wemustfirstidentifythebaselineelectricmarketsupplythatwouldbeusedtomeetNewYorkdemand(i.e.,assumingcontinuedIPECoperations).Wemustthenassesshowtheno-actionalternativewouldchangethissupplytoaccountforthelostbaseloadIPECgeneration.Electricitymarketanalysisisrequiredbecausetheenvironmental impactsofmovingfromthebaselinetotheno-actionalternativedependprimarilyuponwhatpowersourceswouldclearthecompetitivemarketsandbedispatchedtoreplacethesubstantialamountofbaseloadgenerationthatiscurrentlysuppliedbyIPEC.Weperformedsuchanelectricitymarketanalysisbothbyassessingtherelativecostsofalternativepowersourcesandbyconductingempiricalmodelingwithastate-of-the-artandwidelyusedenergymarketmodel.Undertheno-actionalternative,ouranalyses showthatIPECbaseloadgenerationwouldbereplacedprimarilybyfossil-fueledgenerationfromexistingnaturalgasandcoalfacilities.Theseresultsestablishthat(1)theadverseenvironmentalimpactsoftheno-actionalternativeassessedintheFSEISare,ifanything,underestimated;and(2)NewYorkStateisincorrectinitsclaimsunsupportedbyanyempiricalanalysisthattheFSEISoverstatesenvironmental impactsbecausereplacementgenerationwouldbeprimarilyrenewableenergyandconservation.A.Background1.OverviewofFSEISConclusionsTheFSEISidentifiesandassessesthepotentialenvironmentalimpactsofvarioussourcesofreplacementenergyifIPECwerenotavailable. Thesealternativesincludenewnaturalgasfiredplants,purchasedpower,conservation,andcombinationsofreplacementenergysources.TheFSEISalsonotesthatNEPArequiresconsiderationoffeasible,non-speculativealternatives, andthatalternativesthatareeconomicallyimpracticalareexcluded. TheroleofNEPAreviewinthelicenserenewalprocessiscircumscribed,astheNRCindicatedwhenitpromulgateditsregulations:GiventheuncertaintiesinvolvedandthelackofcontrolthattheNRChasinthe choiceofenergyalternativesinthefuture,theCommissionbelievesthatitisreasonabletoexerciseitsNEPAauthoritytorejectlicenserenewalapplicationsonlywhenithasdeterminedthattheimpactsoflicenserenewalsufficientlyexceedtheimpactsofalloralmostallofthealternativesthatpreservingtheoptionoflicenserenewalforfuturedecisionmakerswouldbeunreasonable.(EnvironmentalReviewforRenewalofNuclearPowerPlantOperating Licenses,61Fed.Reg.28,467,28,473(June5,1996)(NYS000127)) | |||
NERAEconomicConsulting E-2TheFSEISconcludesthattheadverseenvironmentalimpactsoflicenserenewalforIP2andIP3arenotsogreatthatpreservingtheoptionoflicenserenewalforenergyplanningdecisionmakerswouldbeunreasonable.FSEISat9-8(NYS00133C).2.NewYorkStateCritiqueoftheFSEISConclusionsTheStateofNewYork,initsStatementofPositiononAdmittedConsolidatedContentionsNYS-9,33,and37(collectively,NYS-37)arguesthattheFSEISisdeficientbecauseitignoresNewYorkStatescommentsthattheenvironmentalimpactoftheno-actionalternativewouldbemuchlessthanassumedintheFSEISandlessthantheenvironmentalimpactsoflicenserenewal. ThecoreoftheNYS-37argumentisthattheFSEISshouldhaveevaluatedenvironmentalimpactsonthepresumptionthatbaseloadIPECgenerationwouldbelargelyreplacedbyadditionalrenewablegenerationandenergyconservation,ratherthanbysubstantialfossil-fuelgenerationasassumedinmanyoftheFSEISalternatives.NYS-37pointstovariousrecentenergyandrelateddevelopmentsallegedlyignoredbytheFSEIS,including existingNewYorkStateprogramstoencouragerenewablesandenergyconservationaswellasrecentreductionsinprojectedelectricitydemandandnaturalgasprices.NYS-37,however,doesnotincludeanyempiricalanalysestosupportitsassertions.3.ReportObjectivesTheprincipalobjectiveofthisreportistoprovidetheresultsofouranalysesofthepotentialenergyandenvironmentalimpactsoftheno-actionalternative.Asnoted,itisnecessarytoconsidertheimpactsontheelectricitysystembecauseenvironmentalimpactswillbedrivenprimarilybythemixofgenerationthatwouldreplacethelostbaseloadIPECgenerationiflicenseswerenotrenewed.Informationonthelikelymarket-drivenelectricityimpactsoftheno-actionalternativeallowsustocompareourfindingstothoseintheFSEISandtoevaluatetheargumentsprovidedbytheStateofNewYorkanditsexperts. ToassessthevalidityofthecentralargumentofNYS-37,itisnecessarytoconducteconomicanalysesofalternativesourcesofpowerasthatistheonlywaytodetermineasNYS-37anditsexpertsallegeiftheconservation/renewablealternativeissodominantthatotheralternatives,includingthoserelyingonfossilgeneration,wouldnotplaya significantroleinreplacinglostIPECgeneration.B.ConclusionsRegardingPotentialEnergyandEnvironmentalImpactsoftheNo-ActionAlternativeIPECisahighlyefficientnucleargeneratingfacilitythatoperatesover90percentofthetimeandprovidesapproximately10percentofthetotalelectricityconsumedinNewYorkState. | |||
Undertheno-actionalternative,itsbaseloadenergywouldhavetobereplaced. ToidentifytheenvironmentalimpactsofthegenerationthatwouldlikelybeusedtoreplaceIPECbaseloadpower,wedevelopedtworelatedevaluations.First,weconsideredthewholesaleelectricmarketstructureinNewYorkStatewhichemphasizesminimizingthecostsofmeetingelectricitydemandwhilesatisfyingallreliabilityandoperatingrequirementsandtheimplicationsofthe NERAEconomicConsulting E-3relativecostofreplacementalternatives.Second,wedevelopedempiricalestimatesoflikelyreplacementgenerationbaseduponmodelingresultsfromastate-of-the-artenergymodeltheNational EnergyModelingSystem(NEMS)developedandoperatedbythe EnergyInformationAdministration(EIA)withintheU.S.Departmentof Energy.NEMSallowsustodevelopestimatesofthechangesingenerationbytypeaswellasthechangesinvariousemissionsthatwouldoccurifIPECgenerationwerenotavailable.1.ConclusionsRegardingthePowerMixThatWouldBeDispatchedIfIPECBaseloadGenerationWereLostThefollowingareourconclusionsregardingthegenerationthatwouldlikelybedispatchedundertheno-actionalternative.Replacementenergywouldcomeprimarilyfromnaturalgasandcoalpowerplants,withamuch smalleramountfromrenewablesandenergyconservation,because: | |||
Thecostsofincreasingtheutilizationofexistingnaturalgasandcoalpowerplants,orbuildingnewnaturalgasplantsarelowerthanrenewablesorconservation;and HundredsofmillionsofdollarsofadditionalannualStatesubsidies(ultimatelypaid byNewYorkStateselectricityconsumersthroughtheirmonthlyutilitybills)wouldberequiredtoforceadditionalrenewablesandenergyefficiencyintotheelectricitysystemtoovercometheirhighercosts;ThedevelopmentscitedinNYS-37,includingNewYorkStates30x15renewableenergy goaland15x15energyefficiencygoal,wouldrenderrenewablesandconservationevenlesseconomicrelativetootheralternatives,andthusevenlessviablethanundertheconditionsnotedintheFSEIS.2.ConclusionsRegardingEnvironmentalImpactsoftheReplacementPowerMixElectricitymarketmodelingcanbeusedtopredicttheresourcesthatwouldlikelyreplaceIPECsbaseloadgenerationandthuswoulddeterminethepotentialadverseenvironmental impactsofthisreplacementenergy.Inexaminingindetailtheenvironmentalimpactofwhatwebelieveisthemostlikelyreplacementmix,wearenotsuggestingadeparturefromtheNRCpracticeofexaminingmanyreplacementalternatives.However,themostlikelysourceof replacementenergyshouldbeaccorded significantweight.AreviewoftheadverseenvironmentalimpactsofthisscenarioalsoisimportantbecauseitplacesNYS-37inpropercontext.EvenwererenewablesourcestoplayamajorroleasreplacementgenerationforIPEC whichaswedemonstrate,theywouldnotNYS-37impliesthatrenewablereplacementsources donothaveenvironmentalimpacts. Thisisnotaccurate.Thus,wealsoprovideinformationon NERAEconomicConsulting E-4thegeneralenvironmentalimpactsofrenewablegenerationtoprovidefullandaccurateinformation.Ouranalysesproducethefollowingconclusions:Themostlikelymixofreplacementpowerprimarilyfossil-firedunitswouldleadto significantincreasesinairemissions,includinganincreaseinannualcarbondioxideemissionsofabout13.5millionmetrictonsperyear(whichisnearlyaslargeastheRegionalGreenhouseGasInitiatives(RGGI)15millionmetrictonsofplannedCO 2emissionreductionbetween2012and2018);andReplacementalternativesthatinvolverenewableswouldhaveadverseenvironmentalimpactsincludingincrementalimpactsresultingfromthenewtransmissioninfrastructurethatwouldberequiredtodeliverenergyproducedbyrenewablestosoutheasternNewYorkwhereitisneeded.C.ConclusionsRegardingtheFundamentalFlaws inNYS-37andRelatedExpertTestimonyNYS-37anditsexpertscometocompletelydifferentconclusionsregardingthelikelysourcesofreplacementenergyforIPECgeneration.However,noanalyseswereprovidedtosupporttheirassertions.Weevaluatedthelimitedinformationtheyprovided.OurreviewleadsustoconcludethatthematerialsinNYS-37andtherelatedexpertreportshavefourfundamentalflaws.1.Failuretorecognizemarketforcesandcost-minimization.NYS-37andtheexpertreportsfailtoaccountforthekeyrolethatmarketforceswouldplay(andhencetheimportanceofrelativecostsandcost-minimization)indeterminingtheresourcesthatwouldbedispatchedundertheno-actionalternative.ItiscriticaltorecognizethatNewYorkStatehasacompetitiveelectricitymarket.Asaresult,decisionsregardingnewinvestmentsarelargelymadebymerchantentitiesthatwouldtendtobuildlow-costfacilities,and facilitiesaredispatchedtoprovideenergyatminimumcostwhilemeetingreliabilityandoperatingrequirements.Marketforcesandcost-minimizationmeanthatlower-costfossilgenerationratherthanhigher-costrenewablegenerationorenergyefficiencywouldconstitutethebulkofgenerationtoreplaceIPECsbaseloadgeneration. | |||
2.Conflationofdevelopmentsthataffectthebaseline,nottheno-actionalternative.NYS-37anditssupportingwitnessesmentionahostofdevelopmentsthattheyclaimwerenotconsideredbytheNRCstaffindevelopingtheFSEISandthattheyclaimwouldleadtodifferentconclusionsregardingtheenergymixandenvironmentalimpactsoftheno-actionalternative. ThesedevelopmentsincludeNewYorkStatesrenewableandenergyefficiencygoals,lowerelectricitydemandduetotherecession,recentincreasesinelectricitygenerationcapacityandtransmission systemexpansions,andlowernaturalgasprices. TheflawpervasiveintheNYS-37reasoningisthatthesedevelopmentsrepresentpartofthebaselineconditionsthatwouldoccurirrespectiveofIPECsstatus.Putanother NERAEconomicConsulting E-5way,thevariousfactorsidentifiedbyNYS-37anditsexpertssuchastheadditionalrenewablegenerationorenergyefficiencyresultingfromNewYorkStategoalswouldnotbeavailabletoreplacethebaseloadIPECgenerationiftheIPECgenerationwerenotavailablebecausetheywouldalreadyexist. | |||
3.Failuretoevaluatetheimpactsofbaselinechanges.Totheextentthatthedevelopmentstheyciteaffectthebaseline,thosedevelopmentswouldifanythingreducetherolesofconservationandrenewablesasIPECreplacementsundertheno-actionalternative. The developmentsemphasizedbyNYS-37,includinglowerelectricitydemandandlowernaturalgasprices,wouldtendtoincreasethesubsidiesthatwouldbenecessarytofundthehighermarginalcostsofthosealternativeswhileatthesametimedecreasingthemarginalcostsoffossilresourcestherebymakingrenewablesandenergyefficiencylesseconomicrelativetofossil-fueledpoweroptions. | |||
4.Failuretoprovideempiricalmodeling.NYS-37andtheexpertsfailtoprovideanystudiesorotheranalysesquantifyinghowtheelectric systemwouldrespondundertheno-actionalternative.Incontrast,ouranalysisusingNEMSshowsthatconservation(intheformofresponsetohigherprices)andrenewableswouldplayminorroles,andthattheprimaryimpactwouldbeincreasedgenerationfromfossil-firedsources. ThisdeficiencyonthepartofNYS-37anditsexpertsisimportant since,withoutsomeempiricalmodeling,theycannotprovideareasonablebasisforevaluatingwhichalternativesactuallywouldbedevelopedanddispatchedifIPECgenerationwerenotavailable.D. OverallConclusionsAsnotedabove,ouranalysesleadustoconcludethat,contrarytotheclaimsinNYS-37anditsaccompanyingdocuments,additionalconservationandrenewableswouldbeunlikelyto play significantrolesundertheno-actionalternative.Incontrast,ouranalysesandempiricalmodelingindicatethatthereplacementmixwouldbedominatedbyfossil-fuelgeneration,includingnaturalgasandcoalgeneration,withmodestcontributionsfromenergyconservationandadditionalrenewables.Thus,ouranalysesdemonstratethattherangeofscenariosconsideredintheFSEISwassufficient.OuranalysesfurtherdemonstratethattheconclusionreachedintheFSEISthattheimpactsoflicenserenewaldidnotexceedtheimpactsofalloralmostallofthealternatives,includingtheno-actionalternativewasreasonable.Ifanything,theFSEISunderstatesthelikelyadverseenvironmentalimpactsoftheno-actionalternativefortwoprimaryreasons:1.Ourassessments showthatthecombination scenariosthattheFSEISevaluatesoverstatetherolesthatrenewablesandconservationwouldbelikelytoplayandunderstatethelikelyroleoffossilsources,with significantimplicationsforthepotentialadverseenvironmentalimpactsoftheno-actionalternative. | |||
NERAEconomicConsulting E-62.TheFSEISassumesthatincreasedfossilgenerationwouldbeprovidedprimarilybynew,highlyefficientandtightlycontrollednaturalgascombinedcycleunits.Infact,asignificantamountofthereplacementfossilpowerwouldbelikelytocomefromunusedcapacityofoldernaturalgas-firedunitsorcoal-firedunits,bothofwhichtendtohavehigheremissionratesthannewnaturalgasunits,andthus,moreadverseenvironmentalimpacts. | |||
NERAEconomicConsulting 1I. IntroductionandBackgroundIPECisanuclearpowerstationinBuchanan,NewYorkconsistingoftwooperatingunits(IP2andIP3) 1withtotalnetsummercapacityofapproximately2,040megawatts(MW)andtotalnetgenerationin2010ofapproximately16.3millionmegawatt-hours(MWh)(NYISO2011c,p.34).IPECscapacityutilizationratein2010wasthusover90percent. | |||
2IPECsgenerationin2010wasapproximately10percentofNewYorkStatestotalelectricityconsumptionandapproximately17percentoftotalconsumptioninsoutheasternNewYorkState(assumedtocompriseNYISOZonesG-K)(NYISO2011c,p.21).TheNRCiscurrentlyconsideringrenewalofIPECsoperatinglicenses. ThetermofIP2scurrentlicenseextendstoSeptember28,2013,andthetermofIP3scurrentlicense extendstoDecember12,2015.Aspartoftherenewalprocess,inDecember2010,NRCstaff issuedanFSEISconcerning site-specificenvironmentalissuesatIPEC(NRC2010).InDecember2011,theStateofNewYorkfiledNYS-37andpre-filedtestimonychallengingtheadequacyoftheFSEIS.NYS-37claims,amongotherthings,thattheFSEISreliesonout-of-dateinformationandasaresultgivesinadequateconsiderationtoconservation 3andrenewableenergyaspossiblesourcesofreplacementforelectricityoutputfromIPECundertheno-action alternative.A.NRCsFinalSupplementalEnvironmentalImpactStatementThissectionprovidesinformationontheenergyalternativestolicenserenewaladdressedintheFSEIS.Itbeginswithinformationontheno-actionalternative,whichdoesnotspecifypotentialreplacementsforIPECsbaseloadenergy. Thissectionthenprovidesinformationon alternativesifIPECsbaseloadenergyisnotavailable.1.No-ActionAlternativeTheNRCevaluatesano-actionalternativeinSection8.2oftheFSEIS.TheFSEISstatesinthecontextoftheno-actionalternativethatifIPECslicenseswerenotrenewed,ThepowernotgeneratedbyIP2andIP3duringthelicenserenewaltermwouldlikelybereplacedby(1)powersuppliedbyotherproducers(eitherexistingornewunits)usinggeneratingtechnologiesthatmaydifferfromthatemployedat 1Unit1hasnotoperatedsince1974. | |||
216,300,000MWh/(2,040MW*8760hoursperyear)=91percent 3Someobserversdistinguishbetweenenergyefficiencyandconservation.Efficiencymaybeusedtomeantechnologiesthatprovideessentiallythesameservicesbutwithlowerenergyuse,suchasreducingtheelectricityconsumedbyarefrigeratorwithoutaffectingitscoolingabilityorotherfeatures.Conservationmaybeusedto meanbehavioralchangesthataffecttheserviceprovidedtoreduceenergyconsumption,suchasturningupthethermostatinthesummertoalesscomfortabletemperaturetoreduceelectricityconsumption.Thisdistinctionisirrelevanttodiscussionsoftotalelectricitydemand.Thus,weusethesetermsinterchangeablyhereinandoftenrefersimplytoconservation. | |||
NERAEconomicConsulting 2IP2andIP3,(2)demand-sidemanagementandenergyconservation,or(3)somecombinationoftheseoptions(FSEISp.8-22).Section8.2oftheFSEISevaluatestheenvironmentalimpactsoftheno-actionalternativewithoutanyspecificassumptionsaboutenergyreplacements.2.AlternativeEnergySources TheNRCevaluatesalternativeenergysourcesinSection8.3oftheFSEIS. ThefivesubsectionsofthispartoftheFSEISrelateto(1)naturalgas-firedcombinedcyclegeneration;(2)purchasedpower;(3)conservation;(4)alternativesdismissedfromindividualconsideration; and(5)combinationsofalternatives. Thesefivecategoriesofalternativeenergysourcesarediscussedinturnbelow.a.New Gas-FiredCombined-CycleUnitsTheFSEISincludesanalternativethatwouldinvolvetheconstructionoffivenewnaturalgas-firedcombinedcycle(NGCC)unitswithacombinedcapacityof2000 MW. Thisalternativewasalsoconsideredin Entergys EnvironmentalReportandintheDraftSEIS.TheFSEISassumesthattheseunitswouldhavelowCO 2emissionratesrelativetootherfossilunits(becauseoftheirrelativelyhighfuelefficiency)andwouldbetightlycontrolledforemissionsof conventionalpollutants.Someofthepotentialenvironmentalimpactsincludingimpactsrelatedtolanduse,ecological,andwaterdependonthe sitingoftheNGCCunits.b.PurchasedPowerIntheFSEIS,thepurchasedpoweralternativerelatestobringingpowerintosoutheasternNewYorkwhereIPECprovidesenergyforconsumers. TheFSEISnotesthatNewYorks transmission systemhaslimitedcapacitytobringinlargeamountsofpowerfromoutsidethedownstatearea,thoughtheFSEISpointstosomeproposedprojectsthatcould,ifbuilt,increasetransmissioncapacity. TheFSEISstatesinverygeneraltermsthekindsofenvironmentalimpactsthatcouldbeassociatedwithnewtransmissionprojects,butdoesnotevaluatethemformally,notingthateachsuchprojectwillrequireitsownenvironmentalreviewprocessbyotherStateandFederalagencies.Asaresult,theFSEISdoesnotpresentasummaryanalysisoftheenvironmentalimpactsofthepurchasedpoweralternative.c.ConservationTheFSEISmentionsseveralelectricityconservationprograms,includingNewYorksEnergyEfficiencyPortfolioStandard,whichisintendedtoassistinachievingtheStatesgoalof reducingenergyusefromforecastedlevelsby15percentby2015(15x15).AlthoughitdoesnotidentifyoraddressthefeasibilityofspecificincrementalconservationmeasuresthatcouldbeusedtomakeupforlostbaseloadIPECoutput,theFSEISconcludesthattheenvironmentalimpactswouldgenerallybesmall. | |||
NERAEconomicConsulting 3d.AlternativesDismissedfromIndividualConsiderationTheFSEISnotesthealternativesthatNRCconsideredbutdeemedindividuallyinadequatetoreplaceIPECsbaseloadenergy. ThealternativesthatNRCdismissed,forvariousreasons,fromfurtherconsiderationarerenewables(includingwind,solar,geothermal,andothertypesofrenewables),combinedheatandpower,oil-firedgeneration,supercriticalcoal-firedgeneration,anddelayedretirementofotherpowerplants.e.CombinationAlternativesAstheFSEIS(p.8-59)notes,[t]herearemanypossiblecombinationsofalternativesthatcouldbeconsideredtoreplacethepowergeneratedbyIP2andIP3. TheFSEISevaluatestwo possiblecombinationsandpresentssummarytableswithqualitativeassessmentsofvariouscategoriesofimpacts.i.CombinationAlternative1CombinationAlternative1involves:continuedoperationofeitherIP2orIP3;obtaining600MW(e)fromrenewableenergysources(primarilywindwith smalleramountsofhydropower,biomass,andpossiblylandfillgas);andimplementing600MW(e)ofconservationprogramsbasedontheStates15x15 energyconservationprogramandothereffortstoimproveenergyefficiencyorincreaseconservation(FSEISp.8-60).TheFSEISnotesthattherenewableenergywouldprobablybewindorbiomassenergy,butNRCdidnotperformanin-depthimpactanalysisofthesepotentialreplacements(FSEISp.8-61).Itconcludesthattheenvironmentalimpactsoftheconservationprogramsarelikelytobenegligible(FSEISp.8-62).ii.CombinationAlternative2CombinationAlternative2involves:repoweringanexistingfossil-poweredplantindownstateNewYorkwithanew400MW(e)to600MW(e)combined-cyclepowerplant;obtaining600MW(e)fromrenewableenergysources(primarilywind,biomass,newhydropower,andlandfillgas);andimplementing1000to1200MW(e)ofconservationprograms(FSEISp.8-60). | |||
NERAEconomicConsulting 4TheFSEISnotesthattheenvironmentalimpactsofCombinationAlternative2wouldincludethesametypesofimpactsasthealternativeinwhichIPECsenergyisreplacedentirelybyenergyfromnewNGCCunits,buttheimpactsassociatedwithnewNGCCunitswouldbeona smallerscaleinCombinationAlternative2(FSEISp.8-67).Italsonotesthattherenewableenergyimpactswouldbe similartothoseinCombinationAlternative1(FSEISp.8-67).ItconcludesthattheenvironmentalimpactsoftheconservationprogramswouldbelargerthaninCombinationAlternative1butarelikelytobenegligible(FSEISp.8-67).3.SummaryofStaffRecommendationsRegardingtheEnvironmentalImpactsofIndianPointLicenseRenewalTheFSEISincludesthefollowingrecommendationfromtheNRCstaff:thattheCommissiondeterminethattheadverseenvironmentalimpactsoflicenserenewalforIP2andIP3arenotsogreatthatpreservingtheoptionoflicenserenewalforenergyplanningdecisionmakerswouldbeunreasonable(FSEIS,p.9-8).B.NewYorkStatesContention37TheStateofNewYorkhassubmittedcommentsthroughoutthelicenserenewalprocesscriticaloftheenvironmentalimpactassessmentspreparedbytheNRC. TheDecember2011pre-filedtestimonyaddressesthethreeadmittedconsolidatedcontentions(9,33,and37).Wereferto NewYorkStatespositionsinthesecontentionscollectivelyasNYS-37.1.OverviewofNYS-37CoreClaimsThecoreclaiminNYS-37isthattheFSEISreliesonobsoleteandinaccuratedataandassumptions(p.1)aboutelectricitydemandand supplyinNewYork. TheStatecontendsthat,asaresult,theFSEISgivesinadequateattentiontotheno-actionalternativeand,specifically,theavailabilityofothersourcesofenergynotablyrenewableenergyandenergyefficiencyasreplacementsforIPEC.NYS-37argues,withoutanysupportinganalyses,thatwhentherecentchangesinNewYorkStatesenergymarketaretakenintoaccount,theno-actionalternativewouldresultinsubstantiallylowerenvironmentalimpactsthanthoseassumedintheFSEIS(pp.1-2).ThefollowingexcerptfromNYS-37summarizestheStatescoreclaims.ThecoreclaiminNYS-37isthatintheFSEIS,NRCstaffhavefailedtopresentananalysisthattakesahardlookattheavailabilityandenvironmentalimpactofcleanenergysourcesandenergyefficiencyandconservationmeasuresthatwouldreplaceIndianPointspowerifrenewallicenseswerenotgranted.ThedocumentunreasonablyreliesonobsoleteandinaccurateinformationandignoresNewYorkscriticalcommentsonDSEISthatdemonstratethattheenvironmentalimpactofrejectingrelicensingofIndianPointwillbe(1)muchlessthanthat NERAEconomicConsulting 5assumedintheFSEISand(2)willbelessthantheenvironmentalimpactofrelicensingIndianPoint(NYS-37,p.3).NYS-37alsocriticizestheFSEISfornotprovidingadetailedanalysisofthepotentialimpactsoftheno-actionalternative.Intheabsenceofacomplete, site-specificenvironmentalimpactanalysisofthe no-actionalternative,theFSEISfailstoprovidethepublicorthedecision-makerswithafullandfairassessmentofthecostsandbenefitsofrelicensing(NYS-37,p.70).2.SpecificEnergyMarketDevelopmentsEmphasized inNYS-37NYS-37putsgreatemphasisonitsclaimthattheFSEISignoresvariousrecentdevelopmentsrelatedtoelectricitysupplyanddemandinNewYork.ThefollowinglistsummarizestherecentdevelopmentsemphasizedinNYS-37.1.NewYorksgoalofobtaining30percentofelectricitydemandfromrenewablesby2015(30by15)andtheadditionalrenewablegenerationithasencouraged;2.NewYorksgoalofreducingelectricitydemandby15percentin2015relativetothedemandforecastproducedin2007whenthegoalwasset(15by15)andtheenergyconservationithasspawned;3.SignificantdecreasesinelectricitydemandinNewYorkanddecreasesinforecastsoffutureelectricitydemandduetotherecessionandthe sloweconomicrecovery;4.NewYorksrecentandproposedgenerationcapacityadditions;5.Increasedsupplyandlowerforecastpricesfornaturalgas;and6.NewtransmissionlinesthatincreasethetransfercapabilitythatisavailabletodeliverpowertothedownstateregionservedbyIndianPoint. | |||
Inadditiontothesepolicyandenergymarketdevelopments,NYS-37andtheexpertreportsalsoprovideestimatesofthelevelofpotentialfutureresourcesthatcouldreplacegenerationatIndianPointincludingrenewables,energyconservation,andpurchasedpowerthroughtransmissionadditionsandupgradesalthoughthesourcesoftheseestimatesdonotpredictthatthesepotentialresourcesactuallywouldbeputinplaceifIndianPointgeneration werenotavailable.Indeed,asdiscussedbelow,despitecallingforasite-specificenvironmentalimpactanalysisoftheno-actionalternative(p.70),NYS-37providesnoempiricalestimatesofthechangeinthegenerationmixortheadverseenvironmentalimpactsthatwouldresultifIPECsbaseloadenergywerenotavailable. | |||
NERAEconomicConsulting 6C.ObjectivesofThisReportTheprincipalobjectiveofthisreportistoprovideinformationonthepotentialenergyandenvironmentalimpactsoftheno-actionalternative.Asnoted,itisnecessaryfirsttoconsidertheimpactsontheelectricitysystembecauseenvironmentalimpactswillbedrivenprimarilybythemixofgenerationthatwouldreplacethelostbaseloadIPECgenerationiflicenseswerenotrenewed.Informationonthelikelyelectricitymarketimpactsoftheno-actionalternativeallowsustocompareourfindingstothoseintheFSEISandtoevaluatetheargumentsprovidedbytheStateofNewYorkanditsexperts. ToassessthevalidityofthecentralargumentofNYS-37,itisnecessarytoconducteconomicanalysesofalternativesourcesofpowerasthatistheonlywaytodetermineifasNYS-37andtheexpertscontendtheconservation/renewablealternativeissodominantthatotheralternatives,includingthoserelyingonfossilgeneration,shouldbeconsideredrelativelyunimportant.D.OrganizationofThisReportTheremainderofthereportisorganizedintofourchapters. Thenextchapter(ChapterII)providesanoverviewofNewYorkStateselectricitysystemandtherelativecostsofalternative futuregeneration,allowingustodevelopassessmentsofthelikelymixofreplacementgenerationifIPECbaseloadgenerationwerelost.Thechapterincludesadiscussionofthepotentialenvironmentalimpactsofdifferentreplacementpoweralternatives.ChapterIIIprovidestheresultsofourNEMSmodelingofthepotentialreplacementpowermixandresultingenvironmentalimpactsifIPECbaseloadgenerationwerenotavailable.ChapterIVusestheresultsofouranalysesandotherinformationtoevaluatethecontentionofNewYorkStateanditsexpertsthattheFSEISshouldbebaseduponareplacementmixdominatedbyrenewableandenergyconservation. ThatchapteridentifiesfourmajorflawsinherentintheclaimsofNewYork Stateanditsexpertsthatexplaintheerrorsintheirconclusions.Finally,ChapterVsummarizesourconclusions. | |||
NERAEconomicConsulting 7II.NewYork StatesElectricitySystemandImplicationsforthe Energyand Environmental ImpactsoftheNo-ActionAlternativeThischapterbeginswithanoverviewofNewYorkStateselectricitysystemandthecentralimportanceofcostminimizationindeterminingwhichtypesofgenerationtechnologiesarebuiltanddispatchedtomeetelectricitydemand.Wethenconsidertheeffectsofgovernmentsupport,focusingonNewYorkStatesupportforexistingrenewablesandenergyefficiencyprograms.WethenconsiderthecostsofpotentialfuturereplacementgenerationifIPECgenerationwerenotavailableundertheno-actionalternative,notingthecrucialdistinctionbetweenbaselineconditionsandchangesingenerationthatcouldoccurundertheno-actionalternative.Weconsidertheimplicationsofthiscostinformationonthelikelymixof replacementgeneration. Thenextsectionofthischapterdescribesingeneraltermstheadverseenvironmentalimpactsofalternativesourcesofreplacementgeneration. Thefinalsectionprovidesourconclusionsregardingthelikelyadverseenvironmentalimpactsoftheno-actionalternativebasedupontheseanalyses.A. OverviewofNewYorkStatesElectricitySystemThissectiondiscussestheNewYorkStateelectricity systemandtheimportanceofcostminimizationinthedevelopmentanddispatchofgenerationresourcesinNewYorkStates electricitysystem.Weincludetheeffectsofcurrentpoliciestoencouragerenewablesandenergyconservation.Notethatthisgeneraloverviewdoesnotincludespecificelementsoftheelectricitymarketdesignorconditions(suchastransmissionconstraintsandvoltagerequirements)thatmustalsoberecognizedwhen systemresourcesaredispatched.1.ElectricityMarketSystemandMajorActorsUntillateinthetwentiethcentury,electricitythroughouttheUnitedStateswasgeneratedanddistributedprimarilybyverticallyintegratedutilitiesthathadanexclusivefranchisewithinagivenareaandweresubjecttorate-of-return(cost-of-service)priceregulation.Manystatesstill relyonthattraditionalregulatorystructure.Startinginthe1990s,NewYorkandseveralother statesmovedtoavertically-disintegrated systeminwhichregulatedinvestor-ownedutilities(IOUs),suchasConsolidated Edison 4,buymostofthepowertheyneedtoservetheircustomersfromwholesalegeneratingcompanies,suchas Entergy,whichrelyuponmarketpricestoobtaintheirrevenues. ThesepurchasescanoccurthroughspotmarketsadministeredbyIndependentSystemOperatorssuchastheNewYorkIndependentSystemOperator(NYISO)thatmanagemarketsinwhichgeneratorsbidtoprovidepowertothe system. | |||
4ThesixIOUsinNewYorkStateareCentralHudsonGas&Electric,ConsolidatedEdison,NewYorkStateElectric&Gas,NationalGrid,Orange&RocklandUtilities,andRochesterGas&Electric.TwootherimportantactorsinNewYorkStateselectricitysystemarenon-profitstateentities:LongIslandPowerAuthority(LIPA)andNewYorkPowerAuthority(NYPA). | |||
NERAEconomicConsulting 82.ElectricityMarketCompetitionandCostMinimizationInNewYorkStatescompetitivewholesaleelectricitymarket,generatorssubmitbidsthatindicatehowmuchpowertheywouldbewillingtosupplyatvariousprices.NYISOfindsthepriceatwhichsufficientpowerwillbesuppliedtomeetdemandateachtimeofday,andallbidderswithbidsatorbelowthismarket-clearingpricereceivethisprice.NYISOalsomustaccountforconstraintsintheelectricitysystemtoensurethe systemsreliability,butinessencethemarketdetermineswhichunitsgenerateelectricitytomeetdemandbasedontheobjectiveof minimizingcosts.Inadditiontothemarketforenergy,NYISOalsoadministersamarketforfirmcapacity(toensureadequatesupplyattimesofpeakdemand)andmarketsforseveralancillaryservices(NYISO2011b).NYISOalsopreparesstudiesontheneedfornewinfrastructureinNewYorkState.However,NYISOlackstheauthoritytobuildnewinfrastructureortorequireanyother organizationtodoso.Instead,wholesalegeneratingcompaniesgenerallymakedecisions regardingretirementofexistingcapacity,theamountofnewcapacitytobuild,whattypeofgenerationcapacitytobuild,andwheretobuildit.Companiesmakethesedecisionswiththeobjectiveofminimizingcostsandmaximizingrevenues.Companiesdecidewhattypeofgenerationcapacitytobuildbasedonlevelizedcosts,whichexpressthesumofcapitalcosts,otherfixedcosts,andvariablecostsoverthelifetimeofthepowerplantperunitofenergyoutput(e.g.,dollarsperMWh).Thus,inNewYorkStatescompetitivewholesaleelectricitymarket,costminimizationiscentraltotwodifferentdecisionsbypowercompanies:(1)thetypeofgenerationcapacitythatwillbebuiltbasedontotallevelizedcosts;and(2)forthecapacitythathasbeenbuilt,thebidthatwillbesubmittedintoNYISOswholesaleenergy,capacity,andancillaryservicesmarketsbasedonshort-runmarginalcosts.Companiesgenerallywillbuildnewgenerationcapacityonlyiftheirexpectedpricesforenergy,capacity,andancillaryservicesaresufficientlyabove short-runmarginalcoststocovercapitalandotherfixedcosts(includinganormalreturntoinvestors).Companiesgenerallywillbidtooperatetheircapacityinagiventimeperiod(subjecttoproductionconstraints)ifthepricewillatleastcovershort-runmarginalcosts,whichare primarilyfuelcostsinthecaseoffossilgeneratingunits.Fornuclearandsometypesofrenewables(suchaswindorrun-of-riverhydro),marginalcostsare smallrelativetopotentialmarket-clearingprices,sotheyoperatevirtuallywhenevertheyareavailable(i.e.,whenevertheyarenotshutdownbecauseofscheduledorunscheduledmaintenanceorbecauseofinsufficientwindorwaterinthecaseofrenewableresources). | |||
5Asaresult,generationgenerallycannotbeincreasedatexistingrenewableunitstoprovidereplacementpowerifIPECgenerationwerenot availableasthefacilitiesarefullyutilized.Incontrast,generationcanoftenbeincreasedatexistingfossil-fueledunitsinordertoprovidereplacementpowerundertheno-actionalternative. | |||
5Nuclearplantshavefuelcosts,buttheyarenotvariableintheveryshortrun.Nuclearfacilitiesalsoarebidinasbaseloadfacilitiesbecausetheycannotcycleupanddownrapidly. | |||
NERAEconomicConsulting 9B.GovernmentSupportforExistingRenewablesandEnergyEfficiencyProgramsStateandfederalpoliciesaffecttherelativecostsofdifferentgenerationsourcesinvariousways.Federaltaxpoliciessubsidizecertaintypesofgeneration,particularlyrenewables,thusmakingcompaniesmoreabletoundertakerenewableprojectsthatotherwisewouldnotbecost-effectiveandprofitable.Forexample,awindprojectthatotherwisewouldnotbeeconomicunderNYISOsmarket-clearingpricesforenergyandcapacitymaybecomeeconomicbyvirtueoftheFederaltaxbenefitsandStateRPSsubsidiesinadditiontothemarket-clearingpricethatitsownerswillreceive.Variationsovertimeinadditionalfundingmechanismssuchasthosetaxbenefitsaswellaslowermarket-clearingelectricityprices(causingalargergapbetweenelectricitypricesandwindprojectcoststhatsubsidiesmustfill)haveledtolargeswingsinthe amountofwindpowerconstructedintheUnitedStates,asshownbelowinFigure1.InFiscalYear2010,thefederalgovernmentprovided$6.6billiontosupportrenewableenergy,ofwhichwindgeneratorsreceived$5.0billion(EIA2011c,p.xviii).Federalsupport mechanismsincludetheproductiontaxcredit,whichcurrentlyprovides$22/MWhincorporatetaxcredittowindgeneratorsandcertainotherrenewableenergyproducersforthefirsttenyearsofoperation(DOE2012). Thefuturelevelsoffederalsubsidiesandothersupportmechanismsarehighlyuncertain,however,andtheymayfallaspartoffuturepotentialfederaldeficit-reductionefforts.Inaddition,asdiscussedindetailbelow,NYSERDAprovidesRPSsubsidiestorenewablegenerationinNewYorkState.Aswithfederalsubsidies,NYSERDAssubsidiesareusedtoaugmentthemarket-clearingelectricitypricethattherenewableproducersreceivefrompurchasersoftheirelectricity. Thus,thesubsidieselicitadditionalsupplyofrenewableenergy.Figure1.U.S.WindCapacityAdditionsandAvailabilityofFederalRenewableEnergySubsidiesNote:Graybandsindicateexpirationoffederalrenewableenergysubsidies.Source:Metcalf(2010) | |||
NERAEconomicConsulting 10ThetotalamountofsubsidyofferedinanyyearislimitedbyabudgetsetbytheNYPSC. ThebudgetsarecoveredbyfeesleviedbyIOUsonNewYorkStateselectricityconsumersthroughsurchargesontheirmonthlyutilitybills.Asaresultofsuchpolicies,consumersalreadypayapremiumforrenewableenergy.IncrementalrenewablegenerationaboveandbeyondtheRPSprogramundertheno-actionalternativewouldrequireincreasedbudgetsandfees.StateandFederalpoliciesalsocaninfluencetheamountofelectricitydemandedbyrequiringorencouragingenergyefficiencyandotherconservationmeasures.Mandatorymechanismsincludeapplianceefficiencystandardsandbuildingcodes.Voluntarymechanismsincludeeducationandvarioussubsidies. Theseeffortsmayinvolvedistributionutilitiesthatofferconservationprogramsofvarioustypes,generallyinresponsetoincentivesorrequirementscreatedbytheirregulators.InNewYork,IOUsandNYSERDAcollectivelyrecoverthecostsofsuchprogramsthroughsurchargestoNewYorkconsumersontheirmonthlyutilitybills.1.NewYorkStates30x15RenewableElectricity GoalThissectionconsidersthespecificeffectsofNewYorkStatesrenewablegoalsonelectricitygeneration.Asnotedabove,statepoliciescansupplementprivatemarketforcesandsubstantiallyinfluencethegenerationmix.a.OverviewofNewYorkState GoalandProgramsNewYorkhasadoptedagoalofmeeting30percentofelectricitydemandin2015(30x15)withrenewablesources,suchaswind,biomass,andhydro.Roughlytwo-thirdsofthatgoal wasmetbeforeitwasset,becauseNewYorkhistoricallyhasgeneratedsubstantialamountsofpowerfromhydroelectricplantsatNiagaraFalls,St.Lawrence,andotherlocations. Thosepreexistingplantshaveprovidedlow-costpowerformanydecades,andarenoteligibleforthesubsidiesdiscussedbelow. TheStateexpectstoobtainmostoftheincrementalresourcesneededprimarilythroughtheRPSprogramadministeredbyNYSERDAandfundedbyNewYorksconsumersthroughsurchargesontheirmonthlyutilitybills. | |||
6NewYorksRPSdiffersfromRPSprogramsinmanyotherStates.UnlikemostotherRPSs,NewYorkacquiresitsrenewableresourcescentrally,throughNYSERDA,underasystemestablishedin2004.In2010,NYPSCincreaseditsoriginalgoalof25percentrenewablesby2013to30percentby2015,settheMWhleveltobeachievedby2015andalsoestablishedannualbudgetsforNYSERDAthrough2024topayforsubsidiesitestimateswillberequiredtoobtaintheadditionalrenewableoutputneededtomeetthegoal(NYPSC2010).NewYorkutilitiesarerequiredbytheNYPSCtoassessavolumetricsurchargeonelectricity salesandtransmittherevenuestoNYSERDAtopaythesubsidiesrequiredtosupportrenewableenergy projects.Ineachyear,thechargeperunitofelectricitysoldissetsothatrevenuescollectedequalthebudgetforthatyear.However,thereisnoguaranteethatthegoalswillbeachieved 6LIPAhasitsownseparategoal,andtheNYPSCexpectsadditionalresourcestobeobtainedthroughavoluntaryprogram(underwhichsomecustomersvolunteertopayhigherratesforpowerprovidedbyrenewables)andthroughotherstateagencies(NYPSC2010,Appendix,p.12). | |||
NERAEconomicConsulting 11withinthosebudgets.UnlikemostStateRPSprograms,therearenopenaltiesforutilitiesiftheydonotpurchasesufficientenergyfromrenewableresources(NYPSC2004,p.5).NYSERDAsolicitsbidsforproductionsubsidiesfromrenewableprojectdevelopersandentersintocontractswithsuccessfulbidders.Inthemaintiersubsidyprogram,whichaccounts forabout97percentofthe30percentoverallgoal, 7NYSERDAholdsannualauctionstoselectrenewablesourcesthatgenerallyrequirethelowestsubsidyperproject(NYSERDA2011). | |||
Thesesubsidiessupplementthemarketprices(andfederalsubsidies)thattherenewablesources willobtain,thusmakingconstructionofthesourcesviable.b.ProgramBudgetstoAchievetheRenewable GoalTheNYPSChas setsubstantialbudgetsforNYSERDAtosubsidizerenewablesthrough2024undertheRPSprogram,as showninFigure2.Forexample,theRPSbudgetfor2011was$170millionandthebudgetfor2015is$321millioninnominaldollars. Thecumulativebudgetfrom2006to2024is$3.0billion. ThebudgetsrepresentthepaymentsthatNYSERDAisauthorizedtomaketorenewablegeneratorsamountsthatmustultimatelyberecoveredfromNewYorksconsumers.NotethatthesebudgetscoveronlytheRPSprogramtotheexclusionoftheadditionalcostsofanyLIPAandNYPAprograms. | |||
7InadditiontoNYSERDAcontractswithlargemaintierrenewablesources,NYSERDArunsamuchsmallerprogramtoencouragesmall-scale,customer-sitedprojects,suchassmallwindturbinesorsolarpanels.Thegoalfortheseprojectsistomakeup1percentofelectricityconsumptionby2015,orabout3percentofthe30percentoverallgoal.AdditionalinformationontheseRPSprogramsisprovidedinAppendixA. | |||
NERAEconomicConsulting 12NYSERDAestimatesthattheaverageproductionsubsidyresultingfromtheJune2011offeringwasover$20perMWh,ormorethanone-thirdthewholesalecostofgeneration(NYSERDA2011b,p.14).Thesubsidiesrequiredtoelicitrenewablesupplieshaveproved higherthanexpectedwhenbudgetswereset.Bytheendof2010,NYSERDAhadspent57percentofitsbudgetfortheperiodthrough2015buthadsecuredonly39percentoftherenewableenergygoal(NYSERDA2011a,p.21).2.NewYorkStates15x15ConservationGoalThissectiondescribestheothermajorstatepolicythatinfluencestheelectricitymarketinNewYork,NewYorkStateseffortstoreduceelectricityuse(conservation).a.OverviewofNewYorkStateConservationGoalIn2007,NewYorksthen-Governor EliotSpitzer seta15x15goal,whichcalledfortheStatetoreduceitsenergyconsumptionby15percentby2015comparedtoforecastbusinessasusualelectricityconsumptionin2015.Fromtheoutset,therehasbeenbroadagreementthatthegoalsofthe15x15goalaresubstantiallymoreambitiousthanpriorprogramsandthat meetingthemwouldrequireadditionalefforts.Inannouncingtheplan,GovernorSpitzercharacterizeditasthethemostaggressivetargetinthenation(Spitzer2007). TheNYPSC,inadoptingthegoalandapprovingseveralprogramsintendedtohelpachieveitintheelectricitysector,statedthatthegoalisextremelyaggressive(NYPSC2007).Figure2.RenewablePortfolioStandardBudgets$29$30$57$106$103$170$203$244$282$321$228$227$202$194$194$160$125$81$42$0$50$100$150$200$250$300$3502006200820102012201420162018202020222024RPSBudget(millionnominaldollars)Source:NYPSC(2010),Appendix,Table13 NERAEconomicConsulting 13In2007,NYSERDAperformedananalysistodevelopappropriatecontributionlevelsfromLIPA,NYPA,the sixinvestor-owneddistributionutilitiesinthestatebasedontheirenergyefficiencyprogramsin2007,NYSERDA,andotherstateagencies. Theanalysisalsoincludedcontributionsthroughcodesandstandardsandmeasuresfortransmissionanddistribution.Figure3summarizestheNYSERDAprojectionsasappliedtoelectricityconsumption. ThejurisdictionalgaprepresentedadditionalreductionsfromnewprogramsthatNYSERDAestimatedwouldbeneededtomeettheoverallgoal.Tofillthisgap,NYPSCannouncedthe EnergyEfficiencyPortfolioStandard(EEPS)programin2008.Underthatprogram,theinvestor-owneddistributionutilitieswouldaddprogramstoreduceconsumptionbytheircustomersandwouldalsofundnewprogramsatNYSERDA. The EEPSprogramisfundedbyvolumetricsurchargesthatutilitiesassesstoNewYorksconsumersontheirmonthlyutilitybills. TheNYPSCestimatedhowmuchitwouldcosttoimplementprogramsnecessarytofillthegapandsetsurchargelevelstofundsuchprogramsthrough2011(NYPSC2008).InasubsequentorderissuedinOctober2011,NYPSCannouncedgoalsfortheinvestor-owneddistributionutilitiesthroughDecember31,2015andsetnewsurchargelevelsthatitestimatedwouldprovidesufficientfundingfortheIOUsandNYSERDAtoachievethosegoals(NYPSC2011b).b.ProgramBudgetstoAchieveNewYorkConservation GoalTheNYPSChas setsubstantialbudgetstosupportconservationprogramsforelectricityconsumptionthrough2015undertheEEPSprogram,asshowninFigure4.Forexample,theEEPSbudgetfor2011was$159millionandthebudgetfor2015is$183millioninnominal dollars. ThebudgetsrepresentthepaymentsthatNYSERDAandtheIOUsareauthorizedtomaketoencourageelectricityconservationandtheamountsthatultimatelymustberecoveredFigure3.NYSERDAAnalysisofPotentialContributionstoMeeting15x15ConservationGoal 05,000,00010,000,00015,000,00020,000,00025,000,000200720082009201020112012201320142015Energy-EfficiencySavings(MWh)JurisdictionalGapTransmission&DistCodes&StandardsUtilities(2007Programs)SBCIII(NYSERDA)StateAgenciesNYPALIPANote:Source:NYPSC(2008,Appendix1,p.5) | |||
NERAEconomicConsulting 14fromelectricityratepayersinNewYork.NotethatthesebudgetscoveronlyelectricityconservationprogramsbyNYSERDAandIOUSunderthe EEPSprogramtheydonotincludethe significantextrapaymentsforelectricityconservationbyLIPA,NYPA,stategovernmentagencies,orotherentitieswithconservationgoalsunderNewYorksoverall15x15policy.C.CostsofAdditionalGenerationinNo-ActionAlternativeThissectionprovidesinformationontherelativecostsofalternativegenerationtechnologiesthatcouldbeusedtoprovidereplacementgenerationifIPECgenerationwerenot available.Webeginwithaconceptualclarificationofthegenerationwhosecostsarerelevantto thecomparison,namelythegenerationthatcouldreplaceIPECgenerationifIPECwerenotavailable. Thisdistinctionisimportantforrenewables(andconservation)becauseoftheneedtobeclearontheroleofgovernmentsupport(orlackthereof)forgenerationbeyondcurrentcommitments.Wethenconsiderinformationonthecostsofpotentialcandidates,includingnewunitsofvariousfueltypesandexpansionofgenerationatexistingunitsofvariousfueltypes.1.BaselineConditionsvs.No-ActionAlternativeAsnotedabove,thecentralissueaddressedbytheFSEISistheimpactsofcontinuedoperationofIPECrelativetotheno-actionalternative. Thisquestionrelatestothedifference inenvironmental(andother)impactsbetweenaninitialscenarioinwhichIPECisavailableandascenariowithoutIPECgeneration.Figure4.EnergyEfficiencyPortfolioStandardBudgets$159$159$159$183$183$183$185$0$20$40$60$80$100$120$140$160$180$2002009201020112012201320142015EEPSBudget(millionnominaldollars)Note:Figureshowscollectionsfromelectricityratepayersforelectricityprograms.Source:NYPSC(2008),Appendix1,Table16;NYPSC(2011),Appendix2,Table1 NERAEconomicConsulting 15a.GeneralDistinctionForclarity,wedefinethescenariowithIPECgenerationasthebaselineandthenmeasuretheimpactsoftheno-actionalternativerelativetothatbaseline. | |||
8Theimpactsoftheno-actionalternativearethusthechangesinenvironmentalconditionsrelativetothebaseline(withcontinuedoperationofIPEC).Wefocusonelectricitytechnologiesbecausebeforeenvironmentalimpactscanbeevaluated,itisnecessarytoestimatehowtheno-actionalternativewould changethemixofelectricityresources(includingconservation)usedtomeetexistingdemandforelectricity servicesinNewYork.Anyenergydevelopmentsthatoccurtoanequaldegreeinboththebaselineandtheno-actionalternativearenotdirectlyrelevanttoanevaluationoftheenvironmentalimpactsoftheno-actionalternative.Whateverthebaselineis,therelevantquestioniswhatincrementalresources(includingconservation)wouldreplacelostbaseloadoutputfromIPEC;i.e.,whatwouldbethedifferencesinresourcesbetweenthebaselineandtheno-actionalternative.b.IllustrationofChangesundertheNo-ActionAlternativeFigure5illustrateshowtheincrementalchangesingenerationofvarioustypeswouldbecalculatedusingahypotheticalbaseline.Notethatthecomponentsofthestackedbarsarenotdrawntoscale,butarepurelyhypothetical. Thefiguredoesnotrelatetoanyparticulargeographicarea.Ontheleft-hand sideisastackedbar showingahypotheticaloriginalforecastofthebaselinesourcesofsupplyincludingconservationthatwouldbeusedtomeetdemand. | |||
9Renewablesandconservationplaymodestrolesinthisbaseline,withthebulkofoutputcoming fromIPECandfromfossilandother,wherethelatterincludespowerprovidedbyothernuclearplantsaswellasfossilunits. | |||
8HerewedefinecontinuedoperationofIPECasourbaseline,butweemphasizethattheresultswouldbenodifferentifwedefinedtheno-actionalternativeasthebaseline. | |||
9Tosimplifythediscussion,wetreatconservationasasourceofsupply,althoughitismoreproperly consideredaspartofdemand. | |||
NERAEconomicConsulting 16Themiddlestackedbarthen showsahypotheticalno-actionalternativeinwhichIPECgenerationwouldnotbeavailabletomeetelectricitydemand. Thefinalstackedbarshowsthechangesbetweenthetwopreviousstackedbars.Byassumption,alloftheoutputfromIPECwouldbelost,anditwouldbemadeupbysomeincreasesintheotherthreesources(renewables,conservation,andfossil/othersources).Thesechangesingenerationandconservationwould providethebasisforanalyzingtheenvironmentalimpactsoftheno-actionalternativerelativetothebaseline.Thekeypointofthisillustrationisthatreplacementgenerationrepresents additionalgenerationthatwouldbeforthcomingifIPECwerenotavailable.Forpurposesofthecost analyses,wefirstprovideinformationontheexpectedfuturelevelizedcostsfordifferenttypesofnewunits,excludingtheeffectsofgovernmentsupport.Wethenassessthecostsof additionalrenewablesor additionalconservationintheno-actionalternative. Thefinalsubsectionconsidersthefeasibilityandcostsofexpandinggenerationatexistingtypesoffacilities.2.LevelizedCostsofNewCapacityExcluding GovernmentSupportFigure6displays EIAsestimatesoflevelizedcostsexpressedasdollarsper MWhfornewelectricitygeneratingcapacity,exclusiveofgovernmentsupport(forexample,exclusiveofFederaltaxcreditsorNewYorkStateRPSincentivepayments).Asdiscussedabove,levelizedcostsincorporatecapitalcosts,otherfixedcosts,andmarginalcostsovertheentirelifetimeofthepowerplant.EIAsestimatesinFigure6suggestthat,exclusiveofgovernmentsupport,Figure5.HypotheticalAnalysisofChangeinGenerationfromBaselinetoNo-ActionAlternativeBaselineNo-actionChangeOutputRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchanges)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 17NGCCunitsaretheleastexpensivegenerationalternativeandthuswouldbethemostlikelytobeaddedinamarketsetting. | |||
103.CostsofAdditionalRenewablesThissectionconsidersthecomplicationsrelatedtoadditionalNewYorkStaterenewablegenerationintheno-actionalternative,firstnotingthatfutureprogresstowardthecurrentrenewablegoalisnotrelevantandthendemonstratingthatadditionalrenewablesarelikelytobemoreexpensivethantherenewablesdevelopedunderthecurrentrenewablegoal.a.ProgresstowardRenewable GoalNYSERDAs2011RPSPerformanceReportstatesthat,asofDecember31,2010,generationfromtheprogramscurrentcontractswouldproducerenewableenergyequivalentto39percentofthe2015target.Whateverrenewablegenerationisultimatelyencouragedthrough 10Theseestimatesdonotaccountforthemanycomplicationsrelatedtolocation,architecture,usage,potentialtechnologicalprogressandotherfactors.SeeBorenstein(2011)foradiscussionoftheseissuesandcomparisonsofdifferentestimatesoflevelizedcostsforalternativegenerationtechnologies.Figure6.EIA'sEstimatesofLevelizedCostsforNewCapacity,ExclusiveofGovernmentSupport$63.1$86.4$94.8$97.0$101.7$103.5$112.5$210.7$243.2$0.0$50.0$100.0$150.0$200.0$250.0$300.0GasCombinedCycleHydroCoalWindOnshoreGeo-thermalGas/OilCombustionTurbineBiomassSolarPVWindOffshore2009$/MWhNote:FigureshowsEIAestimatesbasedonAEO2011becauseEIAestimatesbasedonAEO2012arenotcurrentlyavailable;naturalgaspriceforecastsinAEO2012arelowerthaninAEO2011andthusgas-firedpowerplantshavealargereconomicadvantagebasedonAEO2012thanshownhere.Source:EIA(2011b) | |||
NERAEconomicConsulting 18theprogram,however,thatlevelwillbereflectedinthebaseline. ThisprogressisnotdirectlyrelevanttoIPEClicenserenewal. TheStatesrenewablegoalanditsassociatedprogramsarepartofthebaselineforpurposesofevaluatingtheno-actionalternative;thechangesduetothegoalandprogramswilloccurregardlessofwhateverelseoccursonthe system. Thus,renewablegenerationelicitedbytheprogramssubsidiescannotbecountedintheno-actionalternative.Forrenewablestoplaya significantroleinreplacingIPECsgeneration, additionalrenewables,beyondthegoalsoftheexistingRPSprogram,wouldbeneeded.b.CostsofAdditionalRenewablesUsingBaselineCostsperMWhAsdiscussedbelow,expandingtherenewablesprogramtohelpreplaceIPECsenergywouldtendtoincreasethesubsidiesperMWhneededtoelicitsufficientsupply.Butevenifthe subsidiesper MWhdidnotincrease,replacingallofIPECsenergywithrenewableswouldcostNewYorkselectricityconsumersover$500millionperyearinsubsidiesoverandabovemarketreplacementcosts,basedonimpliedcostsperMWhfortheNYPSCscurrentRPSprograms. | |||
11Thatismorethantheexistingbudgeteveninthepeakyear showninFigure2,whichis$321million. Tomeeteventhiscost(whichislikelytobeconservative),theNYPSCwouldhavetoincreaseitsbudgetsandraisethemonthlysurchargesassessedtoNewYorkconsumerscommensurately.c.CostsofAdditionalRenewablesAccountingfortheIncrementalEffectsonCostsperMWhAsnotedabove,therelevantquestionisnotthecostofrenewablesinthebaseline,butrathertheincrementalcostofadditionalrenewablegenerationundertheno-actionalternative.In NewYorkscompetitivemarketforgeneration,anyincreaseinincrementalcostsforrenewableswillinturnreducethelikelihoodthatrenewableswouldsuccessfullycompetewithfossilpowerundertheno-actionalternative.Thequalitativerationaleforexpectinganincreasedcostforadditionalrenewablesbeyondthecurrentgoalisstraightforward.Thereisasupplycurveforrenewables,whichisafunctionofthetotalpricereceivedperunitgenerated.Holdingconstantthemarketpriceforelectricity(whichisdeterminedbygas-firedunitsmostofthetime)andfederalsubsidies,wecanplotthesupplycurveasafunctionofthesubsidypaidbyNYSERDA.Figure7plotsa hypotheticalsupplyfunction. Thelargerthesubsidy,themorerenewableswouldparticipateinthemarket.Conversely,thelargerthequantityofrenewablesdesired,thelargerthesubsidymustbe. Thus,asnotedinFigure7,ifthequantityofrenewablesinthebaseline(withthe30by15 11Thiscalculationuses16.3millionMWhasIPECsannualenergy(NYISO2011a,p.34).In2015(thefinalyearforwhichanRPSgoalisspecified),theRPSprogramhasagoalof10.4millionMWhandabudgetof$321million(NYPSC2010,Appendix,Tables13and17).IPECsannualenergyis57percentlargerthantheRPSgoalfor2015,sothenecessarybudgetwouldneedtobe57percentlarger:$504million(in2015dollarsassumingthatthecostofsecuringsubstantialamountsofadditionalrenewableresourcesincrementaltothebaseloadwouldremainthesame).Usingadifferentyearthan2015toestimatethenecessaryadditionalbudgetwouldyieldalargerestimate. | |||
NERAEconomicConsulting 19policyinplace)were Q B,obtainingadditionalrenewablestoalevelof Q Nwouldrequireanincreaseinthesubsidyfrom S B to S N.Therisingsupplycurvereflectsthefactthatdifferentrenewableprojectsdifferintheircosts,andhenceintheincrementalsubsidyneedediftheyaretobebuilt.Forexample,forwindprojects,theremaybesomeprojectswithrelativelylowcosts,requiringrelatively smallsubsidies. Thoseprojectswouldbebuiltfirst.Otherprojects,however,willhavehighercosts,perhapsbecauseoflessfavorablewindconditions,moreremotelocations,orhighertransmission costs. Thoseprojectswillnotbebuiltunlessthesubsidiesarehigher.TheimplicationofarisingsupplycurveisthatthesubsidyrequiredtoelicitadditionalrenewablestoreplaceIPECgenerationwouldbegreaterthanthecurrentsubsidylevels,making itevenlesslikelythatrenewableswouldconstituteasubstantial shareofreplacementgeneration.Supply Q BQ Q N S B S NQuantit ygeneratedb yrenewablesSubsidy($/MWh)SFigure7.ImpactofAdditionalRenewablesonSubsidyRatesperMWhNotes: Q B:Quantityofrenewablesinbaselinewith30x15policyQ:Additionalrenewablesdesiredundertheno-actionalternative Q N:Quantityofrenewableswith30x15policyundertheno-actionalternative S B:Subsidyrateforbaselinewith30x15policyS:Additionalsubsidyrequiredundertheno-actionalternative S N:Subsidyraterequiredwith30x15policyundertheno-actionalternative NERAEconomicConsulting 204.CostsofAdditionalConservationThissectionconsidersthecomplicationsrelatedtoadditionalconservation,whichareanalogoustothoseforadditionalrenewablegeneration.Wefirstnotethatfutureprogresstowardthecurrentconservationgoalisnotrelevantandthendemonstratethatadditionalconservationislikelytobemoreexpensivethantheconservationdevelopedunderthecurrentenergyefficiencygoal.a.ProgresstowardNewYorkStateConservation GoalNYS-37anditssupportingdocumentsarguethatifthe15x15planissuccessful,itwillreducedemandbymorethanIPECsannualgeneration(NYS-37,p.49).Aspartofits forecastingandplanninganalyses,NYISOhasevaluatedthelikelyachievementofelectricityconservationinNewYorkthrough2021.NYISO(2011a,p.21)doesnotexpectthe15x15goaltobemetby2015. | |||
12However,evenifthe15x15goalismet,thecomparisonbetweenprogramsuccessandIPECgenerationismeaninglesstotheissueathandbecauseitrelatestothe baselineandhasnodirecteffectonwhatresources(includingenergyefficiencyandconservation)wouldbeusedincrementallyundertheno-actionalternative.Putanotherway,theconservationusedtoachievethe15x15goalwillnotbeavailabletoprovidetheadditionalconservationundertheno-actionalternative.b.CostsofAdditionalConservationUsingBaselineCostsperMWhExpandingtheconservationprogramundertheno-actionalternativewouldincreasethesubsidiesper MWhneededtoelicitsufficientsupply. Evenifthesubsidiesper MWhdidnotincrease,attemptingtoreplaceallofIPECsenergywithconservationwouldcostNewYorkselectricityconsumersabout$250millionperyearinadditionalsubsidies,basedonimpliedcostsperMWhfortheNYPSCscurrent EEPSprograms. | |||
13Tomeetthatcost,theNYPSCwouldhavetoincreaseitsbudgetsandraiseorextend(orboth)themonthlysurchargesassessedtoNewYorkconsumerscommensurately.. | |||
12NYISO(2011,p.21)forecastsagapofabout7,500GWhin2015betweennecessaryenergysupplywithexpectedenergyefficiencyachievementsandnecessaryenergysupplywithfullachievementofthegoal.Thisgaprepresentsabout28percentofthegoal(i.e.,about4percentagepointsofthe15percentgoal).AppendixAprovidesmoreinformationonNewYorks15x15programs. | |||
13Thiscalculationuses16.3millionMWhasIPECsannualenergy(NYISO2011a,p.34).In2015(thefinalyearforwhichanEEPSgoalisspecified),theEEPSprogramhasagoalof12.1millionMWh(NYISO2012,slide5)andabudgetof$183million(NYPSC2011,Appendix2,Table1).IPECsannualenergyis35percentlargerthantheEEPSgoalfor2015,sothenecessaryadditionalbudgetwouldbe35percentlargerthanthebudgetfor2015:$247million(in2015dollarswiththesamecaveatasaboveabouttheuncertainabilitytosecuresignificantadditionalamountsofconservationincrementaltothebaselineatthesamecost).Usingadifferent yearthan2015toestimatethenecessaryadditionalbudgetwouldyieldalargerestimate. | |||
NERAEconomicConsulting 21c.CostsofAdditionalConservationAccountingfortheIncrementalEffectsonCostsperMWhAswithrenewablegeneration,undertakingmoreintensiveconservationeffortswouldlikelyraisethemarginalcostofadditionalconservation,thusfurtherincreasingtheexpendituresneededtosecureadditionalconservationundertheno-actionalternative.Aswithrenewables,itisusefultosummarizethevarietyofmeasuresavailabletoreduceelectricityuseintermsofasupplycurveforconservation,which showsthemarginalcostofsubsidiesandotherprogramstoelicitadditionalconservationbeyondwhatoccursduetopricesandtechnologicaladvancesthatlowertheextracostofmoreefficientequipmentandstructures.Aswithmostsupplycurves,themarginalcostofconservationrisesasadditionalconservationisundertaken(Gillinghametal.2004,p.66).Initialconservationeffortsmayyieldamountsoflow-hangingfruitavailableatrelativelylowmarginalcost,butlatereffortsmustemployincreasingcostlymeasures.Forexample,increaseduseofcompactfluorescentlights(CFL)iswidelyseenasalow-costwaytoreduceelectricityconsumption,includinginNewYork(Maniaci2011, slide3).Additionalconservation,however,requireshighercostmeasures. Thatconclusionappearstobesupportedbyestimatesofthecost-effectivenessofvariousconservationprogramsrunbyNYSERDAandNewYorkdistributionutilities.NYSERDAestimatesthatitsCFLprogramreducesdemandatacostof$20permegawatt-hour(MWh)(Maniaci2011, slide7). | |||
14 Theaveragecostofotherprogramsis$360/MWh(Maniaci2011, slide7).IncommentsontherecentwhitepaperpreparedaspartoftheNYPSCsreviewofitsEEPSprogram,NYISOpresentsanupward slopingsupplycurveforconservationbasedon recentexperienceinNewYork,asshowninFigure8.Inpreparingthisgraph,NYISOuseddata inthewhitepapertoplotthecostofthe EEPSprogramsasafunctionofthecumulativegigawatt-hours(GWh)saved. Thecostrisessubstantiallyasthelevelofenergy savedincreases. Thisgraph showsresultsforexistingprograms.IncrementalprogramstohelpreducedemandtoreplaceIPECundertheno-actionalternativewouldrequiregoingfurther.AlthoughthehighestcostsinthefiguremayrepresentprogramsthattheNYPSCsupportsforreasonsotherthancost-effectiveness,thecurvenonethelessillustratesthatasopportunitiesforrelativelylow-costprogramsareexhausted,additionaldemandreductionscanonlybe securedbyincurringhighercosts. | |||
14NotethatthecostsofconservationmeasuresestimatedbyNYISOandStateagenciesinNewYorkarenotcomparabletoavoidedcostestimatesforgeneration.TheNYISOcostsforconservationmeasuresrepresentonlythecoststoutilitiesorprogramadministratorsanddonotincludetheresidualcostsforconsumerstopurchaseenergy-efficientappliancesorundertakeotherconservationactivities.Wholesaleelectricityprices,however,representthefullmarginalcostofproducingelectricity.Ontheotherhand,thesefigurescomparetheone-time costsoftheprogramstoannualelectricitysavings,whereaswholesalepricesreflectcostsamortizedoverthelivesofthefacilities. | |||
NERAEconomicConsulting 22ThegraphicalanalysisofahigherbaselinelevelofconservationisessentiallythesameastheanalysisforrenewablesinFigure7.IncreasingconservationprogramstohelpmeetreducedoutputfromIPECundertheno-actionalternativewouldrequireincreasedratesofexpenditureperunitofelectricitysaved,assumingthatadditionalconservationprogramscouldevenbedesignedbeyondthoseintendedtomeettheambitiousNewYorkStategoalatanyprice. Thehigherthebaselinelevelofconservationassumed,thehigherwouldbethecostperunitofelectricitysaved,sothatthehigherbaselinelevelofconservationwouldmakeitmoredifficultandcostlytosecureanyincrementalconservationinitiativesbeyondthebaseline EEPSprogramtobeusedintheno-actionalternative(againassumingthatadditionalinitiativescouldbeidentifiedandimplementedeffectively).5.Costsof GenerationatExistingSourcesAsnotedaboveinthediscussionofcompetitiveelectricitymarkets,afterpowerplantshavebeenbuilt,theirutilization(i.e.,hoursofoperationperyear)dependsonphysicalconstraintsandtheirmarginalcostsrelativetoelectricityprices.Apartfromtransmissionconstraints,thebasicphysicalconstraintforallpowerplantsistheirmaximumratedcapacity.Wind,solar,andhydrofacilitieshaveanimportantotherphysicalconstraint:theavailabilityofFigure8.EEPSEnergyEfficiencySupplyCurveCost$perMWhVersusCumulativeGWhNote:Horizontalaxisiscumulativeenergysavedperyear,inGWh.TheverticalmeasureismarginalcostperMWhsavedannually.However,becausethecostsareincompleteandarenotamortizedovertheeffectivelivesoftheprograms,themarginalcostsarenotdirectlycomparabletolevelizedestimatesofcostperMWhgenerated.Source:NYISO(2011d) | |||
NERAEconomicConsulting 23wind,sunlight,andwater,respectively.Afterthesetypesofpowerplantshavebeenbuilt,theirmarginalcostsofoperationarevirtuallyzero,sotheygenerallyoperateduringalltimeswhenphysicalconstraintsallow. Theutilizationoffossilfuelpowerplantsismuchmoresensitivetomarketforces,particularlyelectricityprices,althoughmanycoalunitsarebaseloadunitsthatoperatevirtuallyallofthetime.Ifmoregenerationisneededfromtheelectricitysystem,suchasintheno-actionalternative,fossilfuelpowerplantsnotoperatingatfullcapacityinalltimeperiodswouldbeabletoincreasetheirutilization. This situationisincontrasttothe situationforwind,solar,andhydrofacilities.Table1summarizesthe situationfordifferentfueltypesand showsestimatesofthemarginalcostsperMWhofgeneration(fromexistingfacilitiesorfacilitiesthatwouldbebuiltinthefuture)basedonfuelpriceprojections,heatrates(ameasureoffuelinputperunitofenergyoutput),andvariableoperatingandmaintenance(O&M)costsfrom EIA(2011,2012).Marginalcostsareestimatedforthegenerationtechnologiesthataregenerallycapableofincreasingutilization,whichincludefossilfuelpowerplantsanddonotincludewind,solar,orhydrofacilities.Basedontheestimatedvariablecostsin Table1,coalandNGCCunitsaremostlikelytoincreasetheirutilizationasreplacementgenerationforIPECbecausethesetwo generationtechnologieshavethelowestmarginalcosts.D.ImplicationsofRelativeCostsontheMixofReplacementEnergyinNo-ActionAlternativeThissectiondrawsonevaluationsoftheprevious sectionsnotablythecompetitivenatureoftheelectricitymarketinNewYorkandtherelativecostofalternativegenerationthat couldreplaceIPECgenerationtoprovideassessmentsofthelikelymixofreplacementenergyundertheno-actionalternative. TheimportanceofmarketconditionsinNewYorkmeansthatinformationonrelativecostsmustbeusedtoprovideassessmentsoftheextenttowhichvariousTable1.EstimatesofMarginalCostsofGenerationMarginalCosts(2011$/MWh)CapableofIncreasingUtilizationinResponsetoMarketForces?O&MFuelTotalCoalYes$2$21$23NaturalGas-CombinedCycleYes$2$31$33-CombustionTurbineYes$11$47$58OilCombustionTurbineYes$17$255$272WindNo---SolarPV No---HydroNo---Note:-indicatesthatthevariablecostsarenotestimatedbecausethegenerationtechnologygenerallycannotincreaseutilizationinresponsetomarketforces.Assumedheatratesare8,800Btu/kWhforcoal,7,050Btu/kWhforgascombinedcycle,and10,745 Btu/kWhforcombustionturbinesbasedonEIAestimatesfornewpowerplants.Ifexistingpowerplants havehigherheatrates,theirfuelcostswouldbehigher.Source:NERAcalculationsbasedonEIA(2011)andEIA(2012) | |||
NERAEconomicConsulting 24generationtypeswouldbelikelytoreplaceIPECgenerationintheno-actionalternative,i.e.,therelative sizeofthechangesinthefinalbarinFigure2.1.AdditionalFossilFuel GenerationAdditionalfossilfuelgenerationislikelytoconstitutethemajorreplacementgenerationifIPECgenerationwerenotavailable. Theleastexpensivegenerationoptionsarelikelytocomefromincreasesingenerationatexistingunits,particularlyfromcoalandnaturalgasunitsthatarenotoperatingatfullcapacity.Amongnewunitsthatmightbeaddedasreplacementgeneration,newNGCCunitshavethelowestlevelizedcosts(i.e.,costsperMW-hr,includingcapital,fuelandotheroperatingandmaintenancecosts).2.AdditionalRenewable GenerationAdditionalrenewablegenerationisnotlikelytobeamajorpartofIPECreplacementgeneration.NewYorkStatehasanambitiousrenewablegoalaccompaniedbysubstantialsubsidyprogramsthatextendsintothefuture.ButthatfuturerenewablegenerationwouldbeputinplaceregardlessofIPECsstatus.Thus,thefuturerenewablegenerationduetotheNew YorkStaterenewablegoalisinthebaselineratherthanasadditionalgenerationthatwouldbeavailabletoreplaceIPECgeneration.Expandingrenewablegenerationbeyondthecurrentgoalwouldlikelyrequireanincreaseinthelevelofsubsidybeyondthecurrentlevels. ThecomparisonoflevelizedcostsshowsthatwindgenerationthelowestcostrenewablegenerationforNewYorkStatewouldbesubstantiallymoreexpensivethannaturalgas.GiventhemarketstructureinNewYorkanditsfocusonminimizingthecostsofadditionalgeneration,therelativecostinformationindicatesthatadditionalwindgenerationisnotlikelytobeaddedasreplacementgenerationifIPECwerenotavailable.3.AdditionalEnergyEfficiencyandConservationAdditionalenergyefficiencyalsoisnotlikelytobeamajorpartofIPECreplacementgenerationforreasons similartothoserelevantforrenewablegeneration.Ofcourse,giventhatremovalofIPECgenerationwouldleadtoincreasedretailelectricityprices,therewillbesomeeffectonconservationthroughpriceeffects.However,moststudiesputthepriceelasticityforelectricityataround-0.2,whichmeansthata10percentincreaseinretailelectricitypricewouldresultina2percentdecreaseinelectricitydemand(BernsteinandGriffin2005,pp.18,21). | |||
Thus,wewouldnotexpectthepriceeffectonelectricitydemandtobesubstantialgiventherelativelylowpriceelasticityofdemandforelectricity.Asnotedabovewithregardtorenewables,thelevelofenergyefficiencytobeachievedbyNewYorkStatescurrentprogramsisinthebaseline, sinceitwouldbeachievedregardlessofIPECsstatus.Giventheincreasedcosts(andthussubsidies)thatwouldberequiredtoexpandenergyefficiencyprograms,weconcludethatitisnotlikelythatadditionalenergyefficiency NERAEconomicConsulting 25wouldaccountforsubstantialIPECreplacementgeneration(beyondprice-inducedconservation).E.AdverseEnvironmental ImpactsofGenerationAlternativesThissectionprovidesinformationontheenvironmentalimpactsoffossil-fuelandrenewableelectricity,includingwind,biomassandhydroelectricsources. Theseassessmentsaregeneralanddonotrelatetospecificgenerationfacilities. Thefollowingchapterprovidesadditionalspecificenvironmentalinformationbaseduponenergymarketmodelingoftheadverseenvironmentalimpactsoftheno-actionalternative.1.Fossil-FuelGenerationOuranalyses,includingthosediscussedfurtherinsubsequentchapters,indicatethatifIndianPointgenerationwerenotavailable,asubstantialportionoftheIPECgenerationwouldbereplacedbyfossil-fuelgeneration(naturalgasandcoal). Thissubsectionsummarizessomeofthe potentialadverseenvironmentalimpactsoffossil-fuelgeneration.a.AirPollutantImpactsFossil-firedgeneratingunitsemitvariousairpollutants. Table2summarizestheairemissionsfromnaturalgasandcoalunitsthathavebeenidentifiedby EPAinrecentanalysesofpotentialairemissionregulationsaffectingelectricitygeneration.i.IllustrativeEmissionRatesTable3showsaverageemissionratesforthreemajorpollutantsCO 2,SO 2,andNO X -forcoalandnaturalgas-firedelectricityplantsintheUnitedStates.TheseemissionratesrelatetoallexistingpowerplantsintheUnitedStatesforeachfuelandthusareaveragesfordifferentnaturalgasgenerationtechnologies(e.g.,gas-firedturbinesandcombinedcycleunits)anddifferentpowerplantages. TheemissionrateswillthereforedifferfromratesintheFSEIS,Table2.AirPollutantsbyGenerationPlantTypeAirPollutant CoalGasNuclearCO2andothergreenhousegasesyesyes-Sulfurdioxide(SO2)yesyes-Nitrogenoxides(NOx)yesyes-Particulatematteryesyes-Mercuryandotherheavymetalsyes--Carbonmonoxideyesyes-Volatileorganiccompoundsyesyes-Acidgasesyes--PlantTypeSource:EPA(2011a),EPA(2011b) | |||
NERAEconomicConsulting 26whichrelateonlytonewnatural-gas-firedpowerplants,whichhavelowerratesthantheaverageforexistingunits.BasedonIPECsannualgenerationofover16million MWh(NYISO2011a,p.34),evenifonlyaportionofthisgenerationismadeupbyfossil-firedgeneration,theincreasedemissionsofthesepollutantswouldbe substantial.Thefollowingsubsectionshighlightsomeofthepotentialhealthandotherimpactsassociatedwiththesethreepollutants.(The sizeoftheimpactsdependsuponmanysite-specificfactors,includingemissionrates,meteorologicalconditions,populationexposures,andbackgroundconcentrations.)ii.ImpactsAssociated withNO XandSO 2EmissionsEmissionsofnitrogenoxides(NO X)andsulfurdioxide(SO 2)aretheprimarycausesofacidrainwhichcanleadtoacidificationofwaterbodiesandothereffectsandcanalsoleadtovariousadversehealtheffects.NO XandSO 2arealsoimportantprecursorsintheformationoffineparticles(PM2.5)andozone(NOxonly). EPA(2011b)linksNO XandSO 2emissionstothefollowingpotentialeffects:Asthmacomplications;Chroniclungdisease;Prematuremortality;Otherrespiratoryeffects;Treemortalityandinjurytovegetation;andDegradationtoecosystems.iii.ImpactsAssociated withCO 2and Other Greenhouse GasesAccordingtotheInteragencyWorkingGroupontheSocialCostsofCarbon(2011),climatechangeinducedbygreenhousegasemissionsadverselyaffect:Agriculturalproductivity;Humanhealth;Watertablelevelsresultinginfloodrisk;andEcosystemfunctions.SinceCO 2isaglobalpollutant,theseeffectsdependuponglobalemissions(andconcentrations)ratherthanemissionsinNewYorkStateortheUnitedStates.Table3.AverageEmissionRates CO 2 SO 2 NO xCoal2,1228.93.1Natural Gas9440.10.5Emission Rates(lbs/MWh)Source:NERAanalysisbasedoneGRID(2010) | |||
NERAEconomicConsulting 27b.LandUseAnynewfossil-firedcapacitybuiltundertheno-actionalternativewouldhavelanduseeffects. TheFSEISnotesthatanewnaturalgasplantwouldrequirebetween0.016to0.045hectares(0.04to0.11acres)oflandper MWcapacity(FSEIS,p.8-29). TheFSEISalsonotesthatnewnaturalgascapacitycouldrequireconstructionofadditionalwells,collectionstations,andpipelines(FSEIS,p.8-30). TheFSEISindicatesthat15hectares(37acres)wouldberequiredpermegawattofcapacityduetotheseadditionalfacilities.c.ImpactsRelatedtoHydraulicFracturingtoExtractNatural GasRecentdevelopmentsinthetechnologiesforextractingnaturalgasreferredtoashydraulicfracturingorfrackinghaveledtosomeenvironmentalconcerns.Inrecognitionof theseconcerns,theNewYorkStateDepartmentof EnvironmentalConservation(NYSDEC)recentlyissuedadraftsupplementalenvironmentalimpactstatement,statingthat[h]igh-volumehydraulicfracturing,whichisoftenusedinconjunctionwithhorizontaldrillingandmulti-wellpaddevelopment,isanapproachtoextractingnaturalgasinNewYorkthatraisesnew,potentiallysignificant,adverseimpacts(NYSDEC2011, ExecutiveSummary,p.1).TheNYSDECisproposingregulationstoaddresssuchconcerns.2.Wind GenerationNYS-37claimsthattheenvironmentalimpactsassociatedwiththeno-actionalternativewouldbelessthantheenvironmentalimpactofrelicensingIndianPoint(p.3),presumablybaseduponitsassumptionthatmuchofthereplacementgenerationwouldcomefromrenewable electricity.NYS-37doesnotprovideanyinformationonthepotentialenvironmentaleffectsofrenewablegeneration.Itisusefultoprovideinformationonthepotentialenvironmentaleffectsofrenewablesincludingwindinthis sectionandbiomassandhydroelectricinsubsequentsectionstoprovideadequateinformationconcerningtheNYS-37claim.AlthoughwindgenerationdominatesthecurrentrenewablegenerationinNewYorkState,allthreeofthesetypesareeligibleforRPScreditsandarerepresentedincurrentcontracts.Thissectionsummarizessomeofthetypesofenvironmentalimpactsassociatedwithwindcapacity.NotethatnewwindcapacitymaynotbebuiltindownstateNewYorkandthuswouldlikelyrequireconstructionofnewtransmissionlineswiththeirownassociatedadverseenvironmentalimpacts,asdiscussedbelow.a.BirdandBatMortalityWindfarmscancausethedeathofbirdsandbatsintwomainways(Ifran2011).First,birdsandbatscancollidewithwindturbineblades.Second,batscansufferinternalbleedingwhentheyflythroughpocketsoflowpressurebehindrotatingblades(barotrauma).TheimpactsofwindenergyonbirdsandbatshavebeennotedbyFederalagencies,Stateagencies,andotherorganizations. TheU.S.GovernmentAccountabilityOfficenotedin2005, NERAEconomicConsulting 28whentheUnitedStatesfewerwindfarmsthancurrently,thatstudiesatwindfarmsinCaliforniaandWestVirginiaindicatedthousandsofbirdandbatmortalitiesperyearandthatstudiesinotherregionsofthecountrywereneeded(GAO2005).TheU.S.FishandWildlifeServicenotesthatwindenergyfacilitiescanadverselyimpactwildlife,especiallybirdsandbats,includingthreatenedandendangeredspeciesandotherprotectedspecies,suchasthebaldeagle(FWS2011).TheNewYorkStateDepartmentof EnvironmentalConservationrequiresdevelopersofwindfarmsinNewYorktoevaluatepotentialimpactsonbirdsandbatsaspartoftheirenvironmentalimpactstatements(NYSDEC2009).TheAmericanBirdConservancyhasfiledapetitionrequestingthattheFWSissueregulationstoaddresstheadverseimpactsofwindenergyonbirds(ABC2011). TheABCcitesestimatesthat440,000birdswerekilledbywindturbinesin2009andatleastonemillionbirdswouldbekilledin2020basedongrowthprojectionsforwindenergy(ABC2011,p.6). TheABCcallsforregulationsthatwouldensurecompliancewiththe MigratoryBirds TreatyAct,theEndangeredSpeciesAct,andtheBaldandGolden EagleProtectionAct.TheBatsandWindEnergyCooperativehasananalogousgoalofprotectingbatsfromtheadverseimpactsofwindenergy(BWEC2012).Batsaidfarmersbyeatinginsects,andbatdeathsatwindfacilitiesreduce cropsalesbyalmost$4billioneachyear(Boylesetal.2011).TheNationalWindCoordinatingCollaborativeindicatesthatwindfarmsinNewYorkkillbetweenapproximately1.5and6birdsperMWperyearandkillbetweenapproximately3 and15batsperMWperyear(NWCC2010).Assuminga30percentcapacityutilizationfactorforwindturbines(NYISO2010,p.44),approximately6,000 MWofwindturbineswouldberequiredtoreplacethe16million MWhofannualenergyoutputfromIPEC.Basedonthe mortalityratesfromtheNWCC,thesewindturbineswouldkillbetween9,000and36,000birdseachyearandbetween18,000and90,000batseachyear.b.LandRequirementsWindfarmscanrequirea significantamountoflandaroundthewindturbinesandtransmissionstations. Theselandrequirementscanalsohaveadverseimpactsonwildlifebyinterferingwiththeirhabitatandmigrationroutes(GAO2005). TheFSEIScitestheNationalRenewable EnergyLaboratoryasestimatingthatthetotallanddisturbanceforonshorewindenergyis1hectares(2.5acres)perMW,but70percentofthisareaisonlydisturbedtemporarilyforconstruction(FSEIS,p.8-62).Thus,6,000MWofwindturbinestoreplaceIPECsenergyoutputwoulddisturb6,000hectares(15,000acresorover23squaremilesoflikelynon-contiguousareafortheturbines,accessroads,andmaintenancebuildings).Arearequirementsforoffshorewindenergy,whilelower,arestillsubstantial(FSEIS,p.8-62).c.AestheticsModernwindturbinesrisehundredsoffeetintotheairandcanbeseenfromgreatdistances.Windturbinescan significantlyaffecttheaestheticqualitiesoftheirareas,particularlyinareaswithsubstantialaestheticvaluebeforetheconstructionofwindturbines,suchasforests,rivers,andlakes.Figure9comparestheheightofa550ft.windturbinewithatypicalutility NERAEconomicConsulting 29pole,transmissiontower,andforesttree.IfthewindturbinesreplacingIPECeachhadacapacityof5MW(acommonturbine size),1,200tallwindturbineswouldneedtobeinstalledwithpotentiallysignificantaestheticimpacts.d.NoiseThewhirlingbladesofwindturbinescancauseanoisenuisanceforpeoplelivingnearwindturbines(Zeller2010). Thisnoisenuisancecanaffectmanypeopleifthewindturbinesare locatedindenselypopulatedareas.Figure10showsthelocationofcurrentandproposedwindfarmsinNewYork.MostwindfarmsarelocatedinthesparselypopulatedareasofupstateNewYork.IfanynewwindturbinestoreplaceIPECwerebuiltinthedenselypopulatedareasofdownstateNewYork,noisefromtheturbinebladescouldbeanuisanceformanypeopleinthe area.Figure9.HeightComparisonofWindTurbineandOtherStructuresSource:ABC(2011),p.41 NERAEconomicConsulting 30e.OtherEnvironmental ImpactsAnadditionalpotentialadverseimpactofwindenergyisicethrows(Galbraith2008).Ificeonturbinebladesdoesnotstopthemfromspinning,thebladescansometimesflingchunksoficeseveralhundredyardsathighspeeds.f.TransmissionAsreflectedinFigure10,windgenerationdevelopmenthasprimarilybeencenteredonthreeregionsinwesternandnorthernNewYorkduetowindpatterns. TheNYISOsinterconnectionqueueindicatesacontinuedpatterninthisregard. Thus,assuminganysignificantincrementalamountofwindgenerationdevelopmentundertheno-actionalternativerequiresalsotakingintoconsiderationtheadverseenvironmentalimpactsassociatedwithsignificanttransmissionupgrades. Theseimpactsareaddressedseparatelybelow.3.BiomassFacilitiesThissectionprovidesanoverviewofthepotentialenvironmentaleffectsofadditionalbiomass-firedresources.Asnoted,alimitedamountofbiomassfacilitiesarebeingusedtomeetNewYorkStatesRPSrequirements.Figure10.LocationofCurrentandProposedWindFarmsinNewYorkSource:NYISO(2011),p.30 NERAEconomicConsulting 31Aswithfossil-firedgeneration,theburningofbiomassresultsintheemissionsofvariousairpollutants. Table4displaysairemissionsratesfrombiomassfacilitiesforSO x,NO x,CO,and PM 10asreflectedinNationalRenewable EnergyLaboratory(NREL)(2003)reports.4.HydroFacilitiesThissectionprovidesanoverviewofthepotentialenvironmentaleffectsofadditionalhydroelectricresources.Notethatnewlarge-scalehydrodevelopmentwasexcludedasaneligibleresourceunderNewYorksRPSprogramduetoits significantadverseenvironmentalimpacts(NYPSC2004,AppendixB,page2).a.Greenhouse GasEmissionsHydroelectricfacilitiesareresponsibleforincreasesingreenhousegasemissionsduringbothconstructionandoperations.Indeed,aliteraturereviewbySynapse Energy EconomicsnotesthatinitialreservoirfloodingleadstoaninitialstageofbiomassdecompositionreleasingbothCO 2andmethaneandthatpost-floodedbiomesmayremovelesscarbonfromtheatmospherethanpre-floodedbiomes(Synapse2012).Arecentstudyperformedatanewly floodedborealreservoirinQuebec showedarapidincreaseinbothCO 2andmethaneemissionsafterthefirstyearofflooding,followedbyareturntonaturallevelswithintwoandthreeyearsrespectively(Tremblayetal.2009).Tremblayetal.(2009)notethatGHGemissionsatborealreservoirstypicallyreturntonaturallevelswithintenyearsofflooding.Hydro-Quebecprovidesinformationonlife-cycleassessmentsincludingemissionsfromfuelextraction,processingandtransportation,aswellasfrompowerplantconstructionandelectricitygenerationthatshowstypicalgreenhousegasemissionresultsforNorthAmericanhydrofacilities(Hydro-Quebec2002).Table4.DirectAirEmissionsfromWoodResidueBiomassFacilities(lbs/MWh)Source:NREL2003 NERAEconomicConsulting 32b.OtherEmissionsTheconstructionofhydroelectricplantsleadstotheemissionsofothercompoundsthatareresponsibleforadverseenvironmentalimpacts. TheInternational EnergyAdministration(IEA)liststhefollowingtypesofimpactsassociatedwithemissionsreleasedduringtheconstructionofhydroelectricfacilities(IEA2002):Ozonelayerdepletion,Acidification,Eutrophication,Photochemicaloxidantformation,andEcotoxicimpacts.c.Other ImpactsTheIEAalsonotesthatoperationofhydroelectricfacilitiescanleadtothefollowingadverseenvironmentalimpacts(IEA2002):Increasedlocalhumidity,Erosionandsedimentationofstreams,Damagestoaquatichabitat,Impactstolocalbiodiversity,Impactsonfishpopulations,andAestheticimpacts.5.TransmissionExpansionsElectricitydemandinNewYorkStateismostheavilyconcentratedinthesoutheastpartoftheState,butasreflectedinFigure10andtheNYISOInterconnectionQueue,thevastmajorityofproposedwindprojectsarelocatedinwesternandnorthernNewYork. Theexistingtransmissionfacilitiesbetweenupstateanddownstatealreadyare significantlyconstrained.Inaddition,thedistribution systemsinthethreeprimaryareasofwindgenerationdevelopmentinNewYorknowfacelocaltransmissionconstraints,creatingthepotentialforgenerationpocketsintheseareas. Thus,additionalrenewabledevelopmentincrementaltotheRPSprograminthebaselinewouldlikelyrequirethedevelopmentofsignificantnewtransmissioninfrastructure.The sitingandconstructionofnewtransmissionlineswouldresultinadditionaladverseenvironmentalimpactssuchastheclearingofforestedvegetationandsubsequentdisplacementandimpactsonwildlife,includingimpactstofishandaquaticinvertebratesduetocanopyreductionandstreamcrossings. Transmissionexpansionscanhaveadverseimpactsonbirds,includingmortalityfromcollisionsandelectrocution(ABC2012).TheDEISfortheHounsfieldWindFarminJeffersonCounty,NewYork,indicatedthat50.6milesoftransmissionlineswouldhavetobeconstructedtoconnectthewindfarmtoitsregionalpowergrid(HounsfieldDEIS2009).Hounsfieldsproposedtransmissioncorridor NERAEconomicConsulting 33entailsa150-footwiderightofwaywhichwasestimatedwouldleadtotheclearingof360acresofforestedvegetationandsubsequentdisplacementandimpactsonwildlife,includingimpactstofishandaquaticinvertebratesduetocanopyreductionand53streamcrossings(HounsfieldDEIS2009).ThePublicServiceCommissionofWisconsinlists18potentialimpactsassociatedwithtransmissionlines. Theseincludeimpactsofthefollowingcategories:aesthetics,agricultural lands,airportsandairstrips,archeologicalandhistoricalresources,culturalconcerns,electricand magneticfields,endangered/threatenedandprotectedspecies,implantablemedicaldevicesandpacemakers,invasivespecies,noiseandlightimpacts,propertyownerissues,radioandtelevisionreception,recreationareas,safety,strayvoltage,waterresources,wetlands,andwoodlands(PSCW2011).TheJointProposalfortheChamplainHudsonPower Expresstransmissionproject(discussedinAppendixC)providesillustrativeinformationonthetypesofenvironmentalimpactsfromtheinstallationofsomepotentialtransmissionlines. TheenvironmentalimpactslistedfortheChamplainHudsonPower Expresstransmissionprojectincludethefollowing(ChamplainHudson2012):DredgingwouldberequiredtolaycablesintheHudsonRiverandportionsofLake Champlain,resultingintemporarysedimentresuspensionandotherimpacts;Constructionwouldresultintemporaryimpactsto56acresofwetlandsaswellastostreamsandtributaries;About10.7acresofforestedwetlandcovermaybepermanentlyconvertedtomarshor scrub-shrubcommunities;Approximately236acresofexistingforestcovermaybeclearedduringconstruction,60 acresofwhichwouldbepermanentlycleared;ThreemilesofcablewouldbeinstalledwithinthecitystreetsintheboroughofQueens,NewYorkCity;and138,040linearfeetofright-of-waywithinAgriculturalDistrictswouldbeincludedinthe ConstructionZone.F.ConclusionsRegardingtheLikelyAdverseEnvironmentalImpactsoftheNo-ActionAlternativeThecompetitiveelectricitymarketstructureinNewYorkStatewillleadtoreplacementgenerationbeingdominatedbythelowestcostalternatives(subjecttosystemconstraints).Sincefossil-fuelgenerationprovidesforoveralllowercostpowerthanrenewables,mostreplacementpowerislikelytobefossil-fuelgeneration.Additionalfossil-fuelgenerationwillleadto increasesinCO 2andotherairemissionsaswellasotherpotentialadverseenvironmental NERAEconomicConsulting 34impacts.Indeed,evenifadditionalrenewablescouldreplacesomeofIPECsgeneration,suchadditionalrenewableswouldhaveadverseenvironmentalimpacts,asdiscussedabove. Thenextchapterprovidesquantitativeestimatesofthelikelyenvironmentalimpactsoftheno-actionalternativebaseduponresultsfromelectricitymarketmodeling. | |||
NERAEconomicConsulting 35III.QuantitativeModelingofthePotentialEnergyandAdverseEnvironmental ImpactsoftheNo-ActionAlternativeThischapterprovidesquantitativeassessmentsofthepotentialenergyandenvironmentalimpactsoftheno-actionalternativeusingNEMS,adetailedandwidelyused EIAmodel. EIAusesNEMStoperformpolicyanalysesinresponsetorequestsfromCongress,theWhiteHouse,theDepartmentof Energy,andotherFederalagencies. EIApreparesanAnnual EnergyOutlook(AEO)withlong-termprojectionsofenergypricesandquantities.NEMSisalsousedbythenationallaboratories(e.g.,Cortetal.2007),academics(e.g.,Hoppocketal.2012),thinktanks(e.g.,Krupnicketal.2010),andtheprivatesector.Asnotedabove,thebaselinemustfirstbeestablishedtoprovidethepointofcomparisonfortheno-actionalternative.WeusedNEMStodevelopestimatesofthepotentialenergyandenvironmentalimpactsoftheno-actionalternativebycomparingNEMSresultsbetween(1)abaselinescenarioinwhichIPECcontinuestooperate;and(2)ano-actionalternativeinwhichIPECbaseloadgenerationislost.ThedifferencesbetweenthesetworunsrepresentNEMSsprojectionsofhowelectricitymarketsinNewYorkStateandotherregionsmightrespondunder theno-actionalternative.Forthebaseline,weusedNEMSresultsfrom EIAsAEO2012.Fortheno-actionalternative,weassumedthatbaseloadgenerationfromIP2andIP3wouldbelostin2013and2015,respectively.Notethatthesehypotheticaldateswere simplyassumptionsusedonlyforthepurposeofconductingthemodeling.NEMSincorporatesup-to-dateinformationonnational,regional,andStateenergyandenvironmentalpoliciesaswellasinformationonexistingandproposedpowerplants.NEMSdividestheUnitedStatesinto22electricityregions,includingthreeregionsthatcollectivelycoverallofNewYorkState.ThischapterbeginswithanoverviewofNEMS.AdditionalbackgroundinformationonNEMSappearsinAppendixB. ThischapterthenpresentsNEMSresultsforbaselineenergyconditions,thepotentialenergyimpactsoftheno-actionalternative,andtheassociatedpotentialadverseenvironmentalimpactsoftheno-actionalternative. ThetableswithNEMSresultsrelatetotheUnitedStatesasawhole,butwealsonote significantresultsforNewYorkState.A. OverviewofNEMSNEMSisadetailedenergymarketmodelthatiscomposedofmultiplemodulesthatinteracttogenerateprojectionsofpricesandquantities. Thesemodulesincludeonesthatprojectdemandandsupplyfromvarioussectors. The Electricity MarketModuleprovidesprojectionsfor22regionsacrosstheUnitedStates.NewYorkismodeledbythreeNEMSregionsthatcover(1)NewYorkCityandWestchesterCounty;(2)LongIsland;and(3)therestofthestate. TheElectricityMarketModuleprojectscapacity,generation,fueluse,andairemissions,amongother measuresforeachregion. ThemodelalsoaccountsforinternationaltradeinelectricitywithCanadaandMexico. | |||
NERAEconomicConsulting 36EIAupdatesNEMSonceayeartopreparetheAnnual EnergyOutlook.Asnotedabove,NEMSprojectionsreflectFederal,regional,andStateenergyandenvironmentalpoliciesthathavebeenenactedasofthemodelingdate. TheenergypoliciesincludeFederalsubsidiesforparticulartypesofgeneration,includingrenewablessubsidies.Inaddition,NEMSincorporatesRGGIandRPSpoliciesinvariousstates,includingNewYorkStates30x15RPSgoal.WeusedthelatestversionofNEMS,AEO2012,whichwasreleasedinJanuary2012(EIA2012).Unlikemanymodelsofelectricitymarkets,NEMSdoesnottreatdemandprojectionsasinputdata.Instead,NEMScalculatesdemandforelectricityendogenously,reflectingvariousfactors,includingenergyefficiencypoliciesandelectricityprices.NEMSalsocalculatespricesendogenously,reflectingtheinteractionofsupplyanddemandfactors.NEMSincorporatesplannedadditionsandretirementsofgeneratingcapacity,butalsoprojectsunplannedadditionsandretirementsbasedondemandandthecostsofdifferentgenerationalternatives.Indecidinghowmuchcapacityofdifferenttypestoadd,NEMSselectstheleast-costalternativethatcanmeetthedemandrequirements.NEMScanbeusedtoestimatetheimpactofchangesinpolicy,suchasacap-and-tradeprogramforgreenhousegases,airpollutionregulationsthatwouldrequireadditionalcontrolmeasuresbysometypesofpowerplants,orpoliciestoincreasethefuelefficiencyofnewmotorvehicles.TouseNEMStoestimatetheincrementalimpactsofpolicychanges,onefirstrunsabaselinethatreflectsbusinessasusual(i.e.,withoutthepolicychange).Although EIAhasanofficialbaselineeachyear(thebasecaseforAEO),itispossibletomodifytheunderlyingassumptionstocreateanewbaseline.Whateverbaselineisused,onethenmodifiesinputstoNEMStoreflectthechangeinpolicyandrerunsthemodel.Differencesinthetwosetsof projectionsrepresentestimatesofthepotentialimpactsofthepolicy.NotethatmodelingresultsfromNEMSrepresentareasonableestimationofwhatmayhappenbasedonthemodelinginputsandcalculations.Giventhesubstantialuncertaintythat resultsfromthecomplexanddynamicnatureofthevariousenergymarketsintheUnitedStates, itisimpossibletoforecastfutureenergymarketdevelopmentswithperfectaccuracy.B.BaselineConditionsAsnotedabove,EIAusesNEMStoproduceanAnnual EnergyOutlookwithlong-termprojectionsofpricesandquantities. TheAEO2012versionofNEMSgeneratesprojectionsto2040.IntheAEO2012versionofNEMS,IPECandallotherexistingnuclearpowerplantscontinuetooperatethroughoutthemodelingperiod(i.e.,through2040).WeusedtheAEO2012versionofNEMSwithoutmodificationasthebaselineagainstwhichtoestimatethepotentialenergyandenvironmentalimpactsoftheno-actionalternative.WepresentNEMSresultsofbaselineconditionsintheUnitedStatesfortwoperiods(2011-2015and2016-2025)inordertoprovidecomparisonswiththeno-actionalternative,whichareprovidedfortheperiodfrom2016to2025. TheNEMSresultsreflectaverageannualvaluesduringeachperiod. | |||
NERAEconomicConsulting 37Table5presentsaverageannualgenerationintheUnitedStatesbyfueltypeduringthetwoperiodsunderbaselineconditions,includingcontinuedoperationofIPEC.Generationisexpressedintermsofmillionsof MWhperyear.NotethatcoalaccountsforthelargestshareofU.S.generation(41.0percentintheperiod2016-2025),followedbynaturalgas(23.9percent),nuclear(21.2percent),renewables(13.2percent),andoil(0.7percent). Thegenerationmixintheperiod2016-2025is similartothemixin2011-2015,withrenewablesincreasingsomewhatfromthefirsttothesecondperiod,andcoaldecreasingsomewhat.Changesinotherfuelspercentagesbetweenthetwoperiodsare smallerthanthechangesforrenewablesandcoal.C.ProjectedEnergyMarket ImpactsofNo-ActionAlternativeToestimatehowtheelectricity systemwouldoperateundertheno-actionalternative,werananewNEMScaseinwhichwemodeledthebaseloadIP2andIP3generationaslostin2013 and2015,respectively.WemadenoothermodificationstotheAEO2012versionofNEMS.Wecomparedtheresultsforthisno-actioncasetothebaselineresultstoestimatethepotentialelectricitymarketresponsestoaddressthelostIPECbaseloadgenerationaccordingtoNEMS.Wepresentresultsfortheten-yearperiodbeginningin2016(thefirstyearinwhichIPECwouldnotoperatebasedonourmodelingassumptionsfortheno-actionalternative)andendingin2025.Table6presentstheprojectedchangesintheno-actionalternativebasedontheNEMSresults.NEMSestimatesthatIPECwouldproduce16.7million MWhofbaseloadenergyeachyearonaverageduringtheperiod2016-2025,sotheno-actionalternativereflectsthisamountofreducedgenerationfromIPEC.AccordingtotheNEMSresults,electricitypriceswouldriseasaresultofmakingIPECsbaseloadgenerationunavailable.Inresponsetothesehigherelectricityprices,consumerswouldreducetheirdemandforelectricityby0.3million MWhperyearonaverageduringtheperiod2016-2025.Inadditiontothissaleseffect,thereduceddemandforelectricitywouldinvolvea slightreductioninelectricitynetimportsintotheUnitedStatesby0.2million MWhperyearonaverage.TomakeupforIPECslostoutput,otherpowerplants acrosstheUnitedStateswouldincreasetheirgenerationby17.4million MWhperyearonTable5.ProjectedU.S.BaselineGenerationbyFuelTypemillionMWh/yr%ofTotalmillionMWh/yr%ofTotalCoal1,67342.3%1,71241.0%Naturalgas96624.4%99823.9% | |||
Oil270.7%280.7% | |||
Nuclear81120.5%88721.2% | |||
Renewables47712.1%55313.2%Total3,955100.0%4,177100.0%2011-20152016-2025Note:Totalsdifferslightlyfromsumsofcomponentsbecauseofindependentrounding.Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 38average.MakingIPECunavailablewouldtendtoincreasethedistanceoverwhichelectricitywouldneedtotraveltoconsumers,andthiswouldleadtoincreasedlinelosses(i.e.,dissipationofelectricityinthetransmission system). Thesumofthesefourcategoriesofmarketresponses,accountingproperlyfortheir signs(increasesvs.reductions),isequaltoIPECslostoutput.Asshownbelowin Table7,NEMSprojectsthatlessthanhalfoftheincreasedU.S.generationintheno-actionalternativewouldoccurinNewYorkState.NEMSestimatesthatgenerationfromotherpowerplantsinNewYorkStatewouldincreaseby6.9million MWhperyearonaverageduringtheperiod2016-2025undertheno-actionalternative.NEMSestimatesthatNewYorkStatewouldimportmoreelectricityfromotherStatesand(toamuchlesserextent)CanadainresponsetothelostIPECbaseloadgeneration.Indeed,NEMSestimatesthatgenerationinotherStateswouldincreaseby10.6million MWhperyearonaverageduringtheperiod2016-2025intheno-actionalternative,virtuallyallofwhichwouldbetransmittedtoNewYorkStatetomakeupfortheshortfallthere. TheseincreasedimportsintoNewYorkStatelead totheincreasedlinelossesacrosstheUnitedStatesshownabovein Table6.Table6.IPECsLostOutputandProjectedU.S.MarketResponsesinNo-ActionAlternative(2016-2025)millionMWh/yrIPEC-16.7U.S.marketresponsesReducedsales0.3Increasednetimports-0.2(netimportsdecrease)Increasedgeneration17.4Reducedlinelosses-0.9(linelossesincrease)Total16.7Note:Totaldiffersslightlyfromsumofcomponentsbecauseofindependentrounding.Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 39Thelowerpartof Table7showsU.S.replacementgenerationbyfueltype.Notethatthesevaluesreflectthreeeffects:(1)increasedutilizationofpowerplantsthatexistinbaselineconditions;(2)delayedretirementsofexistingplantsrelativetothebaseline;and(3)constructionofnewpowerplantsintheno-actionalternativerelativetothebaseline.NotetoothatNEMSdeterminesnewpowerplantadditionsendogenouslybasedonitsmodelingalgorithms.WemadenoassumptionsaboutwhattypesofresourcescouldbeusedtoreplaceIPECanddidnot constrainNEMSinanyway.Asshowninthelowerpartof Table7,themajority(55.4percent)oftheU.S.replacementgenerationduringtheperiod2016-2025wouldcomefromnaturalgas,andmostof theremainder(43.1percent)wouldcomefromcoal.NEMSprojectsthattheincreasedcoalgenerationwouldcomefromincreasedutilizationanddelayedretirementofexistingcoalplantsratherthanconstructionofnewcoalplants.Smallcontributionstowardreplacementgeneration wouldcomefromrenewables(1.0percent)andoil(0.5percent). TheseNEMSresultsareinaccordwiththediscussionoftherelativecostsofalternativegenerationtechnologiesinthepreviouschapter.D.ProjectedAdverseEnvironmental ImpactsofNo-ActionAlternativeAswehaveseen,NEMSprojectsthatreplacementofIPECbaseloadgenerationlostundertheno-actionalternativewouldcomeprimarilyfromfossilfuel-firedpowerplants.TheincreasedcombustionoffossilfuelswouldincreaseemissionsofCO 2andotherairemissions.Inthissection,wepresentNEMSresultsforthepotentialincreaseintheUnitedStatesinthreeTable7.ProjectedChangesinGenerationinNo-ActionAlternative(2016-2025)millionMWh/yr%ofTotalReplacementgenerationNewYorkState6.939%Other states10.6 61%U.S.total17.4100%U.S.replacementCoal7.543.1%Naturalgas9.755.4%Oil0.10.5%Nuclear0.00.0%Renewables0.21.0%Total17.4100.0%Note:Totalsdifferslightlyfromsumsofcomponentsbecauseofindependentrounding.Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 40typesofairemissions:CO 2,sulfurdioxide(SO 2),andnitrogenoxides(NO x).15Asshowninthetable,NEMSprojectsthat,eachyearonaverageduringtheperiod2016-2025intheno-actionalternative,U.S.CO 2emissionswouldbe13.5milliontonshigher,U.S.SO 2emissionswouldbe6.4milliontonshigher,andU.S.NO xemissionswouldbe3.3milliontonshigher.ToputtheCO 2increasesinperspective,theycanbecomparedwithplannedCO 2emissionreductionsunderRGGI(RGGI2012). TheprogramsCO 2capfor2012is165millionshorttons,whichisequivalentto150millionmetrictons. Theprogramscapfor2018is10percentlower,whichisequivalenttoaplannedreductioninCO 2emissionsof15millionmetrictons.NotethattheAEO2012versionofNEMSincludestheeffectsofRGGI. TheNEMS resultsindicatethattheno-actionalternativewouldincreaseU.S.CO 2emissionsabovebaselinelevelsby13.5millionmetrictons,nearlyasmuchastheplannedreductioninCO 2emissionsunderRGGIthrough2018. | |||
15AiremissionsaretheonlytypeofenvironmentalimpactmodeledbyNEMS.TheAEO2012versionofNEMSincludestheCross-StateAirPollutionRule(CSAPR),whichEPAissuedinJuly2011tolimitemissionsof SO 2andNO xfrompowerplants.(EIAbaseditsmodelingofCSAPRintheAEO2012versionofNEMSontheoriginalformoftheregulationissuedinJuly2011.EPAsubsequentlymadetechnicaladjustmentstostatecapsandnew-unitset-asides,andtheU.S.CourtofAppealsfortheD.C.Circuitsubsequentlyissuedastayonthe regulation.)NEMSalsoproducesestimatesofmercuryairemissionsfrompowerplants,buttheAEO2012versionofNEMSdoesnotincorporateEPAsrecentMercuryandAirToxicsStandards(MATS).Thus,the modellikelyoverstatesfuturemercuryemissionsinboththebaselineconditionsandtheno-actionalternative, andwedonotpresentthemhere.Table8.ProjectedIncreasesinAverageAnnualU.S.AirEmissionsinNo-ActionAlternative(2016-2025)CO2(milliontons/yr)13.5SO2(thousandtons/yr)6.4NOx(thousandtons/yr)3.3Note:CO 2ismeasuredinmillionsofmetrictons(1,000kilograms),whileSO 2andNO xaremeasuredinthousandsofshorttons(2,000pounds).Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 41IV.EvaluationofNewYorkStateContention37Asnoted,NYS-37andtheaccompanyingexpertreportscometoverydifferentconclusions,withoutanysupportinganalyses,regardingthepotentialgenerationthatwouldbeaddedifIPECwerenotavailable.WehaveevaluatedNYS-37anditsaccompanyingdocumentsandhaveconcludedthatthematerialshavefourfundamentalflawsthatexplainwhytheycome tosuchdifferentconclusions. Thefirstsectionofthischapterprovidesanoverviewofthefourflaws. Twooftheseflawshavealreadybeendiscussedinpreviouschapters. Theimplicationsoftheothertwoflawsonevaluatingthepotentialadverseenvironmentalimpactsoftheno-actionalternativeareexplainedinthe secondandthirdsectionsofthischapter.A. OverviewofMajorFlawsinNYS-37ThedifficultieswiththeNYS-37argumentscanbesummarizedintermsofthefollowingfourmajorflaws. | |||
1.Failuretorecognizemarketforcesandcost-minimization.NYS-37andtheexpertreportsfailtoaccountforthekeyrolethatmarketforceswouldplay(andhencetheimportanceofrelativecostsandcost-minimization)indeterminingtheresourcesthatwouldbedispatchedtoreplacethelostbaseloadIPECgenerationundertheno-actionalternative.ItiscriticaltorecognizethatNewYorkStatehasacompetitiveelectricitymarket.Asaresult,decisionsregardingnewinvestmentsarelargelymadebymerchantentitiesthatwouldtendtobuildlow-costfacilities,andfacilitiesaredispatchedtoprovideenergyatminimumcostwhilemeetingreliabilityandoperatingrequirements.Marketforcesandcost-minimizationmeanthatlower-costfossilgenerationratherthanhigher-cost renewablegenerationorenergyefficiencywouldconstitutethebulkofgenerationundertheno-actionalternative. | |||
2.Conflationofdevelopmentsthataffectthebaseline,nottheno-actionalternatives.NYS-37anditssupportingwitnessesmentionahostofdevelopmentsthattheyclaimwerenotconsideredbytheNRCstaffindevelopingtheFSEISandthattheyclaimwouldleadtodifferentconclusionsregardingtheenergymixandenvironmentalimpactsoftheno-actionalternative. ThesedevelopmentsincludeNewYorkStatesrenewableandenergyefficiencygoals,lowerelectricitydemandduetotherecession,recentincreasesinelectricitygenerationcapacityandtransmission systemexpansions,andlowernaturalgasprices. TheflawpervasiveintheNYS-37reasoningisthatthesedevelopmentsrepresentpartofthebaselineconditionsthatwouldoccurirrespectiveofIPECsstatus.Putanotherway,thevariousfactorsidentifiedbyNYS-37anditsexpertssuchastheadditional renewablegenerationorenergyefficiencyresultingfromNewYorkStategoalswouldnotbeavailabletoreplacethebaseloadIPECgenerationiftheIPECunitswerenotavailablebecausetheyexistnow,whileIPECcontinuestoprovidebaseloadelectricity. | |||
3.Failuretoevaluatetheimpactsofpotentialdifferencesinthebaseline. Totheextentthatthedevelopmentstheyciteaffectthebaseline,thosedevelopmentswouldifanythingreducetherolesofconservationandrenewablesasIPECreplacementsundertheno-NERAEconomicConsulting 42actionalternative. ThedevelopmentsemphasizedbyNYS-37,includinglowerelectricitydemandandlowernaturalgasprices,wouldtendtoincreasethesubsidiesthatwouldbenecessarytofundthehighermarginalcostsofthosealternativeswhileatthesametimedecreasingthemarginalcostsoffossilresourcestherebymakingtheseresourceslesseconomicrelativetofossil-fueledpoweroptions. | |||
4.Failuretoprovideempiricalmodeling.NYS-37andtheexpertsfailtoprovideanystudiesorotheranalysesquantifyinghowtheelectric systemwouldrespondundertheno-actionalternative.Incontrast,ouranalysisusingNEMSshowsthatconservation(intheformofresponsetohigherprices)andrenewableswouldplaymodestroles,andthattheprimaryimpactwouldbeincreasedgenerationfromfossil-firedsources. ThisfailureonthepartofNYS-37anditsexpertsisimportantsince,withoutsomeempiricalmodeling,theycannotprovideareasonablebasisforevaluatingwhichalternativesactuallywouldbedevelopedanddispatchedifIPECgenerationwerenotavailable.TwooftheseflawsfailuretorecognizemarketforcesandfailuretoprovideempiricalmodelingrelatetotheissuesdiscussedinChaptersIIandIIIandthusdonotrequireadditionalexplanation. Theothertwoflawsrelatedtotheconflationofbaselineconditionsandtheno-actionalternativerequirefurtherexplanationtoclarifytheirimplicationsfortheenvironmentalimpactsoftheno-actionalternative.B.ConflationofBaselineandNo-ActionAlternativeNYS-37anditsaccompanyingdocumentspointtonumerouschangesthathaveoccurredinNewYorkStatesenergymarkets,eachoneofwhichNYSclaimssignificantlychangesthe environmentalimpactcalculussetforthintheFSEIS(NYS-37,p.2).However,theciteddevelopmentsrelatetochangesthathaveoccurredalreadyorthatwilloccurregardlessofIPECsfuturestatus.Thus,theycannotprovideadditionalenergytomakeupforlostbaseloadIPECgenerationintheno-actionalternative.Asaresult,theciteddevelopmentsarenotdirectlyrelevanttoevaluatingthelikelyelectricitymarketandenvironmentalimpactsoftheno-actionalternative.Theimportanceofdistinguishingbetweenbaselineconditionsandtheno-actionalternativewasdiscussedaboveinChapterII,andFigure5inChapterIIillustratesthatthepotentialenvironmentalimpactsoftheno-actionalternativearebasedonthechangesinenergyresourcesbetweenbaselineconditionsandtheno-actionalternative. ThissectionelaboratesonthefundamentalpointintroducedinChapterIIbyconsideringtheimplicationsofusingdifferent(i.e.,moreupdated)baselineconditions.1.Differences inBaselineConditionsThissectionconsidersallegeddifferencesbetweenbaselineconditionsassumedintheFSEISandbaselineconditionswiththerecentenergydevelopmentscitedinNYS-37.Figure11illustratessuchahypotheticalchangeinthebaselinemixofgeneration.Ontheleft-hand sideis theOriginalbaselinegenerationmixallegedlyassumedintheFSEIS.Inthemiddleisa NERAEconomicConsulting 43RevisedhypotheticalforecastofthebaselinegenerationmixthattakesaccountofthetypesofchangescitedbyNYS-37andsupportingtestimony(includingmorerenewablesduetothe30x15policy,moreconservationduetothe15x15policy,andtheeffectoftherecessionontotalnecessaryoutputfrompowerplants).NotethatbothbaselinesincludecontinuedoperationofIPEC. Thestackedbarontherightshowsthechangesingenerationresourcesbetweenthetwobaselineforecasts.Inthefigure,overalldemandhasfallenbecauseoflowerlevelsofeconomicactivity(recession).RenewablesandconservationbothhaveincreasedbecauseofvariousStateand federalprogramsandsubsidies.OutputfromIPECisthesameintherevisedforecastasintheoriginalbecause,inbothcases,IPECisabase-loadedresource,andthus,itsgenerationisnotaffectedbythetotalloadforecast.Asaresultoftherecessionandincreasedconservationandrenewables,forecastedgenerationbyfossilandothersourceshasdeclined.Noneofthesechanges,however,speaksdirectlytothequestionathand:Whataretheincrementalchangesin theresourcesthatarelikelytobeusedtomeetdemandwhencomparingthebaselinetotheno-actionalternative?a.IncrementalChanges in GenerationfromaModifiedBaselineToanswerthatquestionrequiresrepeatingtheanalysisillustratedinFigure2(inChapterII)butwiththerevisedbaselinethatwehavedevelopedinthischaptertoreflectthefactorsidentifiedinNYS-37.Figure12illustratessuchahypotheticalanalysisusingtherevisedbaseline. Therevisedbaselineontheleftandtherevisedno-actionalternativeinthemiddlebothinvolvemoreconservationandrenewablesandlessoutputfromfossil/otherthantheirFigure11.HypotheticalIllustrationofChangeinBaselineGenerationOriginalbaselineRevisedbaselineChangeOutputRecessionRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchangesbetweenthetwobaselines)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 44counterpartsinFigure2.However,therelevantcomparisonisbetweenthe changesduetotheno-actionalternativeinthetwofigures,becausethosechangesarewhatdeterminethenetenvironmentalimpactsoftheno-actionalternative. Themerefactthatrenewablesandconservationplaylargerrolesintherevisedbaselinedoesnotnecessarilymeanthattheywillplaylarger(or,perhaps,any)incrementalrolesinreplacingoutputlostfromIPECundertheno-actionalternative. Thechangeinthebaselinedoesnot,infact,affectthenatureofthechangeingenerationmixundertheno-actionalternative.Butaswediscussbelow,thechangedbaselinecanhaveanindirecteffectinamannerthatactuallyrefutestheNYS-37presumptions.b.ImplicationsofIllustrationsTheprecedingillustrations showthatdevelopmentsthataffectbaselineconditions(i.e.,conditionsthathaveoccurredorwilloccurinthefutureregardlessofIPECsstatus)donothave adirecteffectonthechangesingenerationthatwouldoccurundertheno-actionalternative.Inourhypotheticalexample,thechangesingenerationarethesameinFigure12asinFigure5,i.e., | |||
thechangeinbaselinehasnoeffectontheincrementalgeneration.Forreasonswediscussinthethirdsectionofthischapter,however,carefulanalysisoftheindirecteffectsofthedevelopmentscitedinNYS-37anditsaccompanyingdocumentssuggestthatthosedevelopmentswouldbelikelytoreducetheincrementalrolesofrenewablesandconservationundertheno-actionalternative,incontrasttothecontentioninNYS-37.Figure12.HypotheticalAnalysisofImpactofNo-ActionAlternativewithRevisedBaselineRevisedbaselineNo-ActionChangeOutputRecessionRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchangesbetweenthebaselineandtheno-actionalternative)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 452.DevelopmentsCitedbyNYS-37RelatetotheBaseline,NotImpactsoftheNo-ActionAlternativeThemajordevelopmentscitedinNYS-37andaccompanyingdocumentsrelatetochangesinthebaseline(thatis,thecurrentcircumstanceswhichincludescontinuedIPECgeneration),nottowhatalternativescouldbeavailabletoreplaceIPECsenergyintheno-actionalternative. Thefollowingarethe sixmajordevelopmentsemphasizedinNYS-37andtheexpertreports.(AppendixAprovidesupdatedinformationonthese sixdevelopments.) | |||
1.NewYorkStaterenewableelectricitygoal. The30x15renewableelectricitygoalisbeingimplementedbysubsidiespaidbyNYSERDAtodevelopersofrenewableenergysources.ThesesubsidiesarecollectedfromNewYorksconsumersontheirmonthlyutilitybillsthroughavolumetricsurchargefortheRPSprogram. | |||
2.NewYorkStateconservationandenergyefficiencyprograms.Conservationandenergyefficiency,particularlyunderthe15x15plan,willplaylargerrolesthanprojectedinthepast.UtilityandNYSERDAconservationprogramsaresubsidizedwithfundsfromtheSystemsBenefitCharge(SBC)andothervolumetricsurchargesimposedonsalesofelectricitytoNewYorksconsumers. | |||
3.LowerNewYorkStateelectricitydemandduetoeconomicfactors.FuturedemandforelectricityinNewYorkisprojectedtobelowerthanearlierprojectionssuggested,suchasthoseavailablein2006forthereportbytheNationalResearchCouncilonalternativestorenewingIPECslicenses,duetotherecessionandcontinuingeconomicpressures. | |||
4.NewYorkStaterecentandproposedgenerationcapacityadditions.NewYorkStatehasaddeda significantamountofgenerationcapacityinrecentyears(mostlynaturalgasandwind),and significantamountshavebeenproposedforconstructioninfutureyears. | |||
5.Lowernaturalgasprices. Thepriceofnaturalgashasfallenoverthepastseveralyearsandisexpectedtoremainlowerthanpreviouslyexpected,inpartbecauseofnewtechniquesforextractingnaturalgasthathave sharplyincreasedthereservesthatcanbeextractedeconomically. | |||
6.NewtransmissionlinesinNewYorkState.Newtransmissionlines,whichdidnotexistatthetimeofthe2006NationalResearchCouncilreportandallegedlywerenotconsideredbytheFSEIS,willmakeiteasierforthedownstateareasservedbyIPECtoobtainpowerproducedinupstateNewYorkorintheadjoiningregions.Thefollowingsubsectionssummarizetheserecentdevelopments,analyzehowtheyaffectaproperlysetbaselineandaddresswhethertheyprovidedirectevidenceconcerningthepotentialadverseenvironmentalimpactsoftheno-actionalternative. | |||
NERAEconomicConsulting 46a.NewYorkStateRenewableElectricity Goal is intheBaselineNewYorkStates30x15renewableelectricitygoalwasdiscussedaboveinChapterII.SincerenewablesthatareinducedintoNewYorkStateselectricitysystemaspartofthisgoalareelementsofthebaselineregardlessofIPECsstatus,theserenewablescannotalsobecountedasreplacementsforIPECintheno-actionalternative.StatementsbytheStatesexperts(Schlisseltestimony,p.48)regardingfederalsupportforrenewableenergyundertheAmericanRecoveryandReinvestmentActof2009(ARRA)provideanotherexampleoftheconflationofchangesinthebaselineandchangesintheincrementalimpactoftheno-actionalternative.ARRAprovidedtemporaryfederalsupportforrenewableenergyasaresponsetotherecession,andthus,isproperlyincludedinthebaseline.Severalofthesupportmechanisms(includingtheSection1603energygrantprogram)havealreadyexpired(U.S.Treasury2012).Thus,thefederalsupportmechanismsunderARRAnolongerevenexistand,inanyevent,arenotrelevanttopotentialreplacementofIPECsbaseload energywithrenewableenergyintheyearsahead.b.NewYorkStateEnergyEfficiencyandConservation Goal is intheBaselineNewYorkStates15x15conservationgoalwasdiscussedaboveinChapterII.SinceconservationmeasuresthatareinducedinNewYorkStateselectricitysystemaspartofthis goalareelementsofthebaselineregardlessofIPECsstatus,theseconservationmeasurescannotalsobecountedasreplacementsforIPECintheno-actionalternative.InhistestimonyinsupportofNYS-37,Mr.Schlisselprovidesanotherparticularlyclearexampleofadevelopmentthatrelatestothebaselineratherthantotheimpactsoftheno-actionalternative.HenotesthatARRAspendingandincentiveshavestimulatedconservationefforts.AnyincreasethathasoccurredasaresultofARRA,however,ispartofthebaseline,andinanyeventissubsumedunderthe15x15and30x15goals.Moreover,expendituresunderARRApeakedin2010andhavedeclined sincethen.Nonewfundingisavailable. Thus,itwillnotbeapotentialsourceoffundingforincrementalconservationeffortsundertheno-actionalternative.c.ReducedElectricityDemandProjectionsDuetoLowerEconomicActivityand OtherFactorsThissectionconsiderstheeffectsofreducedelectricitydemandprojections,firstsummarizingthechangesinforecastsandthenassessingtherelevance.i.Changes inForecastElectricityDemandAsNYS-37(p.38)andexpertsnote,forecastsofelectricitydemandinNewYorkhavefallensubstantiallyoverthepastseveralyears. TheNYISOhasreportedthatthis significantfall-offinelectricitydemandhasbeendrivenprimarilybytherecessionanditsafter-effects.Figure13showsthechangesovertimeintheNYISOsforecastsofNewYorkStateelectricitydemand. | |||
NERAEconomicConsulting 47Asshowninthefigure,theprojectionsdecreased significantlyovertheperiod,particularlybetween2008and2009asthedepthoftherecessionwasincorporatedintotheforecast.NYISOprojectedin2006thatsalesin2016wouldbe184,630GWh,butitprojectedin 2011thatsalesin2016wouldbeonly165,319GWh,areductionof10.5percentrelativetotheprojectionfrom2006.InapresentationinMay2010,NYISOestimatedthattherecessionreducedelectricitysalesbetweenOctober2008andApril2010(adjustedforweather)by6,400GWhandthatlost economicgrowthaccountedforanadditional1,500to2,000GWh(NYISO2010b,p.2). Thus,forthishistoricalperiod,therecession(includingtheresultinglosteconomicgrowth)was estimatedtoaccountforabout93percentofthetotalreductioninelectricitysales. | |||
16ii.Changes inForecastElectricityDemandare intheBaselineForecastsoffutureelectricitydemandinNewYorkStateareinherentlyuncertain,inlargepartbecauseofuncertaintiesregardingfutureeconomicactivityintheStateandthusthedemandfromindustrial,commercialandrecreationalcustomers. Thesechangesinoveralldemandwillofcourseaffectthegenerationsourcesthatareusedtomeetfutureelectricity 16600GWhofreductionwasattributedtoenergyefficiencyprograms(NYISO2010b,p.2).Figure13.NYISOProjectionsofNewYorkStateElectricitySales145,000150,000155,000160,000165,000170,000175,000180,000185,000190,000195,00020062008201020122014201620182020ElectricitySales(GWh | |||
)2006 2007 2008 2009 2010 2011Note:AllprojectionsincorporateNYISOsprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 48demand.Asnotedabove,however,IPECprovidesbaseloadgenerationand,thus,thelevelofitsgenerationisnotaffectedatallbythelevelofeconomicactivity. Thus,whateverchangesmighthaveoccurredintheforecastsoffutureelectricitydemandorwhateverchangesmayoccurinsubsequentforecastswillnotinfluencethelevelofgenerationfromIPECthatislostundertheno-actionalternative.ChangesinforecastedelectricitydemandareproperlypartofbaselineconditionsratherthanchangesthatshouldbeattributedtothepotentiallossofIPECbaseloadgeneration.Indeed,thesameprincipleappliestochangesinfutureforecasts.Thebaselineconditionsfor2020maychangeinthefutureduetochangesineconomicforecastsandthusforecastelectricitydemand.Buttheprincipleisthesame;thesechangesrepresentchangesinbaselineconditionsratherthanconditionsthatdirectlyaffecttheimpactsoftheno-actionalternative.Asdiscussedbelow,however,changesinthebaselinecanhaveanindirecteffectontheimpactsoftheno-actionalternative,althoughnottheeffectpresumedinNYS-37.d.GenerationCapacityAdditionsThissectionsummarizesinformationonrecentandpotentialfutureelectricitygenerationcapacityadditionsandthenconsiderstheirrelevance.i.RecentCapacityAdditionsAccordingtotheNYISOdatabaseofpowerplantsinNewYorkState,8,348MWofgenerationcapacity(netavailabletothegrid)hasbeenadded since2000.Figure14shows annualcapacityadditionsinNewYorkStatefrom2000to2011byenergytype.Naturalgaswasthedominanttypeofnewcapacityinmostyears,butlargeamountsofwindhavealsobeenaddedinsomeyears.Ofthe8,348MWoftotaladditions since2000,naturalgasaccountedfor6,874MW(83percent)andwindaccountedfor1,348MW(16percent). | |||
NERAEconomicConsulting 49ii.PotentialCapacityAdditionsTheNYISOmaintainsanInterconnectionQueuethatlistsproposedprojects.Applyingforaninterconnectionandbeingplacedinthequeueismerelyastepinthedevelopmentprocess.Farlesscapacityisultimatelybuiltthanisenteredinthequeue. Thisistrueforavarietyofreasonswhichincludeassignmentoftransmissionupgradecoststoprojectswhichincreasescosts,difficultyinobtainingpermits,difficultyinobtainingacontract,unwillingnesstotakemarketrisk,inabilitytosecurefinancingatallorataratethatwillsupporttheproject,increases inprojectcostfrominitialexpectations,changedeconomicconditionsthatwouldreduceprofitability,andtheconstructionofnewunitsbycompetitorswhichreducestheprofitabilityoutlook.TheNYISOInterconnectionQueuedatedDecember31,2011contains12,081 MWofpotentialgenerationprojectsinNewYorkState.Windfacilitiesaccountfor5,698MW(47percent),andnaturalgasfacilitiesaccountfor5,384MW(45percent). ThetotalrenewablecapacityinthecurrentInterconnectionQueueis5,839MW(48percent).Figure15showstheenergytypesandcurrentlyexpectedin-servicedatesforactiveprojectsintheInterconnectionQueue.ProjectsintheInterconnectionQueuehavein-servicedatesasfarinthefutureas2017.Figure14.AnnualGenerationCapacityAdditions(MW) 02004006008001,0001,2001,4001,600 1,800200020012002200320042005200620072008200920102011AnnualAdditions(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011d) | |||
NERAEconomicConsulting 50TheInterconnectionQueuerevealsthatmanyprojectshavehad significantpostponementsorhavebeenwithdrawn. Themajorityofprojectsthatarecurrentlyexpectedtocomeinservicein2012(intermsof MW)wereoriginallyscheduledtocomeinservicein2007orearlier.Acrossallcurrentin-servicedates,46percentofprojects(intermsof MW)havebeenpostponedbyfouryearsormore,accordingtothequeue. ThisisnotunusualbutrepresentstheoutcomeswewouldexpectgiventhatenteringthequeuepreservesanoptionatlowcostandgiventhedeclineindemandgrowthinNewYorkafter2007.TheInterconnectionQueue showsthat8,286MWofwindprojectshavebeenwithdrawnbydevelopers since2000. Thus,thewindcapacitythathasbeenbuiltinNewYorkStatesince2000(1,330MW)isonly14percentofthecapacitythathasbeenproposed.Hence,theamountofwindcapacityintheInterconnectionsQueueisnotausefulindicatoroftheamountofwindcapacitythatwillbedevelopedinthefutureorthatmaybedevelopedinresponsetotheno-actionalternative. Thatwilldependontheabilityoftheprojectstoobtainpermits,theactual costsofdevelopment,ontherelativeeconomicsoftheseprojectsversusthegas-firedunitsinthequeue,themarketpriceoutlook,theavailabilityoffederalandStatesubsidies(andtheassociatedlevels),andthetransmissioncostsultimatelyassignedtotheseunits. TherecentdevelopmentscitedinNYS-37suchasreductionsindemandgrowthandlowergaspricesmaketheseunitslesslikelytobecompetitivewithgasunitsand,despitetheirpresenceinthequeue,lesslikelytobereplacementsforIPECintheno-actionalternative.Figure15.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW) 05001,0001,500 2,0002,5003,0002012201320142015201620172018N/APotentialGenerationProjects(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011e) | |||
NERAEconomicConsulting 51iii.CapacityAdditionsare intheBaselineRecentcapacityadditionsrepresentadditionstothefacilitiesthatcouldintheoryprovideadditionalgenerationtoreplacelostIPECbaseloadgenerationtotheextentandonlytotheextentthattheseunitswouldnotbeoperatingatfulloutputwereIPECtocontinuetooperate.Thesecapacityadditionsdonototherwiserepresentthechangesthatwouldtakeplaceundertheno-actionalternative.Rather,theseadditionsrepresentchangesinthebaselineconditions.WhetheradditionalgenerationtoreplacelostIPECgenerationwouldcomefromtheserecently-addedunitsdependsupontheircapacityutilizationunderbaselineconditionsandthecostpermegawatt-hourofadditionalgenerationaswellastheabilityofthetransmission systemtodeliverthepowertotherelevantdemandregions.Notethat sincewindcapacityisusedwheneveritisavailablebecausethemarginalcostisvirtuallyzero,additionalrecentwindcapacityinthebaselinewouldnotprovidegreateropportunitiesforwindtobeusedasreplacementpowerevenassumingtherewasadequatetransmissiontodeliverit.Thepossibilityoffuturecapacityadditionsalsodoesnotbyitselfrepresentchangesthatwouldresultfromtheno-actionalternative.Potentialfuturecapacityadditions,suchasthoseinthequeue,aresimplyalternativesthatmayormaynotserveasareplacement.Whetherparticularunitswillbeaddedinthefuturewilldependprimarilyupontheirrelativecosts;thisprincipleappliesbothinthebaseline(e.g.,asaresponsetoincreasedelectricitydemand)andintheno-actionalternative.AsanalysesinChaptersIIandIIIshow,renewablegenerationisgenerallynoteconomicallycompetitivewiththemarginalcostsofexistingunutilizedfossilcapacityorwiththelevelizedcostofnewfossilcapacity.Insummary,recentcapacityadditionsarepartofthebaselineconditionsratherthanindicationsofthegenerationthatwouldbedispatchedintheno-actionalternative.Potentialfuturecapacityadditionsrepresentalternativesthatwouldonlyberealisticifsuchadditionswouldbeeconomicallycompetitive.e.LowerNatural GasPricesThissectionsummarizesinformationonrecentdecreasesinforecastnaturalgaspricesandthenconsiderstheirrelevance.i.Changes inForecastNatural GasPricesAsNYS-37(p.35)notes,naturalgaspriceshavefalleninrecentyears.From2008to2010,theaveragepriceofnaturalgasatHenryHubdroppedfromabout$9/MMBtutoabout | |||
$4/MMBtu(in2010dollars),afallofroughly56percent(EIA2011a).Moreover,naturalgaspricesareexpectedtoriseonlymodestlyinthefuture,asincreaseddemandisoffsetbyanumberoffactors,includingincreasedproductionusingnewlow-costtechniques.InAEO2009,forexample, EIAforecastthatthepriceofnaturalgasin2020wouldbeabout$8/MMBtu(in2011dollars)(EIA2009).EIAsprojectioninAEO2011wasthatthepriceofnaturalgasin2020willbeonlyabout$5/MMBtuin2011dollars(EIA2012),adeclineofmorethan35percent. | |||
NERAEconomicConsulting 52ii.Changes inNatural GasPricesare intheBaselineLowernaturalgaspriceswillreducethecostofelectricitygeneratedusingthatfuel,inboththebaselineandundertheno-actionalternative. Thoselowercostswillincreasetherelativecompetitivenessofgas-firedgeneration,leadingtogreateruseinbothstatesoftheworld. Theyalsowillreduceincentivestoreplaceexistinggas-firedsourceswithnew,moreefficientunits,becausetheincrementalcostsavingswillbe smaller.Theseeffectswillapplyequallytoboththebaselineandtheno-actionalternative,andthusarenotdirectlyrelevanttotheincremental impactsoftheno-actionalternative.Aswediscussbelow,however,lowernaturalgaspricesarelikelytoreducetheroleofrenewablesintheno-actionalternativeandtoincreasetheroleoffossilfuelgeneration,whichrunsdirectlycountertoNYS-37sclaimthattheFSEISshouldhaveconsideredscenarioswithlessgas-firedgenerationandmoreconservationandrenewables.f.TransmissionCapacitytoDownstateNewYorkThissectionsummarizesinformationonrecenttransmissioncapacityadditionsinNewYorkStateandthenconsiderstheirrelevance.i.Changes inTransmissionCapacityNYS-37(p.52)criticizestheFSEISforfailingtoconsiderrecentdevelopmentsintransmissioncapacitytodownstateNewYork.Thesedevelopmentsincludethreeprojectsthatwillor(ifnotyetconstructed)mightprovideadditionalcapacitytoimportpowerfromunitsinNewJerseyandotherStatesthatarepartofthePJM system:1.LindenvariablefrequencytransformersinNewJersey,whichbecameoperationalin 20092.Hudson TransmissionPartnerslinefromNewJerseytoNewYorkCity,whichhasreceivedacontract,isnowunderconstructionandiscurrentlyexpectedtobecompletedin2013;and3.Cross-HudsonProject,whichisinthepermittingprocessandis scheduledforcompletionin2015.Inaddition,NYS-37anditsaccompanyingdocumentsfaulttheFSEISforincludingtheNewYorkRegionalInterconnect,aprojectthathasbeenwithdrawn,butthencitetheChamplainHudsonPower Expressproject,whichwouldallowthetransmissionofpowerfromQuebecto NewYorkCity.IssuesrelatedtoCanadiantransmissionlinesandhydrofacilitiesinthecontextofthisproposedprojectarediscussedinAppendixC.ii.Changes inTransmissionCapacityare intheBaselineThe LindenandHTPprojectswillincreasetheabilitytoobtainmorepowerfromoutsidedownstateNewYorkwhenitismoreeconomicalthangeneratingelectricitywithinthecritical NERAEconomicConsulting 53zones.Moreover,whileNYSiscorrectthattheNYRIProjectwaswithdrawn,itnonethelesscanbeusedgenericallytotheextentsuchprojectsareeconomiconapurelymerchantbasistorepresentamajortransmissionproject.Thekeypoint,however,isthatanytransmissiondevelopmentsthatoccur,includinganymajortransmissionprojectsincreasingthetransfercapabilityintotheDownstatearea,areinthebaseline,andthus,havenoincrementaleffectsforpurposesoftheno-actionalternative.Aswithotherenergydevelopments,thesetransmissionchangesarenotdirectlyrelevanttothequestionofwhatenergyandenvironmentalimpactscouldoccurintheno-actionalternative.Aswediscussbelow,totheextentthatthereisexcesstransmissioncapacityinthebaseline,itcouldaffectthemixofresourcesusedtoreplaceoutputlostfromIPECundertheno-actionalternative. Theenvironmentalconsequencesofincreasesinpurchasedpowerwilldependonthemixofsourcesusedtogeneratethatpowerrelativetothemixthatwouldotherwisesupplyitfromin-regionsources.C.FailuretoAccountfortheIndirectEffectsofaModifiedBaselineontheEnergyandEnvironmentalImpactsUndertheNo-ActionAlternativeThissectionprovidesaqualitativeevaluationofamajorclaimofNYS-37thatrecentenergydevelopmentsmeanthattheFSEISoverstatesthepotentialenvironmentaleffectsoftheno-actionalternative. ThedocumentssubmittedinsupportofNYS-37emphasizevariousdevelopmentsthattheStateallegestheFSEISdidnotincorporate.Considerationofthosedevelopments,NYS-37claims,indicatesthattheFSEISshouldhavedevotedmoreattentiontoalternativesthatrelymoreheavily,ifnotexclusively,onconservationandrenewables,ratherthanfossil-firedgeneration.Asdiscussedabove,NYS-37anditsaccompanyingdocumentsfailtodistinguishbetweendevelopmentsthatinfluencethebaseline(thatis,conditionsthatexistorareplannedindependentoftheno-actionalternative)andwhatincrementalchangesinresourceswouldbeusedtoreplacelostIPECbaseloadgenerationundertheno-actionalternative.Mostofthedevelopmentstheyciterelatetochangesinthebaselineandhencearenotdirectlyrelevanttotheeffectsoftheno-actionalternativerelativetothebaseline.ChangesinthebaselinedonotthemselvesrepresentimpactsthatwouldoccurifIPECgenerationwerenotavailable.Butbaselinechangescanindirectlyaffectwhichresourcesarelikelytochangeincrementallyundertheno-actionalternative.Forexample,newtransmissionlinesmaymakepowerimportedfromotherstatespartofthereplacementgeneration ifthosenewlinesarenotfullyutilizedinthebaseline.However,theindirecteffectsofchangesinthebaseline canalsohavecounterintuitiveeffects.Forexample,asweexplainbelow,abaselinewithhighlevelsofconservationislikelytohavehighercostsof additionalconservationaspartofreplacingIPECthanabaselinewithlowerlevelsofconservation. Thus,abaselinewiththehigherlevelsofconservationthatNYS-37arguesaremoreaccuratethanintheFSEISwouldmakeitmoreexpensiveandthereforelesslikelythatsubstantialamountsofadditionalconservationwouldbeusedtoreplaceIPECsbaseloadenergy. | |||
NERAEconomicConsulting 54ThefollowingsectionsprovideassessmentsoftheindirecteffectsofthevariousenergydevelopmentsemphasizedinNYS-37onthetypeofgenerationlikelytoreplaceIPECgenerationundertheno-actionalternative.a.IncreasedRenewableRequirementsAccountingforincreasedrenewablerequirementsinthebaselinewouldtend,ifanything,todecreasethelikelyroleofrenewablesinreplacementgenerationundertheno-actionalternative.Wecanexplainthisusingadiagramtoillustratetheindirecteffectsofachangedbaseline.Figure16below(avariationonFigure7inChapterII)relatesthetotalquantity(MWh)ofrenewablegenerationinNewYorkStatetothesubsidyrateperMWhnecessarytoelicitrenewablegeneration. | |||
17 Theupward-slopedsupplycurveindicatesthatincreasingthetotalquantityofrenewablegenerationrequiresincreasingthesubsidyrateperMWh. | |||
17Asnotedabove,undertheRPSprogram,NYSERDAprovidespaymentstorenewableenergyproducersinordertoincreasethequantityofrenewableenergyproducedinNewYorkState.ThesepaymentsultimatelyarebornebyNewYorkStateselectricityconsumersthroughsurchargesontheirmonthlyutilitybills. | |||
NERAEconomicConsulting 55Supposethatundertheoriginalbaselinewithoutthe30x15RPSprogram,thesubsidyissetat S 0 Banditelicits Q 0 Bunitsofrenewablegeneration. Thus,theincrementalcostofsecuringadditionalrenewablesundertheno-actionalternativewouldstartat S 0 BandincreaseincrementallytotheextentthatthegovernmentwantedtoreplacelostIPECoutputwithrenewables.IfthedesiredincreasewereQ,thesubsidyraterequiredwouldriseto S 0 N. Toprovidetheadditionalrenewablesundertheno-actionalternativewouldrequireraisingthesubsidyrate,aswellasincreasingthequantityonwhichthesubsidyispaid,bothofwhichwouldraisethebudgetneeded.NowsupposethatnewrenewableprogramsofthetypecitedinNYS-37anditssupportingdocumentsareimplemented. Thebaselinequantityofrenewablesrisesfrom Q 0 B to Q 1 B.Toelicitthatadditionalsupply,thesubsidymustbehigher, S 1 Binthenewbaseline.Similarly,undertheno-actionalternative,ifthedesireistoincreaserenewableoutputbyQ,therequiredsubsidyrisesto S 1 N.Asthefigureillustrates,themoreambitiousthegoalintherevisedbaseline,thehigherthesubsidythatisneededtoelicitadditionalsupplyofrenewablesintheno-actionalternative. ThehighersubsidyrequiredtoobtainadditionalrenewablesmeansthatFigure16.ImpactofMoreBaselineRenewablesontheMarginalCostofAdditionalRenewablesSupply Q 0 B Q 1 B Q 0 N Q 1 N S 0 B S 0 N S 1 B S 1 NQuantitygeneratedbyrenewablesSubsidyNotes: Q 0 B:Quantityofrenewablesinoriginalbaselinewithout30x15policyQ:additionalquantityofrenewablesdesiredundertheno-actionalternative S 0 B:Subsidyratefororiginalbaseline S 0 N:Subsidyraterequiredtoelicitadditionalrenewablesunderno-actionalternative Q 1 kand S 1 k:correspondingquantitiesandsubsidiesunderrevisedbaseline. | |||
NERAEconomicConsulting 56renewableswouldbelesslikelytobeaddedasreplacementpowerundertheno-actionalternative.b.IncreasedElectricityConservationRequirementsTheanalysisoftheindirecteffectofahigherbaselinelevelofconservationonthelikelihoodofadditionalconservationintheno-actionalternativeisessentiallythe sameastheanalysisforrenewablesinFigure16.Increasingconservationprogramsundertheno-actionalternativewouldrequireincreasedratesofexpenditureperunitofelectricitysaved,assumingthatadditionalconservationprogramscouldevenbedesignedbeyondthoseintendedtomeettheambitiousNewYorkStategoal. Thehigherthebaselinelevelofconservationassumed,thehigherwouldbethecostperunitofelectricitysaved,sothatthehigherbaselinelevelofconservationcitedbyNYS-37anditsaccompanyingdocumentsinfactwouldmakeitmoredifficultandcostlytosecureanyincrementalconservationinitiativesbeyondthebaseline EEPSprogramtobeusedintheno-actionalternative(assumingthatadditionalinitiativescouldbe identifiedandimplementedeffectively).c.LowerProjectedFutureElectricityDemandLowerelectricitydemandforecastsduetolowerlevelsofeconomicactivityapplytothebaselineanddonothaveadirectimpactonthemixofresourcesthatlikelywouldbeusedundertheno-actionalternative. Theirindirecteffect,however,islikelytomakefossilsourcesmoreattractiveasincrementalsourcesofsupplyundertheno-actionalternative.Aswithouranalyses ofrenewablesandconservation,wecanillustratethislogicwithasupplycurve.Thesupplyoffossil-generatedelectricityisrisingasafunctionofthemarketprice;higherpriceselicitmoresupply,asillustratedinFigure17.Inthefigure,theinitialbaselinequantityoffossilgenerationis Q 0 B,correspondingtoamarketpriceof P 0 B.Undertheno-actionalternative,ifQadditionalunitsoffossilwereusedtoreplacelostIPECoutput,thepricewouldriseto P 0 N.Nowconsidertheeffectsoflowerdemandinthebaselineasaresultoflowerlevelsofeconomicactivity.Lowerdemandmeansthatlessfossilwillbeusedinthebaseline.Inaddition,higherlevelsofrenewablesandconservationalsowillreducetheamountoffossilusedinthebaseline.Inthefigure,thereducedquantityoffossilintherevisedbaselineis Q 1 Bandthecorrespondingmarket-clearingpriceis P 1 B,whichislowerthaninthebaseline.Inotherwords,alower-costfacilitymeetstherequireddemandandsetsthemarket-clearingpriceloweronthesupplycurve.Asaresult,thecosttoreplacelostIPECoutputundertheno-actionalternativealsowouldfall,makingfossilamoreattractiveoptionthanundertheoriginalbaseline.Becausethe newbaselinewouldlowerthemarket-clearingprice,itwouldincreasethesubsidiesrequiredtomeetanygiventargetforrenewables.Italsowouldmakeconservationlessattractivebecauselowermarketpriceswouldmakeconservationlesscost-effectiveforcustomers. | |||
NERAEconomicConsulting 57d.Recent GenerationCapacityAdditionsRecentandproposedcapacityadditionsinNewYorkareprimarilyabaselineissue . Thecapacityadditionsmaydisplacehigh-costpowerplantsintheelectricitymarketssupplycurve,butIPECremainsasourceofbaseloadenergyevenwiththecapacityadditions. Thus,thecapacityadditionshavenotandwouldnotreducetheamountofenergythatIPECsuppliestotheNewYorkelectricity system(andthustheamountofenergythatwouldhavetobereplacedifIPECwerenotavailable).TheindirecteffectsofNewYorkStatesrecentandproposedcapacityadditionsarelikelytoincludedecreasesinthemarketpriceofelectricitythatwouldinturnbelikelytoincreasetheattractivenessoffossil-firedgenerationrelativetorenewablesorconservation.Asdiscussedabove,intheneartermthemarketpriceforagivendemandperiodwouldbedeterminedbytheFigure17.ImpactofReducedDemandinBaselineonMarginalCostofFossilGenerationtoReplaceIPECSupply Q 1 B Q 0 B Q 1 N Q 0 N P 1 B P 1 N P 0 B P 0 NQuantitygeneratedbyfossilPriceNotes: Q 0 B:QuantityoffossilgenerationinoriginalbaselinewithrelativelyhighdemandQ:Differenceinfossilgenerationbetweenbaselineswithrelativelyhighandlowdemand P 0 B:Marketpriceinoriginalbaselinewithrelativelyhighdemand P 0 N:Marketpriceinoriginalbaselineunderno-actionalternative Q 1 kand P 1 k:correspondingquantitiesandpricesunderrevisedbaseline. | |||
NERAEconomicConsulting 58short-runmarginalcostofthemarginalgenerator,wherethemarginalgeneratoristhehighestcostunitgeneratingduringtheperiod.InNewYork,thatmarginalgeneratorisalmostalwaysgas-fired,typicallyanolder,relativelyinefficientunit(althoughthathaschangedsomewhatovertimewiththeoperationofnewcombinedcyclefacilitiesinNewYork).Newerunitsarelikelytohavelowermarginalcostsofgenerationthanthoseolderunits.Asaresult,generationfromnewcapacityislikelytocontinuetodisplacegenerationfromtheolder,marginalunitsforsomedemandperiodsasalreadyhasbeenseeninNewYork(exceptifthegaspricesremainverylow) | |||
.Theseolder,fossilfiredunitswillrunatevenlowercapacityfactorsthanbeforeorwillbe retired. Theirmarginaloutputwillbereplacedbyunitswithlowermarginalcosts,whichwillreducethemarketclearingprices.ThisdecreaseinthemarketpriceofelectricitywouldhaveanindirecteffectonthemixofincrementalresourceslikelytobeusedtoreplaceIPECoutputundertheno-actionalternative.Asdiscussedearlier,thesubsidyrequiredtoelicitadditionalrenewablegenerationistheprojecteddifferencebetweenthelevelizedcostoftheincrementalrenewableresourceandthe(appropriatelyweighted)wholesalepriceofelectricity. Thus,lowerpriceswillincreasethesubsidiesneededtoachieverenewabletargets.Similarly,lowerpriceswillmakeconservationalessattractiveoptionforconsumers,requiringhighersubsidyratestoachievebaselineconservationgoals. Thesehighersubsidycostsarelikelytoreducetherolesthatrenewablesorconservationwouldplayundertheno-actionalternative.e.LowerForecastedNatural GasPricesLowernaturalgaspriceswill shiftdownthesupplycurveforgas-firedunits.Asdiscussedearlier,lowernaturalgaspricesarelikelytoincreasetheamountofgas-firedgenerationinthebaselineandtoreducetheextenttowhicholdergas-firedunitsarereplacedwithnew,fuel-efficientmodels(becausethenewinvestmentisnolongereconomic).Lowergaspricesarealsolikelytolowermarket-clearingelectricitypricesinthebaseline,becausegas-fired unitsarethemarginalunitsduringmosttimeperiods.Asnotedaboveinthecontextofcapacityadditions,lowermarket-clearingelectricitypricesarelikelytorequirelargerexpendituresonconservationprogramstoachievebaselinetargetsandtoincreasethesubsidiesneededtomeetbaselinetargetsforrenewables.Lowernaturalgaspricesalsowillreducetheincrementalcostofincreasinggas-firedgenerationundertheno-actionalternative. Thus,theymakeitmorelikelythatgas-firedunitsratherthanrenewablesorutility-sponsoredconservationwouldbeused.Asaresult, incorporatinglowerprojectedgaspricesintotheanalysisproducesmarketresultsthataredirectlycontrarytotheunsupportedcontentioninNYS-37thattheFSEISoveremphasizestheuseoffossilfuel,naturalgasinparticular,togeneratereplacementpower.f.NewTransmissionLinestoDownstateNewYorkAdditionaltransmissionlinescanreduceconstraintsonbuyingpowerfromoutsideNewYorkStateandthuscouldresultinmoreimportsinthebaselinebecausemoreout-of-stateunitswouldbeabletobidintheNYISOauctions.Totheextentthatthesedevelopmentscreatenew NERAEconomicConsulting 59interconnectionopportunitiesthatwouldnototherwisebefullyutilizedinthebaseline,theyalsocouldproduceadditionalimportsundertheno-actionalternative.ThetworecentlyaddedtransmissionlinesthatarecitedbyNYS-37anditssupportingdocumentsLindenandNeptunewillallowgreaterimportsfromNewJerseyandtherestof thePJMregiontothewestofNewYork.PJMgeneratesahigherpercentageofitspowerfromcoalthanNewYorkdoes.InPJM,coalisthemarginalproducerapproximately74percentofthetime(andnaturalgasisonthemargintheremaining26percent),whereasinNewYorkStatethe marginalproducerisalmostalwaysnaturalgas(FERC2012). Thus,therecentlyaddedtransmissioncapacityseemslikelytoincreasetheroleofcoalgenerationinthebaselineconditions. Totheextentthattheseopportunitiesareexhaustedinthebaseline,however,thisadditionaltransmissionwouldnotnecessarilyleadtogreatercoalgenerationintheno-actionalternative.Ifadditionallow-costcoalgenerationfromPJMwereavailable,however,theadditionaltransmissionwouldleadtoagreaterroleforcoalgenerationundertheno-actionalternative.Aswithotherprojections,thekeyconsiderationistherelativecostofalternativegenerationsourcesundertheno-actionalternative.Thesamegeneralprinciplesapplywhenevaluatingtheeffectsofpotentialadditionaltransmissionasinevaluatingtheeffectsofrecenttransmissionchanges.IfadditionaltransmissionprojectssuchastheChamplainHudsonPowerExpressProjectgoforward,theywouldprovidetheopportunityforadditionalimportsofpowerfromoutsideNewYorkState.Theseopportunitieswouldbepresentbothinthebaselinecaseandintheno-actioncase.Totheextentthatthecost-effectiveopportunitiesforadditionalimportsareexhaustedunderbaselineconditions,however,theadditionaltransmissionlineswouldnotleadtoadditionalimportsunder theno-actionalternative.Moreover,becausetheeffectsoftheno-actionalternativedependinlargepartonrelativecostsofdifferentgeneration sources,itwouldgenerallybenecessarytomodelthechangeinelectricitymarketconditionsundertheno-actionalternativetodeterminetheneteffectofanychangeintransmissiononincrementalgeneration.D.SummaryEvaluationoftheEnergyandEnvironmentalClaimsofNYS-37NYS-37anditssupportingdocumentsclaimthattheFSEISignoresimportantrecentdevelopmentsand,asaresult,givesinsufficientweighttotherolesthatconservationandrenewableenergycouldplayundertheno-actionalternative.Aswediscussedabove,mostofthosedevelopmentsaffectthebaselinebutarenotdirectlyrelevanttothemixofresourcesundertheno-actionalternative.Wealsoanalyzedhowthosedevelopmentsandtheirimpactsonthebaselinewouldbelikelytoindirectlyaffectthemixofreplacementresourcesintheno-actionalternative.Wefoundthatforthemostparttheywouldincreasethecostsofusingconservationorrenewables,reducethecostoffossil-firedalternatives,orboth.Moreover,severalofthedevelopmentsinparticularlowerfossiluseinthebaselineandlowergaspriceswouldbelikelytoincreasetheattractivenessofusingolderfossilsources(bydelayingretirementsorincreasingutilization) ratherthanthenew,moreefficientNGCCunitsassumedinseveraloftheFSEISalternatives, NERAEconomicConsulting 60undertheno-actionalternative.Increaseduseofoldersourcesandreduceduseofnewsourceswouldgenerallyincreasetheenvironmentalimpactsoftheno-actionalternativebeyondthoseidentifiedintheFSEIS.Increasedgenerationandtransmissioncapacitymaynothaveanyimpactsontheincrementaleffectsoftheno-actionalternativeifthecapacitywouldbefullyutilizedinbaselineconditions.Ifcertaincapacityisnotfullyutilized,itsroleintheno-actionalternativewoulddependlargelyuponitsrelativecostsasapotentialsourceofadditionalsupplytoreplaceIPECgeneration. | |||
NERAEconomicConsulting 61V.ConclusionsAcentralissueintheFSEISforIPEClicenserenewalisthecomparativeenvironmentalimpactsbetweenrenewalandtheno-actionalternative. EvaluatingtheenvironmentalimpactsrequiresevaluatingthemixofgenerationthatwouldreplacelostIPECbaseloadgenerationintheno-actionalternative, sinceitisthechangesingenerationthatwoulddeterminethelikely environmentalimpacts.WeevaluatethelikelyreplacementgenerationmixusinginformationontherelativecostsofdifferentgenerationalternativesaswellastheresultsofNEMSmodeling.Fortheno-actionalternative,ouranalyses showthattheIPECreplacementgenerationwouldbereplacedprimarilybyfossil-fueledgeneration,bothfromexistingnaturalgasandcoal unitsandfromsomeadditionalunitsthatwouldbeadded(orunitswhoseretirementwouldbepostponed).Ouranalysesindicatethatbothadditionalrenewablegenerationandadditional conservationwouldconstitute smallsharesofreplacementgeneration.NYS-37providesaverydifferentvisionoflikelyreplacementgeneration,althoughthestatementandtheassociatedexpertdeclarationsdonotprovideanyempiricalanalyses.We reviewedthesematerialsandconcludedthattheirconclusionswereerroneousduetofour fundamentalflaws:(1)failuretoaccountfortheimportanceofmarketforces;(2)conflationofbaselineconditionsandtheno-actionalternative;(3)failuretoconsidertheimplicationsofthecriticismstheymadeontheallegeduseintheFSEISofoutdatedinformationonenergydemandandsupplyconditions;and(4)failuretodevelopempiricalinformation.Insummary,ourresultsestablishtwopropositionsregardingthepotentialenvironmentalimpactsoftheno-actionalternative:1.Theadverseenvironmentalimpactsoftheno-actionalternativeassessedintheFSEIS,ifanything,underestimatedthelikelyenvironmentalimpactsifIPECbaseloadgeneration werelost;and2.NewYorkStateisincorrectinitsclaimsthattheFSEISoverstatesenvironmentalimpactsbecausereplacementgenerationwouldnot,infact,beprimarilyrenewableenergyandconservation. | |||
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-environment/06noise.html NERAEconomicConsulting 68AppendixA: InformationonRecent EnergyDevelopments inNewYork StateThisappendixsummarizesrecentinformationregardingthe sixmajordevelopmentsregardingNewYorkStateenergymarketsandpoliciesemphasizedinNYS-37:1.NewYorkStaterenewableenergygoal;2.NewYorkStateenergyefficiencygoal; 3.NewYorkStateelectricitydemandprojections; 4.NewYorkStategenerationcapacityadditions;5.NationalandNewYorkStatenaturalgasprices;and6.NewYorkStatetransmissioninvestments.Theimplicationsofthesedevelopmentsfortheenvironmentalimpactsoftheno-actionalternativearediscussedinthebodyofthereport.A.NewYorkStateRenewableEnergy GoalThissectionprovidesbackgroundinformationonNewYorks30x15renewableenergygoal.1.Overviewof GoalNewYorkofficiallyestablishedagoalforrenewableenergyina2004orderissuedbytheNYPSC.Theoriginalgoalwastoincreaserenewables shareofretailelectricityconsumptionto25percentby2013,relativetoa2004baselineofroughly19percent.In2010,NYPSCincreasedthegoalto30percentandextendedthedeadlineto2015.TableA-1summarizesthe30x15renewableenergygoal.NotethatthelevelofrenewablesimplicitinthegoalisrelativetotheforecastedloadassumingfullachievementoftheStates15x15energyefficiencygoal(discussedbelow).NYPSCsJanuary2010orderstatesthat[i]ftheexpectedenergyefficiencyachievementsareignored,a30percentgoalfor2015wouldresultinasubstantiallyhigherandmorecostlyrenewableenergytarget(NYPSC2010b,p.10). | |||
NERAEconomicConsulting 69Asshownin TableA-1,theNYPSCs2010Order settherenewableenergygoalin2015as45.7million MWh.Baselineresourceswhichrefertorenewableenergyfromgeneratorsbuiltbefore2004(includingtheNiagaraPowerProjectandotherhydropowerinupstateNewYork)areexpectedtoproduce31.5million MWhin2015,or69percentofthegoal. | |||
18Therestofthegoalistobemadeupbyfoursetsofincrementalpolicy-ledefforts.First,renewableenergyprojectsatStateagencieswillneedtoproduce0.32million MWhin2015.Second,voluntarygreenmarketingprograms,inwhichelectricitycustomerschoosetopayapremiumtosupportrenewableenergy,willneedtoinduce1.5million MWhofrenewableenergyin2015. Third,LIPAwillneedtocontractfor1.9million MWhofrenewableenergyin2015.Theremaining10.4million MWhofthe30x15goalwillneedtocomefromprogramsadministeredbyNYSERDA. TheNYPSCoverseestheseNYSERDAprogramsthroughthe RenewablePortfolioStandard(RPS). | |||
192.RPSAdministrationNewYorksRPSdiffersfromprogramsinmostotherstatesinthatitlacksanenforcementmechanism.InsteadoftheNYPSCpenalizingdistributionutilitiesforfailingtoprocureminimumpercentagesoftheirelectricityfromrenewablesources,theNYPSCprovidesfundingforrenewableenergybycollectinganon-bypassablevolumetricwirescharge(NYPSC2004)fromretailcustomersofinvestor-ownedutilitiesandthenusingthosefundstosubsidizesourcesofrenewablegenerationselectedthroughacompetitivebiddingprocessadministeredbyNYSERDA. TheRPSchargeisavolumetricchargethatisinadditionto,andseparatefrom,NewYorks systemsbenefitcharge(SBC).TheRPSmaintainstwoseparatesetsofeligiblegenerators:(1)utility-scaleMainTiergenerators;and(2)Customer-Sited Tier(CST)distributed,smaller-scalegenerators.MainTierresourcesconsistofbiogas,biomass,liquidbiofuel,fuelcells,hydroelectric(limitedto 18Renewableenergyfrombaselineresourcesisnottrackedeachyearunderthe30x15policy.Thus,thegoalistoincreaserenewableenergyabovetheassumedlevelfrombaselineresourcessoastoachievethetotallevelshowninTableA-1. | |||
19NotethattheRPSdoesnotrepresenttheentirestatewidegoalforrenewableenergy.TableA-1.NewYorks30x15RenewableEnergyGoal(millionMWh)15x15LoadRenewableEnergyGoalBaselineResourcesStateAgenciesVoluntaryProgramsLIPANYSERDA/IOUs[A][B]=[A]*30%=[C]+[D]+[E]+[F]+[G][C][D][E][F][G]152.445.731.50.321.51.910.4Notes:15x15LoadistotalconsumptionassumingreductionsinloadcorrespondingtofullachievementofNewYorks15x15energyefficiencygoal.Theloadisintermsofsendout,whichrepresentsgross energysupplytothegrid.Sendoutexceedssalesbecausesomesupplyislostintransmission.BaselineResourcesrefertorenewableenergyfromfacilitiesbuiltbefore2004.Source:NYPSC(2010b,Appendix,p.12) | |||
NERAEconomicConsulting 70upgradesandnewlow-impactrun-of-riverplantslessthan30MWand,thus,expresslyexcludinglargehydroprojects),solarphotovoltaics,tidaloceanpower,windturbines,andanywind,biomassdirectcombustion,orrun-of-river(lessthan5MW)hydroplantsthatdemonstrateneedtoreceiveRPSfinancialsupporttooperate.CSTresourcesconsistoffuelcells,solarPV,solarthermal(addedasaqualifyingtechnologyinthe2010Order),andwindturbineslessthan300kW(NYPSC2010a,AppendixB).Onlygeneratorsthathavebeenconstructedsince2003canqualifyforfundingundereithertier. Themaintierisexpectedtocontribute9.8million MWhofthe10.4million MWhgoal,withtheremaindercomingfromCST.3.ProjectedBudgetsTheCommissionspecifiedatotalprogrambudgetthrough2024of$2.998billion,or$157.6millionperyearonaverage(NYPSC2010a,Appendix, Table15). ThebulkofthefundsareallocatedtoMainTierprograms. Theannualbudgetpeaksin2015at$321millionand declinessteadilyto$42millionin2024.4.ProgresstowardNewYorksRenewableEnergy GoalNYSERDAs2011RPSPerformanceReportstatesthat,asofDecember31,2010,generationfromtheprogramscurrentcontractswouldproducerenewableenergyequivalentto39percentofthe2015target.MainTierprogramscurrentlyundercontractwereexpectedtoreach3,930,000MWhby2015(40percentoftheMainTiertarget),andCSTprogramscurrentlyundercontractwereexpectedtoreach76,945MWhby2015(12percentoftheCSTtarget).Ofthetotal1,526 MWofMainTierrenewablecapacityalreadyaddedorunderdevelopmentbytheendof2010,1,456MWwerewind,47MWwerehydro,and43MWwerebiomass(NYSERDA,2011a,p.9).Incrementalcapacity(installedorundercontract)fromCSTprogramstotaled36 MW.NYSERDAexpectscapacityfromCSTprogramstoincreaseto284.5MWby2015,resultingintheachievementoftheCSTportionofthe2015goal(NYSERDA,2011a,p.15).NYSERDAs2011PerformanceReportdoesnotassesswhetherMainTierprogramsareexpectedtomeettheirportionofthe2015goal.5.CostsofNewYorksRenewableEnergyMeasuresNYSERDA(2011a,p.21)notesthatbytheendof2010ithadexpended57percentofitsbudgetfortheperiodthrough2015buthadsecuredonly39percentoftherenewableenergygoal. Thus,assumingthegoalcanbemetatall,unlessNYSERDAcanfundlesscostlyrenewableenergyprojectsthanithasfundedsofar(anoutcomethatisunlikelyforthereasonslaidoutindetailinthebodyofthisreport),theprogramisunlikelytoachievethe2015goalwithinbudget.MainTierproductionsubsidieshaveamountedtoaround$20perMWh,oraboutonethirdofNewYorksaveragewholesaleelectricitypricein2010(NYISO2011c,p.21). TableA-2showstheweighted-averageproductionsubsidyforalloftheMainTiersolicitationstodate. | |||
NERAEconomicConsulting 71Wecanestimatetheexpectedcosttocustomersfortheremainderoftheprogramusingapprovedtargetsandgoals. TableA-3 showstheresultsofsuchacalculation.Asshowninthetableabove,from2011to2015,IOUcustomerscanexpecttopayanadditional$1.2billioncumulativelytohelptoachievetheRPSgoal. Thisisequivalenttoabout$33perMWh,whichismorethanhalfthe2010averagepriceofwholesaleelectricityinNewYork.However,astheMainTiersolicitationstodateshow,actualcostshavebeenhigherandachievedlevelsofrenewablegenerationhavebeenlowerthanapprovedbudgetsandtargets.Thus,the$33perMWhfigureislikelytobeconservativewithnoassurancethattheprogram goals(whichare,inanyevent,partofthebaseline)canevenbemet.B.NewYorkStateEnergyEfficiency GoalThissectionprovidesbackgroundinformationonNewYorkStates15x15energyefficiencygoal.1.Overviewof GoalGovernor EliotSpitzerannouncedthe15x15energyefficiencygoalinApril2007.Atthattime,NYPSCforecastedthatNewYorkwouldconsume166millionmegawatt-hoursTableA-2.ProductionSubsidiesforMainTierGeneratorsRoundDateWeightedAverageSubsidy($/MWh)1January2005$22.902February2007$15.523January2008$14.754December2009$19.765March2010$19.506June2011$22.01Source:NYSERDA(2011b,p.14)TableA-3.ImplicitSubsidiesfromNewYorksRPSYearCost(ApprovedBudget)Target(MWh)AverageCostperMWh(ImplicitSubsidy) 2011$170,450,2164,572,910$37.27 2012$202,989,8326,052,842$33.54 2013$243,944,0127,392,550$33.00 2014$281,544,2258,895,160$31.65 2015$321,157,58910,397,854$30.89Cumulative$1,220,085,87437,311,316$32.70Note:Productionsubsidies(inTableA-2)aretheamountsgeneratorsreceive,whereasimplicitsubsidies(inTableA-3)arethetotalamountpaidbycustomersperMWhofelectricity.Source:NYPSC(2010a),AppendixandNERAcalculations NERAEconomicConsulting 72(MWh)ofelectricityin2015. The15x15goalcallsforreducingconsumptionin2015by15percentoftheforecast,or25million MWh,resultingintotalconsumptionof141millionMWh(NYPSC2008,Appendix1,p.4). | |||
20GovernorDavidPatersonreaffirmedthisgoalinhisStateoftheStateaddressinJanuary2009.Achievingthe15x15goalwillrequirecontributionsbyvariousorganizationsacrosstheState.NYSERDAperformedananalysisin2007todevelopappropriatecontributionlevelsforLIPA,NYPA,the sixinvestor-ownedutilitiesinthestatebasedontheirenergyefficiency programsin2007,NYSERDA,andotherstateagencies. Theanalysisalsoincludedcontributionsthroughenergyefficiencycodesandstandardsaswellasenergyefficiencymeasuresfortransmissionanddistribution. TheNYSERDAanalysissuggestedthatthesecontributionswouldcoverabout73percentofthetotalenergyefficiencygoal(i.e.,11percentagepointsoutofthe15percentreduction).NYSERDAexpectedthattheremainderofthenecessaryenergyefficiency(i.e.,4percentagepointsoutofthe15percentreduction),whichwaslabeledtheefficiencygaporjurisdictionalgap,wouldbeachievedthroughnewprogramsadministeredbyinvestor-ownedutilitiesandNYSERDAwhichwerefundedbyelectricityratesurchargesauthorizedbyNYPSC.FigureA-1 showsthepotentialcontributionstowardthe15x15energyefficiencygoalbasedonNYSERDAsanalysis. | |||
20Thegoalcanalsobeexpressedintermsofsendout,whichrepresentsgrossenergysupplytothegrid.Sendoutexceedssalesbecausesomesupplyislostintransmission.In2007,theCommissionforecastedthatsendoutin2015wouldneedtobe179millionMWh.The15x15policycallsforreducingsendoutin2015by15percent oftheforecast,or27millionMWh,resultingintotalsendoutof152millionMWh(NYPSC2008,Appendix1,p.4). | |||
NERAEconomicConsulting 73InanorderissuedinJune2008,NYPSCannouncedthe EnergyEfficiencyPortfolioStandard(EEPS)programwithgoalsthroughDecember31,2011forthe sixinvestor-ownedutilitiesunderitsjurisdictionandNYSERDA.Inthesameorder,NYPSCsetsurchargelevelsonNewYorkStateelectricitybillsthatitestimatedwouldachievethosegoals(NYPSC2008).The totalenergyefficiencygoalfortheinvestor-ownedutilitiesandNYSERDAthroughthatdatewouldcompletelyclosethejurisdictionalgapestimatedbyNYSERDA.InasubsequentorderissuedinOctober2011,NYPSCannouncedrevisedgoalsfortheinvestor-ownedutilitiesthroughDecember31,2015andsetsurchargelevelsthatitestimatedwouldachievethosefurthergoals(NYPSC2011a).2.AssessmentsofEnergyEfficiencySavingsLimitedinformationexistsonwhetherNewYorkStatewillachieveitsenergyefficiencygoalfor2015.Toourknowledge,therearenopubliclyavailableassessmentsoftotalstatewideprogressonenergyefficiencygoals.NYISOtracksseveralprograms,butitdoesnotexaminetransmissionanddistributionsavings,codesandstandards,2007utilityprograms,orStateagencies.NYPSConlytracksprogressonthe EEPSportionofthestatewidegoal.Itispossibletoroughlygaugeelectricity savingsbycomparingactualelectricitysystemdemandtoforecastsfromearlieryearsandmakingadjustmentsforimpactsontheeconomyandprojectedgrowth.In2010,weather-normalizedelectricitysendoutinNewYorkwas161.6million MWhsixpercentlowerthanthelevelofdemandfor2010thatNYISOforecastedinFigureA-1.PotentialContributionstowardEnergyEfficiencyGoalBasedonNYSERDAAnalysis 0 5 10 15 20 25200720082009201020112012201320142015ElectricitySavings(millionMWh)JurisdictionalGapTransmission&DistCodes&StandardsUtilities(2007Programs)SBCIII(NYSERDA)StateAgenciesNYPALIPASource:NYPSC(2008,Appendix1,p.5) | |||
NERAEconomicConsulting 742007,whentheCommissionsetthe15x15baseline(NYISO2011a). | |||
21 Thedemandreductionisdueprimarilytothelowereconomicactivityasaresultoftherecentrecessionand,toamuchsmallerdegree,energyefficiencyprograms,asdiscussedinthenextsectionofthisappendix.Asnotedabove,NYISOtracksenergyefficiencyachievementsfromasubsetofprogramsanddevelopsexpectedlevelsoffutureachievementsforitsloadforecastingand planningpurposes.NYISOreviewsvariousdataonenergyefficiency,including:(1)programevaluationreportssubmittedbyinvestor-ownedutilities,LIPA,andNYPA;(2)long-term forecastsprovidedbyLIPA,Consolidated Edison,andotherinvestor-ownedutilities;and(3)U.S. EnergyInformationAdministrationprojectionsofthedemandimpactsofefficiencycodesandstandards(NYISO2011a,p.6).FigureA-2showsNYISOsestimatesofcumulativesavings(intermsofsendout)through2011forEEPS,NYPA,andLIPA,aswellasNYISOsexpectationsofcumulativesavingsfortheseprogramsthrough2015andtheirgoalsfor2015underthe15x15policy. | |||
21NYISOandNYPSCmakeindependentforecastsofelectricitysales.FigureA-2.HistoricalandNYISOsExpectationofSavingsfromEnergyEfficiencyPrograms 0.9 2.83.7 0.20.7 4.63.05.4 8.4 0.41.710.57.9 12.11.92.316.34.1 0 2 4 6 8 10 12 14 16 18EEPS:IOUsEEPS:NYSERDAEEPS:TotalNYPALIPATotalElectricitySavings(millionMWh)CumulativeSavingsThrough2011NYISO'sExpectationofCumulativeSavingsThrough20152015GoalNotes:Savingsareintermsofsendout.Cumulativesavingsaredefinedasoverallsavingsin2011resultingfromprogramexpendituresinpreviousyearsthrough2011.TheEEPS:NYSERDAsavingsincludetheNYSERDAEnergySmartprogram.Theprogramsincludedinthefigureaccountforabout60percentof thetotal15x15goal.Source:NYISO(2012),slide5 NERAEconomicConsulting 75FigureA-2 showsthatthroughtheendof2011,EEPSprogramshadachieved31percentoftheir2015goal(3.7million MWhoutof12.1million MWhintermsofsendout).NYISOexpects EEPSprogramstoachieve70percent(8.4million MWh)oftheirgoalbytheendof2015.NYISOdoesnotexpectNYPAorLIPAtomeettheirenergyefficiencygoalsfor2015either.Collectivelyforthe EEPSprograms,NYPA,andLIPA,cumulativesavingsthrough2011were28percentofthetotal2015goal(4.6millionMWhoutof16.3million MWh),andNYISOexpectsthemtoachieve64percent(10.5million MWh)oftheirtotalgoalbytheendof2015.InitsofficialcommentsontheNYPSC EEPSWhitePaper,NYISOstatedthatfullachievementofthe[EEPS]programgoalsby2015isnotfeasible(NYISO2011b).NotethatNYISOsforecastsreflecttheorganizationsjudgmentregardinginherentlyuncertainvariables. | |||
22TheNYPSC,ontheotherhand,maintainsthatthereisareasonableexpectationthattheEEPSgoalwillbemetby2015(NYPSC2011b,p.1).ArecentNYPSCwhitepaperreportsthat[s]avingsachieved,asapercentageoftotaltargets,arerunningaheadofdollarsspentasapercentageoftotalbudgets.AsofFebruary28,2011,statewideelectricitysavingsrepresented49.1%ofthecumulativetargetstodatewhilecombinedprogramspendingrepresented38.9%ofbudgetstodate(NYPSC2011b,p.8).Moreover,thewhitepapernotesthat,intheNYPSCsestimation,thesavingsachievedthrough2010and2011shouldnotbeusedtopredictfuturesavings, sincethe EEPSprogramisintransition(NYPSC2011b,p.1).3.CostsofNewYorksEnergyEfficiencyMeasuresAsnotedabove,limitedinformationisavailableonthestatewideprogresstowardmeetingthe15x15energyefficiencygoal. ThismakesitdifficulttomakestatewideassessmentsofthetotalcostsofenergyefficiencymeasuresinNewYork.Informationisavailableonenergyefficiencymeasuresbyinvestor-ownedutilitiesandNYSERDAaspartof the EEPSprogram,however.NYPSCadministersthe EEPSprogramandfundsitthroughsurchargesonretailelectricityratesthatareassessedtoNewYorksconsumersonamonthlybasis.Asnotedabove, NYPSCsetsavingsgoalsandbudgetsforEEPSprogramsateachutilityandNYSERDAthrough 2011inanorderissuedin2008.NYPSCsetnewgoalsandbudgetsfrom2012through2015inanorderissuedinOctober2011.IncommentssubmittedwhileNYPSCwasconsideringalternativesforthesecondphaseofthe EEPSprogramfrom2012to2015,NYISO(2011b)notedthatthe EEPSprogramwould require significantlymorefundingeachyearfrom2012to2015thanduringthefirstphaseinordertoachievethecumulativegoalby2015($370millionperyearonaverageduringthe secondphaseversusamaximumof$250millionduringthefirstphase).NYISOalsoshowedasupplycurvethatcombinedthesavingsfromallEEPSprogramsthroughJune2011andtheircostperMWh.Abouthalfofthesavingswereachievedbyincurringcostsabove$150/MWh, 22AnenergyexpertattheNaturalResourcesDefenseCouncilhasalsoconcludedthatNewYorkisnotontracktomeetthe15x15energyefficiencygoal(Wald2011). | |||
NERAEconomicConsulting 76andseveralprogramshadcostsabove$1,000/MWh.Forcomparison,theaveragewholesaleelectricitypriceinNewYorkin2010was$59/MWh(NYISO2011c,p.21),andtheaverageretailpricewas$163/MWh(EIA2012). Thecostsofenergyefficiencymeasurescanalsobecomparedwiththeavoidedcost,whichisthesumofwholesalecost,distributioncost,andexternalities.Ifexternalitiesarerelatively smallperMWh,theavoidedcostisgenerallyclosetotheretailprice. Thus,manyenergyefficiencyprogramsthroughJune2011werecostlyrelativetoelectricitypricesandavoidedcosts.C.NewYorkStateElectricityDemandProjectionsThissectionprovidesbackgroundonrecentdemandprojectionsforNewYorkStateintermsofelectricitysales(measuredingigawatt-hours:GWh).Wedonotincludedemandprojectionsintermsofpeakloadbecausethismeasureofdemandrelatestoreliabilityratherthan replacementenergybutthelatteristhefocusoftheenvironmentalimpactanalysisundertheno-actionalternative.1.ElectricitySalesProjectionsThissectionprovidesinformationonelectricitysalesprojectionsfirstforNewYorkStateandthenfordownstatezonesthataremostrelevantforIPEC(ZonesG,H,I,J,andK).a.NewYorkStateFigure13showsprojectionsofNewYorkStateelectricitysalesfromNYISOLoad&Capacityreports(GoldBooks)from2006to2011.Asshowninthefigure,theprojectionsdecreased significantlyovertheperiod,particularlybetween2008and2009asthedepthoftherecessionwasincorporatedintotheforecast.NYISOprojectedin2006thatsalesin2016wouldbe184,630GWh,butitprojectedin2011thatsalesin2016wouldbeonly165,319GWh,areductionof10.5percentrelativetotheprojectionfrom2006. | |||
NERAEconomicConsulting 77b.DownstateZonesFigureA-4providesamapofNYISOzones.FigureA-3.NYISOProjectionsofNewYorkStateElectricitySales145,000150,000155,000160,000165,000170,000175,000180,000185,000190,000195,00020062008201020122014201620182020ElectricitySales(GWh | |||
)2006 2007 2008 2009 2010 2011Note:AllprojectionsreflectNYISOsprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 78FigureA-5 showsprojectionsofdownstate(ZonesG-K)electricity salesfromNYISOGoldBooksfrom2006to2011. Thefigurehasa similarpatterntotheNewYorkStatefigure.Theprojectionfor2016from2011(98,200GWh)is10.8percentlowerthantheprojectionfrom 2006(110,135GWh).FigureA-4.NYISOZonesSource:FERC(2012) | |||
NERAEconomicConsulting 792.EffectofRecessionAccordingtotheNationalBureauof EconomicResearch,therecentrecessionbeganinDecember2007andendedinJune2009(NBER2010).NYISOnotesinitsPowerTrends2011reportthatNewYorkStateelectricitysalesdecreasedby1percentin2008relativetosalesinthepreviousyear,decreasedby4percentin2009,andincreasedby3percentin2010(NYISO2011c,p.18).NYISOdiscussestheeffectoftherecessionondemandprojectionsinitsmostrecentReliabilityNeeds Assessment(RNA),whichwaspublishedinSeptember2010.Itcomparesprojectionsinthe2010RNAwithprojectionsinthepreviousRNA,whichwaspublishedinJanuary2009andwasbasedonmodelingperformedbeforetheworstpartoftherecession.NYISOnotesthatitsbasecaseprojectioninthe2010RNAforelectricitysalesin2015isabout10,800GWh(6.1percent)lowerthaninthe2009RNAduetothe2009recessionandsubsequentlowereconomicgrowthprojections(NYISO2010a,p.10).Newenergyefficiencypoliciestohelpachievethe15x15goalalsocontributedtoamuchless significantdegreetolowerprojections.InapreviouspresentationinMay2010,NYISOestimatedthattherecessionreducedelectricitysalesbetweenOctober2008andApril2010(adjustedforweather)by6,400GWh.FigureA-5.NYISOProjectionsofDownstate(ZonesG-K)ElectricitySales85,00090,000 95,000100,000105,000110,000 115,00020062008201020122014201620182020ElectricitySales(GWh | |||
)2006 2007 2008 2009 2010 2011Note:AllprojectionsincorporateNYISOsprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 80Energyefficiencyprogramsaccountedforanadditional600GWhofreduction,andlosteconomicgrowthfor1,500to2,000GWh(NYISO2010b,p.2). Thus,forthishistoricalperiod,therecession(includingtheresultinglosteconomicgrowth)wasestimatedtoaccountforabout93percentofthetotalreductioninelectricitysales.D.NewYorkStateGenerationCapacityAdditionsThissectionprovidesbackgroundinformationonrecentandproposedcapacityadditionsinNewYorkbasedonNYISOslistofpowerplants(NYISO2011d)anditscurrentInterconnectionQueue(NYISO2011e).1.CapacityAdditionsSince2000a.AnnualAdditionsAccordingtotheNYISOdata,8,348MWofgenerationcapacityhasbeenaddedinNewYorkStatesince2000. Thefollowingfiguresillustraterecentadditions. | |||
NERAEconomicConsulting 81Figure14showsannualcapacityadditionsinNewYorkStatefrom2000to2011byenergytype.As showninthefigure,naturalgaswasthedominanttypeofnewcapacityinmostyears,butlargeamountsofwindwasalsoaddedinsomeyears,mostpredominantlyin2008.FigureA-6.AnnualGenerationCapacityAdditions(MW) 02004006008001,0001,2001,4001,600 1,800200020012002200320042005200620072008200920102011AnnualAdditions(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011d) | |||
NERAEconomicConsulting 82b.CumulativeAdditionsFigureA-7 showsthecumulativecapacityadditionsinNewYorkStatefrom2000to2011byenergytype.Ofthe8,348MWoftotaladditions,naturalgasaccountedfor6,874MW(83percent)andwindaccountedfor1,348MW(16percent).FigureA-7.CumulativeGenerationCapacityAdditionsSince2000(MW)NaturalGas,6,874,83%Coal,0,0%Oil,0,0%Nuclear,0,0%Hydro,15,0%Wind,1,348,16%Other,111,1%Solar,0,0%Source:NERAanalysisofNYISO(2011d) | |||
NERAEconomicConsulting 832.GeographicDistributionFigureA-8 showsthegeographicdistributionofcumulativecapacityadditionsinNewYorkStatefrom2000to2011.NoadditionshavebeenbuiltinZoneG(HudsonValley),ZoneH(Millwood),orZoneI(Dunwoodie). ThirtypercentofadditionshavebeenbuiltinZoneJ(NewYorkCity),and16percenthavebeenbuiltinZoneK(LongIsland).3.Current Interconnection Queuea.AnnualProposedAdditionsTheNYISOInterconnectionQueuedatedDecember31,2011contains12,081 MWofpotentialgenerationprojectsinNewYorkState.Windfacilitiesaccountfor5,698MW(47percent),andnaturalgasfacilitiesaccountfor5,384MW(45percent). ThetotalrenewablecapacityintheInterconnectionQueueis5,839MW(48percent).Thefollowingfiguresandtablesillustratetheenergytypes,timing,andlocationofpotentialgenerationprojectsintheInterconnectionQueue.FigureA-8.GeographicDistributionofCumulativeGenerationCapacityAdditionsSince2000(MW)Zone K:LongIsland,1,370,16%OtherZones,4,459,54%ZoneI:Dunwoodie,0, 0%ZoneH:Millwood,0,0%ZoneG:HudsonValley,0,0%ZoneJ:NewYorkCity,2,520,30%Source:NERAanalysisofNYISO(2011d) | |||
NERAEconomicConsulting 84Figure15showstheenergytypesandcurrentlyexpectedin-servicedatesforactiveprojectsintheInterconnectionQueue.ProjectsintheInterconnectionQueueproposetobecomecommerciallyoperationalasfarinthefutureas2017.FigureA-9.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW) 05001,0001,5002,0002,5003,0002012201320142015201620172018N/APotentialGenerationProjects(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011e) | |||
NERAEconomicConsulting 85b.GeographicDistributionFigureA-10 showsthegeographicdistributionofactiveprojectsintheInterconnectionQueue.ZoneGaccountsfor1,681MW(14percent).NeitherZoneHnorZoneIhasanyprojects.ZoneJaccountsfor4,451MW(37percent),andZoneKaccountsfor1,681MW(14percent).Thus,thedownstatezonescollectivelyaccountfor65percentoftheactiveprojectsintheInterconnectionQueue.FigureA-10.GeographicDistributionofProjectsinCurrentInterconnectionQueue(MW)ZoneG:HudsonValley,1,681,14%ZoneH:Millwood,0,0%ZoneI:Dunwoodie,0, 0%ZoneJ:NewYorkCity,4,451,37%ZoneK:LongIsland,1,681, 14%OtherZones,4,269,35%Source:NERAanalysisofNYISO(2011e) | |||
NERAEconomicConsulting 86c.OriginalversusCurrent In-ServiceDatesTableA-4 showsoriginalandcurrentin-servicedatesforprojectsintheInterconnectionQueue(intermsof MW).Manyprojectshavehad significantpostponements. Themajorityofprojectsthatarecurrentlyexpectedtocomeinservicein2012(intermsof MW)wereoriginallyscheduledtocomein servicein2007orearlier.Acrossallcurrentdates,46percentofprojects(intermsof MW)havebeenpostponedbyfouryearsormore.4.WindProjectsWithdrawnfromInterconnection QueueSince2000TheInterconnectionQueue showsthat8,286MWofwindprojectshavebeenwithdrawnbydevelopers since2000. Thus,thewindcapacitythathasbeenbuiltinNewYorkStatesince2000(1,330MW)is16percentofthecapacitythathasbeenwithdrawnand14percentofthetotalwindprojectsoriginallyproposed.E.NationalandNewYorkStateNatural GasPricesThissectionprovidesbackgroundonrecentnationalpriceprojectionsfornaturalgas(measuredin2011dollarspermillionBritishthermalunits2011$/MMBtu).TableA-4.OriginalandCurrentIn-ServiceDatesforProjectsinInterconnectionQueue(MW)Current Date OriginalDate2012201320142015201620172018N/ | |||
ATotal 200578600000084 2006235704000000939 20071,2380000002971,536 2008500992000000117916 2009902100000073373 201044230079437400021,912 2011047900000619756 20122470590656000962 2013065515106600001,465 2014001,536000001,536 20150008100601001,411 20160000174000174 2017000000000 2018000000000 N/A01000000717Total2,8302,0312,8301,1841,49060101,11512,081Postponements0 years1year2 years3 years4years5 years6years>6years3,4211511,1501,1402,1601,71143578810,95631%1%10%10%20%16%4%7%Cumulative0 years1year2 years3years4years5 years6years>6years10,9567,5357,3846,2355,0952,9351,223788100%69%67%57%46%27%11%7%Source:NERAanalysisofNYISO(2011e) | |||
NERAEconomicConsulting 871.HenryHubPriceProjectionsFigureA-11displays EIAsAnnualEnergyOutlookreferencecaseprojectionsoftheHenryHubspotpricefornaturalgasforthereportyearsfrom2007to2012.Themostrecentprojectionforfuturenaturalgaspricesisbetween$1to$3perMMBtucheaperthanpreviousprojectionsduetotheexpandingavailabilityofunconventionalgas.2.NewYorkStateDeliveredPricestoElectricity GeneratorsFigureA-12displays EIAsAnnualEnergyOutlookreferencecaseprojectionsofthedeliveredpricethatelectricitygeneratorsinNewYorkStatewillpayfornaturalgasforthereportyearsfrom2006to2012.Asinthepreviousfigure,itcanbeseenthatthemostrecent projectionforfuturenaturalgaspricesisbetween$1to$3perMMBtucheaperthanpreviouslyforecasted.FigureA-11.AEOProjectionsofHenryHubNaturalGasPrices0.001.002.003.00 4.005.006.007.008.009.002012201320142015201620172018201920202011$/MMBtu2007200820092010 2011 2012Note:AEO2006HenryHubprojectionnotavailableSource:AnnualEnergyOutlook2007-2012(referencecase) | |||
NERAEconomicConsulting 88F.NewYorkStateTransmissionProjectsThissectionprovidesbackgroundinformationonrecent,proposed,andcanceledtransmissionprojectsinNewYork.1.RecentlyCompletedTransmissionProjectsa.NeptuneRegionalTransmissionSystemStatus:Beganoperationin2007Route:Sayreville,NJtoNewCassel(LongIsland),NYCapacity:660MWEnvImpacts:Other:Operatesunderalong-termagreementwithLIPAWebsite:neptunerts.com/FigureA-12.AEOProjectionsofDeliveredNaturalGasPricestoElectricityGeneratorsinNewYorkState0.001.002.003.004.005.006.007.008.009.002012201320142015201620172018201920202011$/MMBtu 2007 2008 2009 2010 2011 2012Note:AEO2011&2012regionisNortheastPowerCoordinatingCouncil/UpstateNewYork.Forallotheryears,AEOreportedNortheastPowerCoordinatingCouncil/NewYork.Source:AnnualEnergyOutlook2007-2012(referencecase) | |||
NERAEconomicConsulting 89b.LindenVariableFrequencyTransformersStatus:BeganoperationinDecember2009Route:Linden,NJ(PJM)toNYCCapacity:315MWEnvImpacts:Other:ThevariablefrequencytransformersaretechnologiesthatfacilitatesendingadditionalpowerfromNJtoNYCusingexistingtransmissionlines.Website:green.blogs.nytimes.com/2009/03/11/a-new-valve-for-controlling-flows-of-electricity/2.ProposedTransmissionProjectsa.HudsonTransmissionPartnersStatus:NYPSCapprovedcertificateforthelineinSeptember2010ConstructionbeganinMay2011andisexpectedtofinishin2013Route:Ridgefield,NJ(PJM)toNYCCapacity:320MWinitiallyEnvImpacts:NYPSCOrdernotesthatmarketsimulationsfor2013indicatehigherairemissionsinPJMwithHTP(pp.27-32);NYSdoesnotincludethissectioninitsexcerptdocuments.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId={CAFAD145-3C87-4E33-ACDF-45D87B7A76C6}Other:Willoperateunderalong-termagreementwithNYPAWebsite:hudsonproject.com/documents.dps.state.ny.us/public/MatterManagement/CaseMaster.aspx?MatterSeq=29123b.ChamplainHudsonPowerExpressStatus:SettlementagreementfiledinArticleVIIproceedingonFebruary24,2012;litigationphasehasnowcommencedRoute:QuebectoNYCCapacity:1000MWEnvImpacts: | |||
Other:Website:chpexpress.com/http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={C5F63E41-5ED5-46A2-99A5-F1C5FC522D36}c.Cross-HudsonCableStatus:Projecthasbeenpursuedsince2001;scheduledtobeginoperationin2015butcurrentlynoopenbaypositionsifHTPcompletesconstructionRoute:PSEGterritory(NJ)toNYCCapacity:700MWEnvImpacts:TheprojectsEnvironmentalManagementandConstructionPlanappearstoincludeonlydirect impactsandnoindirectimpactsintheelectricitymarket(e.g.,airemissionsfromincreased generationbyfossilunits) http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={E95EEDCF-56F9-4CFD-B775-D895D6A9D9C7}Other:Website:http://www.cavalloenergy.com/page2/page2.html NERAEconomicConsulting 90http://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?MatterSeq=191113.CanceledProjectsa.NewYorkRegionalInterconnectStatus:RequestforcertificatewaswithdrawninApril2009Route:OneidaCounty,NYtoOrangeCounty,NYCapacity:1200MWEnvImpacts:Other: | |||
Website:http://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?MatterSeq=29900G.ReferencesDatabaseofStateIncentivesforRenewablesand Efficiency(DSIRE).2011.NewYork.http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=NY03R&state=NY&CurrentPageID=1&RE=1&EE=1 | |||
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NERAEconomicConsulting 93AppendixB:TheNationalEnergyModelingSystemThisappendixprovidesdetailsontheNational EnergyModelingSystem(NEMS). ThetextandfiguresareadaptedfromdocumentationdevelopedbytheU.S. EnergyInformationAdministration(EIA)foritsAnnual EnergyOutlook2011 (EIA2011).WeusedtheAEO2012versionofNEMSforourmodelinginthisstudy,but EIAhasnotyetreleasedadocumentsummarizingtheassumptionsintheAEO2012version.A. OverviewNEMSisdevelopedandmaintainedbythe EIAOfficeof EnergyAnalysistoprovideprojectionsofdomesticenergy-economymarketsinthelongtermandperformpolicyanalysesrequestedbydecision-makersintheWhiteHouse,Congress,Departmentof Energy,andothergovernmentagencies. Theseprojectionsarealsousedbyanalystsandplannersinothergovernmentagenciesandoutsideorganizations.ThetimehorizonofNEMSisapproximately25years,theperiodinwhichthestructureoftheeconomyandthenatureofenergymarketsaresufficientlyunderstoodthatitispossibletorepresentconsiderablestructuralandregionaldetail.Becauseofthediversenatureofenergysupply,demand,andconversionintheUnitedStates,NEMSsupportsregionalmodelingandanalysisinordertorepresenttheregionaldifferencesinenergymarkets,toprovidepolicyimpactsattheregionallevel,andtoportraytransportationflows. Thelevelofregionaldetailfortheend-usedemandmodulesisthenineCensusdivisions.Otherregionalstructuresincludeproductionandconsumptionregionsspecifictooil,naturalgas,andcoalsupplyanddistribution,theNorthAmericanElectricReliabilityCorporation(NERC)regionsandsub-regionsfor electricity,andthePetroleumAdministrationforDefenseDistricts(PADDs)forrefineries.Foreachfuelandconsumingsector,NEMSbalancestheenergysupplyanddemand,accountingfortheeconomiccompetitionbetweenthevariousenergyfuelsandsources.NEMSis organizedandimplementedasamodular system,asshowninFigureB-1below. | |||
NERAEconomicConsulting 94Themodulesrepresenteachofthefuelsupplymarkets,conversionsectors,andend-useconsumptionsectorsoftheenergysystem.NEMSalsoincludesamacroeconomicandaninternationalmodule. Theprimaryflowsofinformationbetweeneachofthesemodulesarethedeliveredpricesofenergytotheenduserandthequantitiesconsumedbyproduct,region,andsector. Thedeliveredpricesoffuelencompassalltheactivitiesnecessarytoproduce,import,andtransportfuelstotheenduser. Theinformationflowsalsoincludeotherdatasuchaseconomicactivity,domesticproduction,andinternationalpetroleumsupplyavailability.TheintegratingmoduleofNEMScontrolstheexecutionofeachofthecomponentmodules. Tofacilitatemodularity,thecomponentsdonotpassinformationtoeachotherdirectlybutcommunicatethroughacentraldatastoragelocation. Thismodulardesignprovidesthecapabilitytoexecutemodulesindividually,thusallowingdecentralizeddevelopmentofthesystemandindependentanalysisandtestingofindividualmodules. Thismodularityallowsuseofthemethodologyandlevelofdetailmostappropriateforeachenergysector.NEMSsolvesby callingeachsupply,conversion,andend-usedemandmoduleinsequenceuntilthedeliveredpricesofenergyandthequantitiesdemandedhaveconvergedwithintolerance,thusachievinganeconomicequilibriumofsupplyanddemandintheconsumingsectors.Solutionisreachedannuallythroughtheprojectionhorizon.Othervariablesarealsoevaluatedforconvergencesuchaspetroleumproductimports,crudeoilimports,andseveralmacroeconomicindicators.EachNEMScomponentalsoincorporatestheimpactsoffederalandstatelawsandregulationsthataffectthesector.Annual EnergyOutlook2012:Early Release,thebaselinescenarioforthisanalysis,reflectslawsandregulationsthroughlate2011.FigureB-1.StructureofNEMSCONVERSIONSUPPLYDEMANDNEMSIntegratingModuleInternationalEnergyModuleMacroeconomicActivityModuleOil&GasSupplyModuleGasTransmission&DistributionModuleCoalMarketModuleRenewableFuelsModuleElectricityMarketModulePetroleumMarketModuleIndustrialDemandModuleTransportationDemandModuleCommercialDemandModuleResidentialDemandModuleCONVERSIONSUPPLYDEMANDNEMSIntegratingModuleInternationalEnergyModuleMacroeconomicActivityModuleOil&GasSupplyModuleGasTransmission&DistributionModuleCoalMarketModuleRenewableFuelsModuleElectricityMarketModulePetroleumMarketModuleIndustrialDemandModuleTransportationDemandModuleCommercialDemandModuleResidentialDemandModuleSource:AdaptedfromEIA(2011) | |||
NERAEconomicConsulting 95B.ComponentModulesThecomponentmodulesofNEMSrepresenttheindividualsupply,demand,andconversion sectorsofdomesticenergymarketsandalsoincludeinternationalandmacroeconomicmodules.Ingeneral,themodulesinteractthroughvaluesrepresentingthepricesofenergydeliveredtotheconsumingsectorsandthequantitiesofend-useenergyconsumption.Thissectionprovidesbriefsummariesofeachofthemodules.1.MacroeconomicActivityModuleTheMacroeconomicActivityModule(MAM)providesasetofmacroeconomicdriverstotheenergymodulesandreceivesenergy-relatedindicatorsfromtheNEMSenergycomponentsaspartofthemacroeconomicfeedbackmechanismwithinNEMS.Keymacroeconomicvariablesusedintheenergymodulesincludegrossdomesticproduct(GDP),disposableincome,valueofindustrial shipments,newhousingstarts,salesofnewlight-dutyvehicles,interestrates,andemployment.KeyenergyindicatorsfedbacktotheMAMincludeaggregateenergypricesandcosts.The MAMusesthefollowingmodelsfromIHSGlobalInsight:MacroeconomicModeloftheU.S.Economy,NationalIndustryModel,andNationalEmploymentModel.Inaddition, EIAhasconstructedaRegional EconomicandIndustryModeltoprojectregionaleconomicdrivers,andaCommercialFloorspaceModeltoproject13floorspacetypesin9Censusdivisions. TheaccountingframeworkforindustrialvalueofshipmentsusestheNorthAmericanIndustryClassificationSystem(NAICS).2.InternationalModuleTheInternationalEnergyModule(IEM)usesassumptionsofeconomicgrowthandexpectationsoffutureU.S.andworldpetroleumliquidsproductionandconsumption,byyear,toprojecttheinteractionofU.S.andinternationalliquidsmarkets. TheIEMcomputesworldoilprices,providesaworldcrude-likeliquidssupplycurve,generatesaworldwideoilsupply/demandbalanceforeachyearoftheprojectionperiod,andcomputesinitialestimatesofcrudeoilandlightandheavypetroleumproductimportstotheUnitedStatesbyPADDregions.Thesupply-curvecalculationsarebasedonhistoricalmarketdataandaworldoilsupply/demandbalance,whichisdevelopedfromreduced-formmodelsofinternationalliquidssupplyanddemand,currentinvestmenttrendsinexplorationanddevelopment,andlong-termresourceeconomics. Theoilproductionestimatesincludebothconventionalandunconventionalsupply recoverytechnologies.IninteractingwiththerestofNEMS,theIEMchangestheworldoilpricewhichisdefinedasthepriceofforeignlight,lowsulfurcrudeoildeliveredtoCushing,Oklahoma(in PADD2)inresponsetochangesinexpectedproductionandconsumptionofcrudeoilandproductliquidsintheUnitedStates. | |||
NERAEconomicConsulting 963.ResidentialandCommercialDemandModulesTheResidentialDemandModuleprojectsenergyconsumptionintheresidentialsectorbyhousingtypeandenduse,basedondeliveredenergyprices,themenuofequipmentavailable,theavailabilityandcostofrenewablesourcesofenergy,andhousingstarts.TheCommercialDemandModuleprojectsenergyconsumptioninthecommercialsectorbybuildingtypeandnon-buildingusesofenergyandbycategoryofenduse,basedondeliveredpricesofenergy,availabilityofrenewablesourcesofenergy,andmacroeconomicvariablesrepresentinginterest ratesandfloorspaceconstruction.Bothmodulesestimatetheequipmentstockforthemajorend-useservices,incorporatingassessmentsofadvancedtechnologies,includingrepresentationsofrenewableenergy technologies,andtheeffectsofbothbuilding shellandappliancestandards,includingthe2009and2010consensusagreementsreachedbetweenmanufacturersandenvironmentalinterestgroups. TheCommercialDemandModuleincorporatescombinedheatandpower(CHP) technology. Themodulesalsoincludeprojectionsofdistributedgeneration.Bothmodulesincorporatechangestonormalheatingandcoolingdegree-daysbyCensusdivision,basedona10-yearaverageandonState-levelpopulationprojections. TheResidentialDemandModuleprojectsanincreaseintheaveragesquarefootageofbothnewconstructionandexistingstructures,basedontrendsinnewconstructionandremodeling.4.IndustrialDemandModuleTheIndustrialDemandModule(IDM)projectstheconsumptionofenergyforheatandpower,feedstocks,andrawmaterialsineachof21industries,subjecttothedeliveredpricesofenergyandthevaluesofmacroeconomicvariablesrepresentingemploymentandthevalueofshipmentsforeachindustry.Asnotedinthedescriptionofthe MAM,thevalueof shipmentsis basedonNAICS. Theindustriesareclassifiedintothreegroups(1)energy-intensivemanufacturing;(2)non-energy-intensivemanufacturing;and(3)nonmanufacturing.Oftheeightenergy-intensiveindustries,sevenaremodeledintheIDM,withenergy-consumingcomponentsforboiler/steam/cogeneration,buildings,andprocess/assemblyuseofenergy. TheuseofenergyforpetroleumrefiningismodeledinthePetroleumMarketModule(PMM),asdescribedbelow,andtheprojectedconsumptionisincludedintheindustrialtotals.Ageneralizedrepresentationofcogenerationandarecyclingcomponentalsoareincluded.AneweconomiccalculationforCHPsystemswasimplementedforAEO2011.TheevaluationofCHP systemsnowusesadiscountrate,whichdependsonthe10-year Treasurybillrateplusariskpremium,replacingthepreviouscalculationthatusedsimplepayback.Also,thebaseyearoftheIDMwasupdatedto2006inkeepingwithanupdatetoEIAs2006Manufacturing EnergyConsumptionSurvey.5.TransportationDemandModuleThe TransportationDemandModuleprojectsconsumptionoffuelsinthetransportationsector,includingpetroleumproducts,electricity,methanol,ethanol,compressednaturalgas,and NERAEconomicConsulting 97hydrogen,bytransportationmode,vehiclevintage,and sizeclass,subjecttodeliveredpricesofenergyfuelsandmacroeconomicvariablesrepresentingdisposablepersonalincome,GDP,population,interestrates,andindustrial shipments.Fleetvehiclesarerepresentedseparatelytoallowanalysisofotherlegislationandlegislativeproposalsspecifictothosemarketsegments.The TransportationDemandModulealsoincludesacomponenttoassessthepenetrationofalternative-fuelvehicles. The EnergyPolicyActof2005(EPACT2005)and EnergyImprovementand ExtensionActof2008(EIEA2008)arereflectedintheassessmentofimpactsoftaxcreditsonthepurchaseofhybridgas-electric,alternative-fuel,andfuel-cellvehicles.Representationsofcorporateaveragefueleconomy(CAFE)standardsandofbiofuelconsumptioninthemodulereflectstandardsenactedbytheNationalHighway TrafficSafetyAdministration(NHTSA)andU.S.EPA,andprovisionsin EISA2007.Theairtransportationcomponentofthe TransportationDemandModuleexplicitlyrepresentsairtravelindomesticandforeignmarketsandincludestheindustrypracticeofparkingaircraftinbothdomesticandinternationalmarketstoreduceoperatingcosts,aswellasthemovementofagingaircraftfrompassengertocargomarkets.Forpassengertravelandairfreightshipments,themodulerepresentsregionalfueluseinregional,narrow-body,andwide-bodyaircraft.Aninfrastructureconstraint,whichisalsomodeled,canpotentiallylimitoverallgrowthinpassengerandfreightairtraveltolevelscommensuratewithindustry-projectedinfrastructureexpansionandcapacitygrowth.6.ElectricityMarketModuleTherearethreeprimarysubmodulesofthe ElectricityMarketModule:(1)capacityplanning;(2)fueldispatching;and(3)financeandpricing. Thecapacityexpansionsubmoduleusesthestockofexistinggenerationcapacity;themenu,cost,andperformanceoffuturegenerationcapacity;expectedfuelprices;expectedfinancialparameters;expectedelectricitydemand;andexpectedenvironmentalregulationstoprojecttheoptimalmixofnewgenerationcapacitythatshouldbeaddedinfutureyears. Thefueldispatchingsubmoduleusestheexistingstockofgenerationequipmenttypes,theiroperationandmaintenancecostsandperformance,fuelpricestotheelectricitysector,electricitydemand,andallapplicableenvironmental regulationstodeterminetheleast-costwaytomeetthatdemand. Thesubmodulealsodeterminestransmissionandpricingofelectricity. Thefinanceandpricingsubmoduleusescapitalcosts,fuelcosts,macroeconomicparameters,environmentalregulations,andloadshapestoestimategenerationcostsforeachtechnology.Allspecificallyidentifiedoptionspromulgatedbythe EPAforcompliancewiththeCleanAirActAmendmentsof1990(CAAA90)areexplicitlyrepresentedinthecapacityexpansionanddispatchdecisions;thosethathavenotbeenpromulgated(e.g.,fineparticulateproposals)arenotincorporated.Allfinancialincentivesforpowergenerationexpansionanddispatchspecificallyidentifiedin EPACT2005havebeenimplemented. TheAEO2012ReferencecasealsoreflectsthenewCrossStateAirPollutionRule(CSAPR). TheAEO2012Referencecasedoesnot,however,incorporatetheupcomingMercuryandAir ToxicsStandard(MATS). | |||
NERAEconomicConsulting 987.Oiland GasSupplyModuleTheOilandGasSupplyModulerepresentsdomesticcrudeoilandnaturalgassupplywithinanintegratedframeworkthatcapturestheinterrelationshipsamongthevarioussourcesofsupplyonshore,offshore,andAlaskabyallproductiontechniques,includingnaturalgasrecoveryfromcoalbedsandlow-permeabilityformationsof sandstoneand shale. Theframeworkanalyzescashflowandprofitabilitytocomputeinvestmentanddrillingforeachofthesupplysources,basedonthepricesforcrudeoilandnaturalgas,thedomesticrecoverable resourcebase,andthestateoftechnology.Oilandnaturalgasproductionactivitiesaremodeledfor12supplyregions,including sixonshore,threeoffshore,andthreeAlaskanregions.TheOnshoreLower48OilandGasSupplySubmoduleevaluatestheeconomicsoffutureexplorationanddevelopmentprojectsforcrudeoilandnaturalgasattheplaylevel.Crudeoil resourcesaredividedintoknownplaysandundiscoveredplays,includinghighlyfracturedcontinuouszones,suchastheAustinchalkandBakken shaleformations.Productionpotential fromadvanced secondaryrecoverytechniques(suchasinfilldrilling,horizontalcontinuity,andhorizontalprofile)andenhancedoilrecovery(suchasCO 2flooding,steamflooding,polymerflooding,andprofilemodification)areexplicitlyrepresented.Naturalgasresourcesaredivided intoknownproducingplays,knowndevelopingplays,andundiscoveredplaysinhigh-permeabilitycarbonateandsandstone,tightgas,shalegas,andcoalbedmethane.DomesticcrudeoilproductionquantitiesareusedasinputstothePMMinNEMSforconversionandblendingintorefinedpetroleumproducts.SupplycurvesfornaturalgasareusedasinputstotheNaturalGas TransmissionandDistributionModule(NGTDM)fordeterminingnaturalgaswellheadpricesanddomesticproduction.8.Natural GasTransmissionandDistributionModuleTheNGTDMrepresentsthetransmission,distribution,andpricingofnaturalgas,subjecttoend-usedemandfornaturalgasandtheavailabilityofdomesticnaturalgasandnaturalgastradedontheinternationalmarket.Themoduletrackstheflowsofnaturalgasanddeterminestheassociatedcapacityexpansionrequirementsinanaggregatepipelinenetwork,connectingthedomesticandforeignsupplyregionswith12U.S.lower48demandregions. The12regionsalignwiththenineCensusdivisions,withthreesubdividedandAlaskahandledseparately. Theflow ofnaturalgasisdeterminedforbothapeakandoff-peakperiodintheyear,assumingahistoricallybasedseasonaldistributionofnaturalgasdemand.Keycomponentsofpipelineanddistributortariffsareincludedinseparatepricingalgorithms.Analgorithmisincludedtoprojecttheadditionofcompressednaturalgasretailfuelingcapability. Themodulealsoaccountsforforeignsourcesofnaturalgas,includingpipelineimportsandexportstoCanadaandMexico,aswellasliquefiednaturalgas(LNG)importsandexports.9.PetroleumMarketModuleThePMMprojectspricesofpetroleumproducts,crudeoilandproductimportactivity,anddomesticrefineryoperations,subjecttodemandforpetroleumproducts,availabilityand NERAEconomicConsulting 99priceofimportedpetroleum,anddomesticproductionofcrudeoil,naturalgasliquids,andbiofuelsethanol,biodiesel,biomass-to-liquids(BTL),CTL,andgas-to-liquids(GTL).Costs,performance,andfirstdatesofcommercialavailabilityfortheadvancedalternativeliquidstechnologiesarereviewedandupdatedannually.ThemodulerepresentsrefiningactivitiesinthefivePADDs,aswellasalessdetailedrepresentationofrefiningactivitiesintherestoftheworld.Itmodelsthecostsofautomotive fuels,suchasconventionalandreformulatedgasoline,andincludesproductionofbiofuelsfor blendingingasolineanddiesel.FuelethanolandbiodieselareincludedinthePMM,becausetheyarecommonlyblendedintopetroleumproducts. Themoduleallowsethanolblendingintogasolineat10percentorlessbyvolume(E10),15percentbyvolume(E15)inStatesthatlackexplicitlanguagecappingethanolvolumeoroxygencontent,andupto85percentbyvolume(E85)foruseinflex-fuelvehicles.ThePMMincludesrepresentationoftheRenewableFuelsStandard(RFS)includedinEISA2007,whichmandatestheuseof36billiongallonsofrenewablefuelby2022.BothdomesticandimportedethanolcounttowardtheRFS.Domesticethanolproductionismodeledforthreefeedstockcategories:corn,cellulosicplantmaterials,andadvancedfeedstockmaterials.Corn-basedethanolplantsarenumerous(morethan180arenowinoperation,withatotaloperatingproductioncapacityofmorethan13billiongallonsannually),andtheyarebasedonawell-knowntechnologythatconvertsstarchandsugarintoethanol.Ethanolfromcellulosicsourcesisanewtechnologywithonlyafew smallpilotplantsinoperation.FuelsproducedbygasificationandFischer-Tropsch synthesisandthroughapyrolysisprocessarealsomodeledinthePMM,basedontheireconomicsrelativetocompetingfeedstocksandproducts.ThefiveprocessesmodeledareCTL,GTL,BTL,CBTL,andpyrolysis.10.CoalMarketModuleTheCoalMarketModule(CMM) simulatesmining,transportation,andpricingofcoal,subjecttoend-usedemandforcoaldifferentiatedbyheatandsulfurcontent.U.S.coalproductionisrepresentedintheCMMby41separatesupplycurvesdifferentiatedbyregion, minetype,coalrank,andsulfurcontent. Thecoalsupplycurvesrespondtocapacityutilizationofmines,miningcapacity,laborproductivity,andfactorinputcosts(miningequipment,mininglabor,andfuelrequirements).ProjectionsofU.S.coaldistributionaredeterminedbyminimizingthecostofcoalsupplied,givencoaldemandsbyregionandsector,environmentalrestrictions,andaccountingforminemouthprices,transportationcosts,andcoalsupplycontracts.Overtheprojectionhorizon,coaltransportationcostsintheCMMvaryinresponsetochangesinthecostofrailinvestments.TheCMMproducesprojectionsofU.S.steamandmetallurgicalcoalexportsandimportsinthecontextofworldcoaltrade,determiningthepatternofworldcoaltradeflowsthatminimizesproductionandtransportationcostswhilemeetingaspecifiedsetofregionalworldcoalimportdemands,subjecttoconstraintsonexportcapacitiesandtradeflows. Theinternationalcoalmarketcomponentofthemodulecomputestradeinthreetypesofcoalfor17 NERAEconomicConsulting 100exportregionsand20importregions.U.S.coalproductionanddistributionarecomputedfor14supplyregionsand16demandregions.11.RenewableFuelsModuleTheRenewableFuelsModule(RFM)includes submodulesrepresentingrenewableresourcesupplyandtechnologyinputinformationforcentral-station,grid-connectedelectricitygenerationtechnologies,includingconventionalhydroelectricity,biomass(dedicatedbiomassplantsandco-firinginexistingcoalplants),geothermal,landfillgas,solarthermalelectricity,solarphotovoltaics(PV),andwindenergy. TheRFMcontainsrenewableresourcesupplyestimatesrepresentingtheregionalopportunitiesforrenewableenergydevelopment.Investmenttaxcredits(ITCs)forrenewablefuelsareincorporated,ascurrentlyenacted,includingapermanent10-percentITCforbusinessinvestmentinsolarenergy(thermalnonpowerusesaswellaspoweruses)andgeothermalpower(availableonlytothoseprojectsnotacceptingtheproductiontaxcredit(PTC)forgeothermalpower).Inaddition,themodulereflectsthe increaseintheITCto30percentforsolarenergy systemsinstalledbeforeJanuary1,2017,andtheextensionofthecredittoindividualhomeownersunder EIEA2008.PTCsforwind,geothermal,landfillgas,andsometypesofhydroelectricandbiomass-fueledplantsalsoarerepresented. Theyprovideacreditofupto2.1centsperkilowatt-hourforelectricityproducedinthefirsttenyearsofplantoperation.ForAEO2011,newwindplantscomingonlinebeforeJanuary1,2013,areeligibletoreceivethePTC;othereligibleplantsmustbeinservicebeforeJanuary1,2014.AspartoftheAmericanRecoveryandReinvestmentAct(ARRA),plantseligibleforthePTCmayinsteadelecttoreceivea30-percentITCoranequivalentdirectgrant.AEO2012alsoaccountsfornewrenewableenergycapacityresultingfromStaterenewableportfoliostandard(RPS)programs,mandates,andgoals.C.ReferencesU.S. EnergyInformationAdministration.2011.Assumptionstothe Annual EnergyOutlook 2011.http://www.eia.gov/forecasts/aeo/assumptions/pdf/0554(2011).pdf | |||
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101AppendixC:InformationonPotentialCanadianHydroandAssociatedTransmissionOneofthedevelopmentscitedinNYS-37andtheaccompanyingexpertreportsconcernstheproposedChamplainHudsonPowerExpresstransmissionproject.Inthisappendix,weexaminethefollowingissues:(1)whethertheChamplainHudsonprojectandpotentialassociatedconstructionofnewhydroelectricgenerationinCanadawouldrepresentpotentialalternativestoIPECgenerationintheno-actionalternative;and,(2)ifadditionalhydroresourcesandassociatedtransmissionwereassumedtobepartofthereplacementgeneration,whatenvironmentalimpactstheywouldhave.A.ConsiderationofTransmissionandCanadianHydroasAlternativestoIPEC Generation1.OverviewoftheChamplainHudsonProjectChamplainHudsonisproposingtoestablisha1,000MWDCconnectionfromtheNewYork-QuebecbordertoNewYorkCity.OnFebruary24,2012,partiestothepermittingproceedingbeforetheNYPSCsubmittedajointproposal(settlementdocument)andsupportingdocumentstotheNewYorkPublicServiceCommissionthatifacceptedbytheNYPSCwouldresultinissuanceofaCertificateof EnvironmentalCompatibilityandPublicNeedandauthorizeconstructionandoperationoftheChamplainHudsonproject. Theproject,ifconstructed,would facilitatedeliveryofpowerfromQuebecandperhapsLabradortoNewYorkCity(Champlain Hudson2012).Althoughtheprojectsponsorshaverecentlyaffirmedthattherearenosupplycontractsfortheproject,thereareplansforthedevelopmentofnewlarge-scalehydrofacilitiesinQuebecandLabrador,asdiscussedbelow.2.OverviewofCanadianHydroProjectsHydro-Quebeccurrentlyisconstructingtwolargehydroprojects,bothofwhichwillgenerateinexcessof8million MWhperyear(Hydro-Quebec2009). Thefirst,the Eastmain-1-A/Sarcelle/Rupertproject,isunderdevelopmentandisscheduledtobecompletedin2012. Thesecondproject,theRomaineComplex,isalsoalreadycommittedandisproceeding.Hydro-QuebecisalsoplanningotherhydroprojectsaspartofitsNorthernPlan.Inaddition,NalcorEnergyautilityownedbythegovernmentofNewfoundlandandLabradoriscurrently exploringtheLowerChurchillFallsprojectin EasternCanada.3.BaselineConditionsvs.No-ActionAlternativeWeunderstandthatthereissubstantialuncertaintyregardingwhetherornottheChamplainHudsonprojectandanyfutureCanadianhydroprojectswillbeconstructed.Aswithotherenergydevelopmentsdiscussedinthereportbody,however,theseprojectsarenotrelevanttoevaluationofthepotentialadverseenvironmentalimpactsoftheno-actionalternativeunlesstheyaffecthowelectricity systemswouldrespondtolossofIPECsbaseloadgeneration.Iftheyareconstructedunderbaselineconditions,theywouldnotbecountedasreplacementsforIPEC 102undertheno-actionalternative. TheCanadianhydroprojectsthathavealreadybegunconstructionareclearlypartofthebaseline,eveniftheChamplainHudsonprojectweretobedevelopedandtheoutputofthesetwohydroprojectssenttoNewYork.Inthatcase,thehydrogenerationfromthesetwoprojectswould simplybedivertedfromotherregions(e.g.,NewBrunswick,New England,Ontario)withthenetenvironmentaleffectdeterminedbytheincrementalgenerationthatwouldbeaddedinthoseregionstomakeupforthelossinthehydrogenerationthatotherwisewouldhavebeenused.EvenifadditionalnewhydrofacilitiesweredevelopedinQuebecaftertheChamplainHudsonlinewasinplace(assumingthatthelinewasconstructed),whetherornotgenerationfromCanadianhydrofacilitieswouldconstitutepartofthenetreplacementforIPECgenerationwoulddependuponthenetchangesintheoverallelectricitysystemand,inparticular,whetherthesehydroresourceswouldotherwisehavebeenusedtodisplacefossilgenerationinotherregions.Aswithotherquestionsrelatedtotheimpactsoftheno-actionalternative,theanswerdependslargelyupondetailsregardingtherelativecostsofthedifferentgenerationalternativestomeetelectricitydemandsindifferentregionsanddifferenttimeperiods.EvenifCanadianhydroresourcesdidconstitutethenetresourcesaddedinresponsetothelossofIPECgeneration,themaximumadditionalpotentialhydrogenerationthatcouldbetransmittedovertheChamplain-HudsonPowerExpressProjectwouldrepresentonly40percentoftheIPECenergythatwouldneedtobereplacedintheno-actionalternative.Moreover,anexpansionofCanadianhydrogeneration(andanyrelatedtransmission)intheno-actionalternativewouldhaveadverseenvironmentalimpactsofitsown,asdiscussedbelow.NotethatNYS-37doesnotprovideanyinformationonthepotentialenergyandenvironmentalimpactsof theno-actionalternativeiftheseCanadiantransmissionandhydroprojectswereimplemented.B.AdverseEnvironmental ImpactsofCanadianHydroThissectionoutlinestheenvironmentalimpactsofthreeillustrativeCanadianhydroprojects,the Eastmain-1-A/Sarcelle/RupertprojectandtheRomaineComplexproject,whicharecurrentlyunderconstruction,andtheLowerChurchillproject,whichisinthepermittingphase.TheseenvironmentalimpactsprovideanindicationofthepotentialimpactsifadditionalCanadianhydroelectricweretoconstitutepartofthereplacementgenerationundertheno-actionalternative.1.Greenhouse GasEmissionsAllthreehydroprojectswouldleadtoincreasesinGHGemissions,baseduponestimatesdevelopedbyHydro-QuebecandNalcor Energy.The Eastmain-1-A/Sarcelle/RupertprojectwouldleadtopeakincreasesingrossCO 2eemissionsofbetween128,000to685,000annualtones(Hydro-Quebec2004).TheRomaineComplexwouldleadtopeakincreasesingrossCO 2 eemissionsofbetween150,000to475,000annualtons(Hydro-Quebec2008).TheLowerChurchillproject,alargerprojectthantheothertwo,isexpectedtocontributemorethan1,000,000tonsofCO 2eemissionsovertenyearsofconstructionandpeakincreasesinnetCO 2 eemissionsofbetween938,000tonsto1,160,000annualtonsduringoperations(Nalcor Energy 1032009).Indeed,evenatyear20,theLowerChurchillfacilitiesareprojectedtocontributebetween121,000to125,000tonsofnetCO 2eemissions(Nalcor Energy2009).2.OtherEmissionsThe EISfortheLowerChurchillprojectquantifiesotherairemissionsduringtheconstructionofthefacilitiesandtheirassociatedlocaltransmissionlines,includingparticulatematter(PM),sulfurdioxide(SO 2),nitrogenoxides(NO X),carbonmonoxide(CO),andvolatileorganiccompounds(VOC).EmissionsofNO XandSO 2aretheprimarycausesofacidrainwhichcanleadtoacidificationofwaterbodiesandothereffectsandcanalsoleadtovarioushealtheffects.NO XandSO 2arealsoimportantprecursorsintheformationoffineparticles(PM2.5),andozoneisformedbycomplicatedatmosphericphotochemicalreactionsinvolvingNO x,VOC,andsunlight.COisapoisonousgasthataidsintheformationofCO 2andozone.PMandozoneareassociatedwith significantadversehealtheffects.TableC-1displaysthequantitiesofairemissionsthatareexpectedtobereleasedduringtheconstructionoftheLowerChurchillfacilitiesandtheirassociatedtransmissionlinestodeliverenergygeneratedattheseremotelocationstotheCanadianborder.3.OtherAdverseEnvironmental ImpactsThe Eastmain-1-A/Sarcelle/RupertEISdetailsanumberofenvironmentalimpacts.Forexample,theprojectwillleadtoincreasedmercurybioaccumulationinfish 23,whichwillnotreturntocurrentlevelsforallspeciesuntil2028(Hydro-Quebec2004). Thiswillleadtoheightenedconsumptionrestrictionsforlocalhumanpopulations. Theprojectwillalsochangeratesoferosionandsedimentationinthevariousaffectedwaterbodies,ultimatelyreducingthesedimentsupplyintheRupertestuarybytwo-thirds(Hydro-Quebec2004).Athirdexampleofnoteisthefactthatthefloodingofthediversionbaywillleadtoalossof18,810hectaresofvegetation,eliminatingnearly383,930greenmetrictonesofwood(Hydro-Quebec2004). | |||
23Decompositionassociatedwithreservoirfloodingcausesincreasedmicrobialactivitywhichconvertsmercuryintomethylmercury(NalcorEnergy2009).Methylmercuryisatoxicformofmercurythatbioaccumulatesinfish.TableC-1.ContaminantsprojectedtobereleasedduringconstructionoftheLowerChurchillfacilitiesandtheirassociatedlocaltransmissionlines.ContaminantTonnesPM1,391 SO 21,301 NO x19,791CO4,264VOC1,615Source:(NalcorEnergy2009) 104TheRomaineComplex EISalsodetailsanumberofenvironmentalimpacts.Forexample,theprojectwillhavemajorimpactstofishcommunitiesbecausesuchcommunitieswillbepermanentlytransformed(Hydro-Quebec2008).Theprojectwillalsoleadtoathreefoldtosevenfoldincreaseinfishmercurybioaccumulation,whichcouldtakeupto30yearstoreturntopresentlevels(Hydro-Quebec2008). TheRomainefacilitieswillalsoresultinimpactson21,746hectaresofland,including12,021hectaresoflostconiferousforestandanet626hectarelossofwetlands(Hydro-Quebec2008).Andaswiththe Eastmainfacility,theRomainecomplexwillalsochangeratesandpatternsoferosionand sedimentationinthevariousaffectedwaterbodies(Hydro-Quebec2008).TheLowerChurchill EISalsodetailsanumberofenvironmentalimpacts.Forexample,mercuryconcentrationsinfishareexpectedtoincreaseandpeakat1.5to4.5timesnaturallevels,dependingonthetypeoffish(NalcorEnergy2009).Itisexpectedtotakeupto35yearsformercuryconcentrationsinallfishtypestoreturntocurrentlevels. TheChurchillfacilitieswillalsoentailhabitatclearingintheformof368kmofroadsand263kmofnewtransmissionlines(Nalcor Energy2009).Furthermore,temporaryconstructioncampsandquarriesandborrowpitswillentailhabitatclearingofa16km 2area(NalcorEnergy2009).8,400hectaresofhabitatwillbeclearedinordertofilltheGullIslandreservoirassociatedwiththeproject(Nalcor Energy2009).Finally,aswiththeotherfacilities,theLowerChurchillprojectwillchangesratesandpatternsoferosionand sedimentationinthevariousaffectedwaterbodies(Nalcor Energy 2009).C.AdverseEnvironmental ImpactsofTransmissionLinesfromCanadaAdditionaltransmissionlineswouldberequiredifnewCanadianhydropowerweretobeexportedtotheNortheastUnitedStates. Therearecurrentlytwosuchlinesthathavebeenproposed,oneofwhichistheChamplainHudsonlinediscussedabove.Asnoted,thiswouldestablisha1,000MWDCconnectionfromtheNewYork-QuebecbordertoNewYorkCity.A secondtransmissionlineistheNorthernPass TransmissionProject,whichwouldestablisha1,200MWDCconnectionfromtheNewHampshire-QuebecbordertosouthernNewHampshire. Thissubsectionoutlinessomeoftheadverseenvironmentalimpactsexpectedtooccurfromconstructionofthesetransmissionlines.ChamplainHudsonsJointProposaldetailssomeoftheenvironmentalimpactsthatareanticipatedfromtheinstallationoftheproposedtransmissionline. Theseimpactsincludethefollowing(ChamplainHudson2012):DredgingwouldberequiredtolaycablesintheHudsonRiverandportionsofLakeChamplain,resultingintemporarysedimentresuspensionandotherimpacts;Constructionwouldresultintemporaryimpactsto56acresofwetlandsaswellasto streamsandtributaries; 105About10.7acresofforestedwetlandcovermaybepermanentlyconvertedtomarshorscrub-shrubcommunities;Approximately236acresofexistingforestcovermaybeclearedduringconstruction,60acresofwhichwouldbepermanentlycleared;ThreemilesofcablewouldbeinstalledwithinthecitystreetsintheboroughofQueens, NewYorkCity;and138,040linearfeetofright-of-waywithinAgriculturalDistrictswouldbeincludedinthe ConstructionZone.NorthernPassPresidentialpermitapplicationcontainsapreliminaryassessmentoftheenvironmentalimpactsofthetransmissionproject.Accordingtotheapplication,potentialU.S.impactsoftheprojectincludethefollowing(NorthernPass2010):Approximately5.5milesofwetlandswillbetraversedalongthepreferredroute; however,atthistimethequantityofforestedwetlandsthatwillbetraversedmaybeunderestimated.Stateendangeredspeciesthatoccurwithin1,000ofthepreferredrouteincludethe northernharrier,wildcomfrey,goldenfruitedsedge,andthemuskflower.StatethreatenedspeciesthatoccurwithinthesamerangeofthepreferredrouteincludetheKlamslobelia,theperegrinefalcon,Pickeringsbluejoint,theblackracer(snake),andthewildlupine.NorthernPassalsosubmittedanaddendumtotheirapplicationspecifyingthattheirpreferredroutewouldspantheConnecticutRiver,aDesignatedRiverandAmericanHeritageRiver.Itwouldalsocrossatleastthreeotherperennialstreams(Sullivan2011).D.ReferencesChamplainHudson.2012.ChamplainHudsonPower Express,Inc.JointProposal.CaseNo.:10-T-0139.February24,2012.2012.http://www.poughkeepsiejournal.com/assets/pdf/BK185815227.pdfHydro-Quebec.2004.Eastmain-1-APowerhouseand RupertDivision:EnvironmentalImpact Statement.Hydro-Quebec.Volume4,Chapters16-25,December2004.http://www.hydroquebec.com/rupert/en/pdf/vol_04_en_web.pdfHydro-Quebec.2008.RomaineComplex: EnvironmentalImpactStatement.Hydro-Quebec,Aubust2008.http://hydroforthefuture.com/docs/sizes/4dc98ad1333fe/source/2008E064 | |||
-ANG-Rom-RES-03.pdf 106Hydro-Quebec.2009.StrategicPlan:2009-2013 | |||
.http://www.hydroquebec.com/publications/en/strategic_plan/pdf/plan-strategique-2009 | |||
-2013.pdfJointReviewPanel.2011.ReportoftheJoint ReviewPanel:LowerChurchillHydroelectricGenerationProject,Nalcor Energy,NewfoundlandandLabrador.ExecutiveSummaryandRecommendations.August2011.http://www.ceaa.gc.ca/050/documents/51706/51706E.pdfNalcor Energy.2009.LowerChurchillHydroelectricGenerationProject: EnvironmentalImpact Statement.February2009.http://www.ceaa.gc.ca/050/document-eng.cfm?document=41653NorthernPass.2010.ApplicationofNorthernPassTransmissionLLCforPresidentialPermit | |||
.UnitedStatesofAmericabeforetheDepartmentof EnergyOfficeofElectricityand EnergyReliability.NorthernPass TransmissionLLC:DocketNo.PP-371.October14,2010.http://www.northernpasseis.us/Document_Library/documents/USDoEPresidentialPermitApplication101410.pdfSullivan,MaryAnn.2011.NorthernPass TransmissionLLC:DocketNo.PP-371:AddendumtoApplication.February15,2011. | |||
http://www.northernpasseis.us/Document_Library/documents/Northern_Pass%20_Addendum_to_Application_Docket_No_PP-371.pdf}} | |||
Revision as of 17:03, 22 July 2018
| ML12339A609 | |
| Person / Time | |
|---|---|
| Site: | Indian Point  |
| Issue date: | 03/31/2012 |
| From: | Foss A, Harrison D, Hodges N, Meehan E, Nichols A L NERA Economic Consulting |
| To: | Atomic Safety and Licensing Board Panel |
| SECY RAS | |
| References | |
| RAS 22161, 50-247-LR, 50-286-LR, ASLBP 07-858-03-LR-BD01 | |
| Download: ML12339A609 (118) | |
Text
March2012PotentialEnergyandEnvironmentalImpactsof DenyingIndianPointsLicense RenewalApplications ENT000481 Submitted: March 30, 2012 United States Nuclear Regulatory Commission Official Hearing Exhibit In the Matter of
- Entergy Nuclear Operations, Inc. (Indian Point Nuclear Generating Units 2 and 3)
ASLBP #:07-858-03-LR-BD01 Docket #:05000247 l 05000286 Exhibit #:
Identified:
Admitted: Withdrawn:
Rejected: Stricken: Other: ENT000481-00-BD01 10/15/2012 10/15/2012 ProjectTeamDavidHarrison,Jr.,Ph.D.EugeneMeehanAlbertL.Nichols,Ph.D.AndrewFossNicholasHodgesNERAEconomicConsulting200ClarendonStreet,11thFloorBoston,Massachusetts02116Tel:+16179274500 Fax:+16179274501 www.nera.com NERAEconomicConsulting i ContentsExecutiveSummary................................................................................................................E-1I.IntroductionandBackground...................................................................................................1A.NRCsFinalSupplemental EnvironmentalImpactStatement..........................................1B.NewYorkStatesContention37.....................................................................................4C.Objectivesof ThisReport................................................................................................6D.Organizationof ThisReport............................................................................................6II.NewYorkStates ElectricitySystemandImplicationsforthe Energyand EnvironmentalImpactsoftheNo-ActionAlternative..............................................................................7A.OverviewofNewYorkStates ElectricitySystem...........................................................7 B.GovernmentSupportfor ExistingRenewablesandEnergyEfficiencyPrograms.............9C.CostsofAdditionalGenerationinNo-ActionAlternative..............................................14D.ImplicationsofRelativeCostsonthe MixofReplacement EnergyinNo-ActionAlternative....................................................................................................................
23E.Adverse EnvironmentalImpactsofGenerationAlternatives..........................................25 F.ConclusionsRegardingthe LikelyAdverse EnvironmentalImpactsoftheNo-ActionAlternative....................................................................................................................
33III.QuantitativeModelingofthePotential EnergyandAdverse EnvironmentalImpactsoftheNo-ActionAlternative.............................................................................................35A.OverviewofNEMS.......................................................................................................35B.BaselineConditions.......................................................................................................36C.Projected EnergyMarketImpactsofNo-ActionAlternative..........................................37 D.ProjectedAdverse EnvironmentalImpactsofNo-ActionAlternative.............................39IV.EvaluationofNewYorkStateContention37......................................................................41A.OverviewofMajorFlawsinNYS-37............................................................................41B.ConflationofBaselineandNo-ActionAlternative.........................................................42C.FailuretoAccountfortheIndirect EffectsofaModifiedBaselineonthe EnergyandEnvironmentalImpactsUndertheNo-ActionAlternative..............................................53D.Summary Evaluationofthe Energyand EnvironmentalClaimsofNYS-37...................59V.Conclusions..........................................................................................................................61References................................................................................................................................62AppendixA:InformationonRecent EnergyDevelopmentsinNewYorkState.........................68AppendixB: TheNationalEnergyModelingSystem................................................................93 AppendixC:InformationonPotentialCanadianHydroandAssociated Transmission............101 NERAEconomicConsulting iiListofFiguresFigure1.U.S.WindCapacityAdditionsandAvailabilityofFederalRenewable EnergySubsidies.........................................................................................................................9Figure2.RenewablePortfolioStandardBudgets......................................................................
12Figure3.NYSERDAAnalysisofPotentialContributionstoMeeting15x15ConservationGoal......................................................................................................................................13Figure4. EnergyEfficiencyPortfolioStandardBudgets...........................................................14Figure5.HypotheticalAnalysisofChangeinGenerationfromBaselinetoNo-ActionAlternative....................................................................................................................
16Figure6.EIA's EstimatesofLevelizedCostsforNewCapacity, ExclusiveofGovernment Support..........................................................................................................................17Figure7.ImpactofAdditionalRenewablesonSubsidyRatesperMWh...................................19Figure8.EEPS Energy EfficiencySupplyCurveCost$perMWhVersusCumulativeGWh....22 Figure9.HeightComparisonofWind TurbineandOtherStructures.........................................29Figure10.LocationofCurrentandProposedWindFarmsinNewYork...................................30Figure11.HypotheticalIllustrationofChangeinBaselineGeneration......................................43Figure12.HypotheticalAnalysisofImpactofNo-ActionAlternativewithRevisedBaseline...44Figure13.NYISOProjectionsofNewYorkStateElectricitySales...........................................47Figure14.AnnualGenerationCapacityAdditions(MW)..........................................................49Figure15.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW)....................50Figure16.ImpactofMoreBaselineRenewablesontheMarginalCostofAdditionalRenewables......................................................................................................................................55Figure17.ImpactofReducedDemandinBaselineonMarginalCostofFossilGenerationtoReplaceIPEC................................................................................................................57FigureA-1.PotentialContributionstowardEnergy EfficiencyGoalBasedonNYSERDAAnalysis........................................................................................................................73FigureA-2.HistoricalandNYISOs ExpectationofSavingsfrom EnergyEfficiencyPrograms74 FigureA-3.NYISOProjectionsofNewYorkState ElectricitySales........................................77FigureA-4.NYISOZones........................................................................................................78FigureA-5.NYISOProjectionsofDownstate(ZonesG-K)ElectricitySales............................79FigureA-6.AnnualGenerationCapacityAdditions(MW)........................................................81FigureA-7.CumulativeGenerationCapacityAdditionsSince2000(MW)...............................82FigureA-8.GeographicDistributionofCumulativeGenerationCapacityAdditionsSince2000(MW)............................................................................................................................83FigureA-9.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW)..................84FigureA-10.GeographicDistributionofProjectsinCurrentInterconnectionQueue(MW)......85FigureA-11.AEOProjectionsofHenryHubNaturalGasPrices..............................................87FigureA-12.AEOProjectionsofDeliveredNaturalGasPricestoElectricityGeneratorsinNewYorkState.....................................................................................................................8 8FigureB-1.StructureofNEMS................................................................................................94 NERAEconomicConsultingiiiListofTablesTable1. EstimatesofMarginalCostsofGeneration..................................................................23Table2.AirPollutantsbyGenerationPlant Type......................................................................25Table3.AverageEmissionRates..............................................................................................26Table4.DirectAirEmissionsfromWoodResidueBiomassFacilities(lbs/MWh)....................31Table5.ProjectedU.S.BaselineGenerationbyFuelType........................................................37Table6.IPECsLostOutputandProjectedU.S.MarketResponsesinNo-ActionAlternative (2016-2025)..................................................................................................................38Table7.ProjectedChangesinGenerationinNo-ActionAlternative(2016-2025).....................39Table8.ProjectedIncreasesinAverageAnnualU.S.Air EmissionsinNo-ActionAlternative (2016-2025)..................................................................................................................40TableA-1.NewYorks30x15Renewable EnergyGoal(million MWh)..............................69 TableA-2.ProductionSubsidiesforMainTierGenerators.......................................................71 TableA-3.ImplicitSubsidiesfromNewYorksRPS................................................................71TableA-4.OriginalandCurrentIn-ServiceDatesforProjectsinInterconnectionQueue(MW)86TableC-1.ContaminantsprojectedtobereleasedduringconstructionoftheLowerChurchillfacilitiesandtheirassociatedlocaltransmissionlines..................................................103 NERAEconomicConsulting ivListofAcronymsAEO:Annual EnergyOutlookARRA:AmericanRecoveryandReinvestmentActof2009CHP:CombinedHeatandPowerDOE:U.S.Departmentof EnergyEEPS:EnergyEfficiencyPortfolioStandardEIA:EnergyInformationAdministration FSEIS:FinalSupplemental EnvironmentalImpactStatementIPEC:IndianPoint EnergyCenterIP2:IPECUnit2IP3:IPECUnit3NEMS:National EnergyModelingSystemNGCC:NaturalGasCombinedCyclegeneratingunitNRC:NuclearRegulatoryCommissionNYS-37:Contention37filedbyNewYorkStateNYSERDA:NewYorkStateEnergyResearchandDevelopmentAuthority PTC:Production TaxCreditRGGI:RegionalGreenhouseGasInitiativeRPS:RenewablePortfolioStandardSBC:SystemBenefitsChargeSEIS:Supplemental EnvironmentalImpactStatement NERAEconomicConsulting E-1ExecutiveSummaryAcentralissueaddressedintheFinalSupplementalEnvironmentalImpactStatement(FSEIS)regardingthelicenserenewalforIndianPoint EnergyCenter(IPEC)isthecomparativeenvironmentalimpactsbetweenrenewalofIPECsoperatinglicensesbytheNuclearRegulatoryCommission(NRC)andtheno-actionalternativeinwhichtheIPEC licenseswouldnotberenewed.Inordertoevaluatethedifferencesinenvironmentalimpactsbetweenthesetwoscenarios,wemustfirstidentifythebaselineelectricmarketsupplythatwouldbeusedtomeetNewYorkdemand(i.e.,assumingcontinuedIPECoperations).Wemustthenassesshowtheno-actionalternativewouldchangethissupplytoaccountforthelostbaseloadIPECgeneration.Electricitymarketanalysisisrequiredbecausetheenvironmental impactsofmovingfromthebaselinetotheno-actionalternativedependprimarilyuponwhatpowersourceswouldclearthecompetitivemarketsandbedispatchedtoreplacethesubstantialamountofbaseloadgenerationthatiscurrentlysuppliedbyIPEC.Weperformedsuchanelectricitymarketanalysisbothbyassessingtherelativecostsofalternativepowersourcesandbyconductingempiricalmodelingwithastate-of-the-artandwidelyusedenergymarketmodel.Undertheno-actionalternative,ouranalyses showthatIPECbaseloadgenerationwouldbereplacedprimarilybyfossil-fueledgenerationfromexistingnaturalgasandcoalfacilities.Theseresultsestablishthat(1)theadverseenvironmentalimpactsoftheno-actionalternativeassessedintheFSEISare,ifanything,underestimated;and(2)NewYorkStateisincorrectinitsclaimsunsupportedbyanyempiricalanalysisthattheFSEISoverstatesenvironmental impactsbecausereplacementgenerationwouldbeprimarilyrenewableenergyandconservation.A.Background1.OverviewofFSEISConclusionsTheFSEISidentifiesandassessesthepotentialenvironmentalimpactsofvarioussourcesofreplacementenergyifIPECwerenotavailable. Thesealternativesincludenewnaturalgasfiredplants,purchasedpower,conservation,andcombinationsofreplacementenergysources.TheFSEISalsonotesthatNEPArequiresconsiderationoffeasible,non-speculativealternatives, andthatalternativesthatareeconomicallyimpracticalareexcluded. TheroleofNEPAreviewinthelicenserenewalprocessiscircumscribed,astheNRCindicatedwhenitpromulgateditsregulations:GiventheuncertaintiesinvolvedandthelackofcontrolthattheNRChasinthe choiceofenergyalternativesinthefuture,theCommissionbelievesthatitisreasonabletoexerciseitsNEPAauthoritytorejectlicenserenewalapplicationsonlywhenithasdeterminedthattheimpactsoflicenserenewalsufficientlyexceedtheimpactsofalloralmostallofthealternativesthatpreservingtheoptionoflicenserenewalforfuturedecisionmakerswouldbeunreasonable.(EnvironmentalReviewforRenewalofNuclearPowerPlantOperating Licenses,61Fed.Reg.28,467,28,473(June5,1996)(NYS000127))
NERAEconomicConsulting E-2TheFSEISconcludesthattheadverseenvironmentalimpactsoflicenserenewalforIP2andIP3arenotsogreatthatpreservingtheoptionoflicenserenewalforenergyplanningdecisionmakerswouldbeunreasonable.FSEISat9-8(NYS00133C).2.NewYorkStateCritiqueoftheFSEISConclusionsTheStateofNewYork,initsStatementofPositiononAdmittedConsolidatedContentionsNYS-9,33,and37(collectively,NYS-37)arguesthattheFSEISisdeficientbecauseitignoresNewYorkStatescommentsthattheenvironmentalimpactoftheno-actionalternativewouldbemuchlessthanassumedintheFSEISandlessthantheenvironmentalimpactsoflicenserenewal. ThecoreoftheNYS-37argumentisthattheFSEISshouldhaveevaluatedenvironmentalimpactsonthepresumptionthatbaseloadIPECgenerationwouldbelargelyreplacedbyadditionalrenewablegenerationandenergyconservation,ratherthanbysubstantialfossil-fuelgenerationasassumedinmanyoftheFSEISalternatives.NYS-37pointstovariousrecentenergyandrelateddevelopmentsallegedlyignoredbytheFSEIS,including existingNewYorkStateprogramstoencouragerenewablesandenergyconservationaswellasrecentreductionsinprojectedelectricitydemandandnaturalgasprices.NYS-37,however,doesnotincludeanyempiricalanalysestosupportitsassertions.3.ReportObjectivesTheprincipalobjectiveofthisreportistoprovidetheresultsofouranalysesofthepotentialenergyandenvironmentalimpactsoftheno-actionalternative.Asnoted,itisnecessarytoconsidertheimpactsontheelectricitysystembecauseenvironmentalimpactswillbedrivenprimarilybythemixofgenerationthatwouldreplacethelostbaseloadIPECgenerationiflicenseswerenotrenewed.Informationonthelikelymarket-drivenelectricityimpactsoftheno-actionalternativeallowsustocompareourfindingstothoseintheFSEISandtoevaluatetheargumentsprovidedbytheStateofNewYorkanditsexperts. ToassessthevalidityofthecentralargumentofNYS-37,itisnecessarytoconducteconomicanalysesofalternativesourcesofpowerasthatistheonlywaytodetermineasNYS-37anditsexpertsallegeiftheconservation/renewablealternativeissodominantthatotheralternatives,includingthoserelyingonfossilgeneration,wouldnotplaya significantroleinreplacinglostIPECgeneration.B.ConclusionsRegardingPotentialEnergyandEnvironmentalImpactsoftheNo-ActionAlternativeIPECisahighlyefficientnucleargeneratingfacilitythatoperatesover90percentofthetimeandprovidesapproximately10percentofthetotalelectricityconsumedinNewYorkState.
Undertheno-actionalternative,itsbaseloadenergywouldhavetobereplaced. ToidentifytheenvironmentalimpactsofthegenerationthatwouldlikelybeusedtoreplaceIPECbaseloadpower,wedevelopedtworelatedevaluations.First,weconsideredthewholesaleelectricmarketstructureinNewYorkStatewhichemphasizesminimizingthecostsofmeetingelectricitydemandwhilesatisfyingallreliabilityandoperatingrequirementsandtheimplicationsofthe NERAEconomicConsulting E-3relativecostofreplacementalternatives.Second,wedevelopedempiricalestimatesoflikelyreplacementgenerationbaseduponmodelingresultsfromastate-of-the-artenergymodeltheNational EnergyModelingSystem(NEMS)developedandoperatedbythe EnergyInformationAdministration(EIA)withintheU.S.Departmentof Energy.NEMSallowsustodevelopestimatesofthechangesingenerationbytypeaswellasthechangesinvariousemissionsthatwouldoccurifIPECgenerationwerenotavailable.1.ConclusionsRegardingthePowerMixThatWouldBeDispatchedIfIPECBaseloadGenerationWereLostThefollowingareourconclusionsregardingthegenerationthatwouldlikelybedispatchedundertheno-actionalternative.Replacementenergywouldcomeprimarilyfromnaturalgasandcoalpowerplants,withamuch smalleramountfromrenewablesandenergyconservation,because:
Thecostsofincreasingtheutilizationofexistingnaturalgasandcoalpowerplants,orbuildingnewnaturalgasplantsarelowerthanrenewablesorconservation;and HundredsofmillionsofdollarsofadditionalannualStatesubsidies(ultimatelypaid byNewYorkStateselectricityconsumersthroughtheirmonthlyutilitybills)wouldberequiredtoforceadditionalrenewablesandenergyefficiencyintotheelectricitysystemtoovercometheirhighercosts;ThedevelopmentscitedinNYS-37,includingNewYorkStates30x15renewableenergy goaland15x15energyefficiencygoal,wouldrenderrenewablesandconservationevenlesseconomicrelativetootheralternatives,andthusevenlessviablethanundertheconditionsnotedintheFSEIS.2.ConclusionsRegardingEnvironmentalImpactsoftheReplacementPowerMixElectricitymarketmodelingcanbeusedtopredicttheresourcesthatwouldlikelyreplaceIPECsbaseloadgenerationandthuswoulddeterminethepotentialadverseenvironmental impactsofthisreplacementenergy.Inexaminingindetailtheenvironmentalimpactofwhatwebelieveisthemostlikelyreplacementmix,wearenotsuggestingadeparturefromtheNRCpracticeofexaminingmanyreplacementalternatives.However,themostlikelysourceof replacementenergyshouldbeaccorded significantweight.AreviewoftheadverseenvironmentalimpactsofthisscenarioalsoisimportantbecauseitplacesNYS-37inpropercontext.EvenwererenewablesourcestoplayamajorroleasreplacementgenerationforIPEC whichaswedemonstrate,theywouldnotNYS-37impliesthatrenewablereplacementsources donothaveenvironmentalimpacts. Thisisnotaccurate.Thus,wealsoprovideinformationon NERAEconomicConsulting E-4thegeneralenvironmentalimpactsofrenewablegenerationtoprovidefullandaccurateinformation.Ouranalysesproducethefollowingconclusions:Themostlikelymixofreplacementpowerprimarilyfossil-firedunitswouldleadto significantincreasesinairemissions,includinganincreaseinannualcarbondioxideemissionsofabout13.5millionmetrictonsperyear(whichisnearlyaslargeastheRegionalGreenhouseGasInitiatives(RGGI)15millionmetrictonsofplannedCO 2emissionreductionbetween2012and2018);andReplacementalternativesthatinvolverenewableswouldhaveadverseenvironmentalimpactsincludingincrementalimpactsresultingfromthenewtransmissioninfrastructurethatwouldberequiredtodeliverenergyproducedbyrenewablestosoutheasternNewYorkwhereitisneeded.C.ConclusionsRegardingtheFundamentalFlaws inNYS-37andRelatedExpertTestimonyNYS-37anditsexpertscometocompletelydifferentconclusionsregardingthelikelysourcesofreplacementenergyforIPECgeneration.However,noanalyseswereprovidedtosupporttheirassertions.Weevaluatedthelimitedinformationtheyprovided.OurreviewleadsustoconcludethatthematerialsinNYS-37andtherelatedexpertreportshavefourfundamentalflaws.1.Failuretorecognizemarketforcesandcost-minimization.NYS-37andtheexpertreportsfailtoaccountforthekeyrolethatmarketforceswouldplay(andhencetheimportanceofrelativecostsandcost-minimization)indeterminingtheresourcesthatwouldbedispatchedundertheno-actionalternative.ItiscriticaltorecognizethatNewYorkStatehasacompetitiveelectricitymarket.Asaresult,decisionsregardingnewinvestmentsarelargelymadebymerchantentitiesthatwouldtendtobuildlow-costfacilities,and facilitiesaredispatchedtoprovideenergyatminimumcostwhilemeetingreliabilityandoperatingrequirements.Marketforcesandcost-minimizationmeanthatlower-costfossilgenerationratherthanhigher-costrenewablegenerationorenergyefficiencywouldconstitutethebulkofgenerationtoreplaceIPECsbaseloadgeneration.
2.Conflationofdevelopmentsthataffectthebaseline,nottheno-actionalternative.NYS-37anditssupportingwitnessesmentionahostofdevelopmentsthattheyclaimwerenotconsideredbytheNRCstaffindevelopingtheFSEISandthattheyclaimwouldleadtodifferentconclusionsregardingtheenergymixandenvironmentalimpactsoftheno-actionalternative. ThesedevelopmentsincludeNewYorkStatesrenewableandenergyefficiencygoals,lowerelectricitydemandduetotherecession,recentincreasesinelectricitygenerationcapacityandtransmission systemexpansions,andlowernaturalgasprices. TheflawpervasiveintheNYS-37reasoningisthatthesedevelopmentsrepresentpartofthebaselineconditionsthatwouldoccurirrespectiveofIPECsstatus.Putanother NERAEconomicConsulting E-5way,thevariousfactorsidentifiedbyNYS-37anditsexpertssuchastheadditionalrenewablegenerationorenergyefficiencyresultingfromNewYorkStategoalswouldnotbeavailabletoreplacethebaseloadIPECgenerationiftheIPECgenerationwerenotavailablebecausetheywouldalreadyexist.
3.Failuretoevaluatetheimpactsofbaselinechanges.Totheextentthatthedevelopmentstheyciteaffectthebaseline,thosedevelopmentswouldifanythingreducetherolesofconservationandrenewablesasIPECreplacementsundertheno-actionalternative. The developmentsemphasizedbyNYS-37,includinglowerelectricitydemandandlowernaturalgasprices,wouldtendtoincreasethesubsidiesthatwouldbenecessarytofundthehighermarginalcostsofthosealternativeswhileatthesametimedecreasingthemarginalcostsoffossilresourcestherebymakingrenewablesandenergyefficiencylesseconomicrelativetofossil-fueledpoweroptions.
4.Failuretoprovideempiricalmodeling.NYS-37andtheexpertsfailtoprovideanystudiesorotheranalysesquantifyinghowtheelectric systemwouldrespondundertheno-actionalternative.Incontrast,ouranalysisusingNEMSshowsthatconservation(intheformofresponsetohigherprices)andrenewableswouldplayminorroles,andthattheprimaryimpactwouldbeincreasedgenerationfromfossil-firedsources. ThisdeficiencyonthepartofNYS-37anditsexpertsisimportant since,withoutsomeempiricalmodeling,theycannotprovideareasonablebasisforevaluatingwhichalternativesactuallywouldbedevelopedanddispatchedifIPECgenerationwerenotavailable.D. OverallConclusionsAsnotedabove,ouranalysesleadustoconcludethat,contrarytotheclaimsinNYS-37anditsaccompanyingdocuments,additionalconservationandrenewableswouldbeunlikelyto play significantrolesundertheno-actionalternative.Incontrast,ouranalysesandempiricalmodelingindicatethatthereplacementmixwouldbedominatedbyfossil-fuelgeneration,includingnaturalgasandcoalgeneration,withmodestcontributionsfromenergyconservationandadditionalrenewables.Thus,ouranalysesdemonstratethattherangeofscenariosconsideredintheFSEISwassufficient.OuranalysesfurtherdemonstratethattheconclusionreachedintheFSEISthattheimpactsoflicenserenewaldidnotexceedtheimpactsofalloralmostallofthealternatives,includingtheno-actionalternativewasreasonable.Ifanything,theFSEISunderstatesthelikelyadverseenvironmentalimpactsoftheno-actionalternativefortwoprimaryreasons:1.Ourassessments showthatthecombination scenariosthattheFSEISevaluatesoverstatetherolesthatrenewablesandconservationwouldbelikelytoplayandunderstatethelikelyroleoffossilsources,with significantimplicationsforthepotentialadverseenvironmentalimpactsoftheno-actionalternative.
NERAEconomicConsulting E-62.TheFSEISassumesthatincreasedfossilgenerationwouldbeprovidedprimarilybynew,highlyefficientandtightlycontrollednaturalgascombinedcycleunits.Infact,asignificantamountofthereplacementfossilpowerwouldbelikelytocomefromunusedcapacityofoldernaturalgas-firedunitsorcoal-firedunits,bothofwhichtendtohavehigheremissionratesthannewnaturalgasunits,andthus,moreadverseenvironmentalimpacts.
NERAEconomicConsulting 1I. IntroductionandBackgroundIPECisanuclearpowerstationinBuchanan,NewYorkconsistingoftwooperatingunits(IP2andIP3) 1withtotalnetsummercapacityofapproximately2,040megawatts(MW)andtotalnetgenerationin2010ofapproximately16.3millionmegawatt-hours(MWh)(NYISO2011c,p.34).IPECscapacityutilizationratein2010wasthusover90percent.
2IPECsgenerationin2010wasapproximately10percentofNewYorkStatestotalelectricityconsumptionandapproximately17percentoftotalconsumptioninsoutheasternNewYorkState(assumedtocompriseNYISOZonesG-K)(NYISO2011c,p.21).TheNRCiscurrentlyconsideringrenewalofIPECsoperatinglicenses. ThetermofIP2scurrentlicenseextendstoSeptember28,2013,andthetermofIP3scurrentlicense extendstoDecember12,2015.Aspartoftherenewalprocess,inDecember2010,NRCstaff issuedanFSEISconcerning site-specificenvironmentalissuesatIPEC(NRC2010).InDecember2011,theStateofNewYorkfiledNYS-37andpre-filedtestimonychallengingtheadequacyoftheFSEIS.NYS-37claims,amongotherthings,thattheFSEISreliesonout-of-dateinformationandasaresultgivesinadequateconsiderationtoconservation 3andrenewableenergyaspossiblesourcesofreplacementforelectricityoutputfromIPECundertheno-action alternative.A.NRCsFinalSupplementalEnvironmentalImpactStatementThissectionprovidesinformationontheenergyalternativestolicenserenewaladdressedintheFSEIS.Itbeginswithinformationontheno-actionalternative,whichdoesnotspecifypotentialreplacementsforIPECsbaseloadenergy. Thissectionthenprovidesinformationon alternativesifIPECsbaseloadenergyisnotavailable.1.No-ActionAlternativeTheNRCevaluatesano-actionalternativeinSection8.2oftheFSEIS.TheFSEISstatesinthecontextoftheno-actionalternativethatifIPECslicenseswerenotrenewed,ThepowernotgeneratedbyIP2andIP3duringthelicenserenewaltermwouldlikelybereplacedby(1)powersuppliedbyotherproducers(eitherexistingornewunits)usinggeneratingtechnologiesthatmaydifferfromthatemployedat 1Unit1hasnotoperatedsince1974.
216,300,000MWh/(2,040MW*8760hoursperyear)=91percent 3Someobserversdistinguishbetweenenergyefficiencyandconservation.Efficiencymaybeusedtomeantechnologiesthatprovideessentiallythesameservicesbutwithlowerenergyuse,suchasreducingtheelectricityconsumedbyarefrigeratorwithoutaffectingitscoolingabilityorotherfeatures.Conservationmaybeusedto meanbehavioralchangesthataffecttheserviceprovidedtoreduceenergyconsumption,suchasturningupthethermostatinthesummertoalesscomfortabletemperaturetoreduceelectricityconsumption.Thisdistinctionisirrelevanttodiscussionsoftotalelectricitydemand.Thus,weusethesetermsinterchangeablyhereinandoftenrefersimplytoconservation.
NERAEconomicConsulting 2IP2andIP3,(2)demand-sidemanagementandenergyconservation,or(3)somecombinationoftheseoptions(FSEISp.8-22).Section8.2oftheFSEISevaluatestheenvironmentalimpactsoftheno-actionalternativewithoutanyspecificassumptionsaboutenergyreplacements.2.AlternativeEnergySources TheNRCevaluatesalternativeenergysourcesinSection8.3oftheFSEIS. ThefivesubsectionsofthispartoftheFSEISrelateto(1)naturalgas-firedcombinedcyclegeneration;(2)purchasedpower;(3)conservation;(4)alternativesdismissedfromindividualconsideration; and(5)combinationsofalternatives. Thesefivecategoriesofalternativeenergysourcesarediscussedinturnbelow.a.New Gas-FiredCombined-CycleUnitsTheFSEISincludesanalternativethatwouldinvolvetheconstructionoffivenewnaturalgas-firedcombinedcycle(NGCC)unitswithacombinedcapacityof2000 MW. Thisalternativewasalsoconsideredin Entergys EnvironmentalReportandintheDraftSEIS.TheFSEISassumesthattheseunitswouldhavelowCO 2emissionratesrelativetootherfossilunits(becauseoftheirrelativelyhighfuelefficiency)andwouldbetightlycontrolledforemissionsof conventionalpollutants.Someofthepotentialenvironmentalimpactsincludingimpactsrelatedtolanduse,ecological,andwaterdependonthe sitingoftheNGCCunits.b.PurchasedPowerIntheFSEIS,thepurchasedpoweralternativerelatestobringingpowerintosoutheasternNewYorkwhereIPECprovidesenergyforconsumers. TheFSEISnotesthatNewYorks transmission systemhaslimitedcapacitytobringinlargeamountsofpowerfromoutsidethedownstatearea,thoughtheFSEISpointstosomeproposedprojectsthatcould,ifbuilt,increasetransmissioncapacity. TheFSEISstatesinverygeneraltermsthekindsofenvironmentalimpactsthatcouldbeassociatedwithnewtransmissionprojects,butdoesnotevaluatethemformally,notingthateachsuchprojectwillrequireitsownenvironmentalreviewprocessbyotherStateandFederalagencies.Asaresult,theFSEISdoesnotpresentasummaryanalysisoftheenvironmentalimpactsofthepurchasedpoweralternative.c.ConservationTheFSEISmentionsseveralelectricityconservationprograms,includingNewYorksEnergyEfficiencyPortfolioStandard,whichisintendedtoassistinachievingtheStatesgoalof reducingenergyusefromforecastedlevelsby15percentby2015(15x15).AlthoughitdoesnotidentifyoraddressthefeasibilityofspecificincrementalconservationmeasuresthatcouldbeusedtomakeupforlostbaseloadIPECoutput,theFSEISconcludesthattheenvironmentalimpactswouldgenerallybesmall.
NERAEconomicConsulting 3d.AlternativesDismissedfromIndividualConsiderationTheFSEISnotesthealternativesthatNRCconsideredbutdeemedindividuallyinadequatetoreplaceIPECsbaseloadenergy. ThealternativesthatNRCdismissed,forvariousreasons,fromfurtherconsiderationarerenewables(includingwind,solar,geothermal,andothertypesofrenewables),combinedheatandpower,oil-firedgeneration,supercriticalcoal-firedgeneration,anddelayedretirementofotherpowerplants.e.CombinationAlternativesAstheFSEIS(p.8-59)notes,[t]herearemanypossiblecombinationsofalternativesthatcouldbeconsideredtoreplacethepowergeneratedbyIP2andIP3. TheFSEISevaluatestwo possiblecombinationsandpresentssummarytableswithqualitativeassessmentsofvariouscategoriesofimpacts.i.CombinationAlternative1CombinationAlternative1involves:continuedoperationofeitherIP2orIP3;obtaining600MW(e)fromrenewableenergysources(primarilywindwith smalleramountsofhydropower,biomass,andpossiblylandfillgas);andimplementing600MW(e)ofconservationprogramsbasedontheStates15x15 energyconservationprogramandothereffortstoimproveenergyefficiencyorincreaseconservation(FSEISp.8-60).TheFSEISnotesthattherenewableenergywouldprobablybewindorbiomassenergy,butNRCdidnotperformanin-depthimpactanalysisofthesepotentialreplacements(FSEISp.8-61).Itconcludesthattheenvironmentalimpactsoftheconservationprogramsarelikelytobenegligible(FSEISp.8-62).ii.CombinationAlternative2CombinationAlternative2involves:repoweringanexistingfossil-poweredplantindownstateNewYorkwithanew400MW(e)to600MW(e)combined-cyclepowerplant;obtaining600MW(e)fromrenewableenergysources(primarilywind,biomass,newhydropower,andlandfillgas);andimplementing1000to1200MW(e)ofconservationprograms(FSEISp.8-60).
NERAEconomicConsulting 4TheFSEISnotesthattheenvironmentalimpactsofCombinationAlternative2wouldincludethesametypesofimpactsasthealternativeinwhichIPECsenergyisreplacedentirelybyenergyfromnewNGCCunits,buttheimpactsassociatedwithnewNGCCunitswouldbeona smallerscaleinCombinationAlternative2(FSEISp.8-67).Italsonotesthattherenewableenergyimpactswouldbe similartothoseinCombinationAlternative1(FSEISp.8-67).ItconcludesthattheenvironmentalimpactsoftheconservationprogramswouldbelargerthaninCombinationAlternative1butarelikelytobenegligible(FSEISp.8-67).3.SummaryofStaffRecommendationsRegardingtheEnvironmentalImpactsofIndianPointLicenseRenewalTheFSEISincludesthefollowingrecommendationfromtheNRCstaff:thattheCommissiondeterminethattheadverseenvironmentalimpactsoflicenserenewalforIP2andIP3arenotsogreatthatpreservingtheoptionoflicenserenewalforenergyplanningdecisionmakerswouldbeunreasonable(FSEIS,p.9-8).B.NewYorkStatesContention37TheStateofNewYorkhassubmittedcommentsthroughoutthelicenserenewalprocesscriticaloftheenvironmentalimpactassessmentspreparedbytheNRC. TheDecember2011pre-filedtestimonyaddressesthethreeadmittedconsolidatedcontentions(9,33,and37).Wereferto NewYorkStatespositionsinthesecontentionscollectivelyasNYS-37.1.OverviewofNYS-37CoreClaimsThecoreclaiminNYS-37isthattheFSEISreliesonobsoleteandinaccuratedataandassumptions(p.1)aboutelectricitydemandand supplyinNewYork. TheStatecontendsthat,asaresult,theFSEISgivesinadequateattentiontotheno-actionalternativeand,specifically,theavailabilityofothersourcesofenergynotablyrenewableenergyandenergyefficiencyasreplacementsforIPEC.NYS-37argues,withoutanysupportinganalyses,thatwhentherecentchangesinNewYorkStatesenergymarketaretakenintoaccount,theno-actionalternativewouldresultinsubstantiallylowerenvironmentalimpactsthanthoseassumedintheFSEIS(pp.1-2).ThefollowingexcerptfromNYS-37summarizestheStatescoreclaims.ThecoreclaiminNYS-37isthatintheFSEIS,NRCstaffhavefailedtopresentananalysisthattakesahardlookattheavailabilityandenvironmentalimpactofcleanenergysourcesandenergyefficiencyandconservationmeasuresthatwouldreplaceIndianPointspowerifrenewallicenseswerenotgranted.ThedocumentunreasonablyreliesonobsoleteandinaccurateinformationandignoresNewYorkscriticalcommentsonDSEISthatdemonstratethattheenvironmentalimpactofrejectingrelicensingofIndianPointwillbe(1)muchlessthanthat NERAEconomicConsulting 5assumedintheFSEISand(2)willbelessthantheenvironmentalimpactofrelicensingIndianPoint(NYS-37,p.3).NYS-37alsocriticizestheFSEISfornotprovidingadetailedanalysisofthepotentialimpactsoftheno-actionalternative.Intheabsenceofacomplete, site-specificenvironmentalimpactanalysisofthe no-actionalternative,theFSEISfailstoprovidethepublicorthedecision-makerswithafullandfairassessmentofthecostsandbenefitsofrelicensing(NYS-37,p.70).2.SpecificEnergyMarketDevelopmentsEmphasized inNYS-37NYS-37putsgreatemphasisonitsclaimthattheFSEISignoresvariousrecentdevelopmentsrelatedtoelectricitysupplyanddemandinNewYork.ThefollowinglistsummarizestherecentdevelopmentsemphasizedinNYS-37.1.NewYorksgoalofobtaining30percentofelectricitydemandfromrenewablesby2015(30by15)andtheadditionalrenewablegenerationithasencouraged;2.NewYorksgoalofreducingelectricitydemandby15percentin2015relativetothedemandforecastproducedin2007whenthegoalwasset(15by15)andtheenergyconservationithasspawned;3.SignificantdecreasesinelectricitydemandinNewYorkanddecreasesinforecastsoffutureelectricitydemandduetotherecessionandthe sloweconomicrecovery;4.NewYorksrecentandproposedgenerationcapacityadditions;5.Increasedsupplyandlowerforecastpricesfornaturalgas;and6.NewtransmissionlinesthatincreasethetransfercapabilitythatisavailabletodeliverpowertothedownstateregionservedbyIndianPoint.
Inadditiontothesepolicyandenergymarketdevelopments,NYS-37andtheexpertreportsalsoprovideestimatesofthelevelofpotentialfutureresourcesthatcouldreplacegenerationatIndianPointincludingrenewables,energyconservation,andpurchasedpowerthroughtransmissionadditionsandupgradesalthoughthesourcesoftheseestimatesdonotpredictthatthesepotentialresourcesactuallywouldbeputinplaceifIndianPointgeneration werenotavailable.Indeed,asdiscussedbelow,despitecallingforasite-specificenvironmentalimpactanalysisoftheno-actionalternative(p.70),NYS-37providesnoempiricalestimatesofthechangeinthegenerationmixortheadverseenvironmentalimpactsthatwouldresultifIPECsbaseloadenergywerenotavailable.
NERAEconomicConsulting 6C.ObjectivesofThisReportTheprincipalobjectiveofthisreportistoprovideinformationonthepotentialenergyandenvironmentalimpactsoftheno-actionalternative.Asnoted,itisnecessaryfirsttoconsidertheimpactsontheelectricitysystembecauseenvironmentalimpactswillbedrivenprimarilybythemixofgenerationthatwouldreplacethelostbaseloadIPECgenerationiflicenseswerenotrenewed.Informationonthelikelyelectricitymarketimpactsoftheno-actionalternativeallowsustocompareourfindingstothoseintheFSEISandtoevaluatetheargumentsprovidedbytheStateofNewYorkanditsexperts. ToassessthevalidityofthecentralargumentofNYS-37,itisnecessarytoconducteconomicanalysesofalternativesourcesofpowerasthatistheonlywaytodetermineifasNYS-37andtheexpertscontendtheconservation/renewablealternativeissodominantthatotheralternatives,includingthoserelyingonfossilgeneration,shouldbeconsideredrelativelyunimportant.D.OrganizationofThisReportTheremainderofthereportisorganizedintofourchapters. Thenextchapter(ChapterII)providesanoverviewofNewYorkStateselectricitysystemandtherelativecostsofalternative futuregeneration,allowingustodevelopassessmentsofthelikelymixofreplacementgenerationifIPECbaseloadgenerationwerelost.Thechapterincludesadiscussionofthepotentialenvironmentalimpactsofdifferentreplacementpoweralternatives.ChapterIIIprovidestheresultsofourNEMSmodelingofthepotentialreplacementpowermixandresultingenvironmentalimpactsifIPECbaseloadgenerationwerenotavailable.ChapterIVusestheresultsofouranalysesandotherinformationtoevaluatethecontentionofNewYorkStateanditsexpertsthattheFSEISshouldbebaseduponareplacementmixdominatedbyrenewableandenergyconservation. ThatchapteridentifiesfourmajorflawsinherentintheclaimsofNewYork Stateanditsexpertsthatexplaintheerrorsintheirconclusions.Finally,ChapterVsummarizesourconclusions.
NERAEconomicConsulting 7II.NewYork StatesElectricitySystemandImplicationsforthe Energyand Environmental ImpactsoftheNo-ActionAlternativeThischapterbeginswithanoverviewofNewYorkStateselectricitysystemandthecentralimportanceofcostminimizationindeterminingwhichtypesofgenerationtechnologiesarebuiltanddispatchedtomeetelectricitydemand.Wethenconsidertheeffectsofgovernmentsupport,focusingonNewYorkStatesupportforexistingrenewablesandenergyefficiencyprograms.WethenconsiderthecostsofpotentialfuturereplacementgenerationifIPECgenerationwerenotavailableundertheno-actionalternative,notingthecrucialdistinctionbetweenbaselineconditionsandchangesingenerationthatcouldoccurundertheno-actionalternative.Weconsidertheimplicationsofthiscostinformationonthelikelymixof replacementgeneration. Thenextsectionofthischapterdescribesingeneraltermstheadverseenvironmentalimpactsofalternativesourcesofreplacementgeneration. Thefinalsectionprovidesourconclusionsregardingthelikelyadverseenvironmentalimpactsoftheno-actionalternativebasedupontheseanalyses.A. OverviewofNewYorkStatesElectricitySystemThissectiondiscussestheNewYorkStateelectricity systemandtheimportanceofcostminimizationinthedevelopmentanddispatchofgenerationresourcesinNewYorkStates electricitysystem.Weincludetheeffectsofcurrentpoliciestoencouragerenewablesandenergyconservation.Notethatthisgeneraloverviewdoesnotincludespecificelementsoftheelectricitymarketdesignorconditions(suchastransmissionconstraintsandvoltagerequirements)thatmustalsoberecognizedwhen systemresourcesaredispatched.1.ElectricityMarketSystemandMajorActorsUntillateinthetwentiethcentury,electricitythroughouttheUnitedStateswasgeneratedanddistributedprimarilybyverticallyintegratedutilitiesthathadanexclusivefranchisewithinagivenareaandweresubjecttorate-of-return(cost-of-service)priceregulation.Manystatesstill relyonthattraditionalregulatorystructure.Startinginthe1990s,NewYorkandseveralother statesmovedtoavertically-disintegrated systeminwhichregulatedinvestor-ownedutilities(IOUs),suchasConsolidated Edison 4,buymostofthepowertheyneedtoservetheircustomersfromwholesalegeneratingcompanies,suchas Entergy,whichrelyuponmarketpricestoobtaintheirrevenues. ThesepurchasescanoccurthroughspotmarketsadministeredbyIndependentSystemOperatorssuchastheNewYorkIndependentSystemOperator(NYISO)thatmanagemarketsinwhichgeneratorsbidtoprovidepowertothe system.
4ThesixIOUsinNewYorkStateareCentralHudsonGas&Electric,ConsolidatedEdison,NewYorkStateElectric&Gas,NationalGrid,Orange&RocklandUtilities,andRochesterGas&Electric.TwootherimportantactorsinNewYorkStateselectricitysystemarenon-profitstateentities:LongIslandPowerAuthority(LIPA)andNewYorkPowerAuthority(NYPA).
NERAEconomicConsulting 82.ElectricityMarketCompetitionandCostMinimizationInNewYorkStatescompetitivewholesaleelectricitymarket,generatorssubmitbidsthatindicatehowmuchpowertheywouldbewillingtosupplyatvariousprices.NYISOfindsthepriceatwhichsufficientpowerwillbesuppliedtomeetdemandateachtimeofday,andallbidderswithbidsatorbelowthismarket-clearingpricereceivethisprice.NYISOalsomustaccountforconstraintsintheelectricitysystemtoensurethe systemsreliability,butinessencethemarketdetermineswhichunitsgenerateelectricitytomeetdemandbasedontheobjectiveof minimizingcosts.Inadditiontothemarketforenergy,NYISOalsoadministersamarketforfirmcapacity(toensureadequatesupplyattimesofpeakdemand)andmarketsforseveralancillaryservices(NYISO2011b).NYISOalsopreparesstudiesontheneedfornewinfrastructureinNewYorkState.However,NYISOlackstheauthoritytobuildnewinfrastructureortorequireanyother organizationtodoso.Instead,wholesalegeneratingcompaniesgenerallymakedecisions regardingretirementofexistingcapacity,theamountofnewcapacitytobuild,whattypeofgenerationcapacitytobuild,andwheretobuildit.Companiesmakethesedecisionswiththeobjectiveofminimizingcostsandmaximizingrevenues.Companiesdecidewhattypeofgenerationcapacitytobuildbasedonlevelizedcosts,whichexpressthesumofcapitalcosts,otherfixedcosts,andvariablecostsoverthelifetimeofthepowerplantperunitofenergyoutput(e.g.,dollarsperMWh).Thus,inNewYorkStatescompetitivewholesaleelectricitymarket,costminimizationiscentraltotwodifferentdecisionsbypowercompanies:(1)thetypeofgenerationcapacitythatwillbebuiltbasedontotallevelizedcosts;and(2)forthecapacitythathasbeenbuilt,thebidthatwillbesubmittedintoNYISOswholesaleenergy,capacity,andancillaryservicesmarketsbasedonshort-runmarginalcosts.Companiesgenerallywillbuildnewgenerationcapacityonlyiftheirexpectedpricesforenergy,capacity,andancillaryservicesaresufficientlyabove short-runmarginalcoststocovercapitalandotherfixedcosts(includinganormalreturntoinvestors).Companiesgenerallywillbidtooperatetheircapacityinagiventimeperiod(subjecttoproductionconstraints)ifthepricewillatleastcovershort-runmarginalcosts,whichare primarilyfuelcostsinthecaseoffossilgeneratingunits.Fornuclearandsometypesofrenewables(suchaswindorrun-of-riverhydro),marginalcostsare smallrelativetopotentialmarket-clearingprices,sotheyoperatevirtuallywhenevertheyareavailable(i.e.,whenevertheyarenotshutdownbecauseofscheduledorunscheduledmaintenanceorbecauseofinsufficientwindorwaterinthecaseofrenewableresources).
5Asaresult,generationgenerallycannotbeincreasedatexistingrenewableunitstoprovidereplacementpowerifIPECgenerationwerenot availableasthefacilitiesarefullyutilized.Incontrast,generationcanoftenbeincreasedatexistingfossil-fueledunitsinordertoprovidereplacementpowerundertheno-actionalternative.
5Nuclearplantshavefuelcosts,buttheyarenotvariableintheveryshortrun.Nuclearfacilitiesalsoarebidinasbaseloadfacilitiesbecausetheycannotcycleupanddownrapidly.
NERAEconomicConsulting 9B.GovernmentSupportforExistingRenewablesandEnergyEfficiencyProgramsStateandfederalpoliciesaffecttherelativecostsofdifferentgenerationsourcesinvariousways.Federaltaxpoliciessubsidizecertaintypesofgeneration,particularlyrenewables,thusmakingcompaniesmoreabletoundertakerenewableprojectsthatotherwisewouldnotbecost-effectiveandprofitable.Forexample,awindprojectthatotherwisewouldnotbeeconomicunderNYISOsmarket-clearingpricesforenergyandcapacitymaybecomeeconomicbyvirtueoftheFederaltaxbenefitsandStateRPSsubsidiesinadditiontothemarket-clearingpricethatitsownerswillreceive.Variationsovertimeinadditionalfundingmechanismssuchasthosetaxbenefitsaswellaslowermarket-clearingelectricityprices(causingalargergapbetweenelectricitypricesandwindprojectcoststhatsubsidiesmustfill)haveledtolargeswingsinthe amountofwindpowerconstructedintheUnitedStates,asshownbelowinFigure1.InFiscalYear2010,thefederalgovernmentprovided$6.6billiontosupportrenewableenergy,ofwhichwindgeneratorsreceived$5.0billion(EIA2011c,p.xviii).Federalsupport mechanismsincludetheproductiontaxcredit,whichcurrentlyprovides$22/MWhincorporatetaxcredittowindgeneratorsandcertainotherrenewableenergyproducersforthefirsttenyearsofoperation(DOE2012). Thefuturelevelsoffederalsubsidiesandothersupportmechanismsarehighlyuncertain,however,andtheymayfallaspartoffuturepotentialfederaldeficit-reductionefforts.Inaddition,asdiscussedindetailbelow,NYSERDAprovidesRPSsubsidiestorenewablegenerationinNewYorkState.Aswithfederalsubsidies,NYSERDAssubsidiesareusedtoaugmentthemarket-clearingelectricitypricethattherenewableproducersreceivefrompurchasersoftheirelectricity. Thus,thesubsidieselicitadditionalsupplyofrenewableenergy.Figure1.U.S.WindCapacityAdditionsandAvailabilityofFederalRenewableEnergySubsidiesNote:Graybandsindicateexpirationoffederalrenewableenergysubsidies.Source:Metcalf(2010)
NERAEconomicConsulting 10ThetotalamountofsubsidyofferedinanyyearislimitedbyabudgetsetbytheNYPSC. ThebudgetsarecoveredbyfeesleviedbyIOUsonNewYorkStateselectricityconsumersthroughsurchargesontheirmonthlyutilitybills.Asaresultofsuchpolicies,consumersalreadypayapremiumforrenewableenergy.IncrementalrenewablegenerationaboveandbeyondtheRPSprogramundertheno-actionalternativewouldrequireincreasedbudgetsandfees.StateandFederalpoliciesalsocaninfluencetheamountofelectricitydemandedbyrequiringorencouragingenergyefficiencyandotherconservationmeasures.Mandatorymechanismsincludeapplianceefficiencystandardsandbuildingcodes.Voluntarymechanismsincludeeducationandvarioussubsidies. Theseeffortsmayinvolvedistributionutilitiesthatofferconservationprogramsofvarioustypes,generallyinresponsetoincentivesorrequirementscreatedbytheirregulators.InNewYork,IOUsandNYSERDAcollectivelyrecoverthecostsofsuchprogramsthroughsurchargestoNewYorkconsumersontheirmonthlyutilitybills.1.NewYorkStates30x15RenewableElectricity GoalThissectionconsidersthespecificeffectsofNewYorkStatesrenewablegoalsonelectricitygeneration.Asnotedabove,statepoliciescansupplementprivatemarketforcesandsubstantiallyinfluencethegenerationmix.a.OverviewofNewYorkState GoalandProgramsNewYorkhasadoptedagoalofmeeting30percentofelectricitydemandin2015(30x15)withrenewablesources,suchaswind,biomass,andhydro.Roughlytwo-thirdsofthatgoal wasmetbeforeitwasset,becauseNewYorkhistoricallyhasgeneratedsubstantialamountsofpowerfromhydroelectricplantsatNiagaraFalls,St.Lawrence,andotherlocations. Thosepreexistingplantshaveprovidedlow-costpowerformanydecades,andarenoteligibleforthesubsidiesdiscussedbelow. TheStateexpectstoobtainmostoftheincrementalresourcesneededprimarilythroughtheRPSprogramadministeredbyNYSERDAandfundedbyNewYorksconsumersthroughsurchargesontheirmonthlyutilitybills.
6NewYorksRPSdiffersfromRPSprogramsinmanyotherStates.UnlikemostotherRPSs,NewYorkacquiresitsrenewableresourcescentrally,throughNYSERDA,underasystemestablishedin2004.In2010,NYPSCincreaseditsoriginalgoalof25percentrenewablesby2013to30percentby2015,settheMWhleveltobeachievedby2015andalsoestablishedannualbudgetsforNYSERDAthrough2024topayforsubsidiesitestimateswillberequiredtoobtaintheadditionalrenewableoutputneededtomeetthegoal(NYPSC2010).NewYorkutilitiesarerequiredbytheNYPSCtoassessavolumetricsurchargeonelectricity salesandtransmittherevenuestoNYSERDAtopaythesubsidiesrequiredtosupportrenewableenergy projects.Ineachyear,thechargeperunitofelectricitysoldissetsothatrevenuescollectedequalthebudgetforthatyear.However,thereisnoguaranteethatthegoalswillbeachieved 6LIPAhasitsownseparategoal,andtheNYPSCexpectsadditionalresourcestobeobtainedthroughavoluntaryprogram(underwhichsomecustomersvolunteertopayhigherratesforpowerprovidedbyrenewables)andthroughotherstateagencies(NYPSC2010,Appendix,p.12).
NERAEconomicConsulting 11withinthosebudgets.UnlikemostStateRPSprograms,therearenopenaltiesforutilitiesiftheydonotpurchasesufficientenergyfromrenewableresources(NYPSC2004,p.5).NYSERDAsolicitsbidsforproductionsubsidiesfromrenewableprojectdevelopersandentersintocontractswithsuccessfulbidders.Inthemaintiersubsidyprogram,whichaccounts forabout97percentofthe30percentoverallgoal, 7NYSERDAholdsannualauctionstoselectrenewablesourcesthatgenerallyrequirethelowestsubsidyperproject(NYSERDA2011).
Thesesubsidiessupplementthemarketprices(andfederalsubsidies)thattherenewablesources willobtain,thusmakingconstructionofthesourcesviable.b.ProgramBudgetstoAchievetheRenewable GoalTheNYPSChas setsubstantialbudgetsforNYSERDAtosubsidizerenewablesthrough2024undertheRPSprogram,as showninFigure2.Forexample,theRPSbudgetfor2011was$170millionandthebudgetfor2015is$321millioninnominaldollars. Thecumulativebudgetfrom2006to2024is$3.0billion. ThebudgetsrepresentthepaymentsthatNYSERDAisauthorizedtomaketorenewablegeneratorsamountsthatmustultimatelyberecoveredfromNewYorksconsumers.NotethatthesebudgetscoveronlytheRPSprogramtotheexclusionoftheadditionalcostsofanyLIPAandNYPAprograms.
7InadditiontoNYSERDAcontractswithlargemaintierrenewablesources,NYSERDArunsamuchsmallerprogramtoencouragesmall-scale,customer-sitedprojects,suchassmallwindturbinesorsolarpanels.Thegoalfortheseprojectsistomakeup1percentofelectricityconsumptionby2015,orabout3percentofthe30percentoverallgoal.AdditionalinformationontheseRPSprogramsisprovidedinAppendixA.
NERAEconomicConsulting 12NYSERDAestimatesthattheaverageproductionsubsidyresultingfromtheJune2011offeringwasover$20perMWh,ormorethanone-thirdthewholesalecostofgeneration(NYSERDA2011b,p.14).Thesubsidiesrequiredtoelicitrenewablesupplieshaveproved higherthanexpectedwhenbudgetswereset.Bytheendof2010,NYSERDAhadspent57percentofitsbudgetfortheperiodthrough2015buthadsecuredonly39percentoftherenewableenergygoal(NYSERDA2011a,p.21).2.NewYorkStates15x15ConservationGoalThissectiondescribestheothermajorstatepolicythatinfluencestheelectricitymarketinNewYork,NewYorkStateseffortstoreduceelectricityuse(conservation).a.OverviewofNewYorkStateConservationGoalIn2007,NewYorksthen-Governor EliotSpitzer seta15x15goal,whichcalledfortheStatetoreduceitsenergyconsumptionby15percentby2015comparedtoforecastbusinessasusualelectricityconsumptionin2015.Fromtheoutset,therehasbeenbroadagreementthatthegoalsofthe15x15goalaresubstantiallymoreambitiousthanpriorprogramsandthat meetingthemwouldrequireadditionalefforts.Inannouncingtheplan,GovernorSpitzercharacterizeditasthethemostaggressivetargetinthenation(Spitzer2007). TheNYPSC,inadoptingthegoalandapprovingseveralprogramsintendedtohelpachieveitintheelectricitysector,statedthatthegoalisextremelyaggressive(NYPSC2007).Figure2.RenewablePortfolioStandardBudgets$29$30$57$106$103$170$203$244$282$321$228$227$202$194$194$160$125$81$42$0$50$100$150$200$250$300$3502006200820102012201420162018202020222024RPSBudget(millionnominaldollars)Source:NYPSC(2010),Appendix,Table13 NERAEconomicConsulting 13In2007,NYSERDAperformedananalysistodevelopappropriatecontributionlevelsfromLIPA,NYPA,the sixinvestor-owneddistributionutilitiesinthestatebasedontheirenergyefficiencyprogramsin2007,NYSERDA,andotherstateagencies. Theanalysisalsoincludedcontributionsthroughcodesandstandardsandmeasuresfortransmissionanddistribution.Figure3summarizestheNYSERDAprojectionsasappliedtoelectricityconsumption. ThejurisdictionalgaprepresentedadditionalreductionsfromnewprogramsthatNYSERDAestimatedwouldbeneededtomeettheoverallgoal.Tofillthisgap,NYPSCannouncedthe EnergyEfficiencyPortfolioStandard(EEPS)programin2008.Underthatprogram,theinvestor-owneddistributionutilitieswouldaddprogramstoreduceconsumptionbytheircustomersandwouldalsofundnewprogramsatNYSERDA. The EEPSprogramisfundedbyvolumetricsurchargesthatutilitiesassesstoNewYorksconsumersontheirmonthlyutilitybills. TheNYPSCestimatedhowmuchitwouldcosttoimplementprogramsnecessarytofillthegapandsetsurchargelevelstofundsuchprogramsthrough2011(NYPSC2008).InasubsequentorderissuedinOctober2011,NYPSCannouncedgoalsfortheinvestor-owneddistributionutilitiesthroughDecember31,2015andsetnewsurchargelevelsthatitestimatedwouldprovidesufficientfundingfortheIOUsandNYSERDAtoachievethosegoals(NYPSC2011b).b.ProgramBudgetstoAchieveNewYorkConservation GoalTheNYPSChas setsubstantialbudgetstosupportconservationprogramsforelectricityconsumptionthrough2015undertheEEPSprogram,asshowninFigure4.Forexample,theEEPSbudgetfor2011was$159millionandthebudgetfor2015is$183millioninnominal dollars. ThebudgetsrepresentthepaymentsthatNYSERDAandtheIOUsareauthorizedtomaketoencourageelectricityconservationandtheamountsthatultimatelymustberecoveredFigure3.NYSERDAAnalysisofPotentialContributionstoMeeting15x15ConservationGoal 05,000,00010,000,00015,000,00020,000,00025,000,000200720082009201020112012201320142015Energy-EfficiencySavings(MWh)JurisdictionalGapTransmission&DistCodes&StandardsUtilities(2007Programs)SBCIII(NYSERDA)StateAgenciesNYPALIPANote:Source:NYPSC(2008,Appendix1,p.5)
NERAEconomicConsulting 14fromelectricityratepayersinNewYork.NotethatthesebudgetscoveronlyelectricityconservationprogramsbyNYSERDAandIOUSunderthe EEPSprogramtheydonotincludethe significantextrapaymentsforelectricityconservationbyLIPA,NYPA,stategovernmentagencies,orotherentitieswithconservationgoalsunderNewYorksoverall15x15policy.C.CostsofAdditionalGenerationinNo-ActionAlternativeThissectionprovidesinformationontherelativecostsofalternativegenerationtechnologiesthatcouldbeusedtoprovidereplacementgenerationifIPECgenerationwerenot available.Webeginwithaconceptualclarificationofthegenerationwhosecostsarerelevantto thecomparison,namelythegenerationthatcouldreplaceIPECgenerationifIPECwerenotavailable. Thisdistinctionisimportantforrenewables(andconservation)becauseoftheneedtobeclearontheroleofgovernmentsupport(orlackthereof)forgenerationbeyondcurrentcommitments.Wethenconsiderinformationonthecostsofpotentialcandidates,includingnewunitsofvariousfueltypesandexpansionofgenerationatexistingunitsofvariousfueltypes.1.BaselineConditionsvs.No-ActionAlternativeAsnotedabove,thecentralissueaddressedbytheFSEISistheimpactsofcontinuedoperationofIPECrelativetotheno-actionalternative. Thisquestionrelatestothedifference inenvironmental(andother)impactsbetweenaninitialscenarioinwhichIPECisavailableandascenariowithoutIPECgeneration.Figure4.EnergyEfficiencyPortfolioStandardBudgets$159$159$159$183$183$183$185$0$20$40$60$80$100$120$140$160$180$2002009201020112012201320142015EEPSBudget(millionnominaldollars)Note:Figureshowscollectionsfromelectricityratepayersforelectricityprograms.Source:NYPSC(2008),Appendix1,Table16;NYPSC(2011),Appendix2,Table1 NERAEconomicConsulting 15a.GeneralDistinctionForclarity,wedefinethescenariowithIPECgenerationasthebaselineandthenmeasuretheimpactsoftheno-actionalternativerelativetothatbaseline.
8Theimpactsoftheno-actionalternativearethusthechangesinenvironmentalconditionsrelativetothebaseline(withcontinuedoperationofIPEC).Wefocusonelectricitytechnologiesbecausebeforeenvironmentalimpactscanbeevaluated,itisnecessarytoestimatehowtheno-actionalternativewould changethemixofelectricityresources(includingconservation)usedtomeetexistingdemandforelectricity servicesinNewYork.Anyenergydevelopmentsthatoccurtoanequaldegreeinboththebaselineandtheno-actionalternativearenotdirectlyrelevanttoanevaluationoftheenvironmentalimpactsoftheno-actionalternative.Whateverthebaselineis,therelevantquestioniswhatincrementalresources(includingconservation)wouldreplacelostbaseloadoutputfromIPEC;i.e.,whatwouldbethedifferencesinresourcesbetweenthebaselineandtheno-actionalternative.b.IllustrationofChangesundertheNo-ActionAlternativeFigure5illustrateshowtheincrementalchangesingenerationofvarioustypeswouldbecalculatedusingahypotheticalbaseline.Notethatthecomponentsofthestackedbarsarenotdrawntoscale,butarepurelyhypothetical. Thefiguredoesnotrelatetoanyparticulargeographicarea.Ontheleft-hand sideisastackedbar showingahypotheticaloriginalforecastofthebaselinesourcesofsupplyincludingconservationthatwouldbeusedtomeetdemand.
9Renewablesandconservationplaymodestrolesinthisbaseline,withthebulkofoutputcoming fromIPECandfromfossilandother,wherethelatterincludespowerprovidedbyothernuclearplantsaswellasfossilunits.
8HerewedefinecontinuedoperationofIPECasourbaseline,butweemphasizethattheresultswouldbenodifferentifwedefinedtheno-actionalternativeasthebaseline.
9Tosimplifythediscussion,wetreatconservationasasourceofsupply,althoughitismoreproperly consideredaspartofdemand.
NERAEconomicConsulting 16Themiddlestackedbarthen showsahypotheticalno-actionalternativeinwhichIPECgenerationwouldnotbeavailabletomeetelectricitydemand. Thefinalstackedbarshowsthechangesbetweenthetwopreviousstackedbars.Byassumption,alloftheoutputfromIPECwouldbelost,anditwouldbemadeupbysomeincreasesintheotherthreesources(renewables,conservation,andfossil/othersources).Thesechangesingenerationandconservationwould providethebasisforanalyzingtheenvironmentalimpactsoftheno-actionalternativerelativetothebaseline.Thekeypointofthisillustrationisthatreplacementgenerationrepresents additionalgenerationthatwouldbeforthcomingifIPECwerenotavailable.Forpurposesofthecost analyses,wefirstprovideinformationontheexpectedfuturelevelizedcostsfordifferenttypesofnewunits,excludingtheeffectsofgovernmentsupport.Wethenassessthecostsof additionalrenewablesor additionalconservationintheno-actionalternative. Thefinalsubsectionconsidersthefeasibilityandcostsofexpandinggenerationatexistingtypesoffacilities.2.LevelizedCostsofNewCapacityExcluding GovernmentSupportFigure6displays EIAsestimatesoflevelizedcostsexpressedasdollarsper MWhfornewelectricitygeneratingcapacity,exclusiveofgovernmentsupport(forexample,exclusiveofFederaltaxcreditsorNewYorkStateRPSincentivepayments).Asdiscussedabove,levelizedcostsincorporatecapitalcosts,otherfixedcosts,andmarginalcostsovertheentirelifetimeofthepowerplant.EIAsestimatesinFigure6suggestthat,exclusiveofgovernmentsupport,Figure5.HypotheticalAnalysisofChangeinGenerationfromBaselinetoNo-ActionAlternativeBaselineNo-actionChangeOutputRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchanges)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 17NGCCunitsaretheleastexpensivegenerationalternativeandthuswouldbethemostlikelytobeaddedinamarketsetting.
103.CostsofAdditionalRenewablesThissectionconsidersthecomplicationsrelatedtoadditionalNewYorkStaterenewablegenerationintheno-actionalternative,firstnotingthatfutureprogresstowardthecurrentrenewablegoalisnotrelevantandthendemonstratingthatadditionalrenewablesarelikelytobemoreexpensivethantherenewablesdevelopedunderthecurrentrenewablegoal.a.ProgresstowardRenewable GoalNYSERDAs2011RPSPerformanceReportstatesthat,asofDecember31,2010,generationfromtheprogramscurrentcontractswouldproducerenewableenergyequivalentto39percentofthe2015target.Whateverrenewablegenerationisultimatelyencouragedthrough 10Theseestimatesdonotaccountforthemanycomplicationsrelatedtolocation,architecture,usage,potentialtechnologicalprogressandotherfactors.SeeBorenstein(2011)foradiscussionoftheseissuesandcomparisonsofdifferentestimatesoflevelizedcostsforalternativegenerationtechnologies.Figure6.EIA'sEstimatesofLevelizedCostsforNewCapacity,ExclusiveofGovernmentSupport$63.1$86.4$94.8$97.0$101.7$103.5$112.5$210.7$243.2$0.0$50.0$100.0$150.0$200.0$250.0$300.0GasCombinedCycleHydroCoalWindOnshoreGeo-thermalGas/OilCombustionTurbineBiomassSolarPVWindOffshore2009$/MWhNote:FigureshowsEIAestimatesbasedonAEO2011becauseEIAestimatesbasedonAEO2012arenotcurrentlyavailable;naturalgaspriceforecastsinAEO2012arelowerthaninAEO2011andthusgas-firedpowerplantshavealargereconomicadvantagebasedonAEO2012thanshownhere.Source:EIA(2011b)
NERAEconomicConsulting 18theprogram,however,thatlevelwillbereflectedinthebaseline. ThisprogressisnotdirectlyrelevanttoIPEClicenserenewal. TheStatesrenewablegoalanditsassociatedprogramsarepartofthebaselineforpurposesofevaluatingtheno-actionalternative;thechangesduetothegoalandprogramswilloccurregardlessofwhateverelseoccursonthe system. Thus,renewablegenerationelicitedbytheprogramssubsidiescannotbecountedintheno-actionalternative.Forrenewablestoplaya significantroleinreplacingIPECsgeneration, additionalrenewables,beyondthegoalsoftheexistingRPSprogram,wouldbeneeded.b.CostsofAdditionalRenewablesUsingBaselineCostsperMWhAsdiscussedbelow,expandingtherenewablesprogramtohelpreplaceIPECsenergywouldtendtoincreasethesubsidiesperMWhneededtoelicitsufficientsupply.Butevenifthe subsidiesper MWhdidnotincrease,replacingallofIPECsenergywithrenewableswouldcostNewYorkselectricityconsumersover$500millionperyearinsubsidiesoverandabovemarketreplacementcosts,basedonimpliedcostsperMWhfortheNYPSCscurrentRPSprograms.
11Thatismorethantheexistingbudgeteveninthepeakyear showninFigure2,whichis$321million. Tomeeteventhiscost(whichislikelytobeconservative),theNYPSCwouldhavetoincreaseitsbudgetsandraisethemonthlysurchargesassessedtoNewYorkconsumerscommensurately.c.CostsofAdditionalRenewablesAccountingfortheIncrementalEffectsonCostsperMWhAsnotedabove,therelevantquestionisnotthecostofrenewablesinthebaseline,butrathertheincrementalcostofadditionalrenewablegenerationundertheno-actionalternative.In NewYorkscompetitivemarketforgeneration,anyincreaseinincrementalcostsforrenewableswillinturnreducethelikelihoodthatrenewableswouldsuccessfullycompetewithfossilpowerundertheno-actionalternative.Thequalitativerationaleforexpectinganincreasedcostforadditionalrenewablesbeyondthecurrentgoalisstraightforward.Thereisasupplycurveforrenewables,whichisafunctionofthetotalpricereceivedperunitgenerated.Holdingconstantthemarketpriceforelectricity(whichisdeterminedbygas-firedunitsmostofthetime)andfederalsubsidies,wecanplotthesupplycurveasafunctionofthesubsidypaidbyNYSERDA.Figure7plotsa hypotheticalsupplyfunction. Thelargerthesubsidy,themorerenewableswouldparticipateinthemarket.Conversely,thelargerthequantityofrenewablesdesired,thelargerthesubsidymustbe. Thus,asnotedinFigure7,ifthequantityofrenewablesinthebaseline(withthe30by15 11Thiscalculationuses16.3millionMWhasIPECsannualenergy(NYISO2011a,p.34).In2015(thefinalyearforwhichanRPSgoalisspecified),theRPSprogramhasagoalof10.4millionMWhandabudgetof$321million(NYPSC2010,Appendix,Tables13and17).IPECsannualenergyis57percentlargerthantheRPSgoalfor2015,sothenecessarybudgetwouldneedtobe57percentlarger:$504million(in2015dollarsassumingthatthecostofsecuringsubstantialamountsofadditionalrenewableresourcesincrementaltothebaseloadwouldremainthesame).Usingadifferentyearthan2015toestimatethenecessaryadditionalbudgetwouldyieldalargerestimate.
NERAEconomicConsulting 19policyinplace)were Q B,obtainingadditionalrenewablestoalevelof Q Nwouldrequireanincreaseinthesubsidyfrom S B to S N.Therisingsupplycurvereflectsthefactthatdifferentrenewableprojectsdifferintheircosts,andhenceintheincrementalsubsidyneedediftheyaretobebuilt.Forexample,forwindprojects,theremaybesomeprojectswithrelativelylowcosts,requiringrelatively smallsubsidies. Thoseprojectswouldbebuiltfirst.Otherprojects,however,willhavehighercosts,perhapsbecauseoflessfavorablewindconditions,moreremotelocations,orhighertransmission costs. Thoseprojectswillnotbebuiltunlessthesubsidiesarehigher.TheimplicationofarisingsupplycurveisthatthesubsidyrequiredtoelicitadditionalrenewablestoreplaceIPECgenerationwouldbegreaterthanthecurrentsubsidylevels,making itevenlesslikelythatrenewableswouldconstituteasubstantial shareofreplacementgeneration.Supply Q BQ Q N S B S NQuantit ygeneratedb yrenewablesSubsidy($/MWh)SFigure7.ImpactofAdditionalRenewablesonSubsidyRatesperMWhNotes: Q B:Quantityofrenewablesinbaselinewith30x15policyQ:Additionalrenewablesdesiredundertheno-actionalternative Q N:Quantityofrenewableswith30x15policyundertheno-actionalternative S B:Subsidyrateforbaselinewith30x15policyS:Additionalsubsidyrequiredundertheno-actionalternative S N:Subsidyraterequiredwith30x15policyundertheno-actionalternative NERAEconomicConsulting 204.CostsofAdditionalConservationThissectionconsidersthecomplicationsrelatedtoadditionalconservation,whichareanalogoustothoseforadditionalrenewablegeneration.Wefirstnotethatfutureprogresstowardthecurrentconservationgoalisnotrelevantandthendemonstratethatadditionalconservationislikelytobemoreexpensivethantheconservationdevelopedunderthecurrentenergyefficiencygoal.a.ProgresstowardNewYorkStateConservation GoalNYS-37anditssupportingdocumentsarguethatifthe15x15planissuccessful,itwillreducedemandbymorethanIPECsannualgeneration(NYS-37,p.49).Aspartofits forecastingandplanninganalyses,NYISOhasevaluatedthelikelyachievementofelectricityconservationinNewYorkthrough2021.NYISO(2011a,p.21)doesnotexpectthe15x15goaltobemetby2015.
12However,evenifthe15x15goalismet,thecomparisonbetweenprogramsuccessandIPECgenerationismeaninglesstotheissueathandbecauseitrelatestothe baselineandhasnodirecteffectonwhatresources(includingenergyefficiencyandconservation)wouldbeusedincrementallyundertheno-actionalternative.Putanotherway,theconservationusedtoachievethe15x15goalwillnotbeavailabletoprovidetheadditionalconservationundertheno-actionalternative.b.CostsofAdditionalConservationUsingBaselineCostsperMWhExpandingtheconservationprogramundertheno-actionalternativewouldincreasethesubsidiesper MWhneededtoelicitsufficientsupply. Evenifthesubsidiesper MWhdidnotincrease,attemptingtoreplaceallofIPECsenergywithconservationwouldcostNewYorkselectricityconsumersabout$250millionperyearinadditionalsubsidies,basedonimpliedcostsperMWhfortheNYPSCscurrent EEPSprograms.
13Tomeetthatcost,theNYPSCwouldhavetoincreaseitsbudgetsandraiseorextend(orboth)themonthlysurchargesassessedtoNewYorkconsumerscommensurately..
12NYISO(2011,p.21)forecastsagapofabout7,500GWhin2015betweennecessaryenergysupplywithexpectedenergyefficiencyachievementsandnecessaryenergysupplywithfullachievementofthegoal.Thisgaprepresentsabout28percentofthegoal(i.e.,about4percentagepointsofthe15percentgoal).AppendixAprovidesmoreinformationonNewYorks15x15programs.
13Thiscalculationuses16.3millionMWhasIPECsannualenergy(NYISO2011a,p.34).In2015(thefinalyearforwhichanEEPSgoalisspecified),theEEPSprogramhasagoalof12.1millionMWh(NYISO2012,slide5)andabudgetof$183million(NYPSC2011,Appendix2,Table1).IPECsannualenergyis35percentlargerthantheEEPSgoalfor2015,sothenecessaryadditionalbudgetwouldbe35percentlargerthanthebudgetfor2015:$247million(in2015dollarswiththesamecaveatasaboveabouttheuncertainabilitytosecuresignificantadditionalamountsofconservationincrementaltothebaselineatthesamecost).Usingadifferent yearthan2015toestimatethenecessaryadditionalbudgetwouldyieldalargerestimate.
NERAEconomicConsulting 21c.CostsofAdditionalConservationAccountingfortheIncrementalEffectsonCostsperMWhAswithrenewablegeneration,undertakingmoreintensiveconservationeffortswouldlikelyraisethemarginalcostofadditionalconservation,thusfurtherincreasingtheexpendituresneededtosecureadditionalconservationundertheno-actionalternative.Aswithrenewables,itisusefultosummarizethevarietyofmeasuresavailabletoreduceelectricityuseintermsofasupplycurveforconservation,which showsthemarginalcostofsubsidiesandotherprogramstoelicitadditionalconservationbeyondwhatoccursduetopricesandtechnologicaladvancesthatlowertheextracostofmoreefficientequipmentandstructures.Aswithmostsupplycurves,themarginalcostofconservationrisesasadditionalconservationisundertaken(Gillinghametal.2004,p.66).Initialconservationeffortsmayyieldamountsoflow-hangingfruitavailableatrelativelylowmarginalcost,butlatereffortsmustemployincreasingcostlymeasures.Forexample,increaseduseofcompactfluorescentlights(CFL)iswidelyseenasalow-costwaytoreduceelectricityconsumption,includinginNewYork(Maniaci2011, slide3).Additionalconservation,however,requireshighercostmeasures. Thatconclusionappearstobesupportedbyestimatesofthecost-effectivenessofvariousconservationprogramsrunbyNYSERDAandNewYorkdistributionutilities.NYSERDAestimatesthatitsCFLprogramreducesdemandatacostof$20permegawatt-hour(MWh)(Maniaci2011, slide7).
14 Theaveragecostofotherprogramsis$360/MWh(Maniaci2011, slide7).IncommentsontherecentwhitepaperpreparedaspartoftheNYPSCsreviewofitsEEPSprogram,NYISOpresentsanupward slopingsupplycurveforconservationbasedon recentexperienceinNewYork,asshowninFigure8.Inpreparingthisgraph,NYISOuseddata inthewhitepapertoplotthecostofthe EEPSprogramsasafunctionofthecumulativegigawatt-hours(GWh)saved. Thecostrisessubstantiallyasthelevelofenergy savedincreases. Thisgraph showsresultsforexistingprograms.IncrementalprogramstohelpreducedemandtoreplaceIPECundertheno-actionalternativewouldrequiregoingfurther.AlthoughthehighestcostsinthefiguremayrepresentprogramsthattheNYPSCsupportsforreasonsotherthancost-effectiveness,thecurvenonethelessillustratesthatasopportunitiesforrelativelylow-costprogramsareexhausted,additionaldemandreductionscanonlybe securedbyincurringhighercosts.
14NotethatthecostsofconservationmeasuresestimatedbyNYISOandStateagenciesinNewYorkarenotcomparabletoavoidedcostestimatesforgeneration.TheNYISOcostsforconservationmeasuresrepresentonlythecoststoutilitiesorprogramadministratorsanddonotincludetheresidualcostsforconsumerstopurchaseenergy-efficientappliancesorundertakeotherconservationactivities.Wholesaleelectricityprices,however,representthefullmarginalcostofproducingelectricity.Ontheotherhand,thesefigurescomparetheone-time costsoftheprogramstoannualelectricitysavings,whereaswholesalepricesreflectcostsamortizedoverthelivesofthefacilities.
NERAEconomicConsulting 22ThegraphicalanalysisofahigherbaselinelevelofconservationisessentiallythesameastheanalysisforrenewablesinFigure7.IncreasingconservationprogramstohelpmeetreducedoutputfromIPECundertheno-actionalternativewouldrequireincreasedratesofexpenditureperunitofelectricitysaved,assumingthatadditionalconservationprogramscouldevenbedesignedbeyondthoseintendedtomeettheambitiousNewYorkStategoalatanyprice. Thehigherthebaselinelevelofconservationassumed,thehigherwouldbethecostperunitofelectricitysaved,sothatthehigherbaselinelevelofconservationwouldmakeitmoredifficultandcostlytosecureanyincrementalconservationinitiativesbeyondthebaseline EEPSprogramtobeusedintheno-actionalternative(againassumingthatadditionalinitiativescouldbeidentifiedandimplementedeffectively).5.Costsof GenerationatExistingSourcesAsnotedaboveinthediscussionofcompetitiveelectricitymarkets,afterpowerplantshavebeenbuilt,theirutilization(i.e.,hoursofoperationperyear)dependsonphysicalconstraintsandtheirmarginalcostsrelativetoelectricityprices.Apartfromtransmissionconstraints,thebasicphysicalconstraintforallpowerplantsistheirmaximumratedcapacity.Wind,solar,andhydrofacilitieshaveanimportantotherphysicalconstraint:theavailabilityofFigure8.EEPSEnergyEfficiencySupplyCurveCost$perMWhVersusCumulativeGWhNote:Horizontalaxisiscumulativeenergysavedperyear,inGWh.TheverticalmeasureismarginalcostperMWhsavedannually.However,becausethecostsareincompleteandarenotamortizedovertheeffectivelivesoftheprograms,themarginalcostsarenotdirectlycomparabletolevelizedestimatesofcostperMWhgenerated.Source:NYISO(2011d)
NERAEconomicConsulting 23wind,sunlight,andwater,respectively.Afterthesetypesofpowerplantshavebeenbuilt,theirmarginalcostsofoperationarevirtuallyzero,sotheygenerallyoperateduringalltimeswhenphysicalconstraintsallow. Theutilizationoffossilfuelpowerplantsismuchmoresensitivetomarketforces,particularlyelectricityprices,althoughmanycoalunitsarebaseloadunitsthatoperatevirtuallyallofthetime.Ifmoregenerationisneededfromtheelectricitysystem,suchasintheno-actionalternative,fossilfuelpowerplantsnotoperatingatfullcapacityinalltimeperiodswouldbeabletoincreasetheirutilization. This situationisincontrasttothe situationforwind,solar,andhydrofacilities.Table1summarizesthe situationfordifferentfueltypesand showsestimatesofthemarginalcostsperMWhofgeneration(fromexistingfacilitiesorfacilitiesthatwouldbebuiltinthefuture)basedonfuelpriceprojections,heatrates(ameasureoffuelinputperunitofenergyoutput),andvariableoperatingandmaintenance(O&M)costsfrom EIA(2011,2012).Marginalcostsareestimatedforthegenerationtechnologiesthataregenerallycapableofincreasingutilization,whichincludefossilfuelpowerplantsanddonotincludewind,solar,orhydrofacilities.Basedontheestimatedvariablecostsin Table1,coalandNGCCunitsaremostlikelytoincreasetheirutilizationasreplacementgenerationforIPECbecausethesetwo generationtechnologieshavethelowestmarginalcosts.D.ImplicationsofRelativeCostsontheMixofReplacementEnergyinNo-ActionAlternativeThissectiondrawsonevaluationsoftheprevious sectionsnotablythecompetitivenatureoftheelectricitymarketinNewYorkandtherelativecostofalternativegenerationthat couldreplaceIPECgenerationtoprovideassessmentsofthelikelymixofreplacementenergyundertheno-actionalternative. TheimportanceofmarketconditionsinNewYorkmeansthatinformationonrelativecostsmustbeusedtoprovideassessmentsoftheextenttowhichvariousTable1.EstimatesofMarginalCostsofGenerationMarginalCosts(2011$/MWh)CapableofIncreasingUtilizationinResponsetoMarketForces?O&MFuelTotalCoalYes$2$21$23NaturalGas-CombinedCycleYes$2$31$33-CombustionTurbineYes$11$47$58OilCombustionTurbineYes$17$255$272WindNo---SolarPV No---HydroNo---Note:-indicatesthatthevariablecostsarenotestimatedbecausethegenerationtechnologygenerallycannotincreaseutilizationinresponsetomarketforces.Assumedheatratesare8,800Btu/kWhforcoal,7,050Btu/kWhforgascombinedcycle,and10,745 Btu/kWhforcombustionturbinesbasedonEIAestimatesfornewpowerplants.Ifexistingpowerplants havehigherheatrates,theirfuelcostswouldbehigher.Source:NERAcalculationsbasedonEIA(2011)andEIA(2012)
NERAEconomicConsulting 24generationtypeswouldbelikelytoreplaceIPECgenerationintheno-actionalternative,i.e.,therelative sizeofthechangesinthefinalbarinFigure2.1.AdditionalFossilFuel GenerationAdditionalfossilfuelgenerationislikelytoconstitutethemajorreplacementgenerationifIPECgenerationwerenotavailable. Theleastexpensivegenerationoptionsarelikelytocomefromincreasesingenerationatexistingunits,particularlyfromcoalandnaturalgasunitsthatarenotoperatingatfullcapacity.Amongnewunitsthatmightbeaddedasreplacementgeneration,newNGCCunitshavethelowestlevelizedcosts(i.e.,costsperMW-hr,includingcapital,fuelandotheroperatingandmaintenancecosts).2.AdditionalRenewable GenerationAdditionalrenewablegenerationisnotlikelytobeamajorpartofIPECreplacementgeneration.NewYorkStatehasanambitiousrenewablegoalaccompaniedbysubstantialsubsidyprogramsthatextendsintothefuture.ButthatfuturerenewablegenerationwouldbeputinplaceregardlessofIPECsstatus.Thus,thefuturerenewablegenerationduetotheNew YorkStaterenewablegoalisinthebaselineratherthanasadditionalgenerationthatwouldbeavailabletoreplaceIPECgeneration.Expandingrenewablegenerationbeyondthecurrentgoalwouldlikelyrequireanincreaseinthelevelofsubsidybeyondthecurrentlevels. ThecomparisonoflevelizedcostsshowsthatwindgenerationthelowestcostrenewablegenerationforNewYorkStatewouldbesubstantiallymoreexpensivethannaturalgas.GiventhemarketstructureinNewYorkanditsfocusonminimizingthecostsofadditionalgeneration,therelativecostinformationindicatesthatadditionalwindgenerationisnotlikelytobeaddedasreplacementgenerationifIPECwerenotavailable.3.AdditionalEnergyEfficiencyandConservationAdditionalenergyefficiencyalsoisnotlikelytobeamajorpartofIPECreplacementgenerationforreasons similartothoserelevantforrenewablegeneration.Ofcourse,giventhatremovalofIPECgenerationwouldleadtoincreasedretailelectricityprices,therewillbesomeeffectonconservationthroughpriceeffects.However,moststudiesputthepriceelasticityforelectricityataround-0.2,whichmeansthata10percentincreaseinretailelectricitypricewouldresultina2percentdecreaseinelectricitydemand(BernsteinandGriffin2005,pp.18,21).
Thus,wewouldnotexpectthepriceeffectonelectricitydemandtobesubstantialgiventherelativelylowpriceelasticityofdemandforelectricity.Asnotedabovewithregardtorenewables,thelevelofenergyefficiencytobeachievedbyNewYorkStatescurrentprogramsisinthebaseline, sinceitwouldbeachievedregardlessofIPECsstatus.Giventheincreasedcosts(andthussubsidies)thatwouldberequiredtoexpandenergyefficiencyprograms,weconcludethatitisnotlikelythatadditionalenergyefficiency NERAEconomicConsulting 25wouldaccountforsubstantialIPECreplacementgeneration(beyondprice-inducedconservation).E.AdverseEnvironmental ImpactsofGenerationAlternativesThissectionprovidesinformationontheenvironmentalimpactsoffossil-fuelandrenewableelectricity,includingwind,biomassandhydroelectricsources. Theseassessmentsaregeneralanddonotrelatetospecificgenerationfacilities. Thefollowingchapterprovidesadditionalspecificenvironmentalinformationbaseduponenergymarketmodelingoftheadverseenvironmentalimpactsoftheno-actionalternative.1.Fossil-FuelGenerationOuranalyses,includingthosediscussedfurtherinsubsequentchapters,indicatethatifIndianPointgenerationwerenotavailable,asubstantialportionoftheIPECgenerationwouldbereplacedbyfossil-fuelgeneration(naturalgasandcoal). Thissubsectionsummarizessomeofthe potentialadverseenvironmentalimpactsoffossil-fuelgeneration.a.AirPollutantImpactsFossil-firedgeneratingunitsemitvariousairpollutants. Table2summarizestheairemissionsfromnaturalgasandcoalunitsthathavebeenidentifiedby EPAinrecentanalysesofpotentialairemissionregulationsaffectingelectricitygeneration.i.IllustrativeEmissionRatesTable3showsaverageemissionratesforthreemajorpollutantsCO 2,SO 2,andNO X -forcoalandnaturalgas-firedelectricityplantsintheUnitedStates.TheseemissionratesrelatetoallexistingpowerplantsintheUnitedStatesforeachfuelandthusareaveragesfordifferentnaturalgasgenerationtechnologies(e.g.,gas-firedturbinesandcombinedcycleunits)anddifferentpowerplantages. TheemissionrateswillthereforedifferfromratesintheFSEIS,Table2.AirPollutantsbyGenerationPlantTypeAirPollutant CoalGasNuclearCO2andothergreenhousegasesyesyes-Sulfurdioxide(SO2)yesyes-Nitrogenoxides(NOx)yesyes-Particulatematteryesyes-Mercuryandotherheavymetalsyes--Carbonmonoxideyesyes-Volatileorganiccompoundsyesyes-Acidgasesyes--PlantTypeSource:EPA(2011a),EPA(2011b)
NERAEconomicConsulting 26whichrelateonlytonewnatural-gas-firedpowerplants,whichhavelowerratesthantheaverageforexistingunits.BasedonIPECsannualgenerationofover16million MWh(NYISO2011a,p.34),evenifonlyaportionofthisgenerationismadeupbyfossil-firedgeneration,theincreasedemissionsofthesepollutantswouldbe substantial.Thefollowingsubsectionshighlightsomeofthepotentialhealthandotherimpactsassociatedwiththesethreepollutants.(The sizeoftheimpactsdependsuponmanysite-specificfactors,includingemissionrates,meteorologicalconditions,populationexposures,andbackgroundconcentrations.)ii.ImpactsAssociated withNO XandSO 2EmissionsEmissionsofnitrogenoxides(NO X)andsulfurdioxide(SO 2)aretheprimarycausesofacidrainwhichcanleadtoacidificationofwaterbodiesandothereffectsandcanalsoleadtovariousadversehealtheffects.NO XandSO 2arealsoimportantprecursorsintheformationoffineparticles(PM2.5)andozone(NOxonly). EPA(2011b)linksNO XandSO 2emissionstothefollowingpotentialeffects:Asthmacomplications;Chroniclungdisease;Prematuremortality;Otherrespiratoryeffects;Treemortalityandinjurytovegetation;andDegradationtoecosystems.iii.ImpactsAssociated withCO 2and Other Greenhouse GasesAccordingtotheInteragencyWorkingGroupontheSocialCostsofCarbon(2011),climatechangeinducedbygreenhousegasemissionsadverselyaffect:Agriculturalproductivity;Humanhealth;Watertablelevelsresultinginfloodrisk;andEcosystemfunctions.SinceCO 2isaglobalpollutant,theseeffectsdependuponglobalemissions(andconcentrations)ratherthanemissionsinNewYorkStateortheUnitedStates.Table3.AverageEmissionRates CO 2 SO 2 NO xCoal2,1228.93.1Natural Gas9440.10.5Emission Rates(lbs/MWh)Source:NERAanalysisbasedoneGRID(2010)
NERAEconomicConsulting 27b.LandUseAnynewfossil-firedcapacitybuiltundertheno-actionalternativewouldhavelanduseeffects. TheFSEISnotesthatanewnaturalgasplantwouldrequirebetween0.016to0.045hectares(0.04to0.11acres)oflandper MWcapacity(FSEIS,p.8-29). TheFSEISalsonotesthatnewnaturalgascapacitycouldrequireconstructionofadditionalwells,collectionstations,andpipelines(FSEIS,p.8-30). TheFSEISindicatesthat15hectares(37acres)wouldberequiredpermegawattofcapacityduetotheseadditionalfacilities.c.ImpactsRelatedtoHydraulicFracturingtoExtractNatural GasRecentdevelopmentsinthetechnologiesforextractingnaturalgasreferredtoashydraulicfracturingorfrackinghaveledtosomeenvironmentalconcerns.Inrecognitionof theseconcerns,theNewYorkStateDepartmentof EnvironmentalConservation(NYSDEC)recentlyissuedadraftsupplementalenvironmentalimpactstatement,statingthat[h]igh-volumehydraulicfracturing,whichisoftenusedinconjunctionwithhorizontaldrillingandmulti-wellpaddevelopment,isanapproachtoextractingnaturalgasinNewYorkthatraisesnew,potentiallysignificant,adverseimpacts(NYSDEC2011, ExecutiveSummary,p.1).TheNYSDECisproposingregulationstoaddresssuchconcerns.2.Wind GenerationNYS-37claimsthattheenvironmentalimpactsassociatedwiththeno-actionalternativewouldbelessthantheenvironmentalimpactofrelicensingIndianPoint(p.3),presumablybaseduponitsassumptionthatmuchofthereplacementgenerationwouldcomefromrenewable electricity.NYS-37doesnotprovideanyinformationonthepotentialenvironmentaleffectsofrenewablegeneration.Itisusefultoprovideinformationonthepotentialenvironmentaleffectsofrenewablesincludingwindinthis sectionandbiomassandhydroelectricinsubsequentsectionstoprovideadequateinformationconcerningtheNYS-37claim.AlthoughwindgenerationdominatesthecurrentrenewablegenerationinNewYorkState,allthreeofthesetypesareeligibleforRPScreditsandarerepresentedincurrentcontracts.Thissectionsummarizessomeofthetypesofenvironmentalimpactsassociatedwithwindcapacity.NotethatnewwindcapacitymaynotbebuiltindownstateNewYorkandthuswouldlikelyrequireconstructionofnewtransmissionlineswiththeirownassociatedadverseenvironmentalimpacts,asdiscussedbelow.a.BirdandBatMortalityWindfarmscancausethedeathofbirdsandbatsintwomainways(Ifran2011).First,birdsandbatscancollidewithwindturbineblades.Second,batscansufferinternalbleedingwhentheyflythroughpocketsoflowpressurebehindrotatingblades(barotrauma).TheimpactsofwindenergyonbirdsandbatshavebeennotedbyFederalagencies,Stateagencies,andotherorganizations. TheU.S.GovernmentAccountabilityOfficenotedin2005, NERAEconomicConsulting 28whentheUnitedStatesfewerwindfarmsthancurrently,thatstudiesatwindfarmsinCaliforniaandWestVirginiaindicatedthousandsofbirdandbatmortalitiesperyearandthatstudiesinotherregionsofthecountrywereneeded(GAO2005).TheU.S.FishandWildlifeServicenotesthatwindenergyfacilitiescanadverselyimpactwildlife,especiallybirdsandbats,includingthreatenedandendangeredspeciesandotherprotectedspecies,suchasthebaldeagle(FWS2011).TheNewYorkStateDepartmentof EnvironmentalConservationrequiresdevelopersofwindfarmsinNewYorktoevaluatepotentialimpactsonbirdsandbatsaspartoftheirenvironmentalimpactstatements(NYSDEC2009).TheAmericanBirdConservancyhasfiledapetitionrequestingthattheFWSissueregulationstoaddresstheadverseimpactsofwindenergyonbirds(ABC2011). TheABCcitesestimatesthat440,000birdswerekilledbywindturbinesin2009andatleastonemillionbirdswouldbekilledin2020basedongrowthprojectionsforwindenergy(ABC2011,p.6). TheABCcallsforregulationsthatwouldensurecompliancewiththe MigratoryBirds TreatyAct,theEndangeredSpeciesAct,andtheBaldandGolden EagleProtectionAct.TheBatsandWindEnergyCooperativehasananalogousgoalofprotectingbatsfromtheadverseimpactsofwindenergy(BWEC2012).Batsaidfarmersbyeatinginsects,andbatdeathsatwindfacilitiesreduce cropsalesbyalmost$4billioneachyear(Boylesetal.2011).TheNationalWindCoordinatingCollaborativeindicatesthatwindfarmsinNewYorkkillbetweenapproximately1.5and6birdsperMWperyearandkillbetweenapproximately3 and15batsperMWperyear(NWCC2010).Assuminga30percentcapacityutilizationfactorforwindturbines(NYISO2010,p.44),approximately6,000 MWofwindturbineswouldberequiredtoreplacethe16million MWhofannualenergyoutputfromIPEC.Basedonthe mortalityratesfromtheNWCC,thesewindturbineswouldkillbetween9,000and36,000birdseachyearandbetween18,000and90,000batseachyear.b.LandRequirementsWindfarmscanrequirea significantamountoflandaroundthewindturbinesandtransmissionstations. Theselandrequirementscanalsohaveadverseimpactsonwildlifebyinterferingwiththeirhabitatandmigrationroutes(GAO2005). TheFSEIScitestheNationalRenewable EnergyLaboratoryasestimatingthatthetotallanddisturbanceforonshorewindenergyis1hectares(2.5acres)perMW,but70percentofthisareaisonlydisturbedtemporarilyforconstruction(FSEIS,p.8-62).Thus,6,000MWofwindturbinestoreplaceIPECsenergyoutputwoulddisturb6,000hectares(15,000acresorover23squaremilesoflikelynon-contiguousareafortheturbines,accessroads,andmaintenancebuildings).Arearequirementsforoffshorewindenergy,whilelower,arestillsubstantial(FSEIS,p.8-62).c.AestheticsModernwindturbinesrisehundredsoffeetintotheairandcanbeseenfromgreatdistances.Windturbinescan significantlyaffecttheaestheticqualitiesoftheirareas,particularlyinareaswithsubstantialaestheticvaluebeforetheconstructionofwindturbines,suchasforests,rivers,andlakes.Figure9comparestheheightofa550ft.windturbinewithatypicalutility NERAEconomicConsulting 29pole,transmissiontower,andforesttree.IfthewindturbinesreplacingIPECeachhadacapacityof5MW(acommonturbine size),1,200tallwindturbineswouldneedtobeinstalledwithpotentiallysignificantaestheticimpacts.d.NoiseThewhirlingbladesofwindturbinescancauseanoisenuisanceforpeoplelivingnearwindturbines(Zeller2010). Thisnoisenuisancecanaffectmanypeopleifthewindturbinesare locatedindenselypopulatedareas.Figure10showsthelocationofcurrentandproposedwindfarmsinNewYork.MostwindfarmsarelocatedinthesparselypopulatedareasofupstateNewYork.IfanynewwindturbinestoreplaceIPECwerebuiltinthedenselypopulatedareasofdownstateNewYork,noisefromtheturbinebladescouldbeanuisanceformanypeopleinthe area.Figure9.HeightComparisonofWindTurbineandOtherStructuresSource:ABC(2011),p.41 NERAEconomicConsulting 30e.OtherEnvironmental ImpactsAnadditionalpotentialadverseimpactofwindenergyisicethrows(Galbraith2008).Ificeonturbinebladesdoesnotstopthemfromspinning,thebladescansometimesflingchunksoficeseveralhundredyardsathighspeeds.f.TransmissionAsreflectedinFigure10,windgenerationdevelopmenthasprimarilybeencenteredonthreeregionsinwesternandnorthernNewYorkduetowindpatterns. TheNYISOsinterconnectionqueueindicatesacontinuedpatterninthisregard. Thus,assuminganysignificantincrementalamountofwindgenerationdevelopmentundertheno-actionalternativerequiresalsotakingintoconsiderationtheadverseenvironmentalimpactsassociatedwithsignificanttransmissionupgrades. Theseimpactsareaddressedseparatelybelow.3.BiomassFacilitiesThissectionprovidesanoverviewofthepotentialenvironmentaleffectsofadditionalbiomass-firedresources.Asnoted,alimitedamountofbiomassfacilitiesarebeingusedtomeetNewYorkStatesRPSrequirements.Figure10.LocationofCurrentandProposedWindFarmsinNewYorkSource:NYISO(2011),p.30 NERAEconomicConsulting 31Aswithfossil-firedgeneration,theburningofbiomassresultsintheemissionsofvariousairpollutants. Table4displaysairemissionsratesfrombiomassfacilitiesforSO x,NO x,CO,and PM 10asreflectedinNationalRenewable EnergyLaboratory(NREL)(2003)reports.4.HydroFacilitiesThissectionprovidesanoverviewofthepotentialenvironmentaleffectsofadditionalhydroelectricresources.Notethatnewlarge-scalehydrodevelopmentwasexcludedasaneligibleresourceunderNewYorksRPSprogramduetoits significantadverseenvironmentalimpacts(NYPSC2004,AppendixB,page2).a.Greenhouse GasEmissionsHydroelectricfacilitiesareresponsibleforincreasesingreenhousegasemissionsduringbothconstructionandoperations.Indeed,aliteraturereviewbySynapse Energy EconomicsnotesthatinitialreservoirfloodingleadstoaninitialstageofbiomassdecompositionreleasingbothCO 2andmethaneandthatpost-floodedbiomesmayremovelesscarbonfromtheatmospherethanpre-floodedbiomes(Synapse2012).Arecentstudyperformedatanewly floodedborealreservoirinQuebec showedarapidincreaseinbothCO 2andmethaneemissionsafterthefirstyearofflooding,followedbyareturntonaturallevelswithintwoandthreeyearsrespectively(Tremblayetal.2009).Tremblayetal.(2009)notethatGHGemissionsatborealreservoirstypicallyreturntonaturallevelswithintenyearsofflooding.Hydro-Quebecprovidesinformationonlife-cycleassessmentsincludingemissionsfromfuelextraction,processingandtransportation,aswellasfrompowerplantconstructionandelectricitygenerationthatshowstypicalgreenhousegasemissionresultsforNorthAmericanhydrofacilities(Hydro-Quebec2002).Table4.DirectAirEmissionsfromWoodResidueBiomassFacilities(lbs/MWh)Source:NREL2003 NERAEconomicConsulting 32b.OtherEmissionsTheconstructionofhydroelectricplantsleadstotheemissionsofothercompoundsthatareresponsibleforadverseenvironmentalimpacts. TheInternational EnergyAdministration(IEA)liststhefollowingtypesofimpactsassociatedwithemissionsreleasedduringtheconstructionofhydroelectricfacilities(IEA2002):Ozonelayerdepletion,Acidification,Eutrophication,Photochemicaloxidantformation,andEcotoxicimpacts.c.Other ImpactsTheIEAalsonotesthatoperationofhydroelectricfacilitiescanleadtothefollowingadverseenvironmentalimpacts(IEA2002):Increasedlocalhumidity,Erosionandsedimentationofstreams,Damagestoaquatichabitat,Impactstolocalbiodiversity,Impactsonfishpopulations,andAestheticimpacts.5.TransmissionExpansionsElectricitydemandinNewYorkStateismostheavilyconcentratedinthesoutheastpartoftheState,butasreflectedinFigure10andtheNYISOInterconnectionQueue,thevastmajorityofproposedwindprojectsarelocatedinwesternandnorthernNewYork. Theexistingtransmissionfacilitiesbetweenupstateanddownstatealreadyare significantlyconstrained.Inaddition,thedistribution systemsinthethreeprimaryareasofwindgenerationdevelopmentinNewYorknowfacelocaltransmissionconstraints,creatingthepotentialforgenerationpocketsintheseareas. Thus,additionalrenewabledevelopmentincrementaltotheRPSprograminthebaselinewouldlikelyrequirethedevelopmentofsignificantnewtransmissioninfrastructure.The sitingandconstructionofnewtransmissionlineswouldresultinadditionaladverseenvironmentalimpactssuchastheclearingofforestedvegetationandsubsequentdisplacementandimpactsonwildlife,includingimpactstofishandaquaticinvertebratesduetocanopyreductionandstreamcrossings. Transmissionexpansionscanhaveadverseimpactsonbirds,includingmortalityfromcollisionsandelectrocution(ABC2012).TheDEISfortheHounsfieldWindFarminJeffersonCounty,NewYork,indicatedthat50.6milesoftransmissionlineswouldhavetobeconstructedtoconnectthewindfarmtoitsregionalpowergrid(HounsfieldDEIS2009).Hounsfieldsproposedtransmissioncorridor NERAEconomicConsulting 33entailsa150-footwiderightofwaywhichwasestimatedwouldleadtotheclearingof360acresofforestedvegetationandsubsequentdisplacementandimpactsonwildlife,includingimpactstofishandaquaticinvertebratesduetocanopyreductionand53streamcrossings(HounsfieldDEIS2009).ThePublicServiceCommissionofWisconsinlists18potentialimpactsassociatedwithtransmissionlines. Theseincludeimpactsofthefollowingcategories:aesthetics,agricultural lands,airportsandairstrips,archeologicalandhistoricalresources,culturalconcerns,electricand magneticfields,endangered/threatenedandprotectedspecies,implantablemedicaldevicesandpacemakers,invasivespecies,noiseandlightimpacts,propertyownerissues,radioandtelevisionreception,recreationareas,safety,strayvoltage,waterresources,wetlands,andwoodlands(PSCW2011).TheJointProposalfortheChamplainHudsonPower Expresstransmissionproject(discussedinAppendixC)providesillustrativeinformationonthetypesofenvironmentalimpactsfromtheinstallationofsomepotentialtransmissionlines. TheenvironmentalimpactslistedfortheChamplainHudsonPower Expresstransmissionprojectincludethefollowing(ChamplainHudson2012):DredgingwouldberequiredtolaycablesintheHudsonRiverandportionsofLake Champlain,resultingintemporarysedimentresuspensionandotherimpacts;Constructionwouldresultintemporaryimpactsto56acresofwetlandsaswellastostreamsandtributaries;About10.7acresofforestedwetlandcovermaybepermanentlyconvertedtomarshor scrub-shrubcommunities;Approximately236acresofexistingforestcovermaybeclearedduringconstruction,60 acresofwhichwouldbepermanentlycleared;ThreemilesofcablewouldbeinstalledwithinthecitystreetsintheboroughofQueens,NewYorkCity;and138,040linearfeetofright-of-waywithinAgriculturalDistrictswouldbeincludedinthe ConstructionZone.F.ConclusionsRegardingtheLikelyAdverseEnvironmentalImpactsoftheNo-ActionAlternativeThecompetitiveelectricitymarketstructureinNewYorkStatewillleadtoreplacementgenerationbeingdominatedbythelowestcostalternatives(subjecttosystemconstraints).Sincefossil-fuelgenerationprovidesforoveralllowercostpowerthanrenewables,mostreplacementpowerislikelytobefossil-fuelgeneration.Additionalfossil-fuelgenerationwillleadto increasesinCO 2andotherairemissionsaswellasotherpotentialadverseenvironmental NERAEconomicConsulting 34impacts.Indeed,evenifadditionalrenewablescouldreplacesomeofIPECsgeneration,suchadditionalrenewableswouldhaveadverseenvironmentalimpacts,asdiscussedabove. Thenextchapterprovidesquantitativeestimatesofthelikelyenvironmentalimpactsoftheno-actionalternativebaseduponresultsfromelectricitymarketmodeling.
NERAEconomicConsulting 35III.QuantitativeModelingofthePotentialEnergyandAdverseEnvironmental ImpactsoftheNo-ActionAlternativeThischapterprovidesquantitativeassessmentsofthepotentialenergyandenvironmentalimpactsoftheno-actionalternativeusingNEMS,adetailedandwidelyused EIAmodel. EIAusesNEMStoperformpolicyanalysesinresponsetorequestsfromCongress,theWhiteHouse,theDepartmentof Energy,andotherFederalagencies. EIApreparesanAnnual EnergyOutlook(AEO)withlong-termprojectionsofenergypricesandquantities.NEMSisalsousedbythenationallaboratories(e.g.,Cortetal.2007),academics(e.g.,Hoppocketal.2012),thinktanks(e.g.,Krupnicketal.2010),andtheprivatesector.Asnotedabove,thebaselinemustfirstbeestablishedtoprovidethepointofcomparisonfortheno-actionalternative.WeusedNEMStodevelopestimatesofthepotentialenergyandenvironmentalimpactsoftheno-actionalternativebycomparingNEMSresultsbetween(1)abaselinescenarioinwhichIPECcontinuestooperate;and(2)ano-actionalternativeinwhichIPECbaseloadgenerationislost.ThedifferencesbetweenthesetworunsrepresentNEMSsprojectionsofhowelectricitymarketsinNewYorkStateandotherregionsmightrespondunder theno-actionalternative.Forthebaseline,weusedNEMSresultsfrom EIAsAEO2012.Fortheno-actionalternative,weassumedthatbaseloadgenerationfromIP2andIP3wouldbelostin2013and2015,respectively.Notethatthesehypotheticaldateswere simplyassumptionsusedonlyforthepurposeofconductingthemodeling.NEMSincorporatesup-to-dateinformationonnational,regional,andStateenergyandenvironmentalpoliciesaswellasinformationonexistingandproposedpowerplants.NEMSdividestheUnitedStatesinto22electricityregions,includingthreeregionsthatcollectivelycoverallofNewYorkState.ThischapterbeginswithanoverviewofNEMS.AdditionalbackgroundinformationonNEMSappearsinAppendixB. ThischapterthenpresentsNEMSresultsforbaselineenergyconditions,thepotentialenergyimpactsoftheno-actionalternative,andtheassociatedpotentialadverseenvironmentalimpactsoftheno-actionalternative. ThetableswithNEMSresultsrelatetotheUnitedStatesasawhole,butwealsonote significantresultsforNewYorkState.A. OverviewofNEMSNEMSisadetailedenergymarketmodelthatiscomposedofmultiplemodulesthatinteracttogenerateprojectionsofpricesandquantities. Thesemodulesincludeonesthatprojectdemandandsupplyfromvarioussectors. The Electricity MarketModuleprovidesprojectionsfor22regionsacrosstheUnitedStates.NewYorkismodeledbythreeNEMSregionsthatcover(1)NewYorkCityandWestchesterCounty;(2)LongIsland;and(3)therestofthestate. TheElectricityMarketModuleprojectscapacity,generation,fueluse,andairemissions,amongother measuresforeachregion. ThemodelalsoaccountsforinternationaltradeinelectricitywithCanadaandMexico.
NERAEconomicConsulting 36EIAupdatesNEMSonceayeartopreparetheAnnual EnergyOutlook.Asnotedabove,NEMSprojectionsreflectFederal,regional,andStateenergyandenvironmentalpoliciesthathavebeenenactedasofthemodelingdate. TheenergypoliciesincludeFederalsubsidiesforparticulartypesofgeneration,includingrenewablessubsidies.Inaddition,NEMSincorporatesRGGIandRPSpoliciesinvariousstates,includingNewYorkStates30x15RPSgoal.WeusedthelatestversionofNEMS,AEO2012,whichwasreleasedinJanuary2012(EIA2012).Unlikemanymodelsofelectricitymarkets,NEMSdoesnottreatdemandprojectionsasinputdata.Instead,NEMScalculatesdemandforelectricityendogenously,reflectingvariousfactors,includingenergyefficiencypoliciesandelectricityprices.NEMSalsocalculatespricesendogenously,reflectingtheinteractionofsupplyanddemandfactors.NEMSincorporatesplannedadditionsandretirementsofgeneratingcapacity,butalsoprojectsunplannedadditionsandretirementsbasedondemandandthecostsofdifferentgenerationalternatives.Indecidinghowmuchcapacityofdifferenttypestoadd,NEMSselectstheleast-costalternativethatcanmeetthedemandrequirements.NEMScanbeusedtoestimatetheimpactofchangesinpolicy,suchasacap-and-tradeprogramforgreenhousegases,airpollutionregulationsthatwouldrequireadditionalcontrolmeasuresbysometypesofpowerplants,orpoliciestoincreasethefuelefficiencyofnewmotorvehicles.TouseNEMStoestimatetheincrementalimpactsofpolicychanges,onefirstrunsabaselinethatreflectsbusinessasusual(i.e.,withoutthepolicychange).Although EIAhasanofficialbaselineeachyear(thebasecaseforAEO),itispossibletomodifytheunderlyingassumptionstocreateanewbaseline.Whateverbaselineisused,onethenmodifiesinputstoNEMStoreflectthechangeinpolicyandrerunsthemodel.Differencesinthetwosetsof projectionsrepresentestimatesofthepotentialimpactsofthepolicy.NotethatmodelingresultsfromNEMSrepresentareasonableestimationofwhatmayhappenbasedonthemodelinginputsandcalculations.Giventhesubstantialuncertaintythat resultsfromthecomplexanddynamicnatureofthevariousenergymarketsintheUnitedStates, itisimpossibletoforecastfutureenergymarketdevelopmentswithperfectaccuracy.B.BaselineConditionsAsnotedabove,EIAusesNEMStoproduceanAnnual EnergyOutlookwithlong-termprojectionsofpricesandquantities. TheAEO2012versionofNEMSgeneratesprojectionsto2040.IntheAEO2012versionofNEMS,IPECandallotherexistingnuclearpowerplantscontinuetooperatethroughoutthemodelingperiod(i.e.,through2040).WeusedtheAEO2012versionofNEMSwithoutmodificationasthebaselineagainstwhichtoestimatethepotentialenergyandenvironmentalimpactsoftheno-actionalternative.WepresentNEMSresultsofbaselineconditionsintheUnitedStatesfortwoperiods(2011-2015and2016-2025)inordertoprovidecomparisonswiththeno-actionalternative,whichareprovidedfortheperiodfrom2016to2025. TheNEMSresultsreflectaverageannualvaluesduringeachperiod.
NERAEconomicConsulting 37Table5presentsaverageannualgenerationintheUnitedStatesbyfueltypeduringthetwoperiodsunderbaselineconditions,includingcontinuedoperationofIPEC.Generationisexpressedintermsofmillionsof MWhperyear.NotethatcoalaccountsforthelargestshareofU.S.generation(41.0percentintheperiod2016-2025),followedbynaturalgas(23.9percent),nuclear(21.2percent),renewables(13.2percent),andoil(0.7percent). Thegenerationmixintheperiod2016-2025is similartothemixin2011-2015,withrenewablesincreasingsomewhatfromthefirsttothesecondperiod,andcoaldecreasingsomewhat.Changesinotherfuelspercentagesbetweenthetwoperiodsare smallerthanthechangesforrenewablesandcoal.C.ProjectedEnergyMarket ImpactsofNo-ActionAlternativeToestimatehowtheelectricity systemwouldoperateundertheno-actionalternative,werananewNEMScaseinwhichwemodeledthebaseloadIP2andIP3generationaslostin2013 and2015,respectively.WemadenoothermodificationstotheAEO2012versionofNEMS.Wecomparedtheresultsforthisno-actioncasetothebaselineresultstoestimatethepotentialelectricitymarketresponsestoaddressthelostIPECbaseloadgenerationaccordingtoNEMS.Wepresentresultsfortheten-yearperiodbeginningin2016(thefirstyearinwhichIPECwouldnotoperatebasedonourmodelingassumptionsfortheno-actionalternative)andendingin2025.Table6presentstheprojectedchangesintheno-actionalternativebasedontheNEMSresults.NEMSestimatesthatIPECwouldproduce16.7million MWhofbaseloadenergyeachyearonaverageduringtheperiod2016-2025,sotheno-actionalternativereflectsthisamountofreducedgenerationfromIPEC.AccordingtotheNEMSresults,electricitypriceswouldriseasaresultofmakingIPECsbaseloadgenerationunavailable.Inresponsetothesehigherelectricityprices,consumerswouldreducetheirdemandforelectricityby0.3million MWhperyearonaverageduringtheperiod2016-2025.Inadditiontothissaleseffect,thereduceddemandforelectricitywouldinvolvea slightreductioninelectricitynetimportsintotheUnitedStatesby0.2million MWhperyearonaverage.TomakeupforIPECslostoutput,otherpowerplants acrosstheUnitedStateswouldincreasetheirgenerationby17.4million MWhperyearonTable5.ProjectedU.S.BaselineGenerationbyFuelTypemillionMWh/yr%ofTotalmillionMWh/yr%ofTotalCoal1,67342.3%1,71241.0%Naturalgas96624.4%99823.9%
Oil270.7%280.7%
Nuclear81120.5%88721.2%
Renewables47712.1%55313.2%Total3,955100.0%4,177100.0%2011-20152016-2025Note:Totalsdifferslightlyfromsumsofcomponentsbecauseofindependentrounding.Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 38average.MakingIPECunavailablewouldtendtoincreasethedistanceoverwhichelectricitywouldneedtotraveltoconsumers,andthiswouldleadtoincreasedlinelosses(i.e.,dissipationofelectricityinthetransmission system). Thesumofthesefourcategoriesofmarketresponses,accountingproperlyfortheir signs(increasesvs.reductions),isequaltoIPECslostoutput.Asshownbelowin Table7,NEMSprojectsthatlessthanhalfoftheincreasedU.S.generationintheno-actionalternativewouldoccurinNewYorkState.NEMSestimatesthatgenerationfromotherpowerplantsinNewYorkStatewouldincreaseby6.9million MWhperyearonaverageduringtheperiod2016-2025undertheno-actionalternative.NEMSestimatesthatNewYorkStatewouldimportmoreelectricityfromotherStatesand(toamuchlesserextent)CanadainresponsetothelostIPECbaseloadgeneration.Indeed,NEMSestimatesthatgenerationinotherStateswouldincreaseby10.6million MWhperyearonaverageduringtheperiod2016-2025intheno-actionalternative,virtuallyallofwhichwouldbetransmittedtoNewYorkStatetomakeupfortheshortfallthere. TheseincreasedimportsintoNewYorkStatelead totheincreasedlinelossesacrosstheUnitedStatesshownabovein Table6.Table6.IPECsLostOutputandProjectedU.S.MarketResponsesinNo-ActionAlternative(2016-2025)millionMWh/yrIPEC-16.7U.S.marketresponsesReducedsales0.3Increasednetimports-0.2(netimportsdecrease)Increasedgeneration17.4Reducedlinelosses-0.9(linelossesincrease)Total16.7Note:Totaldiffersslightlyfromsumofcomponentsbecauseofindependentrounding.Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 39Thelowerpartof Table7showsU.S.replacementgenerationbyfueltype.Notethatthesevaluesreflectthreeeffects:(1)increasedutilizationofpowerplantsthatexistinbaselineconditions;(2)delayedretirementsofexistingplantsrelativetothebaseline;and(3)constructionofnewpowerplantsintheno-actionalternativerelativetothebaseline.NotetoothatNEMSdeterminesnewpowerplantadditionsendogenouslybasedonitsmodelingalgorithms.WemadenoassumptionsaboutwhattypesofresourcescouldbeusedtoreplaceIPECanddidnot constrainNEMSinanyway.Asshowninthelowerpartof Table7,themajority(55.4percent)oftheU.S.replacementgenerationduringtheperiod2016-2025wouldcomefromnaturalgas,andmostof theremainder(43.1percent)wouldcomefromcoal.NEMSprojectsthattheincreasedcoalgenerationwouldcomefromincreasedutilizationanddelayedretirementofexistingcoalplantsratherthanconstructionofnewcoalplants.Smallcontributionstowardreplacementgeneration wouldcomefromrenewables(1.0percent)andoil(0.5percent). TheseNEMSresultsareinaccordwiththediscussionoftherelativecostsofalternativegenerationtechnologiesinthepreviouschapter.D.ProjectedAdverseEnvironmental ImpactsofNo-ActionAlternativeAswehaveseen,NEMSprojectsthatreplacementofIPECbaseloadgenerationlostundertheno-actionalternativewouldcomeprimarilyfromfossilfuel-firedpowerplants.TheincreasedcombustionoffossilfuelswouldincreaseemissionsofCO 2andotherairemissions.Inthissection,wepresentNEMSresultsforthepotentialincreaseintheUnitedStatesinthreeTable7.ProjectedChangesinGenerationinNo-ActionAlternative(2016-2025)millionMWh/yr%ofTotalReplacementgenerationNewYorkState6.939%Other states10.6 61%U.S.total17.4100%U.S.replacementCoal7.543.1%Naturalgas9.755.4%Oil0.10.5%Nuclear0.00.0%Renewables0.21.0%Total17.4100.0%Note:Totalsdifferslightlyfromsumsofcomponentsbecauseofindependentrounding.Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 40typesofairemissions:CO 2,sulfurdioxide(SO 2),andnitrogenoxides(NO x).15Asshowninthetable,NEMSprojectsthat,eachyearonaverageduringtheperiod2016-2025intheno-actionalternative,U.S.CO 2emissionswouldbe13.5milliontonshigher,U.S.SO 2emissionswouldbe6.4milliontonshigher,andU.S.NO xemissionswouldbe3.3milliontonshigher.ToputtheCO 2increasesinperspective,theycanbecomparedwithplannedCO 2emissionreductionsunderRGGI(RGGI2012). TheprogramsCO 2capfor2012is165millionshorttons,whichisequivalentto150millionmetrictons. Theprogramscapfor2018is10percentlower,whichisequivalenttoaplannedreductioninCO 2emissionsof15millionmetrictons.NotethattheAEO2012versionofNEMSincludestheeffectsofRGGI. TheNEMS resultsindicatethattheno-actionalternativewouldincreaseU.S.CO 2emissionsabovebaselinelevelsby13.5millionmetrictons,nearlyasmuchastheplannedreductioninCO 2emissionsunderRGGIthrough2018.
15AiremissionsaretheonlytypeofenvironmentalimpactmodeledbyNEMS.TheAEO2012versionofNEMSincludestheCross-StateAirPollutionRule(CSAPR),whichEPAissuedinJuly2011tolimitemissionsof SO 2andNO xfrompowerplants.(EIAbaseditsmodelingofCSAPRintheAEO2012versionofNEMSontheoriginalformoftheregulationissuedinJuly2011.EPAsubsequentlymadetechnicaladjustmentstostatecapsandnew-unitset-asides,andtheU.S.CourtofAppealsfortheD.C.Circuitsubsequentlyissuedastayonthe regulation.)NEMSalsoproducesestimatesofmercuryairemissionsfrompowerplants,buttheAEO2012versionofNEMSdoesnotincorporateEPAsrecentMercuryandAirToxicsStandards(MATS).Thus,the modellikelyoverstatesfuturemercuryemissionsinboththebaselineconditionsandtheno-actionalternative, andwedonotpresentthemhere.Table8.ProjectedIncreasesinAverageAnnualU.S.AirEmissionsinNo-ActionAlternative(2016-2025)CO2(milliontons/yr)13.5SO2(thousandtons/yr)6.4NOx(thousandtons/yr)3.3Note:CO 2ismeasuredinmillionsofmetrictons(1,000kilograms),whileSO 2andNO xaremeasuredinthousandsofshorttons(2,000pounds).Source:NERAcalculationsbasedonNEMSAEO2012model NERAEconomicConsulting 41IV.EvaluationofNewYorkStateContention37Asnoted,NYS-37andtheaccompanyingexpertreportscometoverydifferentconclusions,withoutanysupportinganalyses,regardingthepotentialgenerationthatwouldbeaddedifIPECwerenotavailable.WehaveevaluatedNYS-37anditsaccompanyingdocumentsandhaveconcludedthatthematerialshavefourfundamentalflawsthatexplainwhytheycome tosuchdifferentconclusions. Thefirstsectionofthischapterprovidesanoverviewofthefourflaws. Twooftheseflawshavealreadybeendiscussedinpreviouschapters. Theimplicationsoftheothertwoflawsonevaluatingthepotentialadverseenvironmentalimpactsoftheno-actionalternativeareexplainedinthe secondandthirdsectionsofthischapter.A. OverviewofMajorFlawsinNYS-37ThedifficultieswiththeNYS-37argumentscanbesummarizedintermsofthefollowingfourmajorflaws.
1.Failuretorecognizemarketforcesandcost-minimization.NYS-37andtheexpertreportsfailtoaccountforthekeyrolethatmarketforceswouldplay(andhencetheimportanceofrelativecostsandcost-minimization)indeterminingtheresourcesthatwouldbedispatchedtoreplacethelostbaseloadIPECgenerationundertheno-actionalternative.ItiscriticaltorecognizethatNewYorkStatehasacompetitiveelectricitymarket.Asaresult,decisionsregardingnewinvestmentsarelargelymadebymerchantentitiesthatwouldtendtobuildlow-costfacilities,andfacilitiesaredispatchedtoprovideenergyatminimumcostwhilemeetingreliabilityandoperatingrequirements.Marketforcesandcost-minimizationmeanthatlower-costfossilgenerationratherthanhigher-cost renewablegenerationorenergyefficiencywouldconstitutethebulkofgenerationundertheno-actionalternative.
2.Conflationofdevelopmentsthataffectthebaseline,nottheno-actionalternatives.NYS-37anditssupportingwitnessesmentionahostofdevelopmentsthattheyclaimwerenotconsideredbytheNRCstaffindevelopingtheFSEISandthattheyclaimwouldleadtodifferentconclusionsregardingtheenergymixandenvironmentalimpactsoftheno-actionalternative. ThesedevelopmentsincludeNewYorkStatesrenewableandenergyefficiencygoals,lowerelectricitydemandduetotherecession,recentincreasesinelectricitygenerationcapacityandtransmission systemexpansions,andlowernaturalgasprices. TheflawpervasiveintheNYS-37reasoningisthatthesedevelopmentsrepresentpartofthebaselineconditionsthatwouldoccurirrespectiveofIPECsstatus.Putanotherway,thevariousfactorsidentifiedbyNYS-37anditsexpertssuchastheadditional renewablegenerationorenergyefficiencyresultingfromNewYorkStategoalswouldnotbeavailabletoreplacethebaseloadIPECgenerationiftheIPECunitswerenotavailablebecausetheyexistnow,whileIPECcontinuestoprovidebaseloadelectricity.
3.Failuretoevaluatetheimpactsofpotentialdifferencesinthebaseline. Totheextentthatthedevelopmentstheyciteaffectthebaseline,thosedevelopmentswouldifanythingreducetherolesofconservationandrenewablesasIPECreplacementsundertheno-NERAEconomicConsulting 42actionalternative. ThedevelopmentsemphasizedbyNYS-37,includinglowerelectricitydemandandlowernaturalgasprices,wouldtendtoincreasethesubsidiesthatwouldbenecessarytofundthehighermarginalcostsofthosealternativeswhileatthesametimedecreasingthemarginalcostsoffossilresourcestherebymakingtheseresourceslesseconomicrelativetofossil-fueledpoweroptions.
4.Failuretoprovideempiricalmodeling.NYS-37andtheexpertsfailtoprovideanystudiesorotheranalysesquantifyinghowtheelectric systemwouldrespondundertheno-actionalternative.Incontrast,ouranalysisusingNEMSshowsthatconservation(intheformofresponsetohigherprices)andrenewableswouldplaymodestroles,andthattheprimaryimpactwouldbeincreasedgenerationfromfossil-firedsources. ThisfailureonthepartofNYS-37anditsexpertsisimportantsince,withoutsomeempiricalmodeling,theycannotprovideareasonablebasisforevaluatingwhichalternativesactuallywouldbedevelopedanddispatchedifIPECgenerationwerenotavailable.TwooftheseflawsfailuretorecognizemarketforcesandfailuretoprovideempiricalmodelingrelatetotheissuesdiscussedinChaptersIIandIIIandthusdonotrequireadditionalexplanation. Theothertwoflawsrelatedtotheconflationofbaselineconditionsandtheno-actionalternativerequirefurtherexplanationtoclarifytheirimplicationsfortheenvironmentalimpactsoftheno-actionalternative.B.ConflationofBaselineandNo-ActionAlternativeNYS-37anditsaccompanyingdocumentspointtonumerouschangesthathaveoccurredinNewYorkStatesenergymarkets,eachoneofwhichNYSclaimssignificantlychangesthe environmentalimpactcalculussetforthintheFSEIS(NYS-37,p.2).However,theciteddevelopmentsrelatetochangesthathaveoccurredalreadyorthatwilloccurregardlessofIPECsfuturestatus.Thus,theycannotprovideadditionalenergytomakeupforlostbaseloadIPECgenerationintheno-actionalternative.Asaresult,theciteddevelopmentsarenotdirectlyrelevanttoevaluatingthelikelyelectricitymarketandenvironmentalimpactsoftheno-actionalternative.Theimportanceofdistinguishingbetweenbaselineconditionsandtheno-actionalternativewasdiscussedaboveinChapterII,andFigure5inChapterIIillustratesthatthepotentialenvironmentalimpactsoftheno-actionalternativearebasedonthechangesinenergyresourcesbetweenbaselineconditionsandtheno-actionalternative. ThissectionelaboratesonthefundamentalpointintroducedinChapterIIbyconsideringtheimplicationsofusingdifferent(i.e.,moreupdated)baselineconditions.1.Differences inBaselineConditionsThissectionconsidersallegeddifferencesbetweenbaselineconditionsassumedintheFSEISandbaselineconditionswiththerecentenergydevelopmentscitedinNYS-37.Figure11illustratessuchahypotheticalchangeinthebaselinemixofgeneration.Ontheleft-hand sideis theOriginalbaselinegenerationmixallegedlyassumedintheFSEIS.Inthemiddleisa NERAEconomicConsulting 43RevisedhypotheticalforecastofthebaselinegenerationmixthattakesaccountofthetypesofchangescitedbyNYS-37andsupportingtestimony(includingmorerenewablesduetothe30x15policy,moreconservationduetothe15x15policy,andtheeffectoftherecessionontotalnecessaryoutputfrompowerplants).NotethatbothbaselinesincludecontinuedoperationofIPEC. Thestackedbarontherightshowsthechangesingenerationresourcesbetweenthetwobaselineforecasts.Inthefigure,overalldemandhasfallenbecauseoflowerlevelsofeconomicactivity(recession).RenewablesandconservationbothhaveincreasedbecauseofvariousStateand federalprogramsandsubsidies.OutputfromIPECisthesameintherevisedforecastasintheoriginalbecause,inbothcases,IPECisabase-loadedresource,andthus,itsgenerationisnotaffectedbythetotalloadforecast.Asaresultoftherecessionandincreasedconservationandrenewables,forecastedgenerationbyfossilandothersourceshasdeclined.Noneofthesechanges,however,speaksdirectlytothequestionathand:Whataretheincrementalchangesin theresourcesthatarelikelytobeusedtomeetdemandwhencomparingthebaselinetotheno-actionalternative?a.IncrementalChanges in GenerationfromaModifiedBaselineToanswerthatquestionrequiresrepeatingtheanalysisillustratedinFigure2(inChapterII)butwiththerevisedbaselinethatwehavedevelopedinthischaptertoreflectthefactorsidentifiedinNYS-37.Figure12illustratessuchahypotheticalanalysisusingtherevisedbaseline. Therevisedbaselineontheleftandtherevisedno-actionalternativeinthemiddlebothinvolvemoreconservationandrenewablesandlessoutputfromfossil/otherthantheirFigure11.HypotheticalIllustrationofChangeinBaselineGenerationOriginalbaselineRevisedbaselineChangeOutputRecessionRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchangesbetweenthetwobaselines)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 44counterpartsinFigure2.However,therelevantcomparisonisbetweenthe changesduetotheno-actionalternativeinthetwofigures,becausethosechangesarewhatdeterminethenetenvironmentalimpactsoftheno-actionalternative. Themerefactthatrenewablesandconservationplaylargerrolesintherevisedbaselinedoesnotnecessarilymeanthattheywillplaylarger(or,perhaps,any)incrementalrolesinreplacingoutputlostfromIPECundertheno-actionalternative. Thechangeinthebaselinedoesnot,infact,affectthenatureofthechangeingenerationmixundertheno-actionalternative.Butaswediscussbelow,thechangedbaselinecanhaveanindirecteffectinamannerthatactuallyrefutestheNYS-37presumptions.b.ImplicationsofIllustrationsTheprecedingillustrations showthatdevelopmentsthataffectbaselineconditions(i.e.,conditionsthathaveoccurredorwilloccurinthefutureregardlessofIPECsstatus)donothave adirecteffectonthechangesingenerationthatwouldoccurundertheno-actionalternative.Inourhypotheticalexample,thechangesingenerationarethesameinFigure12asinFigure5,i.e.,
thechangeinbaselinehasnoeffectontheincrementalgeneration.Forreasonswediscussinthethirdsectionofthischapter,however,carefulanalysisoftheindirecteffectsofthedevelopmentscitedinNYS-37anditsaccompanyingdocumentssuggestthatthosedevelopmentswouldbelikelytoreducetheincrementalrolesofrenewablesandconservationundertheno-actionalternative,incontrasttothecontentioninNYS-37.Figure12.HypotheticalAnalysisofImpactofNo-ActionAlternativewithRevisedBaselineRevisedbaselineNo-ActionChangeOutputRecessionRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchangesbetweenthebaselineandtheno-actionalternative)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 452.DevelopmentsCitedbyNYS-37RelatetotheBaseline,NotImpactsoftheNo-ActionAlternativeThemajordevelopmentscitedinNYS-37andaccompanyingdocumentsrelatetochangesinthebaseline(thatis,thecurrentcircumstanceswhichincludescontinuedIPECgeneration),nottowhatalternativescouldbeavailabletoreplaceIPECsenergyintheno-actionalternative. Thefollowingarethe sixmajordevelopmentsemphasizedinNYS-37andtheexpertreports.(AppendixAprovidesupdatedinformationonthese sixdevelopments.)
1.NewYorkStaterenewableelectricitygoal. The30x15renewableelectricitygoalisbeingimplementedbysubsidiespaidbyNYSERDAtodevelopersofrenewableenergysources.ThesesubsidiesarecollectedfromNewYorksconsumersontheirmonthlyutilitybillsthroughavolumetricsurchargefortheRPSprogram.
2.NewYorkStateconservationandenergyefficiencyprograms.Conservationandenergyefficiency,particularlyunderthe15x15plan,willplaylargerrolesthanprojectedinthepast.UtilityandNYSERDAconservationprogramsaresubsidizedwithfundsfromtheSystemsBenefitCharge(SBC)andothervolumetricsurchargesimposedonsalesofelectricitytoNewYorksconsumers.
3.LowerNewYorkStateelectricitydemandduetoeconomicfactors.FuturedemandforelectricityinNewYorkisprojectedtobelowerthanearlierprojectionssuggested,suchasthoseavailablein2006forthereportbytheNationalResearchCouncilonalternativestorenewingIPECslicenses,duetotherecessionandcontinuingeconomicpressures.
4.NewYorkStaterecentandproposedgenerationcapacityadditions.NewYorkStatehasaddeda significantamountofgenerationcapacityinrecentyears(mostlynaturalgasandwind),and significantamountshavebeenproposedforconstructioninfutureyears.
5.Lowernaturalgasprices. Thepriceofnaturalgashasfallenoverthepastseveralyearsandisexpectedtoremainlowerthanpreviouslyexpected,inpartbecauseofnewtechniquesforextractingnaturalgasthathave sharplyincreasedthereservesthatcanbeextractedeconomically.
6.NewtransmissionlinesinNewYorkState.Newtransmissionlines,whichdidnotexistatthetimeofthe2006NationalResearchCouncilreportandallegedlywerenotconsideredbytheFSEIS,willmakeiteasierforthedownstateareasservedbyIPECtoobtainpowerproducedinupstateNewYorkorintheadjoiningregions.Thefollowingsubsectionssummarizetheserecentdevelopments,analyzehowtheyaffectaproperlysetbaselineandaddresswhethertheyprovidedirectevidenceconcerningthepotentialadverseenvironmentalimpactsoftheno-actionalternative.
NERAEconomicConsulting 46a.NewYorkStateRenewableElectricity Goal is intheBaselineNewYorkStates30x15renewableelectricitygoalwasdiscussedaboveinChapterII.SincerenewablesthatareinducedintoNewYorkStateselectricitysystemaspartofthisgoalareelementsofthebaselineregardlessofIPECsstatus,theserenewablescannotalsobecountedasreplacementsforIPECintheno-actionalternative.StatementsbytheStatesexperts(Schlisseltestimony,p.48)regardingfederalsupportforrenewableenergyundertheAmericanRecoveryandReinvestmentActof2009(ARRA)provideanotherexampleoftheconflationofchangesinthebaselineandchangesintheincrementalimpactoftheno-actionalternative.ARRAprovidedtemporaryfederalsupportforrenewableenergyasaresponsetotherecession,andthus,isproperlyincludedinthebaseline.Severalofthesupportmechanisms(includingtheSection1603energygrantprogram)havealreadyexpired(U.S.Treasury2012).Thus,thefederalsupportmechanismsunderARRAnolongerevenexistand,inanyevent,arenotrelevanttopotentialreplacementofIPECsbaseload energywithrenewableenergyintheyearsahead.b.NewYorkStateEnergyEfficiencyandConservation Goal is intheBaselineNewYorkStates15x15conservationgoalwasdiscussedaboveinChapterII.SinceconservationmeasuresthatareinducedinNewYorkStateselectricitysystemaspartofthis goalareelementsofthebaselineregardlessofIPECsstatus,theseconservationmeasurescannotalsobecountedasreplacementsforIPECintheno-actionalternative.InhistestimonyinsupportofNYS-37,Mr.Schlisselprovidesanotherparticularlyclearexampleofadevelopmentthatrelatestothebaselineratherthantotheimpactsoftheno-actionalternative.HenotesthatARRAspendingandincentiveshavestimulatedconservationefforts.AnyincreasethathasoccurredasaresultofARRA,however,ispartofthebaseline,andinanyeventissubsumedunderthe15x15and30x15goals.Moreover,expendituresunderARRApeakedin2010andhavedeclined sincethen.Nonewfundingisavailable. Thus,itwillnotbeapotentialsourceoffundingforincrementalconservationeffortsundertheno-actionalternative.c.ReducedElectricityDemandProjectionsDuetoLowerEconomicActivityand OtherFactorsThissectionconsiderstheeffectsofreducedelectricitydemandprojections,firstsummarizingthechangesinforecastsandthenassessingtherelevance.i.Changes inForecastElectricityDemandAsNYS-37(p.38)andexpertsnote,forecastsofelectricitydemandinNewYorkhavefallensubstantiallyoverthepastseveralyears. TheNYISOhasreportedthatthis significantfall-offinelectricitydemandhasbeendrivenprimarilybytherecessionanditsafter-effects.Figure13showsthechangesovertimeintheNYISOsforecastsofNewYorkStateelectricitydemand.
NERAEconomicConsulting 47Asshowninthefigure,theprojectionsdecreased significantlyovertheperiod,particularlybetween2008and2009asthedepthoftherecessionwasincorporatedintotheforecast.NYISOprojectedin2006thatsalesin2016wouldbe184,630GWh,butitprojectedin 2011thatsalesin2016wouldbeonly165,319GWh,areductionof10.5percentrelativetotheprojectionfrom2006.InapresentationinMay2010,NYISOestimatedthattherecessionreducedelectricitysalesbetweenOctober2008andApril2010(adjustedforweather)by6,400GWhandthatlost economicgrowthaccountedforanadditional1,500to2,000GWh(NYISO2010b,p.2). Thus,forthishistoricalperiod,therecession(includingtheresultinglosteconomicgrowth)was estimatedtoaccountforabout93percentofthetotalreductioninelectricitysales.
16ii.Changes inForecastElectricityDemandare intheBaselineForecastsoffutureelectricitydemandinNewYorkStateareinherentlyuncertain,inlargepartbecauseofuncertaintiesregardingfutureeconomicactivityintheStateandthusthedemandfromindustrial,commercialandrecreationalcustomers. Thesechangesinoveralldemandwillofcourseaffectthegenerationsourcesthatareusedtomeetfutureelectricity 16600GWhofreductionwasattributedtoenergyefficiencyprograms(NYISO2010b,p.2).Figure13.NYISOProjectionsofNewYorkStateElectricitySales145,000150,000155,000160,000165,000170,000175,000180,000185,000190,000195,00020062008201020122014201620182020ElectricitySales(GWh
)2006 2007 2008 2009 2010 2011Note:AllprojectionsincorporateNYISOsprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 48demand.Asnotedabove,however,IPECprovidesbaseloadgenerationand,thus,thelevelofitsgenerationisnotaffectedatallbythelevelofeconomicactivity. Thus,whateverchangesmighthaveoccurredintheforecastsoffutureelectricitydemandorwhateverchangesmayoccurinsubsequentforecastswillnotinfluencethelevelofgenerationfromIPECthatislostundertheno-actionalternative.ChangesinforecastedelectricitydemandareproperlypartofbaselineconditionsratherthanchangesthatshouldbeattributedtothepotentiallossofIPECbaseloadgeneration.Indeed,thesameprincipleappliestochangesinfutureforecasts.Thebaselineconditionsfor2020maychangeinthefutureduetochangesineconomicforecastsandthusforecastelectricitydemand.Buttheprincipleisthesame;thesechangesrepresentchangesinbaselineconditionsratherthanconditionsthatdirectlyaffecttheimpactsoftheno-actionalternative.Asdiscussedbelow,however,changesinthebaselinecanhaveanindirecteffectontheimpactsoftheno-actionalternative,althoughnottheeffectpresumedinNYS-37.d.GenerationCapacityAdditionsThissectionsummarizesinformationonrecentandpotentialfutureelectricitygenerationcapacityadditionsandthenconsiderstheirrelevance.i.RecentCapacityAdditionsAccordingtotheNYISOdatabaseofpowerplantsinNewYorkState,8,348MWofgenerationcapacity(netavailabletothegrid)hasbeenadded since2000.Figure14shows annualcapacityadditionsinNewYorkStatefrom2000to2011byenergytype.Naturalgaswasthedominanttypeofnewcapacityinmostyears,butlargeamountsofwindhavealsobeenaddedinsomeyears.Ofthe8,348MWoftotaladditions since2000,naturalgasaccountedfor6,874MW(83percent)andwindaccountedfor1,348MW(16percent).
NERAEconomicConsulting 49ii.PotentialCapacityAdditionsTheNYISOmaintainsanInterconnectionQueuethatlistsproposedprojects.Applyingforaninterconnectionandbeingplacedinthequeueismerelyastepinthedevelopmentprocess.Farlesscapacityisultimatelybuiltthanisenteredinthequeue. Thisistrueforavarietyofreasonswhichincludeassignmentoftransmissionupgradecoststoprojectswhichincreasescosts,difficultyinobtainingpermits,difficultyinobtainingacontract,unwillingnesstotakemarketrisk,inabilitytosecurefinancingatallorataratethatwillsupporttheproject,increases inprojectcostfrominitialexpectations,changedeconomicconditionsthatwouldreduceprofitability,andtheconstructionofnewunitsbycompetitorswhichreducestheprofitabilityoutlook.TheNYISOInterconnectionQueuedatedDecember31,2011contains12,081 MWofpotentialgenerationprojectsinNewYorkState.Windfacilitiesaccountfor5,698MW(47percent),andnaturalgasfacilitiesaccountfor5,384MW(45percent). ThetotalrenewablecapacityinthecurrentInterconnectionQueueis5,839MW(48percent).Figure15showstheenergytypesandcurrentlyexpectedin-servicedatesforactiveprojectsintheInterconnectionQueue.ProjectsintheInterconnectionQueuehavein-servicedatesasfarinthefutureas2017.Figure14.AnnualGenerationCapacityAdditions(MW) 02004006008001,0001,2001,4001,600 1,800200020012002200320042005200620072008200920102011AnnualAdditions(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011d)
NERAEconomicConsulting 50TheInterconnectionQueuerevealsthatmanyprojectshavehad significantpostponementsorhavebeenwithdrawn. Themajorityofprojectsthatarecurrentlyexpectedtocomeinservicein2012(intermsof MW)wereoriginallyscheduledtocomeinservicein2007orearlier.Acrossallcurrentin-servicedates,46percentofprojects(intermsof MW)havebeenpostponedbyfouryearsormore,accordingtothequeue. ThisisnotunusualbutrepresentstheoutcomeswewouldexpectgiventhatenteringthequeuepreservesanoptionatlowcostandgiventhedeclineindemandgrowthinNewYorkafter2007.TheInterconnectionQueue showsthat8,286MWofwindprojectshavebeenwithdrawnbydevelopers since2000. Thus,thewindcapacitythathasbeenbuiltinNewYorkStatesince2000(1,330MW)isonly14percentofthecapacitythathasbeenproposed.Hence,theamountofwindcapacityintheInterconnectionsQueueisnotausefulindicatoroftheamountofwindcapacitythatwillbedevelopedinthefutureorthatmaybedevelopedinresponsetotheno-actionalternative. Thatwilldependontheabilityoftheprojectstoobtainpermits,theactual costsofdevelopment,ontherelativeeconomicsoftheseprojectsversusthegas-firedunitsinthequeue,themarketpriceoutlook,theavailabilityoffederalandStatesubsidies(andtheassociatedlevels),andthetransmissioncostsultimatelyassignedtotheseunits. TherecentdevelopmentscitedinNYS-37suchasreductionsindemandgrowthandlowergaspricesmaketheseunitslesslikelytobecompetitivewithgasunitsand,despitetheirpresenceinthequeue,lesslikelytobereplacementsforIPECintheno-actionalternative.Figure15.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW) 05001,0001,500 2,0002,5003,0002012201320142015201620172018N/APotentialGenerationProjects(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011e)
NERAEconomicConsulting 51iii.CapacityAdditionsare intheBaselineRecentcapacityadditionsrepresentadditionstothefacilitiesthatcouldintheoryprovideadditionalgenerationtoreplacelostIPECbaseloadgenerationtotheextentandonlytotheextentthattheseunitswouldnotbeoperatingatfulloutputwereIPECtocontinuetooperate.Thesecapacityadditionsdonototherwiserepresentthechangesthatwouldtakeplaceundertheno-actionalternative.Rather,theseadditionsrepresentchangesinthebaselineconditions.WhetheradditionalgenerationtoreplacelostIPECgenerationwouldcomefromtheserecently-addedunitsdependsupontheircapacityutilizationunderbaselineconditionsandthecostpermegawatt-hourofadditionalgenerationaswellastheabilityofthetransmission systemtodeliverthepowertotherelevantdemandregions.Notethat sincewindcapacityisusedwheneveritisavailablebecausethemarginalcostisvirtuallyzero,additionalrecentwindcapacityinthebaselinewouldnotprovidegreateropportunitiesforwindtobeusedasreplacementpowerevenassumingtherewasadequatetransmissiontodeliverit.Thepossibilityoffuturecapacityadditionsalsodoesnotbyitselfrepresentchangesthatwouldresultfromtheno-actionalternative.Potentialfuturecapacityadditions,suchasthoseinthequeue,aresimplyalternativesthatmayormaynotserveasareplacement.Whetherparticularunitswillbeaddedinthefuturewilldependprimarilyupontheirrelativecosts;thisprincipleappliesbothinthebaseline(e.g.,asaresponsetoincreasedelectricitydemand)andintheno-actionalternative.AsanalysesinChaptersIIandIIIshow,renewablegenerationisgenerallynoteconomicallycompetitivewiththemarginalcostsofexistingunutilizedfossilcapacityorwiththelevelizedcostofnewfossilcapacity.Insummary,recentcapacityadditionsarepartofthebaselineconditionsratherthanindicationsofthegenerationthatwouldbedispatchedintheno-actionalternative.Potentialfuturecapacityadditionsrepresentalternativesthatwouldonlyberealisticifsuchadditionswouldbeeconomicallycompetitive.e.LowerNatural GasPricesThissectionsummarizesinformationonrecentdecreasesinforecastnaturalgaspricesandthenconsiderstheirrelevance.i.Changes inForecastNatural GasPricesAsNYS-37(p.35)notes,naturalgaspriceshavefalleninrecentyears.From2008to2010,theaveragepriceofnaturalgasatHenryHubdroppedfromabout$9/MMBtutoabout
$4/MMBtu(in2010dollars),afallofroughly56percent(EIA2011a).Moreover,naturalgaspricesareexpectedtoriseonlymodestlyinthefuture,asincreaseddemandisoffsetbyanumberoffactors,includingincreasedproductionusingnewlow-costtechniques.InAEO2009,forexample, EIAforecastthatthepriceofnaturalgasin2020wouldbeabout$8/MMBtu(in2011dollars)(EIA2009).EIAsprojectioninAEO2011wasthatthepriceofnaturalgasin2020willbeonlyabout$5/MMBtuin2011dollars(EIA2012),adeclineofmorethan35percent.
NERAEconomicConsulting 52ii.Changes inNatural GasPricesare intheBaselineLowernaturalgaspriceswillreducethecostofelectricitygeneratedusingthatfuel,inboththebaselineandundertheno-actionalternative. Thoselowercostswillincreasetherelativecompetitivenessofgas-firedgeneration,leadingtogreateruseinbothstatesoftheworld. Theyalsowillreduceincentivestoreplaceexistinggas-firedsourceswithnew,moreefficientunits,becausetheincrementalcostsavingswillbe smaller.Theseeffectswillapplyequallytoboththebaselineandtheno-actionalternative,andthusarenotdirectlyrelevanttotheincremental impactsoftheno-actionalternative.Aswediscussbelow,however,lowernaturalgaspricesarelikelytoreducetheroleofrenewablesintheno-actionalternativeandtoincreasetheroleoffossilfuelgeneration,whichrunsdirectlycountertoNYS-37sclaimthattheFSEISshouldhaveconsideredscenarioswithlessgas-firedgenerationandmoreconservationandrenewables.f.TransmissionCapacitytoDownstateNewYorkThissectionsummarizesinformationonrecenttransmissioncapacityadditionsinNewYorkStateandthenconsiderstheirrelevance.i.Changes inTransmissionCapacityNYS-37(p.52)criticizestheFSEISforfailingtoconsiderrecentdevelopmentsintransmissioncapacitytodownstateNewYork.Thesedevelopmentsincludethreeprojectsthatwillor(ifnotyetconstructed)mightprovideadditionalcapacitytoimportpowerfromunitsinNewJerseyandotherStatesthatarepartofthePJM system:1.LindenvariablefrequencytransformersinNewJersey,whichbecameoperationalin 20092.Hudson TransmissionPartnerslinefromNewJerseytoNewYorkCity,whichhasreceivedacontract,isnowunderconstructionandiscurrentlyexpectedtobecompletedin2013;and3.Cross-HudsonProject,whichisinthepermittingprocessandis scheduledforcompletionin2015.Inaddition,NYS-37anditsaccompanyingdocumentsfaulttheFSEISforincludingtheNewYorkRegionalInterconnect,aprojectthathasbeenwithdrawn,butthencitetheChamplainHudsonPower Expressproject,whichwouldallowthetransmissionofpowerfromQuebecto NewYorkCity.IssuesrelatedtoCanadiantransmissionlinesandhydrofacilitiesinthecontextofthisproposedprojectarediscussedinAppendixC.ii.Changes inTransmissionCapacityare intheBaselineThe LindenandHTPprojectswillincreasetheabilitytoobtainmorepowerfromoutsidedownstateNewYorkwhenitismoreeconomicalthangeneratingelectricitywithinthecritical NERAEconomicConsulting 53zones.Moreover,whileNYSiscorrectthattheNYRIProjectwaswithdrawn,itnonethelesscanbeusedgenericallytotheextentsuchprojectsareeconomiconapurelymerchantbasistorepresentamajortransmissionproject.Thekeypoint,however,isthatanytransmissiondevelopmentsthatoccur,includinganymajortransmissionprojectsincreasingthetransfercapabilityintotheDownstatearea,areinthebaseline,andthus,havenoincrementaleffectsforpurposesoftheno-actionalternative.Aswithotherenergydevelopments,thesetransmissionchangesarenotdirectlyrelevanttothequestionofwhatenergyandenvironmentalimpactscouldoccurintheno-actionalternative.Aswediscussbelow,totheextentthatthereisexcesstransmissioncapacityinthebaseline,itcouldaffectthemixofresourcesusedtoreplaceoutputlostfromIPECundertheno-actionalternative. Theenvironmentalconsequencesofincreasesinpurchasedpowerwilldependonthemixofsourcesusedtogeneratethatpowerrelativetothemixthatwouldotherwisesupplyitfromin-regionsources.C.FailuretoAccountfortheIndirectEffectsofaModifiedBaselineontheEnergyandEnvironmentalImpactsUndertheNo-ActionAlternativeThissectionprovidesaqualitativeevaluationofamajorclaimofNYS-37thatrecentenergydevelopmentsmeanthattheFSEISoverstatesthepotentialenvironmentaleffectsoftheno-actionalternative. ThedocumentssubmittedinsupportofNYS-37emphasizevariousdevelopmentsthattheStateallegestheFSEISdidnotincorporate.Considerationofthosedevelopments,NYS-37claims,indicatesthattheFSEISshouldhavedevotedmoreattentiontoalternativesthatrelymoreheavily,ifnotexclusively,onconservationandrenewables,ratherthanfossil-firedgeneration.Asdiscussedabove,NYS-37anditsaccompanyingdocumentsfailtodistinguishbetweendevelopmentsthatinfluencethebaseline(thatis,conditionsthatexistorareplannedindependentoftheno-actionalternative)andwhatincrementalchangesinresourceswouldbeusedtoreplacelostIPECbaseloadgenerationundertheno-actionalternative.Mostofthedevelopmentstheyciterelatetochangesinthebaselineandhencearenotdirectlyrelevanttotheeffectsoftheno-actionalternativerelativetothebaseline.ChangesinthebaselinedonotthemselvesrepresentimpactsthatwouldoccurifIPECgenerationwerenotavailable.Butbaselinechangescanindirectlyaffectwhichresourcesarelikelytochangeincrementallyundertheno-actionalternative.Forexample,newtransmissionlinesmaymakepowerimportedfromotherstatespartofthereplacementgeneration ifthosenewlinesarenotfullyutilizedinthebaseline.However,theindirecteffectsofchangesinthebaseline canalsohavecounterintuitiveeffects.Forexample,asweexplainbelow,abaselinewithhighlevelsofconservationislikelytohavehighercostsof additionalconservationaspartofreplacingIPECthanabaselinewithlowerlevelsofconservation. Thus,abaselinewiththehigherlevelsofconservationthatNYS-37arguesaremoreaccuratethanintheFSEISwouldmakeitmoreexpensiveandthereforelesslikelythatsubstantialamountsofadditionalconservationwouldbeusedtoreplaceIPECsbaseloadenergy.
NERAEconomicConsulting 54ThefollowingsectionsprovideassessmentsoftheindirecteffectsofthevariousenergydevelopmentsemphasizedinNYS-37onthetypeofgenerationlikelytoreplaceIPECgenerationundertheno-actionalternative.a.IncreasedRenewableRequirementsAccountingforincreasedrenewablerequirementsinthebaselinewouldtend,ifanything,todecreasethelikelyroleofrenewablesinreplacementgenerationundertheno-actionalternative.Wecanexplainthisusingadiagramtoillustratetheindirecteffectsofachangedbaseline.Figure16below(avariationonFigure7inChapterII)relatesthetotalquantity(MWh)ofrenewablegenerationinNewYorkStatetothesubsidyrateperMWhnecessarytoelicitrenewablegeneration.
17 Theupward-slopedsupplycurveindicatesthatincreasingthetotalquantityofrenewablegenerationrequiresincreasingthesubsidyrateperMWh.
17Asnotedabove,undertheRPSprogram,NYSERDAprovidespaymentstorenewableenergyproducersinordertoincreasethequantityofrenewableenergyproducedinNewYorkState.ThesepaymentsultimatelyarebornebyNewYorkStateselectricityconsumersthroughsurchargesontheirmonthlyutilitybills.
NERAEconomicConsulting 55Supposethatundertheoriginalbaselinewithoutthe30x15RPSprogram,thesubsidyissetat S 0 Banditelicits Q 0 Bunitsofrenewablegeneration. Thus,theincrementalcostofsecuringadditionalrenewablesundertheno-actionalternativewouldstartat S 0 BandincreaseincrementallytotheextentthatthegovernmentwantedtoreplacelostIPECoutputwithrenewables.IfthedesiredincreasewereQ,thesubsidyraterequiredwouldriseto S 0 N. Toprovidetheadditionalrenewablesundertheno-actionalternativewouldrequireraisingthesubsidyrate,aswellasincreasingthequantityonwhichthesubsidyispaid,bothofwhichwouldraisethebudgetneeded.NowsupposethatnewrenewableprogramsofthetypecitedinNYS-37anditssupportingdocumentsareimplemented. Thebaselinequantityofrenewablesrisesfrom Q 0 B to Q 1 B.Toelicitthatadditionalsupply,thesubsidymustbehigher, S 1 Binthenewbaseline.Similarly,undertheno-actionalternative,ifthedesireistoincreaserenewableoutputbyQ,therequiredsubsidyrisesto S 1 N.Asthefigureillustrates,themoreambitiousthegoalintherevisedbaseline,thehigherthesubsidythatisneededtoelicitadditionalsupplyofrenewablesintheno-actionalternative. ThehighersubsidyrequiredtoobtainadditionalrenewablesmeansthatFigure16.ImpactofMoreBaselineRenewablesontheMarginalCostofAdditionalRenewablesSupply Q 0 B Q 1 B Q 0 N Q 1 N S 0 B S 0 N S 1 B S 1 NQuantitygeneratedbyrenewablesSubsidyNotes: Q 0 B:Quantityofrenewablesinoriginalbaselinewithout30x15policyQ:additionalquantityofrenewablesdesiredundertheno-actionalternative S 0 B:Subsidyratefororiginalbaseline S 0 N:Subsidyraterequiredtoelicitadditionalrenewablesunderno-actionalternative Q 1 kand S 1 k:correspondingquantitiesandsubsidiesunderrevisedbaseline.
NERAEconomicConsulting 56renewableswouldbelesslikelytobeaddedasreplacementpowerundertheno-actionalternative.b.IncreasedElectricityConservationRequirementsTheanalysisoftheindirecteffectofahigherbaselinelevelofconservationonthelikelihoodofadditionalconservationintheno-actionalternativeisessentiallythe sameastheanalysisforrenewablesinFigure16.Increasingconservationprogramsundertheno-actionalternativewouldrequireincreasedratesofexpenditureperunitofelectricitysaved,assumingthatadditionalconservationprogramscouldevenbedesignedbeyondthoseintendedtomeettheambitiousNewYorkStategoal. Thehigherthebaselinelevelofconservationassumed,thehigherwouldbethecostperunitofelectricitysaved,sothatthehigherbaselinelevelofconservationcitedbyNYS-37anditsaccompanyingdocumentsinfactwouldmakeitmoredifficultandcostlytosecureanyincrementalconservationinitiativesbeyondthebaseline EEPSprogramtobeusedintheno-actionalternative(assumingthatadditionalinitiativescouldbe identifiedandimplementedeffectively).c.LowerProjectedFutureElectricityDemandLowerelectricitydemandforecastsduetolowerlevelsofeconomicactivityapplytothebaselineanddonothaveadirectimpactonthemixofresourcesthatlikelywouldbeusedundertheno-actionalternative. Theirindirecteffect,however,islikelytomakefossilsourcesmoreattractiveasincrementalsourcesofsupplyundertheno-actionalternative.Aswithouranalyses ofrenewablesandconservation,wecanillustratethislogicwithasupplycurve.Thesupplyoffossil-generatedelectricityisrisingasafunctionofthemarketprice;higherpriceselicitmoresupply,asillustratedinFigure17.Inthefigure,theinitialbaselinequantityoffossilgenerationis Q 0 B,correspondingtoamarketpriceof P 0 B.Undertheno-actionalternative,ifQadditionalunitsoffossilwereusedtoreplacelostIPECoutput,thepricewouldriseto P 0 N.Nowconsidertheeffectsoflowerdemandinthebaselineasaresultoflowerlevelsofeconomicactivity.Lowerdemandmeansthatlessfossilwillbeusedinthebaseline.Inaddition,higherlevelsofrenewablesandconservationalsowillreducetheamountoffossilusedinthebaseline.Inthefigure,thereducedquantityoffossilintherevisedbaselineis Q 1 Bandthecorrespondingmarket-clearingpriceis P 1 B,whichislowerthaninthebaseline.Inotherwords,alower-costfacilitymeetstherequireddemandandsetsthemarket-clearingpriceloweronthesupplycurve.Asaresult,thecosttoreplacelostIPECoutputundertheno-actionalternativealsowouldfall,makingfossilamoreattractiveoptionthanundertheoriginalbaseline.Becausethe newbaselinewouldlowerthemarket-clearingprice,itwouldincreasethesubsidiesrequiredtomeetanygiventargetforrenewables.Italsowouldmakeconservationlessattractivebecauselowermarketpriceswouldmakeconservationlesscost-effectiveforcustomers.
NERAEconomicConsulting 57d.Recent GenerationCapacityAdditionsRecentandproposedcapacityadditionsinNewYorkareprimarilyabaselineissue . Thecapacityadditionsmaydisplacehigh-costpowerplantsintheelectricitymarketssupplycurve,butIPECremainsasourceofbaseloadenergyevenwiththecapacityadditions. Thus,thecapacityadditionshavenotandwouldnotreducetheamountofenergythatIPECsuppliestotheNewYorkelectricity system(andthustheamountofenergythatwouldhavetobereplacedifIPECwerenotavailable).TheindirecteffectsofNewYorkStatesrecentandproposedcapacityadditionsarelikelytoincludedecreasesinthemarketpriceofelectricitythatwouldinturnbelikelytoincreasetheattractivenessoffossil-firedgenerationrelativetorenewablesorconservation.Asdiscussedabove,intheneartermthemarketpriceforagivendemandperiodwouldbedeterminedbytheFigure17.ImpactofReducedDemandinBaselineonMarginalCostofFossilGenerationtoReplaceIPECSupply Q 1 B Q 0 B Q 1 N Q 0 N P 1 B P 1 N P 0 B P 0 NQuantitygeneratedbyfossilPriceNotes: Q 0 B:QuantityoffossilgenerationinoriginalbaselinewithrelativelyhighdemandQ:Differenceinfossilgenerationbetweenbaselineswithrelativelyhighandlowdemand P 0 B:Marketpriceinoriginalbaselinewithrelativelyhighdemand P 0 N:Marketpriceinoriginalbaselineunderno-actionalternative Q 1 kand P 1 k:correspondingquantitiesandpricesunderrevisedbaseline.
NERAEconomicConsulting 58short-runmarginalcostofthemarginalgenerator,wherethemarginalgeneratoristhehighestcostunitgeneratingduringtheperiod.InNewYork,thatmarginalgeneratorisalmostalwaysgas-fired,typicallyanolder,relativelyinefficientunit(althoughthathaschangedsomewhatovertimewiththeoperationofnewcombinedcyclefacilitiesinNewYork).Newerunitsarelikelytohavelowermarginalcostsofgenerationthanthoseolderunits.Asaresult,generationfromnewcapacityislikelytocontinuetodisplacegenerationfromtheolder,marginalunitsforsomedemandperiodsasalreadyhasbeenseeninNewYork(exceptifthegaspricesremainverylow)
.Theseolder,fossilfiredunitswillrunatevenlowercapacityfactorsthanbeforeorwillbe retired. Theirmarginaloutputwillbereplacedbyunitswithlowermarginalcosts,whichwillreducethemarketclearingprices.ThisdecreaseinthemarketpriceofelectricitywouldhaveanindirecteffectonthemixofincrementalresourceslikelytobeusedtoreplaceIPECoutputundertheno-actionalternative.Asdiscussedearlier,thesubsidyrequiredtoelicitadditionalrenewablegenerationistheprojecteddifferencebetweenthelevelizedcostoftheincrementalrenewableresourceandthe(appropriatelyweighted)wholesalepriceofelectricity. Thus,lowerpriceswillincreasethesubsidiesneededtoachieverenewabletargets.Similarly,lowerpriceswillmakeconservationalessattractiveoptionforconsumers,requiringhighersubsidyratestoachievebaselineconservationgoals. Thesehighersubsidycostsarelikelytoreducetherolesthatrenewablesorconservationwouldplayundertheno-actionalternative.e.LowerForecastedNatural GasPricesLowernaturalgaspriceswill shiftdownthesupplycurveforgas-firedunits.Asdiscussedearlier,lowernaturalgaspricesarelikelytoincreasetheamountofgas-firedgenerationinthebaselineandtoreducetheextenttowhicholdergas-firedunitsarereplacedwithnew,fuel-efficientmodels(becausethenewinvestmentisnolongereconomic).Lowergaspricesarealsolikelytolowermarket-clearingelectricitypricesinthebaseline,becausegas-fired unitsarethemarginalunitsduringmosttimeperiods.Asnotedaboveinthecontextofcapacityadditions,lowermarket-clearingelectricitypricesarelikelytorequirelargerexpendituresonconservationprogramstoachievebaselinetargetsandtoincreasethesubsidiesneededtomeetbaselinetargetsforrenewables.Lowernaturalgaspricesalsowillreducetheincrementalcostofincreasinggas-firedgenerationundertheno-actionalternative. Thus,theymakeitmorelikelythatgas-firedunitsratherthanrenewablesorutility-sponsoredconservationwouldbeused.Asaresult, incorporatinglowerprojectedgaspricesintotheanalysisproducesmarketresultsthataredirectlycontrarytotheunsupportedcontentioninNYS-37thattheFSEISoveremphasizestheuseoffossilfuel,naturalgasinparticular,togeneratereplacementpower.f.NewTransmissionLinestoDownstateNewYorkAdditionaltransmissionlinescanreduceconstraintsonbuyingpowerfromoutsideNewYorkStateandthuscouldresultinmoreimportsinthebaselinebecausemoreout-of-stateunitswouldbeabletobidintheNYISOauctions.Totheextentthatthesedevelopmentscreatenew NERAEconomicConsulting 59interconnectionopportunitiesthatwouldnototherwisebefullyutilizedinthebaseline,theyalsocouldproduceadditionalimportsundertheno-actionalternative.ThetworecentlyaddedtransmissionlinesthatarecitedbyNYS-37anditssupportingdocumentsLindenandNeptunewillallowgreaterimportsfromNewJerseyandtherestof thePJMregiontothewestofNewYork.PJMgeneratesahigherpercentageofitspowerfromcoalthanNewYorkdoes.InPJM,coalisthemarginalproducerapproximately74percentofthetime(andnaturalgasisonthemargintheremaining26percent),whereasinNewYorkStatethe marginalproducerisalmostalwaysnaturalgas(FERC2012). Thus,therecentlyaddedtransmissioncapacityseemslikelytoincreasetheroleofcoalgenerationinthebaselineconditions. Totheextentthattheseopportunitiesareexhaustedinthebaseline,however,thisadditionaltransmissionwouldnotnecessarilyleadtogreatercoalgenerationintheno-actionalternative.Ifadditionallow-costcoalgenerationfromPJMwereavailable,however,theadditionaltransmissionwouldleadtoagreaterroleforcoalgenerationundertheno-actionalternative.Aswithotherprojections,thekeyconsiderationistherelativecostofalternativegenerationsourcesundertheno-actionalternative.Thesamegeneralprinciplesapplywhenevaluatingtheeffectsofpotentialadditionaltransmissionasinevaluatingtheeffectsofrecenttransmissionchanges.IfadditionaltransmissionprojectssuchastheChamplainHudsonPowerExpressProjectgoforward,theywouldprovidetheopportunityforadditionalimportsofpowerfromoutsideNewYorkState.Theseopportunitieswouldbepresentbothinthebaselinecaseandintheno-actioncase.Totheextentthatthecost-effectiveopportunitiesforadditionalimportsareexhaustedunderbaselineconditions,however,theadditionaltransmissionlineswouldnotleadtoadditionalimportsunder theno-actionalternative.Moreover,becausetheeffectsoftheno-actionalternativedependinlargepartonrelativecostsofdifferentgeneration sources,itwouldgenerallybenecessarytomodelthechangeinelectricitymarketconditionsundertheno-actionalternativetodeterminetheneteffectofanychangeintransmissiononincrementalgeneration.D.SummaryEvaluationoftheEnergyandEnvironmentalClaimsofNYS-37NYS-37anditssupportingdocumentsclaimthattheFSEISignoresimportantrecentdevelopmentsand,asaresult,givesinsufficientweighttotherolesthatconservationandrenewableenergycouldplayundertheno-actionalternative.Aswediscussedabove,mostofthosedevelopmentsaffectthebaselinebutarenotdirectlyrelevanttothemixofresourcesundertheno-actionalternative.Wealsoanalyzedhowthosedevelopmentsandtheirimpactsonthebaselinewouldbelikelytoindirectlyaffectthemixofreplacementresourcesintheno-actionalternative.Wefoundthatforthemostparttheywouldincreasethecostsofusingconservationorrenewables,reducethecostoffossil-firedalternatives,orboth.Moreover,severalofthedevelopmentsinparticularlowerfossiluseinthebaselineandlowergaspriceswouldbelikelytoincreasetheattractivenessofusingolderfossilsources(bydelayingretirementsorincreasingutilization) ratherthanthenew,moreefficientNGCCunitsassumedinseveraloftheFSEISalternatives, NERAEconomicConsulting 60undertheno-actionalternative.Increaseduseofoldersourcesandreduceduseofnewsourceswouldgenerallyincreasetheenvironmentalimpactsoftheno-actionalternativebeyondthoseidentifiedintheFSEIS.Increasedgenerationandtransmissioncapacitymaynothaveanyimpactsontheincrementaleffectsoftheno-actionalternativeifthecapacitywouldbefullyutilizedinbaselineconditions.Ifcertaincapacityisnotfullyutilized,itsroleintheno-actionalternativewoulddependlargelyuponitsrelativecostsasapotentialsourceofadditionalsupplytoreplaceIPECgeneration.
NERAEconomicConsulting 61V.ConclusionsAcentralissueintheFSEISforIPEClicenserenewalisthecomparativeenvironmentalimpactsbetweenrenewalandtheno-actionalternative. EvaluatingtheenvironmentalimpactsrequiresevaluatingthemixofgenerationthatwouldreplacelostIPECbaseloadgenerationintheno-actionalternative, sinceitisthechangesingenerationthatwoulddeterminethelikely environmentalimpacts.WeevaluatethelikelyreplacementgenerationmixusinginformationontherelativecostsofdifferentgenerationalternativesaswellastheresultsofNEMSmodeling.Fortheno-actionalternative,ouranalyses showthattheIPECreplacementgenerationwouldbereplacedprimarilybyfossil-fueledgeneration,bothfromexistingnaturalgasandcoal unitsandfromsomeadditionalunitsthatwouldbeadded(orunitswhoseretirementwouldbepostponed).Ouranalysesindicatethatbothadditionalrenewablegenerationandadditional conservationwouldconstitute smallsharesofreplacementgeneration.NYS-37providesaverydifferentvisionoflikelyreplacementgeneration,althoughthestatementandtheassociatedexpertdeclarationsdonotprovideanyempiricalanalyses.We reviewedthesematerialsandconcludedthattheirconclusionswereerroneousduetofour fundamentalflaws:(1)failuretoaccountfortheimportanceofmarketforces;(2)conflationofbaselineconditionsandtheno-actionalternative;(3)failuretoconsidertheimplicationsofthecriticismstheymadeontheallegeduseintheFSEISofoutdatedinformationonenergydemandandsupplyconditions;and(4)failuretodevelopempiricalinformation.Insummary,ourresultsestablishtwopropositionsregardingthepotentialenvironmentalimpactsoftheno-actionalternative:1.Theadverseenvironmentalimpactsoftheno-actionalternativeassessedintheFSEIS,ifanything,underestimatedthelikelyenvironmentalimpactsifIPECbaseloadgeneration werelost;and2.NewYorkStateisincorrectinitsclaimsthattheFSEISoverstatesenvironmentalimpactsbecausereplacementgenerationwouldnot,infact,beprimarilyrenewableenergyandconservation.
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-environment/06noise.html NERAEconomicConsulting 68AppendixA: InformationonRecent EnergyDevelopments inNewYork StateThisappendixsummarizesrecentinformationregardingthe sixmajordevelopmentsregardingNewYorkStateenergymarketsandpoliciesemphasizedinNYS-37:1.NewYorkStaterenewableenergygoal;2.NewYorkStateenergyefficiencygoal; 3.NewYorkStateelectricitydemandprojections; 4.NewYorkStategenerationcapacityadditions;5.NationalandNewYorkStatenaturalgasprices;and6.NewYorkStatetransmissioninvestments.Theimplicationsofthesedevelopmentsfortheenvironmentalimpactsoftheno-actionalternativearediscussedinthebodyofthereport.A.NewYorkStateRenewableEnergy GoalThissectionprovidesbackgroundinformationonNewYorks30x15renewableenergygoal.1.Overviewof GoalNewYorkofficiallyestablishedagoalforrenewableenergyina2004orderissuedbytheNYPSC.Theoriginalgoalwastoincreaserenewables shareofretailelectricityconsumptionto25percentby2013,relativetoa2004baselineofroughly19percent.In2010,NYPSCincreasedthegoalto30percentandextendedthedeadlineto2015.TableA-1summarizesthe30x15renewableenergygoal.NotethatthelevelofrenewablesimplicitinthegoalisrelativetotheforecastedloadassumingfullachievementoftheStates15x15energyefficiencygoal(discussedbelow).NYPSCsJanuary2010orderstatesthat[i]ftheexpectedenergyefficiencyachievementsareignored,a30percentgoalfor2015wouldresultinasubstantiallyhigherandmorecostlyrenewableenergytarget(NYPSC2010b,p.10).
NERAEconomicConsulting 69Asshownin TableA-1,theNYPSCs2010Order settherenewableenergygoalin2015as45.7million MWh.Baselineresourceswhichrefertorenewableenergyfromgeneratorsbuiltbefore2004(includingtheNiagaraPowerProjectandotherhydropowerinupstateNewYork)areexpectedtoproduce31.5million MWhin2015,or69percentofthegoal.
18Therestofthegoalistobemadeupbyfoursetsofincrementalpolicy-ledefforts.First,renewableenergyprojectsatStateagencieswillneedtoproduce0.32million MWhin2015.Second,voluntarygreenmarketingprograms,inwhichelectricitycustomerschoosetopayapremiumtosupportrenewableenergy,willneedtoinduce1.5million MWhofrenewableenergyin2015. Third,LIPAwillneedtocontractfor1.9million MWhofrenewableenergyin2015.Theremaining10.4million MWhofthe30x15goalwillneedtocomefromprogramsadministeredbyNYSERDA. TheNYPSCoverseestheseNYSERDAprogramsthroughthe RenewablePortfolioStandard(RPS).
192.RPSAdministrationNewYorksRPSdiffersfromprogramsinmostotherstatesinthatitlacksanenforcementmechanism.InsteadoftheNYPSCpenalizingdistributionutilitiesforfailingtoprocureminimumpercentagesoftheirelectricityfromrenewablesources,theNYPSCprovidesfundingforrenewableenergybycollectinganon-bypassablevolumetricwirescharge(NYPSC2004)fromretailcustomersofinvestor-ownedutilitiesandthenusingthosefundstosubsidizesourcesofrenewablegenerationselectedthroughacompetitivebiddingprocessadministeredbyNYSERDA. TheRPSchargeisavolumetricchargethatisinadditionto,andseparatefrom,NewYorks systemsbenefitcharge(SBC).TheRPSmaintainstwoseparatesetsofeligiblegenerators:(1)utility-scaleMainTiergenerators;and(2)Customer-Sited Tier(CST)distributed,smaller-scalegenerators.MainTierresourcesconsistofbiogas,biomass,liquidbiofuel,fuelcells,hydroelectric(limitedto 18Renewableenergyfrombaselineresourcesisnottrackedeachyearunderthe30x15policy.Thus,thegoalistoincreaserenewableenergyabovetheassumedlevelfrombaselineresourcessoastoachievethetotallevelshowninTableA-1.
19NotethattheRPSdoesnotrepresenttheentirestatewidegoalforrenewableenergy.TableA-1.NewYorks30x15RenewableEnergyGoal(millionMWh)15x15LoadRenewableEnergyGoalBaselineResourcesStateAgenciesVoluntaryProgramsLIPANYSERDA/IOUs[A][B]=[A]*30%=[C]+[D]+[E]+[F]+[G][C][D][E][F][G]152.445.731.50.321.51.910.4Notes:15x15LoadistotalconsumptionassumingreductionsinloadcorrespondingtofullachievementofNewYorks15x15energyefficiencygoal.Theloadisintermsofsendout,whichrepresentsgross energysupplytothegrid.Sendoutexceedssalesbecausesomesupplyislostintransmission.BaselineResourcesrefertorenewableenergyfromfacilitiesbuiltbefore2004.Source:NYPSC(2010b,Appendix,p.12)
NERAEconomicConsulting 70upgradesandnewlow-impactrun-of-riverplantslessthan30MWand,thus,expresslyexcludinglargehydroprojects),solarphotovoltaics,tidaloceanpower,windturbines,andanywind,biomassdirectcombustion,orrun-of-river(lessthan5MW)hydroplantsthatdemonstrateneedtoreceiveRPSfinancialsupporttooperate.CSTresourcesconsistoffuelcells,solarPV,solarthermal(addedasaqualifyingtechnologyinthe2010Order),andwindturbineslessthan300kW(NYPSC2010a,AppendixB).Onlygeneratorsthathavebeenconstructedsince2003canqualifyforfundingundereithertier. Themaintierisexpectedtocontribute9.8million MWhofthe10.4million MWhgoal,withtheremaindercomingfromCST.3.ProjectedBudgetsTheCommissionspecifiedatotalprogrambudgetthrough2024of$2.998billion,or$157.6millionperyearonaverage(NYPSC2010a,Appendix, Table15). ThebulkofthefundsareallocatedtoMainTierprograms. Theannualbudgetpeaksin2015at$321millionand declinessteadilyto$42millionin2024.4.ProgresstowardNewYorksRenewableEnergy GoalNYSERDAs2011RPSPerformanceReportstatesthat,asofDecember31,2010,generationfromtheprogramscurrentcontractswouldproducerenewableenergyequivalentto39percentofthe2015target.MainTierprogramscurrentlyundercontractwereexpectedtoreach3,930,000MWhby2015(40percentoftheMainTiertarget),andCSTprogramscurrentlyundercontractwereexpectedtoreach76,945MWhby2015(12percentoftheCSTtarget).Ofthetotal1,526 MWofMainTierrenewablecapacityalreadyaddedorunderdevelopmentbytheendof2010,1,456MWwerewind,47MWwerehydro,and43MWwerebiomass(NYSERDA,2011a,p.9).Incrementalcapacity(installedorundercontract)fromCSTprogramstotaled36 MW.NYSERDAexpectscapacityfromCSTprogramstoincreaseto284.5MWby2015,resultingintheachievementoftheCSTportionofthe2015goal(NYSERDA,2011a,p.15).NYSERDAs2011PerformanceReportdoesnotassesswhetherMainTierprogramsareexpectedtomeettheirportionofthe2015goal.5.CostsofNewYorksRenewableEnergyMeasuresNYSERDA(2011a,p.21)notesthatbytheendof2010ithadexpended57percentofitsbudgetfortheperiodthrough2015buthadsecuredonly39percentoftherenewableenergygoal. Thus,assumingthegoalcanbemetatall,unlessNYSERDAcanfundlesscostlyrenewableenergyprojectsthanithasfundedsofar(anoutcomethatisunlikelyforthereasonslaidoutindetailinthebodyofthisreport),theprogramisunlikelytoachievethe2015goalwithinbudget.MainTierproductionsubsidieshaveamountedtoaround$20perMWh,oraboutonethirdofNewYorksaveragewholesaleelectricitypricein2010(NYISO2011c,p.21). TableA-2showstheweighted-averageproductionsubsidyforalloftheMainTiersolicitationstodate.
NERAEconomicConsulting 71Wecanestimatetheexpectedcosttocustomersfortheremainderoftheprogramusingapprovedtargetsandgoals. TableA-3 showstheresultsofsuchacalculation.Asshowninthetableabove,from2011to2015,IOUcustomerscanexpecttopayanadditional$1.2billioncumulativelytohelptoachievetheRPSgoal. Thisisequivalenttoabout$33perMWh,whichismorethanhalfthe2010averagepriceofwholesaleelectricityinNewYork.However,astheMainTiersolicitationstodateshow,actualcostshavebeenhigherandachievedlevelsofrenewablegenerationhavebeenlowerthanapprovedbudgetsandtargets.Thus,the$33perMWhfigureislikelytobeconservativewithnoassurancethattheprogram goals(whichare,inanyevent,partofthebaseline)canevenbemet.B.NewYorkStateEnergyEfficiency GoalThissectionprovidesbackgroundinformationonNewYorkStates15x15energyefficiencygoal.1.Overviewof GoalGovernor EliotSpitzerannouncedthe15x15energyefficiencygoalinApril2007.Atthattime,NYPSCforecastedthatNewYorkwouldconsume166millionmegawatt-hoursTableA-2.ProductionSubsidiesforMainTierGeneratorsRoundDateWeightedAverageSubsidy($/MWh)1January2005$22.902February2007$15.523January2008$14.754December2009$19.765March2010$19.506June2011$22.01Source:NYSERDA(2011b,p.14)TableA-3.ImplicitSubsidiesfromNewYorksRPSYearCost(ApprovedBudget)Target(MWh)AverageCostperMWh(ImplicitSubsidy) 2011$170,450,2164,572,910$37.27 2012$202,989,8326,052,842$33.54 2013$243,944,0127,392,550$33.00 2014$281,544,2258,895,160$31.65 2015$321,157,58910,397,854$30.89Cumulative$1,220,085,87437,311,316$32.70Note:Productionsubsidies(inTableA-2)aretheamountsgeneratorsreceive,whereasimplicitsubsidies(inTableA-3)arethetotalamountpaidbycustomersperMWhofelectricity.Source:NYPSC(2010a),AppendixandNERAcalculations NERAEconomicConsulting 72(MWh)ofelectricityin2015. The15x15goalcallsforreducingconsumptionin2015by15percentoftheforecast,or25million MWh,resultingintotalconsumptionof141millionMWh(NYPSC2008,Appendix1,p.4).
20GovernorDavidPatersonreaffirmedthisgoalinhisStateoftheStateaddressinJanuary2009.Achievingthe15x15goalwillrequirecontributionsbyvariousorganizationsacrosstheState.NYSERDAperformedananalysisin2007todevelopappropriatecontributionlevelsforLIPA,NYPA,the sixinvestor-ownedutilitiesinthestatebasedontheirenergyefficiency programsin2007,NYSERDA,andotherstateagencies. Theanalysisalsoincludedcontributionsthroughenergyefficiencycodesandstandardsaswellasenergyefficiencymeasuresfortransmissionanddistribution. TheNYSERDAanalysissuggestedthatthesecontributionswouldcoverabout73percentofthetotalenergyefficiencygoal(i.e.,11percentagepointsoutofthe15percentreduction).NYSERDAexpectedthattheremainderofthenecessaryenergyefficiency(i.e.,4percentagepointsoutofthe15percentreduction),whichwaslabeledtheefficiencygaporjurisdictionalgap,wouldbeachievedthroughnewprogramsadministeredbyinvestor-ownedutilitiesandNYSERDAwhichwerefundedbyelectricityratesurchargesauthorizedbyNYPSC.FigureA-1 showsthepotentialcontributionstowardthe15x15energyefficiencygoalbasedonNYSERDAsanalysis.
20Thegoalcanalsobeexpressedintermsofsendout,whichrepresentsgrossenergysupplytothegrid.Sendoutexceedssalesbecausesomesupplyislostintransmission.In2007,theCommissionforecastedthatsendoutin2015wouldneedtobe179millionMWh.The15x15policycallsforreducingsendoutin2015by15percent oftheforecast,or27millionMWh,resultingintotalsendoutof152millionMWh(NYPSC2008,Appendix1,p.4).
NERAEconomicConsulting 73InanorderissuedinJune2008,NYPSCannouncedthe EnergyEfficiencyPortfolioStandard(EEPS)programwithgoalsthroughDecember31,2011forthe sixinvestor-ownedutilitiesunderitsjurisdictionandNYSERDA.Inthesameorder,NYPSCsetsurchargelevelsonNewYorkStateelectricitybillsthatitestimatedwouldachievethosegoals(NYPSC2008).The totalenergyefficiencygoalfortheinvestor-ownedutilitiesandNYSERDAthroughthatdatewouldcompletelyclosethejurisdictionalgapestimatedbyNYSERDA.InasubsequentorderissuedinOctober2011,NYPSCannouncedrevisedgoalsfortheinvestor-ownedutilitiesthroughDecember31,2015andsetsurchargelevelsthatitestimatedwouldachievethosefurthergoals(NYPSC2011a).2.AssessmentsofEnergyEfficiencySavingsLimitedinformationexistsonwhetherNewYorkStatewillachieveitsenergyefficiencygoalfor2015.Toourknowledge,therearenopubliclyavailableassessmentsoftotalstatewideprogressonenergyefficiencygoals.NYISOtracksseveralprograms,butitdoesnotexaminetransmissionanddistributionsavings,codesandstandards,2007utilityprograms,orStateagencies.NYPSConlytracksprogressonthe EEPSportionofthestatewidegoal.Itispossibletoroughlygaugeelectricity savingsbycomparingactualelectricitysystemdemandtoforecastsfromearlieryearsandmakingadjustmentsforimpactsontheeconomyandprojectedgrowth.In2010,weather-normalizedelectricitysendoutinNewYorkwas161.6million MWhsixpercentlowerthanthelevelofdemandfor2010thatNYISOforecastedinFigureA-1.PotentialContributionstowardEnergyEfficiencyGoalBasedonNYSERDAAnalysis 0 5 10 15 20 25200720082009201020112012201320142015ElectricitySavings(millionMWh)JurisdictionalGapTransmission&DistCodes&StandardsUtilities(2007Programs)SBCIII(NYSERDA)StateAgenciesNYPALIPASource:NYPSC(2008,Appendix1,p.5)
NERAEconomicConsulting 742007,whentheCommissionsetthe15x15baseline(NYISO2011a).
21 Thedemandreductionisdueprimarilytothelowereconomicactivityasaresultoftherecentrecessionand,toamuchsmallerdegree,energyefficiencyprograms,asdiscussedinthenextsectionofthisappendix.Asnotedabove,NYISOtracksenergyefficiencyachievementsfromasubsetofprogramsanddevelopsexpectedlevelsoffutureachievementsforitsloadforecastingand planningpurposes.NYISOreviewsvariousdataonenergyefficiency,including:(1)programevaluationreportssubmittedbyinvestor-ownedutilities,LIPA,andNYPA;(2)long-term forecastsprovidedbyLIPA,Consolidated Edison,andotherinvestor-ownedutilities;and(3)U.S. EnergyInformationAdministrationprojectionsofthedemandimpactsofefficiencycodesandstandards(NYISO2011a,p.6).FigureA-2showsNYISOsestimatesofcumulativesavings(intermsofsendout)through2011forEEPS,NYPA,andLIPA,aswellasNYISOsexpectationsofcumulativesavingsfortheseprogramsthrough2015andtheirgoalsfor2015underthe15x15policy.
21NYISOandNYPSCmakeindependentforecastsofelectricitysales.FigureA-2.HistoricalandNYISOsExpectationofSavingsfromEnergyEfficiencyPrograms 0.9 2.83.7 0.20.7 4.63.05.4 8.4 0.41.710.57.9 12.11.92.316.34.1 0 2 4 6 8 10 12 14 16 18EEPS:IOUsEEPS:NYSERDAEEPS:TotalNYPALIPATotalElectricitySavings(millionMWh)CumulativeSavingsThrough2011NYISO'sExpectationofCumulativeSavingsThrough20152015GoalNotes:Savingsareintermsofsendout.Cumulativesavingsaredefinedasoverallsavingsin2011resultingfromprogramexpendituresinpreviousyearsthrough2011.TheEEPS:NYSERDAsavingsincludetheNYSERDAEnergySmartprogram.Theprogramsincludedinthefigureaccountforabout60percentof thetotal15x15goal.Source:NYISO(2012),slide5 NERAEconomicConsulting 75FigureA-2 showsthatthroughtheendof2011,EEPSprogramshadachieved31percentoftheir2015goal(3.7million MWhoutof12.1million MWhintermsofsendout).NYISOexpects EEPSprogramstoachieve70percent(8.4million MWh)oftheirgoalbytheendof2015.NYISOdoesnotexpectNYPAorLIPAtomeettheirenergyefficiencygoalsfor2015either.Collectivelyforthe EEPSprograms,NYPA,andLIPA,cumulativesavingsthrough2011were28percentofthetotal2015goal(4.6millionMWhoutof16.3million MWh),andNYISOexpectsthemtoachieve64percent(10.5million MWh)oftheirtotalgoalbytheendof2015.InitsofficialcommentsontheNYPSC EEPSWhitePaper,NYISOstatedthatfullachievementofthe[EEPS]programgoalsby2015isnotfeasible(NYISO2011b).NotethatNYISOsforecastsreflecttheorganizationsjudgmentregardinginherentlyuncertainvariables.
22TheNYPSC,ontheotherhand,maintainsthatthereisareasonableexpectationthattheEEPSgoalwillbemetby2015(NYPSC2011b,p.1).ArecentNYPSCwhitepaperreportsthat[s]avingsachieved,asapercentageoftotaltargets,arerunningaheadofdollarsspentasapercentageoftotalbudgets.AsofFebruary28,2011,statewideelectricitysavingsrepresented49.1%ofthecumulativetargetstodatewhilecombinedprogramspendingrepresented38.9%ofbudgetstodate(NYPSC2011b,p.8).Moreover,thewhitepapernotesthat,intheNYPSCsestimation,thesavingsachievedthrough2010and2011shouldnotbeusedtopredictfuturesavings, sincethe EEPSprogramisintransition(NYPSC2011b,p.1).3.CostsofNewYorksEnergyEfficiencyMeasuresAsnotedabove,limitedinformationisavailableonthestatewideprogresstowardmeetingthe15x15energyefficiencygoal. ThismakesitdifficulttomakestatewideassessmentsofthetotalcostsofenergyefficiencymeasuresinNewYork.Informationisavailableonenergyefficiencymeasuresbyinvestor-ownedutilitiesandNYSERDAaspartof the EEPSprogram,however.NYPSCadministersthe EEPSprogramandfundsitthroughsurchargesonretailelectricityratesthatareassessedtoNewYorksconsumersonamonthlybasis.Asnotedabove, NYPSCsetsavingsgoalsandbudgetsforEEPSprogramsateachutilityandNYSERDAthrough 2011inanorderissuedin2008.NYPSCsetnewgoalsandbudgetsfrom2012through2015inanorderissuedinOctober2011.IncommentssubmittedwhileNYPSCwasconsideringalternativesforthesecondphaseofthe EEPSprogramfrom2012to2015,NYISO(2011b)notedthatthe EEPSprogramwould require significantlymorefundingeachyearfrom2012to2015thanduringthefirstphaseinordertoachievethecumulativegoalby2015($370millionperyearonaverageduringthe secondphaseversusamaximumof$250millionduringthefirstphase).NYISOalsoshowedasupplycurvethatcombinedthesavingsfromallEEPSprogramsthroughJune2011andtheircostperMWh.Abouthalfofthesavingswereachievedbyincurringcostsabove$150/MWh, 22AnenergyexpertattheNaturalResourcesDefenseCouncilhasalsoconcludedthatNewYorkisnotontracktomeetthe15x15energyefficiencygoal(Wald2011).
NERAEconomicConsulting 76andseveralprogramshadcostsabove$1,000/MWh.Forcomparison,theaveragewholesaleelectricitypriceinNewYorkin2010was$59/MWh(NYISO2011c,p.21),andtheaverageretailpricewas$163/MWh(EIA2012). Thecostsofenergyefficiencymeasurescanalsobecomparedwiththeavoidedcost,whichisthesumofwholesalecost,distributioncost,andexternalities.Ifexternalitiesarerelatively smallperMWh,theavoidedcostisgenerallyclosetotheretailprice. Thus,manyenergyefficiencyprogramsthroughJune2011werecostlyrelativetoelectricitypricesandavoidedcosts.C.NewYorkStateElectricityDemandProjectionsThissectionprovidesbackgroundonrecentdemandprojectionsforNewYorkStateintermsofelectricitysales(measuredingigawatt-hours:GWh).Wedonotincludedemandprojectionsintermsofpeakloadbecausethismeasureofdemandrelatestoreliabilityratherthan replacementenergybutthelatteristhefocusoftheenvironmentalimpactanalysisundertheno-actionalternative.1.ElectricitySalesProjectionsThissectionprovidesinformationonelectricitysalesprojectionsfirstforNewYorkStateandthenfordownstatezonesthataremostrelevantforIPEC(ZonesG,H,I,J,andK).a.NewYorkStateFigure13showsprojectionsofNewYorkStateelectricitysalesfromNYISOLoad&Capacityreports(GoldBooks)from2006to2011.Asshowninthefigure,theprojectionsdecreased significantlyovertheperiod,particularlybetween2008and2009asthedepthoftherecessionwasincorporatedintotheforecast.NYISOprojectedin2006thatsalesin2016wouldbe184,630GWh,butitprojectedin2011thatsalesin2016wouldbeonly165,319GWh,areductionof10.5percentrelativetotheprojectionfrom2006.
NERAEconomicConsulting 77b.DownstateZonesFigureA-4providesamapofNYISOzones.FigureA-3.NYISOProjectionsofNewYorkStateElectricitySales145,000150,000155,000160,000165,000170,000175,000180,000185,000190,000195,00020062008201020122014201620182020ElectricitySales(GWh
)2006 2007 2008 2009 2010 2011Note:AllprojectionsreflectNYISOsprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 78FigureA-5 showsprojectionsofdownstate(ZonesG-K)electricity salesfromNYISOGoldBooksfrom2006to2011. Thefigurehasa similarpatterntotheNewYorkStatefigure.Theprojectionfor2016from2011(98,200GWh)is10.8percentlowerthantheprojectionfrom 2006(110,135GWh).FigureA-4.NYISOZonesSource:FERC(2012)
NERAEconomicConsulting 792.EffectofRecessionAccordingtotheNationalBureauof EconomicResearch,therecentrecessionbeganinDecember2007andendedinJune2009(NBER2010).NYISOnotesinitsPowerTrends2011reportthatNewYorkStateelectricitysalesdecreasedby1percentin2008relativetosalesinthepreviousyear,decreasedby4percentin2009,andincreasedby3percentin2010(NYISO2011c,p.18).NYISOdiscussestheeffectoftherecessionondemandprojectionsinitsmostrecentReliabilityNeeds Assessment(RNA),whichwaspublishedinSeptember2010.Itcomparesprojectionsinthe2010RNAwithprojectionsinthepreviousRNA,whichwaspublishedinJanuary2009andwasbasedonmodelingperformedbeforetheworstpartoftherecession.NYISOnotesthatitsbasecaseprojectioninthe2010RNAforelectricitysalesin2015isabout10,800GWh(6.1percent)lowerthaninthe2009RNAduetothe2009recessionandsubsequentlowereconomicgrowthprojections(NYISO2010a,p.10).Newenergyefficiencypoliciestohelpachievethe15x15goalalsocontributedtoamuchless significantdegreetolowerprojections.InapreviouspresentationinMay2010,NYISOestimatedthattherecessionreducedelectricitysalesbetweenOctober2008andApril2010(adjustedforweather)by6,400GWh.FigureA-5.NYISOProjectionsofDownstate(ZonesG-K)ElectricitySales85,00090,000 95,000100,000105,000110,000 115,00020062008201020122014201620182020ElectricitySales(GWh
)2006 2007 2008 2009 2010 2011Note:AllprojectionsincorporateNYISOsprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 80Energyefficiencyprogramsaccountedforanadditional600GWhofreduction,andlosteconomicgrowthfor1,500to2,000GWh(NYISO2010b,p.2). Thus,forthishistoricalperiod,therecession(includingtheresultinglosteconomicgrowth)wasestimatedtoaccountforabout93percentofthetotalreductioninelectricitysales.D.NewYorkStateGenerationCapacityAdditionsThissectionprovidesbackgroundinformationonrecentandproposedcapacityadditionsinNewYorkbasedonNYISOslistofpowerplants(NYISO2011d)anditscurrentInterconnectionQueue(NYISO2011e).1.CapacityAdditionsSince2000a.AnnualAdditionsAccordingtotheNYISOdata,8,348MWofgenerationcapacityhasbeenaddedinNewYorkStatesince2000. Thefollowingfiguresillustraterecentadditions.
NERAEconomicConsulting 81Figure14showsannualcapacityadditionsinNewYorkStatefrom2000to2011byenergytype.As showninthefigure,naturalgaswasthedominanttypeofnewcapacityinmostyears,butlargeamountsofwindwasalsoaddedinsomeyears,mostpredominantlyin2008.FigureA-6.AnnualGenerationCapacityAdditions(MW) 02004006008001,0001,2001,4001,600 1,800200020012002200320042005200620072008200920102011AnnualAdditions(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011d)
NERAEconomicConsulting 82b.CumulativeAdditionsFigureA-7 showsthecumulativecapacityadditionsinNewYorkStatefrom2000to2011byenergytype.Ofthe8,348MWoftotaladditions,naturalgasaccountedfor6,874MW(83percent)andwindaccountedfor1,348MW(16percent).FigureA-7.CumulativeGenerationCapacityAdditionsSince2000(MW)NaturalGas,6,874,83%Coal,0,0%Oil,0,0%Nuclear,0,0%Hydro,15,0%Wind,1,348,16%Other,111,1%Solar,0,0%Source:NERAanalysisofNYISO(2011d)
NERAEconomicConsulting 832.GeographicDistributionFigureA-8 showsthegeographicdistributionofcumulativecapacityadditionsinNewYorkStatefrom2000to2011.NoadditionshavebeenbuiltinZoneG(HudsonValley),ZoneH(Millwood),orZoneI(Dunwoodie). ThirtypercentofadditionshavebeenbuiltinZoneJ(NewYorkCity),and16percenthavebeenbuiltinZoneK(LongIsland).3.Current Interconnection Queuea.AnnualProposedAdditionsTheNYISOInterconnectionQueuedatedDecember31,2011contains12,081 MWofpotentialgenerationprojectsinNewYorkState.Windfacilitiesaccountfor5,698MW(47percent),andnaturalgasfacilitiesaccountfor5,384MW(45percent). ThetotalrenewablecapacityintheInterconnectionQueueis5,839MW(48percent).Thefollowingfiguresandtablesillustratetheenergytypes,timing,andlocationofpotentialgenerationprojectsintheInterconnectionQueue.FigureA-8.GeographicDistributionofCumulativeGenerationCapacityAdditionsSince2000(MW)Zone K:LongIsland,1,370,16%OtherZones,4,459,54%ZoneI:Dunwoodie,0, 0%ZoneH:Millwood,0,0%ZoneG:HudsonValley,0,0%ZoneJ:NewYorkCity,2,520,30%Source:NERAanalysisofNYISO(2011d)
NERAEconomicConsulting 84Figure15showstheenergytypesandcurrentlyexpectedin-servicedatesforactiveprojectsintheInterconnectionQueue.ProjectsintheInterconnectionQueueproposetobecomecommerciallyoperationalasfarinthefutureas2017.FigureA-9.PotentialGenerationProjectsinCurrentInterconnectionQueue(MW) 05001,0001,5002,0002,5003,0002012201320142015201620172018N/APotentialGenerationProjects(MW)OtherSolarWindHydroNuclearOilCoalNaturalGasSource:NERAanalysisofNYISO(2011e)
NERAEconomicConsulting 85b.GeographicDistributionFigureA-10 showsthegeographicdistributionofactiveprojectsintheInterconnectionQueue.ZoneGaccountsfor1,681MW(14percent).NeitherZoneHnorZoneIhasanyprojects.ZoneJaccountsfor4,451MW(37percent),andZoneKaccountsfor1,681MW(14percent).Thus,thedownstatezonescollectivelyaccountfor65percentoftheactiveprojectsintheInterconnectionQueue.FigureA-10.GeographicDistributionofProjectsinCurrentInterconnectionQueue(MW)ZoneG:HudsonValley,1,681,14%ZoneH:Millwood,0,0%ZoneI:Dunwoodie,0, 0%ZoneJ:NewYorkCity,4,451,37%ZoneK:LongIsland,1,681, 14%OtherZones,4,269,35%Source:NERAanalysisofNYISO(2011e)
NERAEconomicConsulting 86c.OriginalversusCurrent In-ServiceDatesTableA-4 showsoriginalandcurrentin-servicedatesforprojectsintheInterconnectionQueue(intermsof MW).Manyprojectshavehad significantpostponements. Themajorityofprojectsthatarecurrentlyexpectedtocomeinservicein2012(intermsof MW)wereoriginallyscheduledtocomein servicein2007orearlier.Acrossallcurrentdates,46percentofprojects(intermsof MW)havebeenpostponedbyfouryearsormore.4.WindProjectsWithdrawnfromInterconnection QueueSince2000TheInterconnectionQueue showsthat8,286MWofwindprojectshavebeenwithdrawnbydevelopers since2000. Thus,thewindcapacitythathasbeenbuiltinNewYorkStatesince2000(1,330MW)is16percentofthecapacitythathasbeenwithdrawnand14percentofthetotalwindprojectsoriginallyproposed.E.NationalandNewYorkStateNatural GasPricesThissectionprovidesbackgroundonrecentnationalpriceprojectionsfornaturalgas(measuredin2011dollarspermillionBritishthermalunits2011$/MMBtu).TableA-4.OriginalandCurrentIn-ServiceDatesforProjectsinInterconnectionQueue(MW)Current Date OriginalDate2012201320142015201620172018N/
ATotal 200578600000084 2006235704000000939 20071,2380000002971,536 2008500992000000117916 2009902100000073373 201044230079437400021,912 2011047900000619756 20122470590656000962 2013065515106600001,465 2014001,536000001,536 20150008100601001,411 20160000174000174 2017000000000 2018000000000 N/A01000000717Total2,8302,0312,8301,1841,49060101,11512,081Postponements0 years1year2 years3 years4years5 years6years>6years3,4211511,1501,1402,1601,71143578810,95631%1%10%10%20%16%4%7%Cumulative0 years1year2 years3years4years5 years6years>6years10,9567,5357,3846,2355,0952,9351,223788100%69%67%57%46%27%11%7%Source:NERAanalysisofNYISO(2011e)
NERAEconomicConsulting 871.HenryHubPriceProjectionsFigureA-11displays EIAsAnnualEnergyOutlookreferencecaseprojectionsoftheHenryHubspotpricefornaturalgasforthereportyearsfrom2007to2012.Themostrecentprojectionforfuturenaturalgaspricesisbetween$1to$3perMMBtucheaperthanpreviousprojectionsduetotheexpandingavailabilityofunconventionalgas.2.NewYorkStateDeliveredPricestoElectricity GeneratorsFigureA-12displays EIAsAnnualEnergyOutlookreferencecaseprojectionsofthedeliveredpricethatelectricitygeneratorsinNewYorkStatewillpayfornaturalgasforthereportyearsfrom2006to2012.Asinthepreviousfigure,itcanbeseenthatthemostrecent projectionforfuturenaturalgaspricesisbetween$1to$3perMMBtucheaperthanpreviouslyforecasted.FigureA-11.AEOProjectionsofHenryHubNaturalGasPrices0.001.002.003.00 4.005.006.007.008.009.002012201320142015201620172018201920202011$/MMBtu2007200820092010 2011 2012Note:AEO2006HenryHubprojectionnotavailableSource:AnnualEnergyOutlook2007-2012(referencecase)
NERAEconomicConsulting 88F.NewYorkStateTransmissionProjectsThissectionprovidesbackgroundinformationonrecent,proposed,andcanceledtransmissionprojectsinNewYork.1.RecentlyCompletedTransmissionProjectsa.NeptuneRegionalTransmissionSystemStatus:Beganoperationin2007Route:Sayreville,NJtoNewCassel(LongIsland),NYCapacity:660MWEnvImpacts:Other:Operatesunderalong-termagreementwithLIPAWebsite:neptunerts.com/FigureA-12.AEOProjectionsofDeliveredNaturalGasPricestoElectricityGeneratorsinNewYorkState0.001.002.003.004.005.006.007.008.009.002012201320142015201620172018201920202011$/MMBtu 2007 2008 2009 2010 2011 2012Note:AEO2011&2012regionisNortheastPowerCoordinatingCouncil/UpstateNewYork.Forallotheryears,AEOreportedNortheastPowerCoordinatingCouncil/NewYork.Source:AnnualEnergyOutlook2007-2012(referencecase)
NERAEconomicConsulting 89b.LindenVariableFrequencyTransformersStatus:BeganoperationinDecember2009Route:Linden,NJ(PJM)toNYCCapacity:315MWEnvImpacts:Other:ThevariablefrequencytransformersaretechnologiesthatfacilitatesendingadditionalpowerfromNJtoNYCusingexistingtransmissionlines.Website:green.blogs.nytimes.com/2009/03/11/a-new-valve-for-controlling-flows-of-electricity/2.ProposedTransmissionProjectsa.HudsonTransmissionPartnersStatus:NYPSCapprovedcertificateforthelineinSeptember2010ConstructionbeganinMay2011andisexpectedtofinishin2013Route:Ridgefield,NJ(PJM)toNYCCapacity:320MWinitiallyEnvImpacts:NYPSCOrdernotesthatmarketsimulationsfor2013indicatehigherairemissionsinPJMwithHTP(pp.27-32);NYSdoesnotincludethissectioninitsexcerptdocuments.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId={CAFAD145-3C87-4E33-ACDF-45D87B7A76C6}Other:Willoperateunderalong-termagreementwithNYPAWebsite:hudsonproject.com/documents.dps.state.ny.us/public/MatterManagement/CaseMaster.aspx?MatterSeq=29123b.ChamplainHudsonPowerExpressStatus:SettlementagreementfiledinArticleVIIproceedingonFebruary24,2012;litigationphasehasnowcommencedRoute:QuebectoNYCCapacity:1000MWEnvImpacts:
Other:Website:chpexpress.com/http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={C5F63E41-5ED5-46A2-99A5-F1C5FC522D36}c.Cross-HudsonCableStatus:Projecthasbeenpursuedsince2001;scheduledtobeginoperationin2015butcurrentlynoopenbaypositionsifHTPcompletesconstructionRoute:PSEGterritory(NJ)toNYCCapacity:700MWEnvImpacts:TheprojectsEnvironmentalManagementandConstructionPlanappearstoincludeonlydirect impactsandnoindirectimpactsintheelectricitymarket(e.g.,airemissionsfromincreased generationbyfossilunits) http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={E95EEDCF-56F9-4CFD-B775-D895D6A9D9C7}Other:Website:http://www.cavalloenergy.com/page2/page2.html NERAEconomicConsulting 90http://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?MatterSeq=191113.CanceledProjectsa.NewYorkRegionalInterconnectStatus:RequestforcertificatewaswithdrawninApril2009Route:OneidaCounty,NYtoOrangeCounty,NYCapacity:1200MWEnvImpacts:Other:
Website:http://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?MatterSeq=29900G.ReferencesDatabaseofStateIncentivesforRenewablesand Efficiency(DSIRE).2011.NewYork.http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=NY03R&state=NY&CurrentPageID=1&RE=1&EE=1
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NERAEconomicConsulting 93AppendixB:TheNationalEnergyModelingSystemThisappendixprovidesdetailsontheNational EnergyModelingSystem(NEMS). ThetextandfiguresareadaptedfromdocumentationdevelopedbytheU.S. EnergyInformationAdministration(EIA)foritsAnnual EnergyOutlook2011 (EIA2011).WeusedtheAEO2012versionofNEMSforourmodelinginthisstudy,but EIAhasnotyetreleasedadocumentsummarizingtheassumptionsintheAEO2012version.A. OverviewNEMSisdevelopedandmaintainedbythe EIAOfficeof EnergyAnalysistoprovideprojectionsofdomesticenergy-economymarketsinthelongtermandperformpolicyanalysesrequestedbydecision-makersintheWhiteHouse,Congress,Departmentof Energy,andothergovernmentagencies. Theseprojectionsarealsousedbyanalystsandplannersinothergovernmentagenciesandoutsideorganizations.ThetimehorizonofNEMSisapproximately25years,theperiodinwhichthestructureoftheeconomyandthenatureofenergymarketsaresufficientlyunderstoodthatitispossibletorepresentconsiderablestructuralandregionaldetail.Becauseofthediversenatureofenergysupply,demand,andconversionintheUnitedStates,NEMSsupportsregionalmodelingandanalysisinordertorepresenttheregionaldifferencesinenergymarkets,toprovidepolicyimpactsattheregionallevel,andtoportraytransportationflows. Thelevelofregionaldetailfortheend-usedemandmodulesisthenineCensusdivisions.Otherregionalstructuresincludeproductionandconsumptionregionsspecifictooil,naturalgas,andcoalsupplyanddistribution,theNorthAmericanElectricReliabilityCorporation(NERC)regionsandsub-regionsfor electricity,andthePetroleumAdministrationforDefenseDistricts(PADDs)forrefineries.Foreachfuelandconsumingsector,NEMSbalancestheenergysupplyanddemand,accountingfortheeconomiccompetitionbetweenthevariousenergyfuelsandsources.NEMSis organizedandimplementedasamodular system,asshowninFigureB-1below.
NERAEconomicConsulting 94Themodulesrepresenteachofthefuelsupplymarkets,conversionsectors,andend-useconsumptionsectorsoftheenergysystem.NEMSalsoincludesamacroeconomicandaninternationalmodule. Theprimaryflowsofinformationbetweeneachofthesemodulesarethedeliveredpricesofenergytotheenduserandthequantitiesconsumedbyproduct,region,andsector. Thedeliveredpricesoffuelencompassalltheactivitiesnecessarytoproduce,import,andtransportfuelstotheenduser. Theinformationflowsalsoincludeotherdatasuchaseconomicactivity,domesticproduction,andinternationalpetroleumsupplyavailability.TheintegratingmoduleofNEMScontrolstheexecutionofeachofthecomponentmodules. Tofacilitatemodularity,thecomponentsdonotpassinformationtoeachotherdirectlybutcommunicatethroughacentraldatastoragelocation. Thismodulardesignprovidesthecapabilitytoexecutemodulesindividually,thusallowingdecentralizeddevelopmentofthesystemandindependentanalysisandtestingofindividualmodules. Thismodularityallowsuseofthemethodologyandlevelofdetailmostappropriateforeachenergysector.NEMSsolvesby callingeachsupply,conversion,andend-usedemandmoduleinsequenceuntilthedeliveredpricesofenergyandthequantitiesdemandedhaveconvergedwithintolerance,thusachievinganeconomicequilibriumofsupplyanddemandintheconsumingsectors.Solutionisreachedannuallythroughtheprojectionhorizon.Othervariablesarealsoevaluatedforconvergencesuchaspetroleumproductimports,crudeoilimports,andseveralmacroeconomicindicators.EachNEMScomponentalsoincorporatestheimpactsoffederalandstatelawsandregulationsthataffectthesector.Annual EnergyOutlook2012:Early Release,thebaselinescenarioforthisanalysis,reflectslawsandregulationsthroughlate2011.FigureB-1.StructureofNEMSCONVERSIONSUPPLYDEMANDNEMSIntegratingModuleInternationalEnergyModuleMacroeconomicActivityModuleOil&GasSupplyModuleGasTransmission&DistributionModuleCoalMarketModuleRenewableFuelsModuleElectricityMarketModulePetroleumMarketModuleIndustrialDemandModuleTransportationDemandModuleCommercialDemandModuleResidentialDemandModuleCONVERSIONSUPPLYDEMANDNEMSIntegratingModuleInternationalEnergyModuleMacroeconomicActivityModuleOil&GasSupplyModuleGasTransmission&DistributionModuleCoalMarketModuleRenewableFuelsModuleElectricityMarketModulePetroleumMarketModuleIndustrialDemandModuleTransportationDemandModuleCommercialDemandModuleResidentialDemandModuleSource:AdaptedfromEIA(2011)
NERAEconomicConsulting 95B.ComponentModulesThecomponentmodulesofNEMSrepresenttheindividualsupply,demand,andconversion sectorsofdomesticenergymarketsandalsoincludeinternationalandmacroeconomicmodules.Ingeneral,themodulesinteractthroughvaluesrepresentingthepricesofenergydeliveredtotheconsumingsectorsandthequantitiesofend-useenergyconsumption.Thissectionprovidesbriefsummariesofeachofthemodules.1.MacroeconomicActivityModuleTheMacroeconomicActivityModule(MAM)providesasetofmacroeconomicdriverstotheenergymodulesandreceivesenergy-relatedindicatorsfromtheNEMSenergycomponentsaspartofthemacroeconomicfeedbackmechanismwithinNEMS.Keymacroeconomicvariablesusedintheenergymodulesincludegrossdomesticproduct(GDP),disposableincome,valueofindustrial shipments,newhousingstarts,salesofnewlight-dutyvehicles,interestrates,andemployment.KeyenergyindicatorsfedbacktotheMAMincludeaggregateenergypricesandcosts.The MAMusesthefollowingmodelsfromIHSGlobalInsight:MacroeconomicModeloftheU.S.Economy,NationalIndustryModel,andNationalEmploymentModel.Inaddition, EIAhasconstructedaRegional EconomicandIndustryModeltoprojectregionaleconomicdrivers,andaCommercialFloorspaceModeltoproject13floorspacetypesin9Censusdivisions. TheaccountingframeworkforindustrialvalueofshipmentsusestheNorthAmericanIndustryClassificationSystem(NAICS).2.InternationalModuleTheInternationalEnergyModule(IEM)usesassumptionsofeconomicgrowthandexpectationsoffutureU.S.andworldpetroleumliquidsproductionandconsumption,byyear,toprojecttheinteractionofU.S.andinternationalliquidsmarkets. TheIEMcomputesworldoilprices,providesaworldcrude-likeliquidssupplycurve,generatesaworldwideoilsupply/demandbalanceforeachyearoftheprojectionperiod,andcomputesinitialestimatesofcrudeoilandlightandheavypetroleumproductimportstotheUnitedStatesbyPADDregions.Thesupply-curvecalculationsarebasedonhistoricalmarketdataandaworldoilsupply/demandbalance,whichisdevelopedfromreduced-formmodelsofinternationalliquidssupplyanddemand,currentinvestmenttrendsinexplorationanddevelopment,andlong-termresourceeconomics. Theoilproductionestimatesincludebothconventionalandunconventionalsupply recoverytechnologies.IninteractingwiththerestofNEMS,theIEMchangestheworldoilpricewhichisdefinedasthepriceofforeignlight,lowsulfurcrudeoildeliveredtoCushing,Oklahoma(in PADD2)inresponsetochangesinexpectedproductionandconsumptionofcrudeoilandproductliquidsintheUnitedStates.
NERAEconomicConsulting 963.ResidentialandCommercialDemandModulesTheResidentialDemandModuleprojectsenergyconsumptionintheresidentialsectorbyhousingtypeandenduse,basedondeliveredenergyprices,themenuofequipmentavailable,theavailabilityandcostofrenewablesourcesofenergy,andhousingstarts.TheCommercialDemandModuleprojectsenergyconsumptioninthecommercialsectorbybuildingtypeandnon-buildingusesofenergyandbycategoryofenduse,basedondeliveredpricesofenergy,availabilityofrenewablesourcesofenergy,andmacroeconomicvariablesrepresentinginterest ratesandfloorspaceconstruction.Bothmodulesestimatetheequipmentstockforthemajorend-useservices,incorporatingassessmentsofadvancedtechnologies,includingrepresentationsofrenewableenergy technologies,andtheeffectsofbothbuilding shellandappliancestandards,includingthe2009and2010consensusagreementsreachedbetweenmanufacturersandenvironmentalinterestgroups. TheCommercialDemandModuleincorporatescombinedheatandpower(CHP) technology. Themodulesalsoincludeprojectionsofdistributedgeneration.Bothmodulesincorporatechangestonormalheatingandcoolingdegree-daysbyCensusdivision,basedona10-yearaverageandonState-levelpopulationprojections. TheResidentialDemandModuleprojectsanincreaseintheaveragesquarefootageofbothnewconstructionandexistingstructures,basedontrendsinnewconstructionandremodeling.4.IndustrialDemandModuleTheIndustrialDemandModule(IDM)projectstheconsumptionofenergyforheatandpower,feedstocks,andrawmaterialsineachof21industries,subjecttothedeliveredpricesofenergyandthevaluesofmacroeconomicvariablesrepresentingemploymentandthevalueofshipmentsforeachindustry.Asnotedinthedescriptionofthe MAM,thevalueof shipmentsis basedonNAICS. Theindustriesareclassifiedintothreegroups(1)energy-intensivemanufacturing;(2)non-energy-intensivemanufacturing;and(3)nonmanufacturing.Oftheeightenergy-intensiveindustries,sevenaremodeledintheIDM,withenergy-consumingcomponentsforboiler/steam/cogeneration,buildings,andprocess/assemblyuseofenergy. TheuseofenergyforpetroleumrefiningismodeledinthePetroleumMarketModule(PMM),asdescribedbelow,andtheprojectedconsumptionisincludedintheindustrialtotals.Ageneralizedrepresentationofcogenerationandarecyclingcomponentalsoareincluded.AneweconomiccalculationforCHPsystemswasimplementedforAEO2011.TheevaluationofCHP systemsnowusesadiscountrate,whichdependsonthe10-year Treasurybillrateplusariskpremium,replacingthepreviouscalculationthatusedsimplepayback.Also,thebaseyearoftheIDMwasupdatedto2006inkeepingwithanupdatetoEIAs2006Manufacturing EnergyConsumptionSurvey.5.TransportationDemandModuleThe TransportationDemandModuleprojectsconsumptionoffuelsinthetransportationsector,includingpetroleumproducts,electricity,methanol,ethanol,compressednaturalgas,and NERAEconomicConsulting 97hydrogen,bytransportationmode,vehiclevintage,and sizeclass,subjecttodeliveredpricesofenergyfuelsandmacroeconomicvariablesrepresentingdisposablepersonalincome,GDP,population,interestrates,andindustrial shipments.Fleetvehiclesarerepresentedseparatelytoallowanalysisofotherlegislationandlegislativeproposalsspecifictothosemarketsegments.The TransportationDemandModulealsoincludesacomponenttoassessthepenetrationofalternative-fuelvehicles. The EnergyPolicyActof2005(EPACT2005)and EnergyImprovementand ExtensionActof2008(EIEA2008)arereflectedintheassessmentofimpactsoftaxcreditsonthepurchaseofhybridgas-electric,alternative-fuel,andfuel-cellvehicles.Representationsofcorporateaveragefueleconomy(CAFE)standardsandofbiofuelconsumptioninthemodulereflectstandardsenactedbytheNationalHighway TrafficSafetyAdministration(NHTSA)andU.S.EPA,andprovisionsin EISA2007.Theairtransportationcomponentofthe TransportationDemandModuleexplicitlyrepresentsairtravelindomesticandforeignmarketsandincludestheindustrypracticeofparkingaircraftinbothdomesticandinternationalmarketstoreduceoperatingcosts,aswellasthemovementofagingaircraftfrompassengertocargomarkets.Forpassengertravelandairfreightshipments,themodulerepresentsregionalfueluseinregional,narrow-body,andwide-bodyaircraft.Aninfrastructureconstraint,whichisalsomodeled,canpotentiallylimitoverallgrowthinpassengerandfreightairtraveltolevelscommensuratewithindustry-projectedinfrastructureexpansionandcapacitygrowth.6.ElectricityMarketModuleTherearethreeprimarysubmodulesofthe ElectricityMarketModule:(1)capacityplanning;(2)fueldispatching;and(3)financeandpricing. Thecapacityexpansionsubmoduleusesthestockofexistinggenerationcapacity;themenu,cost,andperformanceoffuturegenerationcapacity;expectedfuelprices;expectedfinancialparameters;expectedelectricitydemand;andexpectedenvironmentalregulationstoprojecttheoptimalmixofnewgenerationcapacitythatshouldbeaddedinfutureyears. Thefueldispatchingsubmoduleusestheexistingstockofgenerationequipmenttypes,theiroperationandmaintenancecostsandperformance,fuelpricestotheelectricitysector,electricitydemand,andallapplicableenvironmental regulationstodeterminetheleast-costwaytomeetthatdemand. Thesubmodulealsodeterminestransmissionandpricingofelectricity. Thefinanceandpricingsubmoduleusescapitalcosts,fuelcosts,macroeconomicparameters,environmentalregulations,andloadshapestoestimategenerationcostsforeachtechnology.Allspecificallyidentifiedoptionspromulgatedbythe EPAforcompliancewiththeCleanAirActAmendmentsof1990(CAAA90)areexplicitlyrepresentedinthecapacityexpansionanddispatchdecisions;thosethathavenotbeenpromulgated(e.g.,fineparticulateproposals)arenotincorporated.Allfinancialincentivesforpowergenerationexpansionanddispatchspecificallyidentifiedin EPACT2005havebeenimplemented. TheAEO2012ReferencecasealsoreflectsthenewCrossStateAirPollutionRule(CSAPR). TheAEO2012Referencecasedoesnot,however,incorporatetheupcomingMercuryandAir ToxicsStandard(MATS).
NERAEconomicConsulting 987.Oiland GasSupplyModuleTheOilandGasSupplyModulerepresentsdomesticcrudeoilandnaturalgassupplywithinanintegratedframeworkthatcapturestheinterrelationshipsamongthevarioussourcesofsupplyonshore,offshore,andAlaskabyallproductiontechniques,includingnaturalgasrecoveryfromcoalbedsandlow-permeabilityformationsof sandstoneand shale. Theframeworkanalyzescashflowandprofitabilitytocomputeinvestmentanddrillingforeachofthesupplysources,basedonthepricesforcrudeoilandnaturalgas,thedomesticrecoverable resourcebase,andthestateoftechnology.Oilandnaturalgasproductionactivitiesaremodeledfor12supplyregions,including sixonshore,threeoffshore,andthreeAlaskanregions.TheOnshoreLower48OilandGasSupplySubmoduleevaluatestheeconomicsoffutureexplorationanddevelopmentprojectsforcrudeoilandnaturalgasattheplaylevel.Crudeoil resourcesaredividedintoknownplaysandundiscoveredplays,includinghighlyfracturedcontinuouszones,suchastheAustinchalkandBakken shaleformations.Productionpotential fromadvanced secondaryrecoverytechniques(suchasinfilldrilling,horizontalcontinuity,andhorizontalprofile)andenhancedoilrecovery(suchasCO 2flooding,steamflooding,polymerflooding,andprofilemodification)areexplicitlyrepresented.Naturalgasresourcesaredivided intoknownproducingplays,knowndevelopingplays,andundiscoveredplaysinhigh-permeabilitycarbonateandsandstone,tightgas,shalegas,andcoalbedmethane.DomesticcrudeoilproductionquantitiesareusedasinputstothePMMinNEMSforconversionandblendingintorefinedpetroleumproducts.SupplycurvesfornaturalgasareusedasinputstotheNaturalGas TransmissionandDistributionModule(NGTDM)fordeterminingnaturalgaswellheadpricesanddomesticproduction.8.Natural GasTransmissionandDistributionModuleTheNGTDMrepresentsthetransmission,distribution,andpricingofnaturalgas,subjecttoend-usedemandfornaturalgasandtheavailabilityofdomesticnaturalgasandnaturalgastradedontheinternationalmarket.Themoduletrackstheflowsofnaturalgasanddeterminestheassociatedcapacityexpansionrequirementsinanaggregatepipelinenetwork,connectingthedomesticandforeignsupplyregionswith12U.S.lower48demandregions. The12regionsalignwiththenineCensusdivisions,withthreesubdividedandAlaskahandledseparately. Theflow ofnaturalgasisdeterminedforbothapeakandoff-peakperiodintheyear,assumingahistoricallybasedseasonaldistributionofnaturalgasdemand.Keycomponentsofpipelineanddistributortariffsareincludedinseparatepricingalgorithms.Analgorithmisincludedtoprojecttheadditionofcompressednaturalgasretailfuelingcapability. Themodulealsoaccountsforforeignsourcesofnaturalgas,includingpipelineimportsandexportstoCanadaandMexico,aswellasliquefiednaturalgas(LNG)importsandexports.9.PetroleumMarketModuleThePMMprojectspricesofpetroleumproducts,crudeoilandproductimportactivity,anddomesticrefineryoperations,subjecttodemandforpetroleumproducts,availabilityand NERAEconomicConsulting 99priceofimportedpetroleum,anddomesticproductionofcrudeoil,naturalgasliquids,andbiofuelsethanol,biodiesel,biomass-to-liquids(BTL),CTL,andgas-to-liquids(GTL).Costs,performance,andfirstdatesofcommercialavailabilityfortheadvancedalternativeliquidstechnologiesarereviewedandupdatedannually.ThemodulerepresentsrefiningactivitiesinthefivePADDs,aswellasalessdetailedrepresentationofrefiningactivitiesintherestoftheworld.Itmodelsthecostsofautomotive fuels,suchasconventionalandreformulatedgasoline,andincludesproductionofbiofuelsfor blendingingasolineanddiesel.FuelethanolandbiodieselareincludedinthePMM,becausetheyarecommonlyblendedintopetroleumproducts. Themoduleallowsethanolblendingintogasolineat10percentorlessbyvolume(E10),15percentbyvolume(E15)inStatesthatlackexplicitlanguagecappingethanolvolumeoroxygencontent,andupto85percentbyvolume(E85)foruseinflex-fuelvehicles.ThePMMincludesrepresentationoftheRenewableFuelsStandard(RFS)includedinEISA2007,whichmandatestheuseof36billiongallonsofrenewablefuelby2022.BothdomesticandimportedethanolcounttowardtheRFS.Domesticethanolproductionismodeledforthreefeedstockcategories:corn,cellulosicplantmaterials,andadvancedfeedstockmaterials.Corn-basedethanolplantsarenumerous(morethan180arenowinoperation,withatotaloperatingproductioncapacityofmorethan13billiongallonsannually),andtheyarebasedonawell-knowntechnologythatconvertsstarchandsugarintoethanol.Ethanolfromcellulosicsourcesisanewtechnologywithonlyafew smallpilotplantsinoperation.FuelsproducedbygasificationandFischer-Tropsch synthesisandthroughapyrolysisprocessarealsomodeledinthePMM,basedontheireconomicsrelativetocompetingfeedstocksandproducts.ThefiveprocessesmodeledareCTL,GTL,BTL,CBTL,andpyrolysis.10.CoalMarketModuleTheCoalMarketModule(CMM) simulatesmining,transportation,andpricingofcoal,subjecttoend-usedemandforcoaldifferentiatedbyheatandsulfurcontent.U.S.coalproductionisrepresentedintheCMMby41separatesupplycurvesdifferentiatedbyregion, minetype,coalrank,andsulfurcontent. Thecoalsupplycurvesrespondtocapacityutilizationofmines,miningcapacity,laborproductivity,andfactorinputcosts(miningequipment,mininglabor,andfuelrequirements).ProjectionsofU.S.coaldistributionaredeterminedbyminimizingthecostofcoalsupplied,givencoaldemandsbyregionandsector,environmentalrestrictions,andaccountingforminemouthprices,transportationcosts,andcoalsupplycontracts.Overtheprojectionhorizon,coaltransportationcostsintheCMMvaryinresponsetochangesinthecostofrailinvestments.TheCMMproducesprojectionsofU.S.steamandmetallurgicalcoalexportsandimportsinthecontextofworldcoaltrade,determiningthepatternofworldcoaltradeflowsthatminimizesproductionandtransportationcostswhilemeetingaspecifiedsetofregionalworldcoalimportdemands,subjecttoconstraintsonexportcapacitiesandtradeflows. Theinternationalcoalmarketcomponentofthemodulecomputestradeinthreetypesofcoalfor17 NERAEconomicConsulting 100exportregionsand20importregions.U.S.coalproductionanddistributionarecomputedfor14supplyregionsand16demandregions.11.RenewableFuelsModuleTheRenewableFuelsModule(RFM)includes submodulesrepresentingrenewableresourcesupplyandtechnologyinputinformationforcentral-station,grid-connectedelectricitygenerationtechnologies,includingconventionalhydroelectricity,biomass(dedicatedbiomassplantsandco-firinginexistingcoalplants),geothermal,landfillgas,solarthermalelectricity,solarphotovoltaics(PV),andwindenergy. TheRFMcontainsrenewableresourcesupplyestimatesrepresentingtheregionalopportunitiesforrenewableenergydevelopment.Investmenttaxcredits(ITCs)forrenewablefuelsareincorporated,ascurrentlyenacted,includingapermanent10-percentITCforbusinessinvestmentinsolarenergy(thermalnonpowerusesaswellaspoweruses)andgeothermalpower(availableonlytothoseprojectsnotacceptingtheproductiontaxcredit(PTC)forgeothermalpower).Inaddition,themodulereflectsthe increaseintheITCto30percentforsolarenergy systemsinstalledbeforeJanuary1,2017,andtheextensionofthecredittoindividualhomeownersunder EIEA2008.PTCsforwind,geothermal,landfillgas,andsometypesofhydroelectricandbiomass-fueledplantsalsoarerepresented. Theyprovideacreditofupto2.1centsperkilowatt-hourforelectricityproducedinthefirsttenyearsofplantoperation.ForAEO2011,newwindplantscomingonlinebeforeJanuary1,2013,areeligibletoreceivethePTC;othereligibleplantsmustbeinservicebeforeJanuary1,2014.AspartoftheAmericanRecoveryandReinvestmentAct(ARRA),plantseligibleforthePTCmayinsteadelecttoreceivea30-percentITCoranequivalentdirectgrant.AEO2012alsoaccountsfornewrenewableenergycapacityresultingfromStaterenewableportfoliostandard(RPS)programs,mandates,andgoals.C.ReferencesU.S. EnergyInformationAdministration.2011.Assumptionstothe Annual EnergyOutlook 2011.http://www.eia.gov/forecasts/aeo/assumptions/pdf/0554(2011).pdf
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101AppendixC:InformationonPotentialCanadianHydroandAssociatedTransmissionOneofthedevelopmentscitedinNYS-37andtheaccompanyingexpertreportsconcernstheproposedChamplainHudsonPowerExpresstransmissionproject.Inthisappendix,weexaminethefollowingissues:(1)whethertheChamplainHudsonprojectandpotentialassociatedconstructionofnewhydroelectricgenerationinCanadawouldrepresentpotentialalternativestoIPECgenerationintheno-actionalternative;and,(2)ifadditionalhydroresourcesandassociatedtransmissionwereassumedtobepartofthereplacementgeneration,whatenvironmentalimpactstheywouldhave.A.ConsiderationofTransmissionandCanadianHydroasAlternativestoIPEC Generation1.OverviewoftheChamplainHudsonProjectChamplainHudsonisproposingtoestablisha1,000MWDCconnectionfromtheNewYork-QuebecbordertoNewYorkCity.OnFebruary24,2012,partiestothepermittingproceedingbeforetheNYPSCsubmittedajointproposal(settlementdocument)andsupportingdocumentstotheNewYorkPublicServiceCommissionthatifacceptedbytheNYPSCwouldresultinissuanceofaCertificateof EnvironmentalCompatibilityandPublicNeedandauthorizeconstructionandoperationoftheChamplainHudsonproject. Theproject,ifconstructed,would facilitatedeliveryofpowerfromQuebecandperhapsLabradortoNewYorkCity(Champlain Hudson2012).Althoughtheprojectsponsorshaverecentlyaffirmedthattherearenosupplycontractsfortheproject,thereareplansforthedevelopmentofnewlarge-scalehydrofacilitiesinQuebecandLabrador,asdiscussedbelow.2.OverviewofCanadianHydroProjectsHydro-Quebeccurrentlyisconstructingtwolargehydroprojects,bothofwhichwillgenerateinexcessof8million MWhperyear(Hydro-Quebec2009). Thefirst,the Eastmain-1-A/Sarcelle/Rupertproject,isunderdevelopmentandisscheduledtobecompletedin2012. Thesecondproject,theRomaineComplex,isalsoalreadycommittedandisproceeding.Hydro-QuebecisalsoplanningotherhydroprojectsaspartofitsNorthernPlan.Inaddition,NalcorEnergyautilityownedbythegovernmentofNewfoundlandandLabradoriscurrently exploringtheLowerChurchillFallsprojectin EasternCanada.3.BaselineConditionsvs.No-ActionAlternativeWeunderstandthatthereissubstantialuncertaintyregardingwhetherornottheChamplainHudsonprojectandanyfutureCanadianhydroprojectswillbeconstructed.Aswithotherenergydevelopmentsdiscussedinthereportbody,however,theseprojectsarenotrelevanttoevaluationofthepotentialadverseenvironmentalimpactsoftheno-actionalternativeunlesstheyaffecthowelectricity systemswouldrespondtolossofIPECsbaseloadgeneration.Iftheyareconstructedunderbaselineconditions,theywouldnotbecountedasreplacementsforIPEC 102undertheno-actionalternative. TheCanadianhydroprojectsthathavealreadybegunconstructionareclearlypartofthebaseline,eveniftheChamplainHudsonprojectweretobedevelopedandtheoutputofthesetwohydroprojectssenttoNewYork.Inthatcase,thehydrogenerationfromthesetwoprojectswould simplybedivertedfromotherregions(e.g.,NewBrunswick,New England,Ontario)withthenetenvironmentaleffectdeterminedbytheincrementalgenerationthatwouldbeaddedinthoseregionstomakeupforthelossinthehydrogenerationthatotherwisewouldhavebeenused.EvenifadditionalnewhydrofacilitiesweredevelopedinQuebecaftertheChamplainHudsonlinewasinplace(assumingthatthelinewasconstructed),whetherornotgenerationfromCanadianhydrofacilitieswouldconstitutepartofthenetreplacementforIPECgenerationwoulddependuponthenetchangesintheoverallelectricitysystemand,inparticular,whetherthesehydroresourceswouldotherwisehavebeenusedtodisplacefossilgenerationinotherregions.Aswithotherquestionsrelatedtotheimpactsoftheno-actionalternative,theanswerdependslargelyupondetailsregardingtherelativecostsofthedifferentgenerationalternativestomeetelectricitydemandsindifferentregionsanddifferenttimeperiods.EvenifCanadianhydroresourcesdidconstitutethenetresourcesaddedinresponsetothelossofIPECgeneration,themaximumadditionalpotentialhydrogenerationthatcouldbetransmittedovertheChamplain-HudsonPowerExpressProjectwouldrepresentonly40percentoftheIPECenergythatwouldneedtobereplacedintheno-actionalternative.Moreover,anexpansionofCanadianhydrogeneration(andanyrelatedtransmission)intheno-actionalternativewouldhaveadverseenvironmentalimpactsofitsown,asdiscussedbelow.NotethatNYS-37doesnotprovideanyinformationonthepotentialenergyandenvironmentalimpactsof theno-actionalternativeiftheseCanadiantransmissionandhydroprojectswereimplemented.B.AdverseEnvironmental ImpactsofCanadianHydroThissectionoutlinestheenvironmentalimpactsofthreeillustrativeCanadianhydroprojects,the Eastmain-1-A/Sarcelle/RupertprojectandtheRomaineComplexproject,whicharecurrentlyunderconstruction,andtheLowerChurchillproject,whichisinthepermittingphase.TheseenvironmentalimpactsprovideanindicationofthepotentialimpactsifadditionalCanadianhydroelectricweretoconstitutepartofthereplacementgenerationundertheno-actionalternative.1.Greenhouse GasEmissionsAllthreehydroprojectswouldleadtoincreasesinGHGemissions,baseduponestimatesdevelopedbyHydro-QuebecandNalcor Energy.The Eastmain-1-A/Sarcelle/RupertprojectwouldleadtopeakincreasesingrossCO 2eemissionsofbetween128,000to685,000annualtones(Hydro-Quebec2004).TheRomaineComplexwouldleadtopeakincreasesingrossCO 2 eemissionsofbetween150,000to475,000annualtons(Hydro-Quebec2008).TheLowerChurchillproject,alargerprojectthantheothertwo,isexpectedtocontributemorethan1,000,000tonsofCO 2eemissionsovertenyearsofconstructionandpeakincreasesinnetCO 2 eemissionsofbetween938,000tonsto1,160,000annualtonsduringoperations(Nalcor Energy 1032009).Indeed,evenatyear20,theLowerChurchillfacilitiesareprojectedtocontributebetween121,000to125,000tonsofnetCO 2eemissions(Nalcor Energy2009).2.OtherEmissionsThe EISfortheLowerChurchillprojectquantifiesotherairemissionsduringtheconstructionofthefacilitiesandtheirassociatedlocaltransmissionlines,includingparticulatematter(PM),sulfurdioxide(SO 2),nitrogenoxides(NO X),carbonmonoxide(CO),andvolatileorganiccompounds(VOC).EmissionsofNO XandSO 2aretheprimarycausesofacidrainwhichcanleadtoacidificationofwaterbodiesandothereffectsandcanalsoleadtovarioushealtheffects.NO XandSO 2arealsoimportantprecursorsintheformationoffineparticles(PM2.5),andozoneisformedbycomplicatedatmosphericphotochemicalreactionsinvolvingNO x,VOC,andsunlight.COisapoisonousgasthataidsintheformationofCO 2andozone.PMandozoneareassociatedwith significantadversehealtheffects.TableC-1displaysthequantitiesofairemissionsthatareexpectedtobereleasedduringtheconstructionoftheLowerChurchillfacilitiesandtheirassociatedtransmissionlinestodeliverenergygeneratedattheseremotelocationstotheCanadianborder.3.OtherAdverseEnvironmental ImpactsThe Eastmain-1-A/Sarcelle/RupertEISdetailsanumberofenvironmentalimpacts.Forexample,theprojectwillleadtoincreasedmercurybioaccumulationinfish 23,whichwillnotreturntocurrentlevelsforallspeciesuntil2028(Hydro-Quebec2004). Thiswillleadtoheightenedconsumptionrestrictionsforlocalhumanpopulations. Theprojectwillalsochangeratesoferosionandsedimentationinthevariousaffectedwaterbodies,ultimatelyreducingthesedimentsupplyintheRupertestuarybytwo-thirds(Hydro-Quebec2004).Athirdexampleofnoteisthefactthatthefloodingofthediversionbaywillleadtoalossof18,810hectaresofvegetation,eliminatingnearly383,930greenmetrictonesofwood(Hydro-Quebec2004).
23Decompositionassociatedwithreservoirfloodingcausesincreasedmicrobialactivitywhichconvertsmercuryintomethylmercury(NalcorEnergy2009).Methylmercuryisatoxicformofmercurythatbioaccumulatesinfish.TableC-1.ContaminantsprojectedtobereleasedduringconstructionoftheLowerChurchillfacilitiesandtheirassociatedlocaltransmissionlines.ContaminantTonnesPM1,391 SO 21,301 NO x19,791CO4,264VOC1,615Source:(NalcorEnergy2009) 104TheRomaineComplex EISalsodetailsanumberofenvironmentalimpacts.Forexample,theprojectwillhavemajorimpactstofishcommunitiesbecausesuchcommunitieswillbepermanentlytransformed(Hydro-Quebec2008).Theprojectwillalsoleadtoathreefoldtosevenfoldincreaseinfishmercurybioaccumulation,whichcouldtakeupto30yearstoreturntopresentlevels(Hydro-Quebec2008). TheRomainefacilitieswillalsoresultinimpactson21,746hectaresofland,including12,021hectaresoflostconiferousforestandanet626hectarelossofwetlands(Hydro-Quebec2008).Andaswiththe Eastmainfacility,theRomainecomplexwillalsochangeratesandpatternsoferosionand sedimentationinthevariousaffectedwaterbodies(Hydro-Quebec2008).TheLowerChurchill EISalsodetailsanumberofenvironmentalimpacts.Forexample,mercuryconcentrationsinfishareexpectedtoincreaseandpeakat1.5to4.5timesnaturallevels,dependingonthetypeoffish(NalcorEnergy2009).Itisexpectedtotakeupto35yearsformercuryconcentrationsinallfishtypestoreturntocurrentlevels. TheChurchillfacilitieswillalsoentailhabitatclearingintheformof368kmofroadsand263kmofnewtransmissionlines(Nalcor Energy2009).Furthermore,temporaryconstructioncampsandquarriesandborrowpitswillentailhabitatclearingofa16km 2area(NalcorEnergy2009).8,400hectaresofhabitatwillbeclearedinordertofilltheGullIslandreservoirassociatedwiththeproject(Nalcor Energy2009).Finally,aswiththeotherfacilities,theLowerChurchillprojectwillchangesratesandpatternsoferosionand sedimentationinthevariousaffectedwaterbodies(Nalcor Energy 2009).C.AdverseEnvironmental ImpactsofTransmissionLinesfromCanadaAdditionaltransmissionlineswouldberequiredifnewCanadianhydropowerweretobeexportedtotheNortheastUnitedStates. Therearecurrentlytwosuchlinesthathavebeenproposed,oneofwhichistheChamplainHudsonlinediscussedabove.Asnoted,thiswouldestablisha1,000MWDCconnectionfromtheNewYork-QuebecbordertoNewYorkCity.A secondtransmissionlineistheNorthernPass TransmissionProject,whichwouldestablisha1,200MWDCconnectionfromtheNewHampshire-QuebecbordertosouthernNewHampshire. Thissubsectionoutlinessomeoftheadverseenvironmentalimpactsexpectedtooccurfromconstructionofthesetransmissionlines.ChamplainHudsonsJointProposaldetailssomeoftheenvironmentalimpactsthatareanticipatedfromtheinstallationoftheproposedtransmissionline. Theseimpactsincludethefollowing(ChamplainHudson2012):DredgingwouldberequiredtolaycablesintheHudsonRiverandportionsofLakeChamplain,resultingintemporarysedimentresuspensionandotherimpacts;Constructionwouldresultintemporaryimpactsto56acresofwetlandsaswellasto streamsandtributaries; 105About10.7acresofforestedwetlandcovermaybepermanentlyconvertedtomarshorscrub-shrubcommunities;Approximately236acresofexistingforestcovermaybeclearedduringconstruction,60acresofwhichwouldbepermanentlycleared;ThreemilesofcablewouldbeinstalledwithinthecitystreetsintheboroughofQueens, NewYorkCity;and138,040linearfeetofright-of-waywithinAgriculturalDistrictswouldbeincludedinthe ConstructionZone.NorthernPassPresidentialpermitapplicationcontainsapreliminaryassessmentoftheenvironmentalimpactsofthetransmissionproject.Accordingtotheapplication,potentialU.S.impactsoftheprojectincludethefollowing(NorthernPass2010):Approximately5.5milesofwetlandswillbetraversedalongthepreferredroute; however,atthistimethequantityofforestedwetlandsthatwillbetraversedmaybeunderestimated.Stateendangeredspeciesthatoccurwithin1,000ofthepreferredrouteincludethe northernharrier,wildcomfrey,goldenfruitedsedge,andthemuskflower.StatethreatenedspeciesthatoccurwithinthesamerangeofthepreferredrouteincludetheKlamslobelia,theperegrinefalcon,Pickeringsbluejoint,theblackracer(snake),andthewildlupine.NorthernPassalsosubmittedanaddendumtotheirapplicationspecifyingthattheirpreferredroutewouldspantheConnecticutRiver,aDesignatedRiverandAmericanHeritageRiver.Itwouldalsocrossatleastthreeotherperennialstreams(Sullivan2011).D.ReferencesChamplainHudson.2012.ChamplainHudsonPower Express,Inc.JointProposal.CaseNo.:10-T-0139.February24,2012.2012.http://www.poughkeepsiejournal.com/assets/pdf/BK185815227.pdfHydro-Quebec.2004.Eastmain-1-APowerhouseand RupertDivision:EnvironmentalImpact Statement.Hydro-Quebec.Volume4,Chapters16-25,December2004.http://www.hydroquebec.com/rupert/en/pdf/vol_04_en_web.pdfHydro-Quebec.2008.RomaineComplex: EnvironmentalImpactStatement.Hydro-Quebec,Aubust2008.http://hydroforthefuture.com/docs/sizes/4dc98ad1333fe/source/2008E064
-ANG-Rom-RES-03.pdf 106Hydro-Quebec.2009.StrategicPlan:2009-2013
.http://www.hydroquebec.com/publications/en/strategic_plan/pdf/plan-strategique-2009
-2013.pdfJointReviewPanel.2011.ReportoftheJoint ReviewPanel:LowerChurchillHydroelectricGenerationProject,Nalcor Energy,NewfoundlandandLabrador.ExecutiveSummaryandRecommendations.August2011.http://www.ceaa.gc.ca/050/documents/51706/51706E.pdfNalcor Energy.2009.LowerChurchillHydroelectricGenerationProject: EnvironmentalImpact Statement.February2009.http://www.ceaa.gc.ca/050/document-eng.cfm?document=41653NorthernPass.2010.ApplicationofNorthernPassTransmissionLLCforPresidentialPermit
.UnitedStatesofAmericabeforetheDepartmentof EnergyOfficeofElectricityand EnergyReliability.NorthernPass TransmissionLLC:DocketNo.PP-371.October14,2010.http://www.northernpasseis.us/Document_Library/documents/USDoEPresidentialPermitApplication101410.pdfSullivan,MaryAnn.2011.NorthernPass TransmissionLLC:DocketNo.PP-371:AddendumtoApplication.February15,2011.