ML12090A842

From kanterella
Revision as of 00:24, 29 June 2019 by StriderTol (talk | contribs) (Created page by program invented by StriderTol)
Jump to navigation Jump to search
Entergy Pre-Filed Evidentiary Hearing Exhibit ENT000481 - David Harrison, Jr. & Eugene Meehan, Potential Energy and Environmental Impacts of Denying Indian Point'S License Renewal Applications (Mar. 2012)
ML12090A842
Person / Time
Site: Indian Point  Entergy icon.png
Issue date: 03/31/2012
From: Foss A, Harrison D, Hodges N, Meehan E, Nichols A
NERA Economic Consulting
To:
Atomic Safety and Licensing Board Panel
SECY RAS
Shared Package
ML12090A819 List:
References
RAS 22161, 50-247-LR, 50-286-LR, ASLBP 07-858-03-LR-BD01
Download: ML12090A842 (118)
v • d • e


Text

March2012PotentialEnergyandEnvironmentalImpactsof DenyingIndianPoint'sLicense RenewalApplications ENT000481 Submitted: March 30, 2012 ProjectTeamDavidHarrison,Jr.,Ph.D.EugeneMeehanAlbertL.Nichols,Ph.D.AndrewFossNicholasHodgesNERAEconomicConsulting200ClarendonStreet,11thFloorBoston,Massachusetts02116Tel:+16179274500 Fax:+16179274501 www.nera.com NERAEconomicConsulting iContentsExecutiveSummary................................................................................................................E-1I.IntroductionandBackground...................................................................................................1A.NRC'sFinalSupplemental EnvironmentalImpactStatement..........................................1B.NewYorkState'sContention37.....................................................................................4C.Objectivesof ThisReport................................................................................................6D.Organizationof ThisReport............................................................................................6II.NewYorkState's ElectricitySystemandImplicationsforthe Energyand EnvironmentalImpactsoftheNo-ActionAlternative..............................................................................7A.OverviewofNewYorkState's ElectricitySystem...........................................................7B.GovernmentSupportfor ExistingRenewablesandEnergyEfficiencyPrograms.............9C.CostsofAdditionalGenerationinNo-ActionAlternative..............................................14D.ImplicationsofRelativeCostsonthe MixofReplacement EnergyinNo-ActionAlternative....................................................................................................................

23E.Adverse EnvironmentalImpactsofGenerationAlternatives..........................................25F.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 Suppor t..........................................................................................................................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.HistoricalandNYISO's ExpectationofSavingsfrom EnergyEfficiencyPrograms74FigureA-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.IPEC'sLostOutputandProjectedU.S.MarketResponsesinNo-ActionAlternative (2016-2025)

..................................................................................................................

38Table7.ProjectedChangesinGenerationinNo-ActionAlternative(2016-2025).....................39Table8.ProjectedIncreasesinAverageAnnualU.S.Air EmissionsinNo-ActionAlternative (2016-2025)

..................................................................................................................

40TableA-1.NewYork's"30x15"Renewable EnergyGoal(million MWh)..............................69TableA-2.ProductionSubsidiesforMainTierGenerators.......................................................71 TableA-3.ImplicitSubsidiesfromNewYork'sRPS................................................................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")isthecomparativeenvironmentalimpactsbetweenrenewalofIPEC'soperatinglicensesbytheNuclearRegulatoryCommission("NRC")andtheno-actionalternativeinwhichtheIPEC licenseswouldnotberenewed.Inordertoevaluatethedifferencesinenvironmentalimpactsbetweenthesetwoscenarios,wemustfirstidentifythebaselineelectricmarketsupplythatwouldbeusedtomeetNewYorkdemand(i.e.,assumingcontinuedIPECoperations).Wemustthenassesshowtheno-actionalternativewouldchangethissupplytoaccountforthelostbaseloadIPECgeneration.Electricitymarketanalysisisrequiredbecausetheenvironmentalimpactsofmovingfromthebaselinetotheno-actionalternativedependprimarilyuponwhatpowersourceswouldclearthecompetitivemarketsandbedispatchedtoreplacethesubstantialamountofbaseloadgenerationthatiscurrentlysuppliedbyIPEC.Weperformedsuchanelectricitymarketanalysisbothbyassessingtherelativecostsofalternativepowersourcesandbyconductingempiricalmodelingwithastate-of-the-artandwidelyusedenergymarketmodel.Undertheno-actionalternative,ouranalyses showthatIPECbaseloadgenerationwouldbereplacedprimarilybyfossil-fueledgenerationfromexistingnaturalgasandcoalfacilities.Theseresultsestablishthat(1)theadverseenvironmentalimpactsoftheno-actionalternativeassessedintheFSEISare,ifanything,underestimated;and(2)NewYorkStateisincorrectinitsclaims-unsupportedbyanyempiricalanalysis-thattheFSEISoverstatesenvironmental impactsbecausereplacementgenerationwouldbeprimarilyrenewableenergyandconservation.A.Background1.OverviewofFSEISConclusionsTheFSEISidentifiesandassessesthepotentialenvironmentalimpactsofvarioussourcesofreplacementenergyifIPECwerenotavailable. Thesealternativesincludenewnaturalgasfiredplants,purchasedpower,conservation,andcombinationsofreplacementenergysources.TheFSEISalsonotesthatNEPArequiresconsiderationoffeasible,non-speculativealternatives, andthatalternativesthatareeconomicallyimpracticalareexcluded. TheroleofNEPAreviewinthelicenserenewalprocessiscircumscribed,astheNRCindicatedwhenitpromulgateditsregulations:GiventheuncertaintiesinvolvedandthelackofcontrolthattheNRChasinthechoiceofenergyalternativesinthefuture,theCommissionbelievesthatitisreasonabletoexerciseitsNEPAauthoritytorejectlicenserenewalapplicationsonlywhenithasdeterminedthattheimpactsoflicenserenewalsufficientlyexceedtheimpactsofalloralmostallofthealternativesthatpreservingtheoptionoflicenserenewalforfuturedecisionmakerswouldbeunreasonable.(EnvironmentalReviewforRenewalofNuclearPowerPlantOperating Licenses,61Fed.Reg.28,467,28,473(June5,1996)(NYS000127))

NERAEconomicConsulting E-2TheFSEISconcludesthat"theadverseenvironmentalimpactsoflicenserenewalforIP2andIP3arenotsogreatthatpreservingtheoptionoflicenserenewalforenergyplanningdecisionmakerswouldbeunreasonable."FSEISat9-8(NYS00133C).2.NewYorkStateCritiqueoftheFSEISConclusionsTheStateofNewYork,initsStatementofPositiononAdmittedConsolidatedContentionsNYS-9,33,and37(collectively,"NYS-37")arguesthattheFSEISisdeficientbecauseitignoresNewYorkState'scommentsthattheenvironmentalimpactoftheno-actionalternativewouldbemuchlessthanassumedintheFSEISandlessthantheenvironmentalimpactsoflicenserenewal. ThecoreoftheNYS-37argumentisthattheFSEISshouldhaveevaluatedenvironmentalimpactsonthepresumptionthatbaseloadIPECgenerationwouldbelargelyreplacedbyadditionalrenewablegenerationandenergyconservation,ratherthanbysubstantialfossil-fuelgenerationasassumedinmanyoftheFSEISalternatives.NYS-37pointstovariousrecentenergyandrelateddevelopmentsallegedlyignoredbytheFSEIS,including existingNewYorkStateprogramstoencouragerenewablesandenergyconservationaswellasrecentreductionsinprojectedelectricitydemandandnaturalgasprices.NYS-37,however,doesnotincludeanyempiricalanalysestosupportitsassertions.3.ReportObjectives Theprincipalobjectiveofthisreportistoprovidetheresultsofouranalysesofthepotentialenergyandenvironmentalimpactsoftheno-actionalternative.Asnoted,itisnecessarytoconsidertheimpactsontheelectricitysystembecauseenvironmentalimpactswillbedrivenprimarilybythemixofgenerationthatwouldreplacethelostbaseloadIPECgenerationiflicenseswerenotrenewed.Informationonthelikelymarket-drivenelectricityimpactsoftheno-actionalternativeallowsustocompareourfindingstothoseintheFSEISandtoevaluatetheargumentsprovidedbytheStateofNewYorkanditsexperts. ToassessthevalidityofthecentralargumentofNYS-37,itisnecessarytoconducteconomicanalysesofalternativesourcesofpowerasthatistheonlywaytodetermine-asNYS-37anditsexpertsallege-iftheconservation/renewablealternativeissodominantthatotheralternatives,includingthoserelyingonfossilgeneration,wouldnotplaya significantroleinreplacinglostIPECgeneration.B.ConclusionsRegardingPotentialEnergyandEnvironmentalImpactsoftheNo-ActionAlternativeIPECisahighlyefficientnucleargeneratingfacilitythatoperatesover90percentofthetimeandprovidesapproximately10percentofthetotalelectricityconsumedinNewYorkState.Undertheno-actionalternative,itsbaseloadenergywouldhavetobereplaced. ToidentifytheenvironmentalimpactsofthegenerationthatwouldlikelybeusedtoreplaceIPECbaseloadpower,wedevelopedtworelatedevaluations.First,weconsideredthewholesaleelectricmarketstructureinNewYorkState-whichemphasizesminimizingthecostsofmeetingelectricitydemandwhilesatisfyingallreliabilityandoperatingrequirements-andtheimplicationsofthe NERAEconomicConsulting E-3relativecostofreplacementalternatives.Second,wedevelopedempiricalestimatesoflikelyreplacementgenerationbaseduponmodelingresultsfromastate-of-the-artenergymodel-theNational EnergyModelingSystem("NEMS")-developedandoperatedbythe EnergyInformationAdministration("EIA")withintheU.S.Departmentof Energy.NEMSallowsustodevelopestimatesofthechangesingenerationbytypeaswellasthechangesinvariousemissionsthatwouldoccurifIPECgenerationwerenotavailable.1.ConclusionsRegardingthePowerMixThatWouldBeDispatchedIfIPECBaseloadGenerationWereLostThefollowingareourconclusionsregardingthegenerationthatwouldlikelybedispatchedundertheno-actionalternative.Replacementenergywouldcomeprimarilyfromnaturalgasandcoalpowerplants,withamuch smalleramountfromrenewablesandenergyconservation,because:Thecostsofincreasingtheutilizationofexistingnaturalgasandcoalpowerplants,orbuildingnewnaturalgasplantsarelowerthanrenewablesorconservation;andHundredsofmillionsofdollarsofadditionalannualStatesubsidies(ultimatelypaidbyNewYorkState'selectricityconsumersthroughtheirmonthlyutilitybills)wouldberequiredtoforceadditionalrenewablesandenergyefficiencyintotheelectricitysystemtoovercometheirhighercosts;ThedevelopmentscitedinNYS-37,includingNewYorkState's"30x15"renewableenergygoaland"15x15"energyefficiencygoal,wouldrenderrenewablesandconservationevenlesseconomicrelativetootheralternatives,andthusevenlessviablethanundertheconditionsnotedintheFSEIS.2.ConclusionsRegardingEnvironmentalImpactsoftheReplacementPowerMixElectricitymarketmodelingcanbeusedtopredicttheresourcesthatwouldlikelyreplaceIPEC'sbaseloadgenerationandthuswoulddeterminethepotentialadverseenvironmentalimpactsofthisreplacementenergy.Inexaminingindetailtheenvironmentalimpactofwhatwebelieveisthemostlikelyreplacementmix,wearenotsuggestingadeparturefromtheNRCpracticeofexaminingmanyreplacementalternatives.However,themostlikelysourceof replacementenergyshouldbeaccorded significantweight.AreviewoftheadverseenvironmentalimpactsofthisscenarioalsoisimportantbecauseitplacesNYS-37inpropercontext.EvenwererenewablesourcestoplayamajorroleasreplacementgenerationforIPEC -whichaswedemonstrate,theywouldnot-NYS-37impliesthatrenewablereplacementsourcesdonothaveenvironmentalimpacts. Thisisnotaccurate.Thus,wealsoprovideinformationon NERAEconomicConsulting E-4thegeneralenvironmentalimpactsofrenewablegenerationtoprovidefullandaccurateinformation.Ouranalysesproducethefollowingconclusions:Themostlikelymixofreplacementpower-primarilyfossil-firedunits-wouldleadtosignificantincreasesinairemissions,includinganincreaseinannualcarbondioxideemissionsofabout13.5millionmetrictonsperyear(whichisnearlyaslargeastheRegionalGreenhouseGasInitiative's("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-costrenewablegenerationorenergyefficiencywouldconstitutethebulkofgenerationtoreplaceIPEC'sbaseloadgeneration.

2.Conflationofdevelopmentsthataffectthebaseline,nottheno-actionalternative.NYS-37anditssupportingwitnessesmentionahostofdevelopmentsthattheyclaimwerenotconsideredbytheNRCstaffindevelopingtheFSEISandthattheyclaimwouldleadtodifferentconclusionsregardingtheenergymixandenvironmentalimpactsoftheno-actionalternative. ThesedevelopmentsincludeNewYorkState'srenewableandenergyefficiencygoals,lowerelectricitydemandduetotherecession,recentincreasesinelectricitygenerationcapacityandtransmission systemexpansions,andlowernaturalgasprices. TheflawpervasiveintheNYS-37reasoningisthatthesedevelopmentsrepresentpartofthebaselineconditionsthatwouldoccurirrespectiveofIPEC'sstatus.Putanother NERAEconomicConsulting E-5way,thevariousfactorsidentifiedbyNYS-37anditsexperts-suchastheadditionalrenewablegenerationorenergyefficiencyresultingfromNewYorkStategoals-wouldnotbe"available"toreplacethebaseloadIPECgenerationiftheIPECgenerationwerenotavailablebecausetheywouldalreadyexist.

3.Failuretoevaluatetheimpactsofbaselinechanges.Totheextentthatthedevelopmentstheyciteaffectthebaseline,thosedevelopmentswouldifanythingreducetherolesofconservationandrenewablesasIPECreplacementsundertheno-actionalternative. The developmentsemphasizedbyNYS-37,includinglowerelectricitydemandandlowernaturalgasprices,wouldtendtoincreasethesubsidiesthatwouldbenecessarytofundthehighermarginalcostsofthosealternatives-whileatthesametimedecreasingthemarginalcostsoffossilresources-therebymakingrenewablesandenergyefficiencylesseconomicrelativetofossil-fueledpoweroptions.

4.Failuretoprovideempiricalmodeling.NYS-37andtheexpertsfailtoprovideanystudiesorotheranalysesquantifyinghowtheelectric systemwouldrespondundertheno-actionalternative.Incontrast,ouranalysisusingNEMSshowsthatconservation(intheformofresponsetohigherprices)andrenewableswouldplayminorroles,andthattheprimaryimpactwouldbeincreasedgenerationfromfossil-firedsources. ThisdeficiencyonthepartofNYS-37anditsexpertsisimportant since,withoutsomeempiricalmodeling,theycannotprovideareasonablebasisforevaluatingwhichalternativesactuallywouldbedevelopedanddispatchedifIPECgenerationwerenotavailable.D. OverallConclusionsAsnotedabove,ouranalysesleadustoconcludethat,contrarytotheclaimsinNYS-37anditsaccompanyingdocuments,additionalconservationandrenewableswouldbeunlikelytoplay significantrolesundertheno-actionalternative.Incontrast,ouranalysesandempiricalmodelingindicatethatthereplacementmixwouldbedominatedbyfossil-fuelgeneration,includingnaturalgasandcoalgeneration,withmodestcontributionsfromenergyconservationandadditionalrenewables.Thus,ouranalysesdemonstratethattherangeofscenariosconsideredintheFSEISwassufficient.OuranalysesfurtherdemonstratethattheconclusionreachedintheFSEIS-thattheimpactsoflicenserenewaldidnotexceedtheimpactsofalloralmostallofthealternatives,includingtheno-actionalternative-wasreasonable.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("IP2"and"IP3")

1withtotalnetsummercapacityofapproximately2,040megawatts("MW")andtotalnetgenerationin2010ofapproximately16.3millionmegawatt-hours("MWh")(NYISO2011c,p.34).IPEC'scapacityutilizationratein2010wasthusover90percent.

2IPEC'sgenerationin2010wasapproximately10percentofNewYorkState'stotalelectricityconsumptionandapproximately17percentoftotalconsumptioninsoutheasternNewYorkState(assumedtocompriseNYISOZonesG-K)(NYISO2011c,p.21).TheNRCiscurrentlyconsideringrenewalofIPEC'soperatinglicenses. ThetermofIP2'scurrentlicenseextendstoSeptember28,2013,andthetermofIP3'scurrentlicenseextendstoDecember12,2015.Aspartoftherenewalprocess,inDecember2010,NRCstaff issuedanFSEISconcerning site-specificenvironmentalissuesatIPEC(NRC2010).InDecember2011,theStateofNewYorkfiledNYS-37andpre-filedtestimonychallengingtheadequacyoftheFSEIS.NYS-37claims,amongotherthings,thattheFSEISreliesonout-of-dateinformationandasaresultgivesinadequateconsiderationtoconservation 3andrenewableenergyaspossiblesourcesofreplacementforelectricityoutputfromIPECundertheno-actionalternative.A.NRC'sFinalSupplementalEnvironmentalImpactStatementThissectionprovidesinformationontheenergyalternativestolicenserenewaladdressedintheFSEIS.Itbeginswithinformationonthe"no-action"alternative,whichdoesnotspecifypotentialreplacementsforIPEC'sbaseloadenergy. Thissectionthenprovidesinformationon alternativesifIPEC'sbaseloadenergyisnotavailable.1."No-Action"Alternative TheNRCevaluatesa"no-action"alternativeinSection8.2oftheFSEIS.TheFSEISstatesinthecontextofthe"no-action"alternativethatifIPEC'slicenseswerenotrenewed,ThepowernotgeneratedbyIP2andIP3duringthelicenserenewaltermwouldlikelybereplacedby(1)powersuppliedbyotherproducers(eitherexistingornewunits)usinggeneratingtechnologiesthatmaydifferfromthatemployedat 1Unit1hasnotoperatedsince1974.

216,300,000MWh/(2,040MW*8760hoursperyear)=91percent 3Someobserversdistinguishbetweenenergy"efficiency"and"conservation.""Efficiency"maybeusedtomeantechnologiesthatprovideessentiallythesameservicesbutwithlowerenergyuse,suchasreducingtheelectricity consumedbyarefrigeratorwithoutaffectingitscoolingabilityorotherfeatures."Conservation"maybeusedto meanbehavioralchangesthataffecttheserviceprovidedtoreduceenergyconsumption,suchasturningupthe thermostatinthesummertoalesscomfortabletemperaturetoreduceelectricityconsumption.Thisdistinctionis irrelevanttodiscussionsoftotalelectricitydemand.Thus,weusethesetermsinterchangeablyhereinandoftenrefersimplyto"conservation."

NERAEconomicConsulting 2IP2andIP3,(2)demand-sidemanagementandenergyconservation,or(3)somecombinationoftheseoptions(FSEISp.8-22).Section8.2oftheFSEISevaluatestheenvironmentalimpactsoftheno-actionalternativewithoutanyspecificassumptionsaboutenergyreplacements.2.AlternativeEnergySourcesTheNRCevaluatesalternativeenergysourcesinSection8.3oftheFSEIS. ThefivesubsectionsofthispartoftheFSEISrelateto(1)naturalgas-firedcombinedcyclegeneration;(2)purchasedpower;(3)conservation;(4)alternativesdismissedfromindividualconsideration; and(5)combinationsofalternatives. Thesefivecategoriesofalternativeenergysourcesarediscussedinturnbelow.a.New Gas-FiredCombined-CycleUnitsTheFSEISincludesanalternativethatwouldinvolvetheconstructionoffivenewnaturalgas-firedcombinedcycle("NGCC")unitswithacombinedcapacityof2000 MW. Thisalternativewasalsoconsideredin Entergy's EnvironmentalReportandintheDraftSEIS.TheFSEISassumesthattheseunitswouldhavelowCO 2emissionratesrelativetootherfossilunits(becauseoftheirrelativelyhighfuelefficiency)andwouldbetightlycontrolledforemissionsofconventionalpollutants.Someofthepotentialenvironmentalimpacts-includingimpactsrelatedtolanduse,ecological,andwater-dependonthe sitingoftheNGCCunits.b.PurchasedPowerIntheFSEIS,thepurchasedpoweralternativerelatestobringingpowerintosoutheasternNewYorkwhereIPECprovidesenergyforconsumers. TheFSEISnotesthatNewYork'stransmission systemhaslimitedcapacitytobringinlargeamountsofpowerfromoutsidethedownstatearea,thoughtheFSEISpointstosomeproposedprojectsthatcould,ifbuilt,increasetransmissioncapacity. TheFSEISstatesinverygeneraltermsthekindsofenvironmentalimpactsthatcouldbeassociatedwithnewtransmissionprojects,butdoesnotevaluatethemformally,notingthateachsuchprojectwillrequireitsownenvironmentalreviewprocessbyotherStateandFederalagencies.Asaresult,theFSEISdoesnotpresentasummaryanalysisoftheenvironmentalimpactsofthepurchasedpoweralternative.c.ConservationTheFSEISmentionsseveralelectricityconservationprograms,includingNewYork'sEnergyEfficiencyPortfolioStandard,whichisintendedtoassistinachievingtheState'sgoalof reducingenergyusefromforecastedlevelsby15percentby2015("15x15").AlthoughitdoesnotidentifyoraddressthefeasibilityofspecificincrementalconservationmeasuresthatcouldbeusedtomakeupforlostbaseloadIPECoutput,theFSEISconcludesthattheenvironmentalimpactswouldgenerallybe"small."

NERAEconomicConsulting 3d.AlternativesDismissedfromIndividualConsiderationTheFSEISnotesthealternativesthatNRCconsideredbutdeemedindividuallyinadequatetoreplaceIPEC'sbaseloadenergy. ThealternativesthatNRCdismissed,forvariousreasons,fromfurtherconsiderationarerenewables(includingwind,solar,geothermal,andothertypesofrenewables),combinedheatandpower,oil-firedgeneration,supercriticalcoal-firedgeneration,anddelayedretirementofotherpowerplants.e.CombinationAlternativesAstheFSEIS(p.8-59)notes,"[t]herearemanypossiblecombinationsofalternativesthatcouldbeconsideredtoreplacethepowergeneratedbyIP2andIP3." TheFSEISevaluatestwopossiblecombinationsandpresentssummarytableswithqualitativeassessmentsofvariouscategoriesofimpacts.i.CombinationAlternative1CombinationAlternative1involves:"continuedoperationofeitherIP2orIP3;obtaining600MW(e)fromrenewableenergysources(primarilywindwith smalleramountsofhydropower,biomass,andpossiblylandfillgas);andimplementing600MW(e)ofconservationprogramsbasedontheState's"15x15"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 4TheFSEISnotesthattheenvironmentalimpactsofCombinationAlternative2wouldincludethesametypesofimpactsasthealternativeinwhichIPEC'senergyisreplacedentirelybyenergyfromnewNGCCunits,buttheimpactsassociatedwithnewNGCCunitswouldbeona smallerscaleinCombinationAlternative2(FSEISp.8-67).Italsonotesthattherenewableenergyimpactswouldbe similartothoseinCombinationAlternative1(FSEISp.8-67).ItconcludesthattheenvironmentalimpactsoftheconservationprogramswouldbelargerthaninCombinationAlternative1butarelikelytobenegligible(FSEISp.8-67).3.SummaryofStaffRecommendationsRegardingtheEnvironmentalImpactsofIndianPointLicenseRenewalTheFSEISincludesthefollowingrecommendationfromtheNRCstaff:thattheCommissiondeterminethattheadverseenvironmentalimpactsoflicenserenewalforIP2andIP3arenotsogreatthatpreservingtheoptionoflicenserenewalforenergyplanningdecisionmakerswouldbeunreasonable(FSEIS,p.9-8).B.NewYorkState'sContention37TheStateofNewYorkhassubmittedcommentsthroughoutthelicenserenewalprocesscriticaloftheenvironmentalimpactassessmentspreparedbytheNRC. TheDecember2011pre-filedtestimonyaddressesthethreeadmittedconsolidatedcontentions(9,33,and37).Wereferto NewYorkState'spositionsinthesecontentionscollectivelyasNYS-37.1.OverviewofNYS-37CoreClaims ThecoreclaiminNYS-37isthattheFSEISrelieson"obsoleteandinaccuratedataandassumptions"(p.1)aboutelectricitydemandand supplyinNewYork. TheStatecontendsthat,asaresult,theFSEISgivesinadequateattentiontothe"no-action"alternativeand,specifically,theavailabilityofothersourcesofenergy-notablyrenewableenergy-andenergyefficiencyasreplacementsforIPEC.NYS-37argues,withoutanysupportinganalyses,thatwhentherecentchangesinNewYorkState'senergymarketaretakenintoaccount,theno-actionalternativewouldresultin"substantiallylowerenvironmentalimpactsthanthoseassumedintheFSEIS"(pp.1-2).ThefollowingexcerptfromNYS-37summarizestheState'scoreclaims.ThecoreclaiminNYS-37isthatintheFSEIS,NRCstaffhavefailedtopresentananalysisthattakesa"hardlook"attheavailabilityandenvironmentalimpactofcleanenergysourcesandenergyefficiencyandconservationmeasuresthatwouldreplaceIndianPoint'spowerifrenewallicenseswerenotgranted.ThedocumentunreasonablyreliesonobsoleteandinaccurateinformationandignoresNewYork'scriticalcommentsonDSEISthatdemonstratethattheenvironmentalimpactofrejectingrelicensingofIndianPointwillbe(1)muchlessthanthat NERAEconomicConsulting 5assumedintheFSEISand(2)willbelessthantheenvironmentalimpactofrelicensingIndianPoint(NYS-37,p.3).NYS-37alsocriticizestheFSEISfornotprovidingadetailedanalysisofthepotentialimpactsoftheno-actionalternative.Intheabsenceofacomplete, site-specificenvironmentalimpactanalysisoftheno-actionalternative,theFSEISfailstoprovidethepublicorthedecision-makerswithafullandfairassessmentofthecostsandbenefitsofrelicensing(NYS-37,p.70).2.SpecificEnergyMarketDevelopmentsEmphasized inNYS-37NYS-37putsgreatemphasisonitsclaimthattheFSEISignoresvariousrecentdevelopmentsrelatedtoelectricitysupplyanddemandinNewYork.ThefollowinglistsummarizestherecentdevelopmentsemphasizedinNYS-37.1.NewYork'sgoalofobtaining30percentofelectricitydemandfromrenewablesby2015("30by15")andtheadditionalrenewablegenerationithasencouraged;2.NewYork'sgoalofreducingelectricitydemandby15percentin2015relativetothedemandforecastproducedin2007whenthegoalwasset("15by15")andtheenergyconservationithasspawned;3.SignificantdecreasesinelectricitydemandinNewYorkanddecreasesinforecastsoffutureelectricitydemandduetotherecessionandthe sloweconomicrecovery;4.NewYork'srecentandproposedgenerationcapacityadditions;5.Increasedsupplyandlowerforecastpricesfornaturalgas;and6.NewtransmissionlinesthatincreasethetransfercapabilitythatisavailabletodeliverpowertothedownstateregionservedbyIndianPoint.Inadditiontothesepolicyandenergymarketdevelopments,NYS-37andtheexpertreportsalsoprovideestimatesofthelevelofpotentialfutureresourcesthatcouldreplacegenerationatIndianPoint-includingrenewables,energyconservation,andpurchasedpowerthroughtransmissionadditionsandupgrades-althoughthesourcesoftheseestimatesdonotpredictthatthesepotentialresourcesactuallywouldbeputinplaceifIndianPointgeneration werenotavailable.Indeed,asdiscussedbelow,despitecallingfora"site-specificenvironmentalimpactanalysisoftheno-actionalternative"(p.70),NYS-37providesnoempiricalestimatesofthechangeinthegenerationmixortheadverseenvironmentalimpactsthatwouldresultifIPEC'sbaseloadenergywerenotavailable.

NERAEconomicConsulting 6C.ObjectivesofThisReportTheprincipalobjectiveofthisreportistoprovideinformationonthepotentialenergyandenvironmentalimpactsoftheno-actionalternative.Asnoted,itisnecessaryfirsttoconsidertheimpactsontheelectricitysystembecauseenvironmentalimpactswillbedrivenprimarilybythemixofgenerationthatwouldreplacethelostbaseloadIPECgenerationiflicenseswerenotrenewed.Informationonthelikelyelectricitymarketimpactsoftheno-actionalternativeallowsustocompareourfindingstothoseintheFSEISandtoevaluatetheargumentsprovidedbytheStateofNewYorkanditsexperts. ToassessthevalidityofthecentralargumentofNYS-37,itisnecessarytoconducteconomicanalysesofalternativesourcesofpowerasthatistheonlywaytodetermineif-asNYS-37andtheexpertscontend-theconservation/renewablealternativeissodominantthatotheralternatives,includingthoserelyingonfossilgeneration,shouldbeconsideredrelativelyunimportant.D.OrganizationofThisReportTheremainderofthereportisorganizedintofourchapters. Thenextchapter(ChapterII)providesanoverviewofNewYorkState'selectricitysystemandtherelativecostsofalternativefuturegeneration,allowingustodevelopassessmentsofthelikelymixofreplacementgenerationifIPECbaseloadgenerationwerelost.Thechapterincludesadiscussionofthepotentialenvironmentalimpactsofdifferentreplacementpoweralternatives.ChapterIIIprovidestheresultsofourNEMSmodelingofthepotentialreplacementpowermixandresultingenvironmentalimpactsifIPECbaseloadgenerationwerenotavailable.ChapterIVusestheresultsofouranalysesandotherinformationtoevaluatethecontentionofNewYorkStateanditsexpertsthattheFSEISshouldbebaseduponareplacementmixdominatedbyrenewableandenergyconservation. ThatchapteridentifiesfourmajorflawsinherentintheclaimsofNewYork Stateanditsexpertsthatexplaintheerrorsintheirconclusions.Finally,ChapterVsummarizesourconclusions.

NERAEconomicConsulting 7II.NewYork State'sElectricitySystemandImplicationsforthe Energyand Environmental ImpactsoftheNo-ActionAlternativeThischapterbeginswithanoverviewofNewYorkState'selectricitysystemandthecentralimportanceofcostminimizationindeterminingwhichtypesofgenerationtechnologiesarebuiltanddispatchedtomeetelectricitydemand.Wethenconsidertheeffectsofgovernmentsupport,focusingonNewYorkStatesupportforexistingrenewablesandenergyefficiencyprograms.WethenconsiderthecostsofpotentialfuturereplacementgenerationifIPECgenerationwerenotavailableundertheno-actionalternative,notingthecrucialdistinctionbetweenbaselineconditionsandchangesingenerationthatcouldoccurundertheno-actionalternative.Weconsidertheimplicationsofthiscostinformationonthelikelymixofreplacementgeneration. Thenextsectionofthischapterdescribesingeneraltermstheadverseenvironmentalimpactsofalternativesourcesofreplacementgeneration. Thefinalsectionprovidesourconclusionsregardingthelikelyadverseenvironmentalimpactsoftheno-actionalternativebasedupontheseanalyses.A. OverviewofNewYorkState'sElectricitySystemThissectiondiscussestheNewYorkStateelectricity systemandtheimportanceofcostminimizationinthedevelopmentanddispatchofgenerationresourcesinNewYorkState'selectricitysystem.Weincludetheeffectsofcurrentpoliciestoencouragerenewablesandenergyconservation.Notethatthisgeneraloverviewdoesnotincludespecificelementsoftheelectricitymarketdesignorconditions(suchastransmissionconstraintsandvoltagerequirements)thatmustalsoberecognizedwhen systemresourcesaredispatched.1.ElectricityMarketSystemandMajorActorsUntillateinthetwentiethcentury,electricitythroughouttheUnitedStateswasgeneratedanddistributedprimarilybyverticallyintegratedutilitiesthathadanexclusivefranchisewithinagivenareaandweresubjecttorate-of-return(cost-of-service)priceregulation.Manystatesstill relyonthattraditionalregulatorystructure.Startinginthe1990s,NewYorkandseveralother statesmovedtoavertically-disintegrated systeminwhichregulatedinvestor-ownedutilities("IOUs"),suchasConsolidatedEdison 4,buymostofthepowertheyneedtoservetheircustomersfromwholesalegeneratingcompanies,suchas Entergy,whichrelyuponmarketpricestoobtaintheirrevenues. Thesepurchasescanoccurthroughspotmarketsadministeredby"IndependentSystemOperators"suchastheNewYorkIndependentSystemOperator("NYISO")thatmanagemarketsinwhichgeneratorsbidtoprovidepowertothe system.

4ThesixIOUsinNewYorkStateareCentralHudsonGas&Electric,ConsolidatedEdison,NewYorkStateElectric&Gas,NationalGrid,Orange&RocklandUtilities,andRochesterGas&Electric.TwootherimportantactorsinNewYorkState'selectricitysystemarenon-profitstateentities:LongIslandPowerAuthority("LIPA")andNewYorkPowerAuthority("NYPA").

NERAEconomicConsulting 82.ElectricityMarketCompetitionandCostMinimizationInNewYorkState'scompetitivewholesaleelectricitymarket,generatorssubmitbidsthatindicatehowmuchpowertheywouldbewillingtosupplyatvariousprices.NYISOfindsthepriceatwhichsufficientpowerwillbesuppliedtomeetdemandateachtimeofday,andallbidderswithbidsatorbelowthismarket-clearingpricereceivethisprice.NYISOalsomustaccountforconstraintsintheelectricitysystemtoensurethe system'sreliability,butinessencethemarketdetermineswhichunitsgenerateelectricitytomeetdemandbasedontheobjectiveof minimizingcosts.Inadditiontothemarketforenergy,NYISOalsoadministersamarketforfirmcapacity(toensureadequatesupplyattimesofpeakdemand)andmarketsforseveralancillaryservices(NYISO2011b).NYISOalsopreparesstudiesontheneedfornewinfrastructureinNewYorkState.However,NYISOlackstheauthoritytobuildnewinfrastructureortorequireanyotherorganizationtodoso.Instead,wholesalegeneratingcompaniesgenerallymakedecisions regardingretirementofexistingcapacity,theamountofnewcapacitytobuild,whattypeofgenerationcapacitytobuild,andwheretobuildit.Companiesmakethesedecisionswiththeobjectiveofminimizingcostsandmaximizingrevenues.Companiesdecidewhattypeofgenerationcapacitytobuildbasedonlevelizedcosts,whichexpressthesumofcapitalcosts,otherfixedcosts,andvariablecostsoverthelifetimeofthepowerplantperunitofenergyoutput(e.g.,dollarsperMWh).Thus,inNewYorkState'scompetitivewholesaleelectricitymarket,costminimizationiscentraltotwodifferentdecisionsbypowercompanies:(1)thetypeofgenerationcapacitythatwillbebuiltbasedontotal"levelized"costs;and(2)forthecapacitythathasbeenbuilt,thebidthatwillbesubmittedintoNYISO'swholesaleenergy,capacity,andancillaryservicesmarketsbasedonshort-runmarginalcosts.Companiesgenerallywillbuildnewgenerationcapacityonlyiftheirexpectedpricesforenergy,capacity,andancillaryservicesaresufficientlyabove short-runmarginalcoststocovercapitalandotherfixedcosts(includinga"normal"returntoinvestors).Companiesgenerallywillbidtooperatetheircapacityinagiventimeperiod(subjecttoproductionconstraints)ifthepricewillatleastcovershort-runmarginalcosts,whichare primarilyfuelcostsinthecaseoffossilgeneratingunits.Fornuclearandsometypesofrenewables(suchaswindorrun-of-riverhydro),marginalcostsare smallrelativetopotentialmarket-clearingprices,sotheyoperatevirtuallywhenevertheyareavailable(i.e.,whenevertheyarenotshutdownbecauseofscheduledorunscheduledmaintenanceorbecauseofinsufficientwindorwaterinthecaseofrenewableresources).

5Asaresult,generationgenerallycannotbeincreasedatexistingrenewableunitstoprovidereplacementpowerifIPECgenerationwerenotavailableasthefacilitiesarefullyutilized.Incontrast,generationcanoftenbeincreasedatexistingfossil-fueledunitsinordertoprovidereplacementpowerundertheno-actionalternative.

5Nuclearplantshavefuelcosts,buttheyarenotvariableintheveryshortrun.Nuclearfacilitiesalsoarebidinasbaseloadfacilitiesbecausetheycannotcycleupanddownrapidly.

NERAEconomicConsulting 9B.GovernmentSupportforExistingRenewablesandEnergyEfficiencyProgramsStateandfederalpoliciesaffecttherelativecostsofdifferentgenerationsourcesinvariousways.Federaltaxpoliciessubsidizecertaintypesofgeneration,particularlyrenewables,thusmakingcompaniesmoreabletoundertakerenewableprojectsthatotherwisewouldnotbecost-effectiveandprofitable.Forexample,awindprojectthatotherwisewouldnotbeeconomicunderNYISO'smarket-clearingpricesforenergyandcapacitymaybecomeeconomicbyvirtueoftheFederaltaxbenefitsandStateRPSsubsidiesinadditiontothemarket-clearingpricethatitsownerswillreceive.Variationsovertimein"additional"fundingmechanismssuchasthosetaxbenefitsaswellaslowermarket-clearingelectricityprices(causingalargergapbetweenelectricitypricesandwindprojectcoststhatsubsidiesmustfill)haveledtolargeswingsinthe amountofwindpowerconstructedintheUnitedStates,asshownbelowinFigure1.InFiscalYear2010,thefederalgovernmentprovided$6.6billiontosupportrenewableenergy,ofwhichwindgeneratorsreceived$5.0billion(EIA2011c,p.xviii).Federalsupportmechanismsincludetheproductiontaxcredit,whichcurrentlyprovides$22/MWhincorporatetaxcredittowindgeneratorsandcertainotherrenewableenergyproducersforthefirsttenyearsofoperation(DOE2012). Thefuturelevelsoffederalsubsidiesandothersupportmechanismsarehighlyuncertain,however,andtheymayfallaspartoffuturepotentialfederaldeficit-reductionefforts.Inaddition,asdiscussedindetailbelow,NYSERDAprovidesRPSsubsidiestorenewablegenerationinNewYorkState.Aswithfederalsubsidies,NYSERDA'ssubsidiesareusedtoaugmentthemarket-clearingelectricitypricethattherenewableproducersreceivefrompurchasersoftheirelectricity. Thus,thesubsidieselicitadditionalsupplyofrenewableenergy.Figure1.U.S.WindCapacityAdditionsandAvailabilityofFederalRenewableEnergySubsidiesNote:Graybandsindicateexpirationoffederalrenewableenergysubsidies.Source:Metcalf(2010)

NERAEconomicConsulting 10ThetotalamountofsubsidyofferedinanyyearislimitedbyabudgetsetbytheNYPSC. ThebudgetsarecoveredbyfeesleviedbyIOUsonNewYorkState'selectricityconsumersthroughsurchargesontheirmonthlyutilitybills.Asaresultofsuchpolicies,consumersalreadypayapremiumforrenewableenergy.IncrementalrenewablegenerationaboveandbeyondtheRPSprogramundertheno-actionalternativewouldrequireincreasedbudgetsandfees.StateandFederalpoliciesalsocaninfluencetheamountofelectricitydemandedbyrequiringorencouragingenergyefficiencyandotherconservationmeasures.Mandatory mechanismsincludeapplianceefficiencystandardsandbuildingcodes.Voluntarymechanismsincludeeducationandvarioussubsidies. Theseeffortsmayinvolvedistributionutilitiesthatofferconservationprogramsofvarioustypes,generallyinresponsetoincentivesorrequirementscreatedbytheirregulators.InNewYork,IOUsandNYSERDAcollectivelyrecoverthecostsofsuchprogramsthroughsurchargestoNewYorkconsumersontheirmonthlyutilitybills.1.NewYorkState's"30x15"RenewableElectricity Goal ThissectionconsidersthespecificeffectsofNewYorkState'srenewablegoalsonelectricitygeneration.Asnotedabove,statepoliciescansupplementprivatemarketforcesandsubstantiallyinfluencethegenerationmix.a.OverviewofNewYorkState GoalandProgramsNewYorkhasadoptedagoalofmeeting30percentofelectricitydemandin2015("30x15")withrenewablesources,suchaswind,biomass,andhydro.Roughlytwo-thirdsofthatgoalwasmetbeforeitwasset,becauseNewYorkhistoricallyhasgeneratedsubstantialamountsofpowerfromhydroelectricplantsatNiagaraFalls,St.Lawrence,andotherlocations. Thosepreexistingplantshaveprovidedlow-costpowerformanydecades,andarenoteligibleforthesubsidiesdiscussedbelow. TheStateexpectstoobtainmostoftheincrementalresourcesneededprimarilythroughtheRPSprogramadministeredbyNYSERDAandfundedbyNewYork'sconsumersthroughsurchargesontheirmonthlyutilitybills.

6NewYork'sRPSdiffersfromRPSprogramsinmanyotherStates.UnlikemostotherRPS's,NewYorkacquiresitsrenewableresourcescentrally,throughNYSERDA,underasystemestablishedin2004.In2010,NYPSCincreaseditsoriginalgoalof25percentrenewablesby2013to30percentby2015,settheMWhleveltobeachievedby2015andalsoestablishedannualbudgetsforNYSERDAthrough2024topayforsubsidiesitestimateswillberequiredtoobtaintheadditionalrenewableoutputneededtomeetthegoal(NYPSC2010).NewYorkutilitiesarerequiredbytheNYPSCtoassessavolumetricsurchargeonelectricity salesandtransmittherevenuestoNYSERDAtopaythesubsidiesrequiredtosupportrenewableenergy projects.Ineachyear,thechargeperunitofelectricitysoldissetsothatrevenuescollectedequalthebudgetforthatyear.However,thereisnoguaranteethatthegoalswillbeachieved 6LIPAhasitsownseparategoal,andtheNYPSCexpectsadditionalresourcestobeobtainedthroughavoluntaryprogram(underwhichsomecustomersvolunteertopayhigherratesforpowerprovidedbyrenewables)and throughotherstateagencies(NYPSC2010,Appendix,p.12).

NERAEconomicConsulting 11withinthosebudgets.UnlikemostStateRPSprograms,therearenopenaltiesforutilitiesiftheydonotpurchasesufficientenergyfromrenewableresources(NYPSC2004,p.5).NYSERDAsolicitsbidsforproductionsubsidiesfromrenewableprojectdevelopersandentersintocontractswithsuccessfulbidders.Inthe"maintier"subsidyprogram,whichaccountsforabout97percentofthe30percentoverallgoal, 7NYSERDAholdsannualauctionstoselectrenewablesourcesthatgenerallyrequirethelowestsubsidyperproject(NYSERDA2011).Thesesubsidiessupplementthemarketprices(andfederalsubsidies)thattherenewablesources willobtain,thusmakingconstructionofthesourcesviable.b.ProgramBudgetstoAchievetheRenewable GoalTheNYPSChas setsubstantialbudgetsforNYSERDAtosubsidizerenewablesthrough2024undertheRPSprogram,as showninFigure2.Forexample,theRPSbudgetfor2011was$170millionandthebudgetfor2015is$321millioninnominaldollars. Thecumulativebudgetfrom2006to2024is$3.0billion. ThebudgetsrepresentthepaymentsthatNYSERDAisauthorizedtomaketorenewablegenerators-amountsthatmustultimatelyberecoveredfromNewYork'sconsumers.NotethatthesebudgetscoveronlytheRPSprogramtotheexclusionoftheadditionalcostsofanyLIPAandNYPAprograms.

7InadditiontoNYSERDAcontractswithlarge"maintier"renewablesources,NYSERDArunsamuchsmallerprogramtoencouragesmall-scale,customer-sitedprojects,suchassmallwindturbinesorsolarpanels.Thegoal fortheseprojectsistomakeup1percentofelectricityconsumptionby2015,orabout3percentofthe30percentoverallgoal.AdditionalinformationontheseRPSprogramsisprovidedinAppendixA.

NERAEconomicConsulting 12NYSERDAestimatesthattheaverageproductionsubsidyresultingfromtheJune2011offeringwasover$20perMWh,ormorethanone-thirdthewholesalecostofgeneration(NYSERDA2011b,p.14).Thesubsidiesrequiredtoelicitrenewablesupplieshaveproved higherthanexpectedwhenbudgetswereset.Bytheendof2010,NYSERDAhadspent57percentofitsbudgetfortheperiodthrough2015buthadsecuredonly39percentoftherenewableenergygoal(NYSERDA2011a,p.21).2.NewYorkState's"15x15"ConservationGoal ThissectiondescribestheothermajorstatepolicythatinfluencestheelectricitymarketinNewYork,NewYorkState'seffortstoreduceelectricityuse("conservation").a.OverviewofNewYorkStateConservationGoalIn2007,NewYork'sthen-Governor EliotSpitzer seta"15x15"goal,whichcalledfortheStatetoreduceitsenergyconsumptionby15percentby2015comparedtoforecast"businessasusual"electricityconsumptionin2015.Fromtheoutset,therehasbeenbroadagreementthatthegoalsofthe15x15goalaresubstantiallymoreambitiousthanpriorprogramsandthat meetingthemwouldrequireadditionalefforts.Inannouncingtheplan,GovernorSpitzercharacterizeditasthe"themostaggressivetargetinthenation"(Spitzer2007). TheNYPSC,inadoptingthegoalandapprovingseveralprogramsintendedtohelpachieveitintheelectricitysector,statedthatthegoalis"extremelyaggressive"(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. The"jurisdictionalgap"representedadditionalreductionsfromnewprogramsthatNYSERDAestimatedwouldbeneededtomeettheoverallgoal.Tofillthisgap,NYPSCannouncedthe EnergyEfficiencyPortfolioStandard("EEPS")programin2008.Underthatprogram,theinvestor-owneddistributionutilitieswouldadd programstoreduceconsumptionbytheircustomersandwouldalsofundnewprogramsatNYSERDA. The EEPSprogramisfundedbyvolumetricsurchargesthatutilitiesassesstoNewYork'sconsumersontheirmonthlyutilitybills. TheNYPSCestimatedhowmuchitwouldcosttoimplementprogramsnecessarytofillthegapandsetsurchargelevelstofundsuchprogramsthrough2011(NYPSC2008).InasubsequentorderissuedinOctober2011,NYPSCannouncedgoalsfortheinvestor-owneddistributionutilitiesthroughDecember31,2015andsetnewsurchargelevelsthatitestimatedwouldprovidesufficientfundingfortheIOUsandNYSERDAtoachievethosegoals(NYPSC2011b).b.ProgramBudgetstoAchieveNewYorkConservation GoalTheNYPSChas setsubstantialbudgetstosupportconservationprogramsforelectricityconsumptionthrough2015undertheEEPSprogram,asshowninFigure4.Forexample,theEEPSbudgetfor2011was$159millionandthebudgetfor2015is$183millioninnominal dollars. ThebudgetsrepresentthepaymentsthatNYSERDAandtheIOUsareauthorizedtomaketoencourageelectricityconservationandtheamountsthatultimatelymustberecoveredFigure3.NYSERDAAnalysisofPotentialContributionstoMeeting15x15ConservationGoal 05,000,00010,000,00015,000,00020,000,000 25,000,000200720082009201020112012201320142015Energy-EfficiencySavings(MWh)JurisdictionalGapTransmission&DistCodes&StandardsUtilities(2007Programs)SBCIII(NYSERDA)StateAgenciesNYPALIPANote:Source:NYPSC(2008,Appendix1,p.5)

NERAEconomicConsulting 14fromelectricityratepayersinNewYork.NotethatthesebudgetscoveronlyelectricityconservationprogramsbyNYSERDAandIOUSunderthe EEPSprogram-theydonotincludethe significantextrapaymentsforelectricityconservationbyLIPA,NYPA,stategovernmentagencies,orotherentitieswithconservationgoalsunderNewYork'soverall"15x15"policy.C.CostsofAdditionalGenerationinNo-ActionAlternativeThissectionprovidesinformationontherelativecostsofalternativegenerationtechnologiesthatcouldbeusedtoprovidereplacementgenerationifIPECgenerationwerenotavailable.Webeginwithaconceptualclarificationofthegenerationwhosecostsarerelevantto thecomparison,namelythegenerationthatcouldreplaceIPECgenerationifIPECwerenotavailable. Thisdistinctionisimportantforrenewables(andconservation)becauseoftheneedtobeclearontheroleofgovernmentsupport(orlackthereof)forgenerationbeyondcurrentcommitments.Wethenconsiderinformationonthecostsofpotentialcandidates,includingnewunitsofvariousfueltypesandexpansionofgenerationatexistingunitsofvariousfueltypes.1.BaselineConditionsvs.No-ActionAlternative Asnotedabove,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,wedefinethescenariowithIPECgenerationasthe"baseline"andthenmeasuretheimpactsoftheno-actionalternativerelativetothatbaseline.

8Theimpactsoftheno-actionalternativearethusthe"changes"inenvironmentalconditionsrelativetothebaseline(withcontinuedoperationofIPEC).Wefocusonelectricitytechnologiesbecausebeforeenvironmentalimpactscanbeevaluated,itisnecessarytoestimatehowtheno-actionalternativewould changethemixofelectricityresources(includingconservation)usedtomeetexistingdemandforelectricityservicesinNewYork.Anyenergydevelopmentsthatoccurtoanequaldegreeinboththebaselineandtheno-actionalternativearenotdirectlyrelevanttoanevaluationoftheenvironmentalimpactsoftheno-actionalternative.Whateverthebaselineis,therelevantquestioniswhatincrementalresources(includingconservation)wouldreplacelostbaseloadoutputfromIPEC;i.e.,whatwouldbethedifferencesinresourcesbetweenthebaselineandthe no-actionalternative.b.IllustrationofChangesundertheNo-ActionAlternativeFigure5illustrateshowtheincrementalchangesingenerationofvarioustypeswouldbecalculatedusingahypotheticalbaseline.Notethatthecomponentsofthestackedbarsarenotdrawntoscale,butarepurelyhypothetical. Thefiguredoesnotrelatetoanyparticulargeographicarea.Ontheleft-hand sideisastackedbar showingahypothetical"original"forecastofthebaselinesourcesofsupply-includingconservation-thatwouldbeusedtomeetdemand.

9Renewablesandconservationplaymodestrolesinthisbaseline,withthebulkofoutputcoming fromIPECandfrom"fossilandother,"wherethelatterincludespowerprovidedbyothernuclearplantsaswellasfossilunits.

8HerewedefinecontinuedoperationofIPECasour"baseline,"butweemphasizethattheresultswouldbenodifferentifwedefinedtheno-actionalternativeasthe"baseline."

9Tosimplifythediscussion,wetreatconservationasasourceof"supply,"althoughitismoreproperly consideredaspartofdemand.

NERAEconomicConsulting 16Themiddlestackedbarthen showsahypotheticalno-actionalternativeinwhichIPECgenerationwouldnotbeavailabletomeetelectricitydemand. Thefinalstackedbarshowsthechangesbetweenthetwopreviousstackedbars.Byassumption,alloftheoutputfromIPECwouldbelost,anditwouldbemadeupbysomeincreasesintheotherthreesources(renewables,conservation,andfossil/othersources).Thesechangesingenerationandconservationwould providethebasisforanalyzingtheenvironmentalimpactsoftheno-actionalternativerelativetothebaseline.Thekeypointofthisillustrationisthatreplacementgenerationrepresents additionalgenerationthatwouldbeforthcomingifIPECwerenotavailable.Forpurposesofthecostanalyses,wefirstprovideinformationontheexpectedfuture"levelized"costsfordifferenttypesofnewunits,excludingtheeffectsofgovernmentsupport.Wethenassessthecostsof additionalrenewablesor additionalconservationintheno-actionalternative. Thefinalsubsectionconsidersthefeasibilityandcostsofexpandinggenerationatexistingtypesoffacilities.2.LevelizedCostsofNewCapacityExcluding GovernmentSupportFigure6displays EIA'sestimatesoflevelizedcosts-expressedasdollarsper MWh-fornewelectricitygeneratingcapacity,exclusiveofgovernmentsupport(forexample,exclusiveofFederaltaxcreditsorNewYorkStateRPSincentivepayments).Asdiscussedabove,levelizedcostsincorporatecapitalcosts,otherfixedcosts,andmarginalcostsovertheentirelifetimeofthepowerplant.EIA'sestimatesinFigure6suggestthat,exclusiveofgovernmentsupport,Figure5.HypotheticalAnalysisofChangeinGenerationfromBaselinetoNo-ActionAlternativeBaselineNo-actionChangeOutputRenewablesConservationIPECFossilandotherNote:Mixesofresources(andresultingchanges)arenotdrawntoscaleandshouldbeinterpretedonlyinqualitativeterms.Source:Hypotheticalexample NERAEconomicConsulting 17NGCCunitsaretheleastexpensivegenerationalternativeandthuswouldbethemostlikelytobeaddedinamarketsetting.

103.CostsofAdditionalRenewablesThissectionconsidersthecomplicationsrelatedtoadditionalNewYorkStaterenewablegenerationintheno-actionalternative,firstnotingthatfutureprogresstowardthecurrent renewablegoalisnotrelevantandthendemonstratingthatadditionalrenewablesarelikelytobemoreexpensivethantherenewablesdevelopedunderthecurrentrenewablegoal.a.ProgresstowardRenewable GoalNYSERDA's2011RPSPerformanceReportstatesthat,asofDecember31,2010,generationfromtheprogram'scurrentcontractswouldproducerenewableenergyequivalentto39percentofthe2015target.Whateverrenewablegenerationisultimatelyencouragedthrough 10Theseestimatesdonotaccountforthemanycomplicationsrelatedtolocation,architecture,usage,potentialtechnologicalprogressandotherfactors.SeeBorenstein(2011)foradiscussionoftheseissuesandcomparisons ofdifferentestimatesoflevelizedcostsforalternativegenerationtechnologies.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. TheState'srenewablegoalanditsassociatedprogramsarepartofthebaselineforpurposesofevaluatingtheno-actionalternative;thechangesduetothegoalandprogramswilloccurregardlessofwhateverelseoccursonthe system. Thus,renewablegenerationelicitedbytheprogram'ssubsidiescannotbecountedintheno-actionalternative.Forrenewablestoplaya significantroleinreplacingIPEC'sgeneration, additionalrenewables,beyondthegoalsoftheexistingRPSprogram,wouldbeneeded.b.CostsofAdditionalRenewablesUsingBaselineCostsperMWhAsdiscussedbelow,expandingtherenewablesprogramtohelpreplaceIPEC'senergywouldtendtoincreasethesubsidiesperMWhneededtoelicitsufficientsupply.Butevenifthesubsidiesper MWhdidnotincrease,replacingallofIPEC'senergywithrenewableswouldcostNewYork'selectricityconsumersover$500millionperyearinsubsidiesoverandabovemarketreplacementcosts,basedonimpliedcostsperMWhfortheNYPSC'scurrentRPSprograms.

11Thatismorethantheexistingbudgeteveninthepeakyear showninFigure2,whichis$321million. Tomeeteventhiscost(whichislikelytobeconservative),theNYPSCwouldhavetoincreaseitsbudgetsandraisethemonthlysurchargesassessedtoNewYorkconsumerscommensurately.c.CostsofAdditionalRenewablesAccountingfortheIncrementalEffectsonCostsperMWhAsnotedabove,therelevantquestionisnotthecostofrenewablesinthebaseline,butrathertheincrementalcostofadditionalrenewablegenerationundertheno-actionalternative.InNewYork'scompetitivemarketforgeneration,anyincreaseinincrementalcostsforrenewableswillinturnreducethelikelihoodthatrenewableswouldsuccessfullycompetewithfossilpowerundertheno-actionalternative.Thequalitativerationaleforexpectinganincreasedcostforadditionalrenewablesbeyondthecurrentgoalisstraightforward.Thereisasupplycurveforrenewables,whichisafunctionofthetotalpricereceivedperunitgenerated.Holdingconstantthemarketpriceforelectricity(whichisdeterminedbygas-firedunitsmostofthetime)andfederalsubsidies,wecanplotthesupplycurveasafunctionofthesubsidypaidbyNYSERDA.Figure7plotsa hypotheticalsupplyfunction. Thelargerthesubsidy,themorerenewableswouldparticipateinthemarket.Conversely,thelargerthequantityofrenewablesdesired,thelargerthesubsidymustbe. Thus,asnotedinFigure7,ifthequantityofrenewablesinthebaseline(withthe"30by15" 11Thiscalculationuses16.3millionMWhasIPEC'sannualenergy(NYISO2011a,p.34).In2015(thefinalyearforwhichanRPSgoalisspecified),theRPSprogramhasagoalof10.4millionMWhandabudgetof$321million(NYPSC2010,Appendix,Tables13and17).IPEC'sannualenergyis57percentlargerthantheRPSgoalfor2015,sothenecessarybudgetwouldneedtobe57percentlarger:$504million(in2015dollarsassumingthatthecostofsecuringsubstantialamountsofadditionalrenewableresourcesincrementaltothe baseloadwouldremainthesame).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,makingitevenlesslikelythatrenewableswouldconstituteasubstantial 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,itwillreducedemandbymorethanIPEC'sannualgeneration(NYS-37,p.49).Aspartofitsforecastingandplanninganalyses,NYISOhasevaluatedthelikelyachievementofelectricityconservationinNewYorkthrough2021.NYISO(2011a,p.21)doesnotexpectthe"15x15"goaltobemetby2015.

12However,evenifthe15x15goalismet,thecomparisonbetweenprogramsuccessandIPECgenerationismeaninglesstotheissueathandbecauseitrelatestothebaselineandhasnodirecteffectonwhatresources(includingenergyefficiencyandconservation)wouldbeusedincrementallyundertheno-actionalternative.Putanotherway,theconservationusedtoachievethe15x15goalwillnotbeavailabletoprovidetheadditionalconservationundertheno-actionalternative.b.CostsofAdditionalConservationUsingBaselineCostsperMWhExpandingtheconservationprogramundertheno-actionalternativewouldincreasethesubsidiesper MWhneededtoelicitsufficientsupply. Evenifthesubsidiesper MWhdidnot increase,attemptingtoreplaceallofIPEC'senergywithconservationwouldcostNewYork'selectricityconsumersabout$250millionperyearinadditionalsubsidies,basedonimpliedcostsperMWhfortheNYPSC'scurrent EEPSprograms.

13Tomeetthatcost,theNYPSCwouldhavetoincreaseitsbudgetsandraiseorextend(orboth)themonthlysurchargesassessedtoNewYorkconsumerscommensurately..

12NYISO(2011,p.21)forecastsagapofabout7,500GWhin2015betweennecessaryenergysupplywithexpectedenergyefficiencyachievementsandnecessaryenergysupplywithfullachievementofthegoal.Thisgaprepresentsabout28percentofthegoal(i.e.,about4percentagepointsofthe15percentgoal).AppendixAprovidesmoreinformationonNewYork's15x15programs.

13Thiscalculationuses16.3millionMWhasIPEC'sannualenergy(NYISO2011a,p.34).In2015(thefinalyear forwhichanEEPSgoalisspecified),theEEPSprogramhasagoalof12.1millionMWh(NYISO2012,slide5)andabudgetof$183million(NYPSC2011,Appendix2,Table1).IPEC'sannualenergyis35percentlargerthantheEEPSgoalfor2015,sothenecessaryadditionalbudgetwouldbe35percentlargerthanthebudgetfor2015:$247million(in2015dollarswiththesamecaveatasaboveabouttheuncertainabilitytosecure significantadditionalamountsofconservationincrementaltothebaselineatthesamecost).Usingadifferent yearthan2015toestimatethenecessaryadditionalbudgetwouldyieldalargerestimate.

NERAEconomicConsulting 21c.CostsofAdditionalConservationAccountingfortheIncrementalEffectsonCostsperMWhAswithrenewablegeneration,undertakingmoreintensiveconservationeffortswouldlikelyraisethemarginalcostofadditionalconservation,thusfurtherincreasingtheexpendituresneededtosecureadditionalconservationundertheno-actionalternative.Aswithrenewables,itisusefultosummarizethevarietyofmeasuresavailabletoreduceelectricityuseintermsofasupplycurveforconservation,which showsthemarginalcostofsubsidiesandotherprogramstoelicitadditionalconservationbeyondwhatoccursduetopricesandtechnologicaladvancesthatlowertheextracostofmoreefficientequipmentandstructures.Aswithmostsupplycurves,themarginalcostofconservationrisesasadditionalconservationisundertaken(Gillinghametal.2004,p.66).Initialconservationeffortsmayyieldamountsof"low-hangingfruit"availableatrelativelylowmarginalcost,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).Incommentsontherecent"whitepaper"preparedaspartoftheNYPSC'sreviewofitsEEPSprogram,NYISOpresentsanupward slopingsupplycurveforconservationbasedonrecentexperienceinNewYork,asshowninFigure8.Inpreparingthisgraph,NYISOuseddata inthewhitepapertoplotthecostofthe EEPSprogramsasafunctionofthecumulativegigawatt-hours("GWh")saved. Thecostrisessubstantiallyasthelevelofenergy savedincreases. Thisgraph showsresultsforexistingprograms.Incrementalprogramstohelpreducedemandto"replace"IPECundertheno-actionalternativewouldrequiregoingfurther.AlthoughthehighestcostsinthefiguremayrepresentprogramsthattheNYPSCsupportsforreasonsotherthancost-effectiveness,thecurvenonethelessillustratesthatasopportunitiesforrelativelylow-costprogramsareexhausted,additionaldemandreductionscanonlybe securedbyincurringhighercosts.

14NotethatthecostsofconservationmeasuresestimatedbyNYISOandStateagenciesinNewYorkarenotcomparabletoavoidedcostestimatesforgeneration.TheNYISOcostsforconservationmeasuresrepresentonlythecoststoutilitiesorprogramadministratorsanddonotincludetheresidualcostsforconsumerstopurchaseenergy-efficientappliancesorundertakeotherconservationactivities.Wholesaleelectricityprices,however, representthefullmarginalcostofproducingelectricity.Ontheotherhand,thesefigurescomparetheone-time costsoftheprogramstoannualelectricitysavings,whereaswholesalepricesreflectcostsamortizedoverthe livesofthefacilities.

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 sections-notablythecompetitivenatureoftheelectricitymarketinNewYorkandtherelativecostofalternativegenerationthatcouldreplaceIPECgeneration-toprovideassessmentsofthelikelymixofreplacementenergyundertheno-actionalternative. TheimportanceofmarketconditionsinNewYorkmeansthatinformationonrelativecostsmustbeusedtoprovideassessmentsoftheextenttowhichvariousTable1.EstimatesofMarginalCostsofGenerationMarginalCosts(2011$/MWh)CapableofIncreasingUtilizationinResponsetoMarketForces?O&MFuelTotalCoalYes$2$21$23NaturalGas-CombinedCycleYes$2$31$33-CombustionTurbineYes$11$47$58OilCombustionTurbineYes$17$255$272WindNo---SolarPVNo---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 Generation AdditionalfossilfuelgenerationislikelytoconstitutethemajorreplacementgenerationifIPECgenerationwerenotavailable. Theleastexpensivegenerationoptionsarelikelytocomefromincreasesingenerationatexistingunits,particularlyfromcoalandnaturalgasunitsthatarenotoperatingatfullcapacity.Amongnewunitsthatmightbeaddedasreplacementgeneration,newNGCCunitshavethelowestlevelizedcosts(i.e.,costsperMW-hr,includingcapital,fuelandotheroperatingandmaintenancecosts).2.AdditionalRenewable Generation AdditionalrenewablegenerationisnotlikelytobeamajorpartofIPECreplacementgeneration.NewYorkStatehasanambitiousrenewablegoal-accompaniedbysubstantialsubsidyprograms-thatextendsintothefuture.ButthatfuturerenewablegenerationwouldbeputinplaceregardlessofIPEC'sstatus.Thus,thefuturerenewablegenerationduetotheNew YorkStaterenewablegoalisinthebaselineratherthanasadditionalgenerationthatwouldbe"available"toreplaceIPECgeneration.Expandingrenewablegenerationbeyondthecurrentgoalwouldlikelyrequireanincreaseinthelevelofsubsidybeyondthecurrentlevels. Thecomparisonoflevelizedcostsshowsthat windgeneration-thelowestcostrenewablegenerationforNewYorkState-wouldbesubstantiallymoreexpensivethannaturalgas.GiventhemarketstructureinNewYorkanditsfocusonminimizingthecostsofadditionalgeneration,therelativecostinformationindicatesthatadditionalwindgenerationisnotlikelytobeaddedasreplacementgenerationifIPECwerenotavailable.3.AdditionalEnergyEfficiencyandConservation AdditionalenergyefficiencyalsoisnotlikelytobeamajorpartofIPECreplacementgenerationforreasons similartothoserelevantforrenewablegeneration.Ofcourse,giventhatremovalofIPECgenerationwouldleadtoincreasedretailelectricityprices,therewillbesomeeffectonconservationthroughpriceeffects.However,moststudiesputthepriceelasticityforelectricityataround-0.2,whichmeansthata10percentincreaseinretailelectricitypricewouldresultina2percentdecreaseinelectricitydemand(BernsteinandGriffin2005,pp.18,21).

Thus,wewouldnotexpectthepriceeffectonelectricitydemandtobesubstantialgiventherelativelylowpriceelasticityofdemandforelectricity.Asnotedabovewithregardtorenewables,thelevelofenergyefficiencytobeachievedbyNewYorkState'scurrentprogramsisinthebaseline, sinceitwouldbeachievedregardlessof IPEC'sstatus.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.IllustrativeEmissionRatesTable3showsaverageemissionratesforthreemajorpollutants-CO 2,SO 2,andNO X -forcoalandnaturalgas-firedelectricityplantsintheUnitedStates.TheseemissionratesrelatetoallexistingpowerplantsintheUnitedStatesforeachfuelandthusareaveragesfordifferentnaturalgasgenerationtechnologies(e.g.,gas-firedturbinesandcombinedcycleunits)anddifferentpowerplantages. TheemissionrateswillthereforedifferfromratesintheFSEIS,Table2.AirPollutantsbyGenerationPlantTypeAirPollutantCoalGasNuclearCO2andothergreenhousegasesyesyes-Sulfurdioxide(SO2)yesyes-Nitrogenoxides(NOx)yesyes-Particulatematteryesyes-Mercuryandotherheavymetalsyes--Carbonmonoxideyesyes-Volatileorganiccompoundsyesyes-Acidgasesyes--PlantTypeSource:EPA(2011a),EPA(2011b)

NERAEconomicConsulting 26whichrelateonlytonewnatural-gas-firedpowerplants,whichhavelowerratesthantheaverageforexistingunits.BasedonIPEC'sannualgenerationofover16million 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)aretheprimarycausesofacidrain-whichcanleadtoacidificationofwaterbodiesandothereffects-andcanalsoleadtovariousadversehealtheffects.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 GasRecentdevelopmentsinthetechnologiesforextractingnaturalgas-referredtoashydraulicfracturingor"fracking"-haveledtosomeenvironmentalconcerns.Inrecognitionoftheseconcerns,theNewYorkStateDepartmentof EnvironmentalConservation("NYSDEC")recentlyissuedadraftsupplementalenvironmentalimpactstatement,statingthat"[h]igh-volumehydraulicfracturing,whichisoftenusedinconjunctionwithhorizontaldrillingandmulti-wellpaddevelopment,isanapproachtoextractingnaturalgasinNewYorkthatraisesnew,potentiallysignificant,adverseimpacts-"(NYSDEC2011, ExecutiveSummary,p.1).TheNYSDECisproposingregulationstoaddresssuchconcerns.2.Wind GenerationNYS-37claimsthattheenvironmentalimpactsassociatedwiththeno-actionalternativewouldbe"lessthantheenvironmentalimpactofrelicensingIndianPoint"(p.3),presumablybaseduponitsassumptionthatmuchofthereplacementgenerationwouldcomefromrenewable electricity.NYS-37doesnotprovideanyinformationonthepotentialenvironmentaleffectsofrenewablegeneration.Itisusefultoprovideinformationonthepotentialenvironmentaleffectsofrenewables-includingwindinthis sectionandbiomassandhydroelectricinsubsequentsections-toprovideadequateinformationconcerningtheNYS-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.FishandWildlifeServicenotesthat"windenergyfacilitiescanadverselyimpactwildlife,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).TheNationalWindCoordinatingCollaborativeindicatesthatwindfarmsinNewYorkkillbetweenapproximately1.5and6birdsperMWperyearandkillbetweenapproximately3and15batsperMWperyear(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,6,000MWofwindturbinestoreplaceIPEC'senergyoutputwoulddisturb6,000hectares(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). Thisnoisenuisancecanaffectmanypeopleifthewindturbinesarelocatedindenselypopulatedareas.Figure10showsthelocationofcurrentandproposedwindfarmsinNewYork.MostwindfarmsarelocatedinthesparselypopulatedareasofupstateNewYork.IfanynewwindturbinestoreplaceIPECwerebuiltinthedenselypopulatedareasofdownstateNewYork,noisefromtheturbinebladescouldbeanuisanceformanypeopleinthe area.Figure9.HeightComparisonofWindTurbineandOtherStructuresSource:ABC(2011),p.41 NERAEconomicConsulting 30e.OtherEnvironmental ImpactsAnadditionalpotentialadverseimpactofwindenergyisicethrows(Galbraith2008).Ificeonturbinebladesdoesnotstopthemfromspinning,thebladescansometimesflingchunksoficeseveralhundredyardsathighspeeds.f.TransmissionAsreflectedinFigure10,windgenerationdevelopmenthasprimarilybeencenteredonthreeregionsinwesternandnorthernNewYorkduetowindpatterns. TheNYISO'sinterconnectionqueueindicatesacontinuedpatterninthisregard. Thus,assuminganysignificantincrementalamountofwindgenerationdevelopmentundertheno-actionalternativerequiresalsotakingintoconsiderationtheadverseenvironmentalimpactsassociatedwithsignificanttransmissionupgrades. Theseimpactsareaddressedseparatelybelow.3.BiomassFacilitiesThissectionprovidesanoverviewofthepotentialenvironmentaleffectsofadditionalbiomass-firedresources.Asnoted,alimitedamountofbiomassfacilitiesarebeingusedtomeetNewYorkState'sRPSrequirements.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-scalehydrodevelopmentwasexcludedasaneligibleresourceunderNewYork'sRPSprogramduetoits significantadverseenvironmentalimpacts(NYPSC2004,AppendixB,page2).a.Greenhouse GasEmissionsHydroelectricfacilitiesareresponsibleforincreasesingreenhousegasemissionsduringbothconstructionandoperations.Indeed,aliteraturereviewbySynapse Energy Economicsnotesthatinitialreservoirfloodingleadstoaninitialstageofbiomassdecomposition-releasingbothCO 2andmethane-andthatpost-floodedbiomesmayremovelesscarbonfromtheatmospherethanpre-floodedbiomes(Synapse2012).ArecentstudyperformedatanewlyfloodedborealreservoirinQuebec showedarapidincreaseinbothCO 2andmethaneemissionsafterthefirstyearofflooding,followedbyareturntonaturallevelswithintwoandthreeyears respectively(Tremblayetal.2009).Tremblayetal.(2009)notethatGHGemissionsatborealreservoirstypicallyreturntonaturallevelswithintenyearsofflooding.Hydro-Quebecprovidesinformationonlife-cycleassessments-includingemissionsfromfuelextraction,processingandtransportation,aswellasfrompowerplantconstructionandelectricitygeneration-thatshowstypicalgreenhousegasemissionresultsforNorthAmericanhydrofacilities(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.TransmissionExpansions ElectricitydemandinNewYorkStateismostheavilyconcentratedinthesoutheastpartoftheState,butasreflectedinFigure10andtheNYISOInterconnectionQueue,thevastmajorityofproposedwindprojectsarelocatedinwesternandnorthernNewYork. Theexistingtransmissionfacilitiesbetweenupstateanddownstatealreadyare significantlyconstrained.Inaddition,thedistribution systemsinthethreeprimaryareasofwindgenerationdevelopmentinNewYorknowfacelocaltransmissionconstraints,creatingthepotentialforgenerationpocketsintheseareas. Thus,additionalrenewabledevelopmentincrementaltotheRPSprograminthebaselinewouldlikelyrequirethedevelopmentofsignificantnewtransmissioninfrastructure.The sitingandconstructionofnewtransmissionlineswouldresultinadditionaladverseenvironmentalimpactssuchastheclearingofforestedvegetationandsubsequentdisplacementandimpactsonwildlife,includingimpactstofishandaquaticinvertebratesduetocanopyreductionandstreamcrossings. Transmissionexpansionscanhaveadverseimpactsonbirds,includingmortalityfromcollisionsandelectrocution(ABC2012).TheDEISfortheHounsfieldWindFarminJeffersonCounty,NewYork,indicatedthat50.6milesoftransmissionlineswouldhavetobeconstructedtoconnectthewindfarmtoitsregionalpowergrid(HounsfieldDEIS2009).Hounsfield'sproposedtransmissioncorridor NERAEconomicConsulting 33entailsa150-footwiderightofwaywhichwasestimatedwouldleadtotheclearingof360acresofforestedvegetationandsubsequentdisplacementandimpactsonwildlife,includingimpactstofishandaquaticinvertebratesduetocanopyreductionand53streamcrossings(HounsfieldDEIS2009).ThePublicServiceCommissionofWisconsinlists18potentialimpactsassociatedwithtransmissionlines. Theseincludeimpactsofthefollowingcategories:aesthetics,agriculturallands,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):DredgingwouldberequiredtolaycablesintheHudsonRiverandportionsofLakeChamplain,resultingintemporarysedimentresuspensionandotherimpacts;Constructionwouldresultintemporaryimpactsto56acresofwetlandsaswellastostreamsandtributaries;About10.7acresofforestedwetlandcovermaybepermanentlyconvertedtomarshorscrub-shrubcommunities;Approximately236acresofexistingforestcovermaybeclearedduringconstruction,60acresofwhichwouldbepermanentlycleared;ThreemilesofcablewouldbeinstalledwithinthecitystreetsintheboroughofQueens,NewYorkCity;and138,040linearfeetofright-of-waywithinAgriculturalDistrictswouldbeincludedintheConstructionZone.F.ConclusionsRegardingtheLikelyAdverseEnvironmentalImpactsoftheNo-ActionAlternativeThecompetitiveelectricitymarketstructureinNewYorkStatewillleadtoreplacementgenerationbeingdominatedbythelowestcostalternatives(subjecttosystemconstraints).Sincefossil-fuelgenerationprovidesforoveralllowercostpowerthanrenewables,mostreplacementpowerislikelytobefossil-fuelgeneration.Additionalfossil-fuelgenerationwillleadto increasesinCO 2andotherairemissionsaswellasotherpotentialadverseenvironmental NERAEconomicConsulting 34impacts.Indeed,evenifadditionalrenewablescouldreplacesomeofIPEC'sgeneration,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.ThedifferencesbetweenthesetworunsrepresentNEMS'sprojectionsofhowelectricitymarketsinNewYorkStateandotherregionsmightrespondunder theno-actionalternative.Forthebaseline,weusedNEMSresultsfrom EIA'sAEO2012.Fortheno-actionalternative,weassumedthatbaseloadgenerationfromIP2andIP3wouldbelostin2013and2015,respectively.Notethatthesehypotheticaldateswere simplyassumptionsusedonlyforthepurposeofconductingthemodeling.NEMSincorporatesup-to-dateinformationonnational,regional,andStateenergyandenvironmentalpoliciesaswellasinformationonexistingandproposedpowerplants.NEMSdividestheUnitedStatesinto22electricityregions,includingthreeregionsthatcollectivelycoverallofNewYorkState.ThischapterbeginswithanoverviewofNEMS.AdditionalbackgroundinformationonNEMSappearsinAppendixB. ThischapterthenpresentsNEMSresultsforbaselineenergy conditions,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,includingNewYorkState's"30x15"RPSgoal.WeusedthelatestversionofNEMS,"AEO2012,"whichwasreleasedinJanuary2012(EIA2012).Unlikemanymodelsofelectricitymarkets,NEMSdoesnottreatdemandprojectionsasinputdata.Instead,NEMScalculatesdemandforelectricityendogenously,reflectingvariousfactors,includingenergyefficiencypoliciesandelectricityprices.NEMSalsocalculatespricesendogenously,reflectingtheinteractionofsupplyanddemandfactors.NEMSincorporatesplannedadditionsandretirementsofgeneratingcapacity,butalsoprojectsunplannedadditionsandretirementsbasedondemandandthecostsofdifferentgenerationalternatives.Indecidinghowmuchcapacityofdifferenttypestoadd,NEMSselectstheleast-costalternativethatcanmeetthedemandrequirements.NEMScanbeusedtoestimatetheimpactofchangesinpolicy,suchasacap-and-tradeprogramforgreenhousegases,airpollutionregulationsthatwouldrequireadditionalcontrolmeasuresbysometypesofpowerplants,orpoliciestoincreasethefuelefficiencyofnewmotorvehicles.TouseNEMStoestimatetheincrementalimpactsofpolicychanges,onefirstrunsabaselinethatreflects"businessasusual"(i.e.,withoutthepolicychange).Although EIAhasanofficialbaselineeachyear(thebasecaseforAEO),itispossibletomodifytheunderlyingassumptionstocreateanewbaseline.Whateverbaselineisused,onethenmodifiesinputstoNEMStoreflectthechangeinpolicyandrerunsthemodel.Differencesinthetwosetsof projectionsrepresentestimatesofthepotentialimpactsofthepolicy.NotethatmodelingresultsfromNEMSrepresentareasonableestimationofwhatmayhappenbasedonthemodelinginputsandcalculations.GiventhesubstantialuncertaintythatresultsfromthecomplexanddynamicnatureofthevariousenergymarketsintheUnitedStates, 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.Changesinotherfuels'percentagesbetweenthetwoperiodsare smallerthanthechangesforrenewablesandcoal.C.ProjectedEnergyMarket ImpactsofNo-ActionAlternativeToestimatehowtheelectricity systemwouldoperateundertheno-actionalternative,werananewNEMScaseinwhichwemodeledthebaseloadIP2andIP3generationaslostin2013and2015,respectively.WemadenoothermodificationstotheAEO2012versionofNEMS.Wecomparedtheresultsforthisno-actioncasetothebaselineresultstoestimatethepotentialelectricitymarketresponsestoaddressthelostIPECbaseloadgenerationaccordingtoNEMS.Wepresentresultsfortheten-yearperiodbeginningin2016(thefirstyearinwhichIPECwouldnotoperatebasedonourmodelingassumptionsfortheno-actionalternative)andendingin2025.Table6presentstheprojectedchangesintheno-actionalternativebasedontheNEMSresults.NEMSestimatesthatIPECwouldproduce16.7million MWhofbaseloadenergyeachyearonaverageduringtheperiod2016-2025,sotheno-actionalternativereflectsthisamountofreducedgenerationfromIPEC.AccordingtotheNEMSresults,electricitypriceswouldriseasaresultofmakingIPEC'sbaseloadgenerationunavailable.Inresponsetothesehigherelectricityprices,consumerswouldreducetheirdemandforelectricityby0.3million MWhperyearonaverageduringtheperiod2016-2025.Inadditiontothissaleseffect,thereduceddemandforelectricitywouldinvolvea slightreductioninelectricitynetimportsintotheUnitedStatesby0.2million MWhperyearonaverage.TomakeupforIPEC'slostoutput,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,andthiswouldleadtoincreased"linelosses"(i.e.,dissipationofelectricityinthetransmission system). Thesumofthesefourcategoriesofmarketresponses,accountingproperlyfortheir signs(increasesvs.reductions),isequaltoIPEC'slostoutput.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.IPEC'sLostOutputandProjectedU.S.MarketResponsesinNo-ActionAlternative(2016-2025)millionMWh/yrIPEC-16.7U.S.marketresponsesReducedsales0.3 Increasednetimports-0.2(netimportsdecrease)

Increasedgeneration17.4 Reducedlinelosses-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,andmostoftheremainder(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). Theprogram'sCO 2capfor2012is165millionshorttons,whichisequivalentto150millionmetrictons. Theprogram'scapfor2018is10percentlower,whichisequivalenttoaplannedreductioninCO 2emissionsof15millionmetrictons.NotethattheAEO2012versionofNEMSincludestheeffectsofRGGI. TheNEMSresultsindicatethattheno-actionalternativewouldincreaseU.S.CO 2emissionsabovebaselinelevelsby13.5millionmetrictons,nearlyasmuchastheplannedreductioninCO 2emissionsunderRGGIthrough2018.

15AiremissionsaretheonlytypeofenvironmentalimpactmodeledbyNEMS.TheAEO2012versionofNEMSincludestheCross-StateAirPollutionRule("CSAPR"),whichEPAissuedinJuly2011tolimitemissionsof SO 2andNO xfrompowerplants.(EIAbaseditsmodelingofCSAPRintheAEO2012versionofNEMSontheoriginalformoftheregulationissuedinJuly2011.EPAsubsequentlymadetechnicaladjustmentstostatecaps andnew-unitset-asides,andtheU.S.CourtofAppealsfortheD.C.Circuitsubsequentlyissuedastayonthe regulation.)NEMSalsoproducesestimatesofmercuryairemissionsfrompowerplants,buttheAEO2012 versionofNEMSdoesnotincorporateEPA'srecentMercuryandAirToxicsStandards("MATS").Thus,the modellikelyoverstatesfuturemercuryemissionsinboththebaselineconditionsandtheno-actionalternative, andwedonotpresentthemhere.Table8.ProjectedIncreasesinAverageAnnualU.S.AirEmissionsinNo-ActionAlternative(2016-2025)CO2(milliontons/yr)13.5SO2(thousandtons/yr)6.4 NOx(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-37anditssupportingwitnessesmentionahostofdevelopmentsthattheyclaimwerenot consideredbytheNRCstaffindevelopingtheFSEISandthattheyclaimwouldleadtodifferentconclusionsregardingtheenergymixandenvironmentalimpactsoftheno-actionalternative. ThesedevelopmentsincludeNewYorkState'srenewableandenergyefficiencygoals,lowerelectricitydemandduetotherecession,recentincreasesinelectricitygenerationcapacityandtransmission systemexpansions,andlowernaturalgasprices. TheflawpervasiveintheNYS-37reasoningisthatthesedevelopmentsrepresentpartofthebaselineconditionsthatwouldoccurirrespectiveofIPEC'sstatus.Putanotherway,thevariousfactorsidentifiedbyNYS-37anditsexperts-suchastheadditionalrenewablegenerationorenergyefficiencyresultingfromNewYorkStategoals-wouldnotbe"available"toreplacethebaseloadIPECgenerationiftheIPECunitswerenotavailablebecausetheyexistnow,whileIPECcontinuestoprovidebaseloadelectricity.

3.Failuretoevaluatetheimpactsofpotentialdifferencesinthebaseline. Totheextentthatthedevelopmentstheyciteaffectthebaseline,thosedevelopmentswouldifanythingreducetherolesofconservationandrenewablesasIPECreplacementsundertheno-NERAEconomicConsulting 42actionalternative. ThedevelopmentsemphasizedbyNYS-37,includinglowerelectricitydemandandlowernaturalgasprices,wouldtendtoincreasethesubsidiesthatwouldbenecessarytofundthehighermarginalcostsofthosealternativeswhileatthesametimedecreasingthemarginalcostsoffossilresourcestherebymakingtheseresourceslesseconomicrelativetofossil-fueledpoweroptions.

4.Failuretoprovideempiricalmodeling.NYS-37andtheexpertsfailtoprovideanystudiesorotheranalysesquantifyinghowtheelectric systemwouldrespondunderthe no-actionalternative.Incontrast,ouranalysisusingNEMSshowsthatconservation(intheformofresponsetohigherprices)andrenewableswouldplaymodestroles,andthattheprimaryimpactwouldbeincreasedgenerationfromfossil-firedsources. ThisfailureonthepartofNYS-37anditsexpertsisimportantsince,withoutsomeempiricalmodeling,theycannotprovideareasonablebasisforevaluatingwhichalternativesactuallywouldbedevelopedanddispatchedifIPECgenerationwerenotavailable.Twooftheseflaws-failuretorecognizemarketforcesandfailuretoprovideempiricalmodeling-relatetotheissuesdiscussedinChaptersIIandIIIandthusdonotrequireadditionalexplanation. Theothertwoflaws-relatedtotheconflationofbaselineconditionsandtheno-actionalternative-requirefurtherexplanationtoclarifytheirimplicationsfortheenvironmentalimpactsoftheno-actionalternative.B.ConflationofBaselineandNo-ActionAlternativeNYS-37anditsaccompanyingdocumentspointtonumerouschangesthathaveoccurredinNewYorkState'senergymarkets,eachoneofwhichNYSclaims"significantlychangesthe environmentalimpactcalculussetforthintheFSEIS"(NYS-37,p.2).However,theciteddevelopmentsrelatetochangesthathaveoccurredalreadyorthatwilloccurregardlessofIPEC'sfuturestatus.Thus,theycannotprovideadditionalenergytomakeupforlostbaseloadIPECgenerationintheno-actionalternative.Asaresult,theciteddevelopmentsarenotdirectlyrelevanttoevaluatingthelikelyelectricitymarketandenvironmentalimpactsoftheno-actionalternative.Theimportanceofdistinguishingbetweenbaselineconditionsandtheno-actionalternativewasdiscussedaboveinChapterII,andFigure5inChapterIIillustratesthatthepotentialenvironmentalimpactsoftheno-actionalternativearebasedonthechangesinenergyresourcesbetweenbaselineconditionsandtheno-actionalternative. ThissectionelaboratesonthefundamentalpointintroducedinChapterIIbyconsideringtheimplicationsofusingdifferent(i.e.,moreupdated)baselineconditions.1.Differences inBaselineConditionsThissectionconsidersallegeddifferencesbetweenbaselineconditionsassumedintheFSEISandbaselineconditionswiththerecentenergydevelopmentscitedinNYS-37.Figure11illustratessuchahypotheticalchangeinthebaselinemixofgeneration.Ontheleft-hand sideis the"Original"baselinegenerationmixallegedlyassumedintheFSEIS.Inthemiddleisa NERAEconomicConsulting 43"Revised"hypotheticalforecastofthebaselinegenerationmixthattakesaccountofthetypesofchangescitedbyNYS-37andsupportingtestimony(includingmorerenewablesduetothe"30x15"policy,moreconservationduetothe"15x15"policy,andtheeffectoftherecessionontotalnecessaryoutputfrompowerplants).NotethatbothbaselinesincludecontinuedoperationofIPEC. Thestackedbarontherightshowsthechangesingenerationresourcesbetweenthetwobaselineforecasts.Inthefigure,overalldemandhasfallenbecauseoflowerlevelsofeconomicactivity("recession").RenewablesandconservationbothhaveincreasedbecauseofvariousStateandfederalprogramsandsubsidies.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.,conditionsthathaveoccurredorwilloccurinthefutureregardlessofIPEC'sstatus)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),nottowhatalternativescouldbeavailabletoreplaceIPEC'senergyintheno-actionalternative. Thefollowingarethe sixmajordevelopmentsemphasizedinNYS-37andtheexpertreports.(AppendixAprovidesupdatedinformationonthese sixdevelopments.)

1.NewYorkStaterenewableelectricitygoal. The"30x15"renewableelectricitygoalisbeingimplementedbysubsidiespaidbyNYSERDAtodevelopersofrenewableenergysources.ThesesubsidiesarecollectedfromNewYork'sconsumersontheirmonthlyutilitybillsthroughavolumetricsurchargefortheRPSprogram.

2.NewYorkStateconservationandenergyefficiencyprograms.Conservationandenergyefficiency,particularlyunderthe"15x15"plan,willplaylargerrolesthanprojectedinthepast.UtilityandNYSERDAconservationprogramsaresubsidizedwithfundsfromtheSystemsBenefitCharge("SBC")andothervolumetricsurchargesimposedonsalesofelectricitytoNewYork'sconsumers.

3.LowerNewYorkStateelectricitydemandduetoeconomicfactors.FuturedemandforelectricityinNewYorkisprojectedtobelowerthanearlierprojectionssuggested,suchasthoseavailablein2006forthereportbytheNationalResearchCouncilonalternativestorenewingIPEC'slicenses,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 intheBaselineNewYorkState's"30x15"renewableelectricitygoalwasdiscussedaboveinChapterII.SincerenewablesthatareinducedintoNewYorkState'selectricitysystemaspartofthisgoalareelementsofthebaselineregardlessofIPEC'sstatus,theserenewablescannotalsobecountedasreplacementsforIPECintheno-actionalternative.StatementsbytheState'sexperts(Schlisseltestimony,p.48)regardingfederalsupportforrenewableenergyundertheAmericanRecoveryandReinvestmentActof2009("ARRA")provideanotherexampleoftheconflationofchangesinthebaselineandchangesintheincrementalimpactoftheno-actionalternative.ARRAprovidedtemporaryfederalsupportforrenewableenergyasaresponsetotherecession,andthus,isproperlyincludedinthebaseline.Severalofthesupportmechanisms(includingtheSection1603energygrantprogram)havealreadyexpired(U.S.Treasury2012).Thus,thefederalsupportmechanismsunderARRAnolongerevenexistand,inanyevent,arenotrelevanttopotentialreplacementofIPEC'sbaseload energywithrenewableenergyintheyearsahead.b.NewYorkStateEnergyEfficiencyandConservation Goal is intheBaselineNewYorkState's"15x15"conservationgoalwasdiscussedaboveinChapterII.SinceconservationmeasuresthatareinducedinNewYorkState'selectricitysystemaspartofthisgoalareelementsofthebaselineregardlessofIPEC'sstatus,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.Figure13showsthechangesovertimeintheNYISO'sforecastsofNewYorkStateelectricitydemand.

NERAEconomicConsulting 47Asshowninthefigure,theprojectionsdecreased significantlyovertheperiod,particularlybetween2008and2009asthedepthoftherecessionwasincorporatedintotheforecast.NYISOprojectedin2006thatsalesin2016wouldbe184,630GWh,butitprojectedin 2011thatsalesin2016wouldbeonly165,319GWh,areductionof10.5percentrelativetotheprojectionfrom2006.InapresentationinMay2010,NYISOestimatedthattherecessionreducedelectricitysalesbetweenOctober2008andApril2010(adjustedforweather)by6,400GWhandthatlosteconomicgrowthaccountedforanadditional1,500to2,000GWh(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:AllprojectionsincorporateNYISO'sprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 48demand.Asnotedabove,however,IPECprovidesbaseloadgenerationand,thus,thelevelofitsgenerationisnotaffectedatallbythelevelofeconomicactivity. Thus,whateverchangesmighthaveoccurredintheforecastsoffutureelectricitydemand-orwhateverchangesmayoccurinsubsequentforecasts-willnotinfluencethelevelofgenerationfromIPECthatislostundertheno-actionalternative.ChangesinforecastedelectricitydemandareproperlypartofbaselineconditionsratherthanchangesthatshouldbeattributedtothepotentiallossofIPECbaseloadgeneration.Indeed,thesameprincipleappliestochangesinfutureforecasts.Thebaselineconditionsfor2020maychangeinthefutureduetochangesineconomicforecastsandthusforecastelectricitydemand.Buttheprincipleisthesame;thesechangesrepresentchangesinbaselineconditionsratherthanconditionsthatdirectlyaffecttheimpactsoftheno-actionalternative.Asdiscussedbelow,however,changesinthebaselinecanhaveanindirecteffectontheimpactsoftheno-actionalternative,althoughnottheeffectpresumedinNYS-37.d.GenerationCapacityAdditionsThissectionsummarizesinformationonrecentandpotentialfutureelectricitygenerationcapacityadditionsandthenconsiderstheirrelevance.i.RecentCapacityAdditionsAccordingtotheNYISOdatabaseofpowerplantsinNewYorkState,8,348MWofgenerationcapacity(netavailabletothegrid)hasbeenadded since2000.Figure14showsannualcapacityadditionsinNewYorkStatefrom2000to2011byenergytype.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) 0200 4006008001,000 1,2001,4001,600 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) 05001,000 1,500 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).EIA'sprojectioninAEO2011wasthatthepriceofnaturalgasin2020willbeonlyabout$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-37'sclaimthattheFSEISshouldhaveconsideredscenarioswithlessgas-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,itnonethelesscanbeusedgenerically-totheextentsuchprojectsareeconomiconapurelymerchantbasis-torepresentamajortransmissionproject.Thekeypoint,however,isthatanytransmissiondevelopmentsthatoccur,includinganymajortransmissionprojectsincreasingthetransfercapabilityintotheDownstatearea,areinthebaseline,andthus,havenoincrementaleffectsforpurposesoftheno-actionalternative.Aswithotherenergydevelopments,thesetransmissionchangesarenotdirectlyrelevanttothequestionofwhatenergyandenvironmentalimpactscouldoccurintheno-actionalternative.Aswediscussbelow,totheextentthatthereisexcesstransmissioncapacityinthebaseline,itcouldaffectthemixofresourcesusedtoreplaceoutputlostfromIPECundertheno-actionalternative. Theenvironmentalconsequencesofincreasesinpurchasedpowerwilldependonthemixofsourcesusedtogeneratethatpowerrelativetothemixthatwouldotherwisesupplyitfromin-regionsources.C.FailuretoAccountfortheIndirectEffectsofaModifiedBaselineontheEnergyandEnvironmentalImpactsUndertheNo-Action AlternativeThissectionprovidesaqualitativeevaluationofamajorclaimofNYS-37-thatrecentenergydevelopmentsmeanthattheFSEISoverstatesthepotentialenvironmentaleffectsofthe no-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,theindirecteffectsofchangesinthebaselinecanalsohavecounterintuitiveeffects.Forexample,asweexplainbelow,abaselinewithhighlevelsofconservationislikelytohavehighercostsof additionalconservationaspartofreplacingIPECthanabaselinewithlowerlevelsofconservation. Thus,abaselinewiththe higherlevelsofconservationthatNYS-37arguesaremoreaccuratethanintheFSEISwouldmakeitmoreexpensiveandthereforelesslikelythatsubstantialamountsofadditionalconservationwouldbeusedtoreplaceIPEC'sbaseloadenergy.

NERAEconomicConsulting 54ThefollowingsectionsprovideassessmentsoftheindirecteffectsofthevariousenergydevelopmentsemphasizedinNYS-37onthetypeofgenerationlikelytoreplaceIPECgenerationundertheno-actionalternative.a.IncreasedRenewableRequirementsAccountingforincreasedrenewablerequirementsinthebaselinewouldtend,ifanything,todecreasethelikelyroleofrenewablesinreplacementgenerationundertheno-actionalternative.Wecanexplainthisusingadiagramtoillustratetheindirecteffectsofachangedbaseline.Figure16below(avariationonFigure7inChapterII)relatesthetotalquantity(MWh)ofrenewablegenerationinNewYorkStatetothesubsidyrateperMWhnecessarytoelicitrenewablegeneration.

17 Theupward-slopedsupplycurveindicatesthatincreasingthetotalquantityofrenewablegenerationrequiresincreasingthesubsidyrateperMWh.

17Asnotedabove,undertheRPSprogram,NYSERDAprovidespaymentstorenewableenergyproducersinordertoincreasethequantityofrenewableenergyproducedinNewYorkState.Thesepaymentsultimatelyareborne byNewYorkState'selectricityconsumersthroughsurchargesontheirmonthlyutilitybills.

NERAEconomicConsulting 55Supposethatundertheoriginalbaselinewithoutthe"30x15"RPSprogram,thesubsidyissetat S 0 Banditelicits Q 0 Bunitsofrenewablegeneration. Thus,theincrementalcostofsecuringadditionalrenewablesundertheno-actionalternativewouldstartat S 0 BandincreaseincrementallytotheextentthatthegovernmentwantedtoreplacelostIPECoutputwithrenewables.IfthedesiredincreasewereQ,thesubsidyraterequiredwouldriseto S 0 N. Toprovidetheadditionalrenewablesundertheno-actionalternativewouldrequireraisingthe subsidyrate,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.Aswithouranalysesofrenewablesandconservation,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-costpowerplantsintheelectricitymarket'ssupplycurve,butIPECremainsasourceofbaseloadenergyevenwiththecapacityadditions. Thus,thecapacityadditionshavenotandwouldnotreducetheamountofenergythatIPECsuppliestotheNewYorkelectricity system(andthustheamountofenergythatwouldhavetobereplacedifIPECwerenotavailable).TheindirecteffectsofNewYorkState'srecentandproposedcapacityadditionsarelikelytoincludedecreasesinthemarketpriceofelectricitythatwouldinturnbelikelytoincreasetheattractivenessoffossil-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,fossilfiredunitswillrunatevenlowercapacityfactorsthanbeforeorwillberetired. 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-firedunits-ratherthanrenewablesorutility-sponsoredconservation-wouldbeused.Asaresult,incorporatinglowerprojectedgaspricesintotheanalysisproducesmarketresultsthataredirectlycontrarytotheunsupportedcontentioninNYS-37thattheFSEISoveremphasizestheuseoffossilfuel,naturalgasinparticular,togeneratereplacementpower.f.NewTransmissionLinestoDownstateNewYorkAdditionaltransmissionlinescanreduceconstraintsonbuyingpowerfromoutsideNewYorkStateandthuscouldresultinmoreimportsinthebaselinebecausemoreout-of-stateunitswouldbeabletobidintheNYISOauctions.Totheextentthatthesedevelopmentscreatenew NERAEconomicConsulting 59interconnectionopportunitiesthatwouldnototherwisebefullyutilizedinthebaseline,theyalsocouldproduceadditionalimportsundertheno-actionalternative.ThetworecentlyaddedtransmissionlinesthatarecitedbyNYS-37anditssupportingdocuments-LindenandNeptune-willallowgreaterimportsfromNewJerseyandtherestofthePJMregiontothewestofNewYork.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,severalofthedevelopments-inparticularlowerfossiluseinthebaselineandlowergasprices-wouldbelikelytoincreasetheattractivenessofusingolderfossilsources(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,bothfromexistingnaturalgasandcoalunitsandfromsomeadditionalunitsthatwouldbeadded(orunitswhoseretirementwouldbepostponed).Ouranalysesindicatethatbothadditionalrenewablegenerationandadditional conservationwouldconstitute smallsharesofreplacementgeneration.NYS-37providesaverydifferentvisionoflikelyreplacementgeneration,althoughthestatementandtheassociatedexpertdeclarationsdonotprovideanyempiricalanalyses.Wereviewedthesematerialsandconcludedthattheirconclusionswereerroneousduetofour fundamentalflaws:(1)failuretoaccountfortheimportanceofmarketforces;(2)conflationofbaselineconditionsandtheno-actionalternative;(3)failuretoconsidertheimplicationsofthecriticismstheymadeontheallegeduseintheFSEISofoutdatedinformationonenergydemandandsupplyconditions;and(4)failuretodevelopempiricalinformation.Insummary,ourresultsestablishtwopropositionsregardingthepotentialenvironmentalimpactsoftheno-actionalternative:1.Theadverseenvironmentalimpactsoftheno-actionalternativeassessedintheFSEIS,ifanything,underestimatedthelikelyenvironmentalimpactsifIPECbaseloadgenerationwerelost;and2.NewYorkStateisincorrectinitsclaimsthattheFSEISoverstatesenvironmentalimpactsbecausereplacementgenerationwouldnot,infact,beprimarilyrenewableenergyandconservation.

NERAEconomicConsulting 62 References 2 ndCir.2007.Riverkeeper v

.EPA.475F.3d83.AmericanBirdConservancy.2011.RulemakingPetitiontotheU.S.Fish&WildlifeServiceforRegulatingtheImpactsofWindEnergyProjectsonMigratory Birds.December14.http://www.abcbirds.org/abcprograms/policy/collisions/pdf/wind_rulemaking_petition.pdfAmericanBirdConservancy.2012."Power LineCollisionsand Executions."http://www.abcbirds.org/abcprograms/policy/collisions/powerlines.htmlBatsandWind EnergyCooperative.2012."Overview."http://www.batsandwind.org/Bernstein,MarkA.andJamesGriffin.2005.RegionalDifferencesinthePrice-ElasticityofDemandFor Energy.RANDCorporation TechnicalReport292.http://www.rand.org/pubs/technical_reports/2005/RAND_TR292.pdfBorenstein,Severin.2011. ThePrivateandPublicEconomicsofRenewableElectricityGeneration.NBERWorkingPaper17695.http://www.nber.org/papers/w17695.pdfBoyles,J.G.,P.M.Cryan,G.F.McCracken,and T.H.Kunz.2011."EconomicImportanceofBatstoAgriculture."

Science332:341-342.ChamplainHudson.2012.ChamplainHudsonPower Express,Inc.JointProposal.CaseNo.:10-T-0139.February24,2012.http://www.poughkeepsiejournal.com/assets/pdf/BK185815227.pdfCort,K.A.etal.2007.ModelingEEREDeploymentPrograms.PacificNorthwestNationalLaboratory.November.http://www.pnl.gov/main/publications/external/technical_reports/PNNL-17089.pdfEmissions&GenerationResourceIntegratedDatabase(eGRID).2010.http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html.AccessedJanuary30, 2012.EntergyCorp.2007.IndianPointEnergyCenterLicense Renewal ApplicationAppendixE:Applicant's EnvironmentalReport.SubmittedtoU.S.NuclearRegulatoryCommissionLicenseRenewalApplicationforIndianPointNuclearGeneratingUnitsNos.2and3.April.FederalEnergyRegulatoryCommission.2012."ElectricPowerMarkets:NationalOverview."http://www.ferc.gov/market-oversight/mkt-electric/overview.aspGalbraith,Kate.2008."Ice-Tossing Turbines: MythorHazard?"TheNewYorkTimes.December9.http://green.blogs.nytimes.com/2008/12/09/ice-tossing-turbines-myth-or

-hazard/

NERAEconomicConsulting 63Gillingham,Kenneth,RichardG.NewellandKarenPalmer.2004.Retrospective ExaminationofDemand-Side EnergyEfficiencyPolicies.ResourcesfortheFutureDiscussionPaper04-19:rev.September.Hibbard,PaulJ.,SusanF. Tierney,AndreaM.Okie,andPavelG.Darling.2011.TheEconomicImpactsoftheRegionalGreenhouseGasInitiativeonTenNortheastandMid-AtlanticStates: ReviewoftheUseof RGGIAuctionProceedsfromtheFirstThree-YearCompliancePeriod.Boston:AnalysisGroup,November15.www.analysisgroup.com/uploadedFiles/

-Publishing/Articles/Economic_Impact_RGGI_Report.pdfHoppock,David,DaliaPatino Echeverri,and EtanGumerman.2012.DeterminingtheLeast-CostInvestmentforanExistingCoalPlanttoComplywith EPA RegulationsunderUncertainty.NicholasInstitutefor EnvironmentalPolicySolutions.WorkingPaper12-03.February.http://nicholasinstitute.duke.edu/climate/lowcarbontech/determining-the-least

-cost-investment-for-an-existing-coal-plant-to-comply-with-epa-regulations-under-uncertaintyHounsfieldDEIS.2009.DraftEnvironmentalImpactStatementforHounsfieldWindFarm

.TownofHounsfield,JeffersonCounty,NewYork.AmericanConsultingProfessionalsofNewYork,PLLCforNewYorkStateDepartmentof EnvironmentalConservationFebruary27,2009.http://www.dec.ny.gov/docs/permits_ej_operations_pdf/hounsfielddfteis.pdfHydro-Quebec.2002.ComparingPowerGenerationOptions:GreenhouseGas Emissions

.http://www.hydroquebec.com/sustainable

-development/documentation/pdf/options_energetiques/pop_01_06.pdfIfran,Umair.2011."BatsandBirdsFaceSerious ThreatsFromGrowthofWind Energy."

TheNewYorkTimes.August8.http://www.nytimes.com/cwire/2011/08/08/08climatewire-bats

-and-birds-face-serious-threats-from-gro-10511.htmlInteragencyWorkingGrouponSocialCostofCarbon.2011.SocialCostofCarbonforRegulatoryImpact AnalysisUnder ExecutiveOrder12866.http://www.epa.gov/otaq/climate/regulations/scc-tsd.pdfInternational EnergyAgency("IEA").2002.EnvironmentalandHealthImpactsofElectricityGeneration: A ComparisonoftheEnvironmentalImpactsofHydropowerwiththoseofOtherGenerationTechnologies.International EnergyAgency.June2002.Krupnick,AlanJ.,IanW.H.Parry,MargaretWalls,TonyKnowles,andKristinHayes.2010.TowardaNational EnergyPolicy:AssessingtheOptions.ResourcesfortheFutureandtheNational EnergyPolicyInstitute.November.http://www.rff.org/documents/rff-rpt

-nepi%20tech%20manual_final.pdfManiaci,Arthur.2011."NewYorkStateEnergy EfficiencyCost&PerformanceMetrics."NYISO ElectricSystemPlanningWorkingGroup:4April.

NERAEconomicConsulting 64Metcalf,Gilbert E.2010."Investmentin EnergyInfrastructureandthe TaxCode."InJeffreyR.Brown,ed.,TaxPolicyandtheEconomy:Volume24.Chicago:UniversityofChicagoPress.http://www.nber.org/papers/w15429NationalRenewable EnergyLaboratory(NREL).2003.BiopowerTechnicalAssessment:StateoftheIndustryand Technology.NREL/TP-510-33123.March2003.http://www.fs.fed.us/ccrc/topics/urban

-forests/docs/Biopower_Assessment.pdfhttp://www.fs.fed.us/ccrc/topics/urban

-forests/docs/Biopower_Assessment.pdfNationalWindCoordinatingCollaborative.2010.WindTurbineInteractionswith Birds, Bats,andtheirHabitats:ASummaryofResearch ResultsandPriorityQuestions.Spring.https://www.nationalwind.org/assets/publications/Birds_and_Bats_Fact_Sheet_.pdfNaturalResourcesDefenseCouncil(NRDC).2011."RiskyGasDrilling ThreatensHealth,WaterSupplies."www.nrdc.org/energy/gasdrilling/

.Navarro,Mireya.2009."GroupsCriticizeaProposaltoPullEnvironmentalFunds."TheNewYorkTimes.October18.http://www.nytimes.com/2009/10/19/nyregion/19rggi.html

.NewYorkIndependentSystemOperator(NYISO).2010.GrowingWind.September.http://www.nyiso.com/public/webdocs/newsroom/press_releases/2010/GROWING_WIND_

-_Final_Report_of_the_NYISO_2010_Wind_Generation_Study.pdfNewYorkIndependentSystemOperator(NYISO).2011a.PowerTrends2011: EnergizingNewYork'sLegacyofLeadership

.http://www.nyiso.com/public/webdocs/newsroom/power_trends/Power_Trends_2011.pdf

.NewYorkIndependentSystemOperator(NYISO).2011b.MarketParticipantsUser'sGuide

.May.http://www.nyiso.com/public/webdocs/documents/guides/mpug.pdf

.NewYorkIndependentSystemOperator(NYISO).2011c.2011Load&CapacityData("GoldBook").April.http://www.nyiso.com/public/webdocs/services/planning/planning_data_reference_documents/2011_GoldBook_Public_Final.pdfNewYorkIndependentSystemOperator(NYISO).2011d.CommentsontheProposed RuleMakingNotesinCase07-M-0548.August22.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={42E788F9-A36F-4406-B450-078ED98F1652}NewYorkIndependentSystemOperator("NYISO").2012.2012Long-TermForecastUpdate

.Draft.March6.http://www.nyiso.com/public/webdocs/committees/bic_espwg/meeting_materials/2012-03

-06/2012_Long_Term_Forecast_Update.pdf NERAEconomicConsulting 65NewYorkState(NYS-37).2011.StateofNewYorkInitialStatementofPosition:ContentionNYS-9/33/37("NYS-37").DocketNos.50-247-LR;50-286-LR:December14.NewYorkStateDepartmentof EnvironmentalConservation(NYSDEC).2011."RevisedDraftSGEISontheOil,GasandSolution MiningRegulatoryProgram."http://www.dec.ny.gov/docs/materials_minerals_pdf/rdsgeisexecsum0911.pdf

.NewYorkStateDepartmentof EnvironmentalConservation.2009.GuidelinesforConductingBirdandBatStudiesatCommercialWind EnergyProjects.August.http://www.dec.ny.gov/docs/wildlife_pdf/finwindguide.pdfNewYorkStateEnergyResearchandDevelopmentAuthority(NYSERDA).2011.NewYorkState RenewablePortfolioStandardPerformance Report:ProgramPeriodDecember31, 2010.http://www.nyserda.ny.gov/Page-Sections/Energy-and-Environmental

-Markets/Renewable-Portfolio-Standard/~/media/Files/Publications/NYSERDA/2011-rps-annual-report.ashxNewYorkStatePublicServiceCommission(NYPSC).2004.Order Regarding RetailRenewablePortfolioStandard.Case03-E-0188-ProceedingonaMotionoftheCommissionRegardingaRetailRenewablePortfolioStandard.Issuedand EffectiveSeptember24.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7BB1830060-A43F-426D-8948-F60E6B754734%7DNewYorkStatePublicServiceCommission(NYPSC).2008.Order EstablishingEnergyEfficiencyPortfolioStandardandApprovingPrograms.Case07-M-0548-ProceedingonMotionoftheCommissionRegardingan EnergyEfficiencyPortfolioStandard.June23.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={D9F7E0DF-A518-4199-84CC-C2E03950A28D}NewYorkStatePublicServiceCommission(NYPSC).2010.Order AuthorizingCustomer-SitedTierProgramthrough2015and ResolvingGeographic BalanceandOtherIssuesPertainingtothe RPSProgram.Case03-E-0188.Issuedand EffectiveApril2,2010.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={C05CD0D6-8EA5-4CB9-A9FA-6ADD3AECB739}NewYorkStatePublicServiceCommission(NYPSC).2011.Order AuthorizingEfficiencyPrograms, RevisingIncentiveMechanism,and EstablishingaSurchargeSchedule.Case07-M-0548-ProceedingonMotionoftheCommissionRegardingan EnergyEfficiencyPortfolioStandard;Case07-G-0141-ProceedingonMotionoftheCommissionastotheRates,Charges,RulesandRegulationsofNationalFuelGasDistributionCorporationforGasService.October25.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7BC0BD1A5B-6E4F-4C4A-A0E9-BC78799DAA23%7D NERAEconomicConsulting 66Palmer,Karen,AnthonyPaul,andMattWoerman.2011.FederalPoliciesfor RenewableEnergy:ImpactsandInteractions.ResourcesfortheFutureDiscussionPaper10-53:January.http://www.rff.org/documents/RFF-DP-10-53_Final.pdf

.PublicServiceCommissionofWisconsin("PSCW").2011.EnvironmentalImpactsofTransmissionLines.June.http://psc.wi.gov/thelibrary/publications/electric/electric10.pdf

.RegionalGreenhouseGasInitiative("RGGI").2012.AbouttheRegionalGreenhouseGasInitiative

.http://www.rggi.org/docs/RGGI_Fact_Sheet.pdfSpitzer,Eliot.2007."15x15:"AClean EnergyStrategyforNewYork.http://worldcat.org/arcviewer/1/AO%23/2008/03/17/0000083244/viewer/file478.pdfSynapse Energy Economics,Inc.2011.IndianPoint EnergyCenterNuclearPlant RetirementAnalysis: ReplacementOptions,ReliabilityIssues,and Economic Effects.October17.http://www.synapse-energy.com/Downloads/SynapseReport.2011-10.NRDC.Indian-Point

-Analysis.11-041.pdfSynapse.2012.HydropowerGreenhouseGas Emissions:StateoftheResearch.SynapseEnergyEconomics.Cambridge, MA:February14,2012.http://www.synapse

-energy.com/Downloads/SynapseReport.2012-02.CLF+PEW.GHG-from-Hydro.10-056.pdfTremblayetal.2009.Eastmain-1NetGHG EmissionsProject-TheUseof AutomatedSystemstoMeasureGreenhouseGas Emissionsfrom Reservoirs.WaterpowerXVI.PennWellCorporation,2009.http://www.hydroreform.org/sites/www.hydroreform.org/files/Tremblay_Eastmain_1_GHG_project.pdfU.S.Departmentof Energy(DOE).DatabaseofStateIncentivesforRenewablesand Efficiency.2012."RenewableElectricityProduction TaxCredit(PTC)."http://dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F

.U.S. EnergyInformationAdministration(EIA).2009.AnnualEnergyOutlook2009.April.U.S. EnergyInformationAdministration(EIA).2011a.NaturalGasSpotandFuturesPrices.http://www.eia.gov/dnav/ng/ng_pri_fut_s1_a.htm(accessedJune15,2011).U.S. EnergyInformationAdministration(EIA).2011b.LevelizedCostofNewGenerationResourcesinthe AnnualEnergyOutlook2011

.http://www.eia.gov/forecasts/aeo/electricity_generation.cfmU.S. EnergyInformationAdministration(EIA).2011c.DirectFederalFinancialInterventionsandSubsidiesin EnergyinFiscalYear2010.Washington,DC:EIA,July.http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf NERAEconomicConsulting 67U.S. EnergyInformationAdministration(EIA).2012.AnnualEnergyOutlook2012.January.http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2012).pdfU.S. EnvironmentalProtectionAgency(EPA).2010."eGRID."http://www.epa.gov/cleanenergy/energy-resources/egrid/index.htmlU.S. EnvironmentalProtectionAgency(EPA).2011a.RegulatoryImpact AnalysisfortheFederalImplementationPlansto ReduceInterstateTransportofFineParticulateMatterandOzonein27States.http://www.epa.gov/airtransport/pdfs/FinalRIA.pdf.June2011U.S. EnvironmentalProtectionAgency(EPA).2011b.RegulatoryImpact AnalysisfortheFinalMercuryand AirToxicsStandards.December2011.http://www.epa.gov/mats/pdfs/20111221MATSfinalRIA.pdfU.S.FishandWildlifeService.2011."SecretaryoftheInteriorSalazarAnnouncesAdditionalStepstowardSmarterDevelopmentofRenewableEnergyonU.S.PublicLands."February8.

http://www.fws.gov/habitatconservation/wind.htmlU.S.GovernmentAccountabilityOffice.2005.WindPower:ImpactsonWildlifeandGovernment Responsibilitiesfor RegulatingDevelopmentandProtectingWildlife

.http://www.gao.gov/new.items/d05906.pdfU.S.NuclearRegulatoryCommission(NRC).1996.Generic EnvironmentalImpactStatementforLicense RenewalofNuclearPlants:MainReport(NUREG-1437,Volume1).May1996.U.S.NuclearRegulatoryCommission(NRC).2008.Generic EnvironmentalImpactStatementforLicense RenewalofNuclearPlantsSupplement38 RegardingIndianPointNuclearGeneratingUnitNos.2and3:Draft ReportforCommentMainReport.December.U.S.NuclearRegulatoryCommission(NRC).2010.Generic EnvironmentalImpactStatementfor LicenseRenewalofNuclearPlantsSupplement38RegardingIndianNuclearGeneratingUnitNos.2and3:FinalReport,MainReportandCommentResponses.December.U.S. Treasury.2012."1603Program:PaymentsforSpecified EnergyPropertyin Lieuof TaxCredits."http://www.treasury.gov/initiatives/recovery/Pages/1603.aspxZeller,TomJr.2010."For ThoseNear,the MiserableHumofClean Energy."TheNewYorkTimes.October5.http://www.nytimes.com/2010/10/06/business/energy

-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 GoalThissectionprovidesbackgroundinformationonNewYork's"30x15"renewableenergygoal.1.Overviewof GoalNewYorkofficiallyestablishedagoalforrenewableenergyina2004orderissuedbytheNYPSC.Theoriginalgoalwastoincreaserenewables' shareofretailelectricityconsumptionto25percentby2013,relativetoa2004baselineofroughly19percent.In2010,NYPSCincreasedthegoalto30percentandextendedthedeadlineto2015.TableA-1summarizesthe"30x15"renewableenergygoal.NotethatthelevelofrenewablesimplicitinthegoalisrelativetotheforecastedloadassumingfullachievementoftheState's"15x15"energyefficiencygoal(discussedbelow).NYPSC'sJanuary2010orderstatesthat"[i]ftheexpectedenergyefficiencyachievementsareignored,a30percentgoalfor2015wouldresultinasubstantiallyhigherandmorecostly"renewableenergytarget(NYPSC2010b,p.10).

NERAEconomicConsulting 69Asshownin TableA-1,theNYPSC's2010Order settherenewableenergygoalin2015as45.7million MWh."Baselineresources"-whichrefertorenewableenergyfromgeneratorsbuiltbefore2004(includingtheNiagaraPowerProjectandotherhydropowerinupstateNewYork)-areexpectedtoproduce31.5million MWhin2015,or69percentofthegoal.

18Therestofthegoalistobemadeupbyfoursetsofincrementalpolicy-ledefforts.First,renewableenergyprojectsatStateagencieswillneedtoproduce0.32million MWhin2015.Second,voluntary"greenmarketing"programs,inwhichelectricitycustomerschoosetopayapremiumtosupportrenewableenergy,willneedtoinduce1.5million MWhofrenewableenergyin2015. Third,LIPAwillneedtocontractfor1.9million MWhofrenewableenergyin2015.Theremaining10.4million MWhofthe"30x15"goalwillneedtocomefromprogramsadministeredbyNYSERDA. TheNYPSCoverseestheseNYSERDAprogramsthroughthe RenewablePortfolioStandard("RPS").

192.RPSAdministrationNewYork'sRPSdiffersfromprogramsinmostotherstatesinthatitlacksanenforcementmechanism.InsteadoftheNYPSCpenalizingdistributionutilitiesforfailingtoprocureminimumpercentagesoftheirelectricityfromrenewablesources,theNYPSCprovidesfundingforrenewableenergybycollectinga"non-bypassablevolumetricwirescharge"(NYPSC2004)fromretailcustomersofinvestor-ownedutilitiesandthenusingthosefundstosubsidizesourcesofrenewablegenerationselectedthroughacompetitivebiddingprocessadministeredbyNYSERDA. TheRPSchargeisavolumetricchargethatisinadditionto,andseparatefrom,NewYork's systemsbenefitcharge("SBC").TheRPSmaintainstwoseparatesetsofeligiblegenerators:(1)utility-scale"MainTier"generators;and(2)"Customer-Sited Tier"("CST")distributed,smaller-scalegenerators.MainTierresourcesconsistofbiogas,biomass,liquidbiofuel,fuelcells,hydroelectric(limitedto 18Renewableenergyfrom"baselineresources"isnottrackedeachyearunderthe"30x15"policy.Thus,thegoalistoincreaserenewableenergyabovetheassumedlevelfrom"baselineresources"soastoachievethetotal levelshowninTableA-1.

19NotethattheRPSdoesnotrepresenttheentirestatewidegoalforrenewableenergy.TableA-1.NewYork's"30x15"RenewableEnergyGoal(millionMWh)"15x15"LoadRenewableEnergyGoalBaselineResourcesStateAgenciesVoluntaryProgramsLIPANYSERDA/IOUs[A][B]=[A]*30%=[C]+[D]+[E]+[F]+[G][C][D][E][F][G]152.445.731.50.321.51.910.4Notes:"15x15"LoadistotalconsumptionassumingreductionsinloadcorrespondingtofullachievementofNewYork's"15x15"energyefficiencygoal.Theloadisintermsof"sendout,"whichrepresentsgross energysupplytothegrid.Sendoutexceedssalesbecausesomesupplyislostintransmission."BaselineResources"refertorenewableenergyfromfacilitiesbuiltbefore2004.Source:NYPSC(2010b,Appendix,p.12)

NERAEconomicConsulting 70upgradesand"newlow-impactrun-of-river"plantslessthan30MWand,thus,expresslyexcludinglargehydroprojects),solarphotovoltaics,tidaloceanpower,windturbines,andanywind,biomassdirectcombustion,orrun-of-river(lessthan5MW)hydroplants"thatdemonstrateneedtoreceiveRPSfinancialsupporttooperate."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.ProgresstowardNewYork'sRenewableEnergy Goal NYSERDA's2011RPSPerformanceReportstatesthat,asofDecember31,2010,generationfromtheprogram'scurrentcontractswouldproducerenewableenergyequivalentto39percentofthe2015target.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).NYSERDA's2011PerformanceReportdoesnotassesswhetherMainTierprogramsareexpectedtomeettheirportionofthe2015goal.5.CostsofNewYork'sRenewableEnergyMeasuresNYSERDA(2011a,p.21)notesthatbytheendof2010ithadexpended57percentofitsbudgetfortheperiodthrough2015buthadsecuredonly39percentoftherenewableenergygoal. Thus,assumingthegoalcanbemetatall,unlessNYSERDAcanfundlesscostlyrenewableenergyprojectsthanithasfundedsofar(anoutcomethatisunlikelyforthereasonslaidoutindetailinthebodyofthisreport),theprogramisunlikelytoachievethe2015goalwithinbudget.MainTierproductionsubsidieshaveamountedtoaround$20perMWh,oraboutonethirdofNewYork'saveragewholesaleelectricitypricein2010(NYISO2011c,p.21). TableA-2showstheweighted-averageproductionsubsidyforalloftheMainTiersolicitationstodate.

NERAEconomicConsulting 71Wecanestimatetheexpectedcosttocustomersfortheremainderoftheprogramusingapprovedtargetsandgoals. TableA-3 showstheresultsofsuchacalculation.Asshowninthetableabove,from2011to2015,IOUcustomerscanexpecttopayanadditional$1.2billioncumulativelytohelptoachievetheRPSgoal. Thisisequivalenttoabout$33perMWh,whichismorethanhalfthe2010averagepriceofwholesaleelectricityinNewYork.However,astheMainTiersolicitationstodateshow,actualcostshavebeenhigherandachievedlevelsofrenewablegenerationhavebeenlowerthanapprovedbudgetsandtargets.Thus,the$33perMWhfigureislikelytobeconservativewithnoassurancethattheprogram goals(whichare,inanyevent,partofthebaseline)canevenbemet.B.NewYorkStateEnergyEfficiency GoalThissectionprovidesbackgroundinformationonNewYorkState's"15x15"energyefficiencygoal.1.Overviewof Goal Governor EliotSpitzerannouncedthe"15x15"energyefficiencygoalinApril2007.Atthattime,NYPSCforecastedthatNewYorkwouldconsume166millionmegawatt-hoursTableA-2.ProductionSubsidiesforMainTierGeneratorsRoundDateWeightedAverageSubsidy($/MWh)1January2005$22.902February2007$15.52 3January2008$14.75 4December2009$19.76 5March2010$19.50 6June2011$22.01Source:NYSERDA(2011b,p.14)TableA-3.ImplicitSubsidiesfromNewYork'sRPSYearCost(ApprovedBudget)Target(MWh)AverageCostperMWh(ImplicitSubsidy)2011$170,450,2164,572,910$37.272012$202,989,8326,052,842$33.542013$243,944,0127,392,550$33.002014$281,544,2258,895,160$31.652015$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. The"15x15"goalcallsforreducingconsumptionin2015by15percentoftheforecast,or25million MWh,resultingintotalconsumptionof141millionMWh(NYPSC2008,Appendix1,p.4).

20GovernorDavidPatersonreaffirmedthisgoalinhisStateoftheStateaddressinJanuary2009.Achievingthe"15x15"goalwillrequirecontributionsbyvariousorganizationsacrosstheState.NYSERDAperformedananalysisin2007todevelopappropriatecontributionlevelsforLIPA,NYPA,the sixinvestor-ownedutilitiesinthestatebasedontheirenergyefficiency programsin2007,NYSERDA,andotherstateagencies. Theanalysisalsoincludedcontributionsthroughenergyefficiencycodesandstandardsaswellasenergyefficiencymeasuresfortransmissionanddistribution. TheNYSERDAanalysissuggestedthatthesecontributionswouldcoverabout73percentofthetotalenergyefficiencygoal(i.e.,11percentagepointsoutofthe15percentreduction).NYSERDAexpectedthattheremainderofthenecessaryenergyefficiency(i.e.,4percentagepointsoutofthe15percentreduction),whichwaslabeledthe"efficiencygap"or"jurisdictionalgap,"wouldbeachievedthroughnewprogramsadministeredbyinvestor-ownedutilitiesandNYSERDAwhichwerefundedbyelectricityratesurchargesauthorizedbyNYPSC.FigureA-1 showsthepotentialcontributionstowardthe"15x15"energyefficiencygoalbasedonNYSERDA'sanalysis.

20Thegoalcanalsobeexpressedintermsof"sendout,"whichrepresentsgrossenergysupplytothegrid.Sendoutexceedssalesbecausesomesupplyislostintransmission.In2007,theCommissionforecastedthatsendoutin 2015wouldneedtobe179millionMWh.The"15x15"policycallsforreducingsendoutin2015by15percent oftheforecast,or27millionMWh,resultingintotalsendoutof152millionMWh(NYPSC2008,Appendix1,p.4).

NERAEconomicConsulting 73InanorderissuedinJune2008,NYPSCannouncedthe EnergyEfficiencyPortfolioStandard("EEPS")programwithgoalsthroughDecember31,2011forthe sixinvestor-ownedutilitiesunderitsjurisdictionandNYSERDA.Inthesameorder,NYPSCsetsurchargelevelsonNewYorkStateelectricitybillsthatitestimatedwouldachievethosegoals(NYPSC2008).The totalenergyefficiencygoalfortheinvestor-ownedutilitiesandNYSERDAthroughthatdatewouldcompletelyclosethe"jurisdictionalgap"estimatedbyNYSERDA.InasubsequentorderissuedinOctober2011,NYPSCannouncedrevisedgoalsfortheinvestor-ownedutilitiesthroughDecember31,2015andsetsurchargelevelsthatitestimatedwouldachievethosefurthergoals(NYPSC2011a).2.AssessmentsofEnergyEfficiencySavings LimitedinformationexistsonwhetherNewYorkStatewillachieveitsenergyefficiencygoalfor2015.Toourknowledge,therearenopubliclyavailableassessmentsoftotalstatewideprogressonenergyefficiencygoals.NYISOtracksseveralprograms,butitdoesnotexaminetransmissionanddistributionsavings,codesandstandards,2007utilityprograms,orStateagencies.NYPSConlytracksprogressonthe EEPSportionofthestatewidegoal.Itispossibletoroughlygaugeelectricity savingsbycomparingactualelectricitysystemdemandtoforecastsfromearlieryearsandmakingadjustmentsforimpactsontheeconomyandprojectedgrowth.In2010,weather-normalizedelectricitysendoutinNewYorkwas161.6million MWh-sixpercentlowerthanthelevelofdemandfor2010thatNYISOforecastedinFigureA-1.PotentialContributionstowardEnergyEfficiencyGoalBasedonNYSERDAAnalysis 0 5 10 15 20 25200720082009201020112012201320142015ElectricitySavings(millionMWh)JurisdictionalGapTransmission&DistCodes&StandardsUtilities(2007Programs)SBCIII(NYSERDA)StateAgenciesNYPALIPASource:NYPSC(2008,Appendix1,p.5)

NERAEconomicConsulting 742007,whentheCommissionsetthe"15x15"baseline(NYISO2011a).

21 Thedemandreductionisdueprimarilytothelowereconomicactivityasaresultoftherecentrecessionand,toamuchsmallerdegree,energyefficiencyprograms,asdiscussedinthenextsectionofthisappendix.Asnotedabove,NYISOtracksenergyefficiencyachievementsfromasubsetofprogramsanddevelopsexpectedlevelsoffutureachievementsforitsloadforecastingandplanningpurposes.NYISOreviewsvariousdataonenergyefficiency,including:(1)programevaluationreportssubmittedbyinvestor-ownedutilities,LIPA,andNYPA;(2)long-term forecastsprovidedbyLIPA,Consolidated Edison,andotherinvestor-ownedutilities;and(3)U.S. EnergyInformationAdministrationprojectionsofthedemandimpactsofefficiencycodesandstandards(NYISO2011a,p.6).FigureA-2showsNYISO'sestimatesofcumulativesavings(intermsofsendout)through2011forEEPS,NYPA,andLIPA,aswellasNYISO'sexpectationsofcumulativesavingsfortheseprogramsthrough2015andtheirgoalsfor2015underthe"15x15"policy.

21NYISOandNYPSCmakeindependentforecastsofelectricitysales.FigureA-2.HistoricalandNYISO'sExpectationofSavingsfromEnergyEfficiencyPrograms 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."Cumulative"savingsaredefinedasoverallsavingsin2011resultingfromprogramexpendituresinpreviousyearsthrough2011.TheEEPS:NYSERDAsavingsincludethe NYSERDAEnergySmartprogram.Theprogramsincludedinthefigureaccountforabout60percentof thetotal"15x15"goal.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,NYISOstatedthat"fullachievementofthe[EEPS]programgoalsby2015isnotfeasible"(NYISO2011b).NotethatNYISO'sforecastsreflecttheorganization'sjudgmentregardinginherentlyuncertainvariables.

22TheNYPSC,ontheotherhand,maintainsthatthereisa"reasonableexpectation"thattheEEPSgoalwillbemetby2015(NYPSC2011b,p.1).ArecentNYPSCwhitepaperreportsthat"[s]avingsachieved,asapercentageoftotaltargets,arerunningaheadofdollarsspentasapercentageoftotalbudgets.AsofFebruary28,2011,statewideelectricitysavingsrepresented49.1%ofthecumulativetargetstodate-whilecombinedprogramspendingrepresented38.9%ofbudgetstodate"(NYPSC2011b,p.8).Moreover,thewhitepapernotesthat,intheNYPSC'sestimation,thesavingsachievedthrough2010and2011shouldnotbeusedtopredictfuturesavings, sincethe EEPSprogramis"intransition"(NYPSC2011b,p.1).3.CostsofNewYork'sEnergyEfficiencyMeasures Asnotedabove,limitedinformationisavailableonthestatewideprogresstowardmeetingthe"15x15"energyefficiencygoal. ThismakesitdifficulttomakestatewideassessmentsofthetotalcostsofenergyefficiencymeasuresinNewYork.Informationisavailableonenergyefficiencymeasuresbyinvestor-ownedutilitiesandNYSERDAaspartof the EEPSprogram,however.NYPSCadministersthe EEPSprogramandfundsitthroughsurchargesonretailelectricityratesthatareassessedtoNewYork'sconsumersonamonthlybasis.Asnotedabove,NYPSCsetsavingsgoalsandbudgetsforEEPSprogramsateachutilityandNYSERDAthrough 2011inanorderissuedin2008.NYPSCsetnewgoalsandbudgetsfrom2012through2015inanorderissuedinOctober2011.IncommentssubmittedwhileNYPSCwasconsideringalternativesforthesecondphaseofthe EEPSprogramfrom2012to2015,NYISO(2011b)notedthatthe EEPSprogramwouldrequire significantlymorefundingeachyearfrom2012to2015thanduringthefirstphaseinordertoachievethecumulativegoalby2015($370millionperyearonaverageduringthe secondphaseversusamaximumof$250millionduringthefirstphase).NYISOalsoshoweda"supplycurve"thatcombinedthesavingsfromallEEPSprogramsthroughJune2011andtheircostperMWh.Abouthalfofthesavingswereachievedbyincurringcostsabove$150/MWh, 22AnenergyexpertattheNaturalResourcesDefenseCouncilhasalsoconcludedthatNewYorkis"notontrack"tomeetthe"15x15"energyefficiencygoal(Wald2011).

NERAEconomicConsulting 76andseveralprogramshadcostsabove$1,000/MWh.Forcomparison,theaveragewholesaleelectricitypriceinNewYorkin2010was$59/MWh(NYISO2011c,p.21),andtheaverageretailpricewas$163/MWh(EIA2012). Thecostsofenergyefficiencymeasurescanalsobecomparedwiththe"avoidedcost,"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:AllprojectionsreflectNYISO'sprojectionsofenergyefficiency.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)lowerthaninthe2009RNA"duetothe2009recessionandsubsequentlowereconomicgrowthprojections"(NYISO2010a,p.10).Newenergyefficiencypoliciestohelpachievethe"15x15"goalalsocontributedtoamuchless 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:AllprojectionsincorporateNYISO'sprojectionsofenergyefficiency.Source:NYISOGoldBooks2006-2011 NERAEconomicConsulting 80Energyefficiencyprogramsaccountedforanadditional600GWhofreduction,andlosteconomicgrowthfor1,500to2,000GWh(NYISO2010b,p.2). Thus,forthishistoricalperiod,therecession(includingtheresultinglosteconomicgrowth)wasestimatedtoaccountforabout93percentofthetotalreductioninelectricitysales.D.NewYorkStateGenerationCapacityAdditionsThissectionprovidesbackgroundinformationonrecentandproposedcapacityadditionsinNewYorkbasedonNYISO'slistofpowerplants(NYISO2011d)anditscurrentInterconnectionQueue(NYISO2011e).1.CapacityAdditionsSince2000a.AnnualAdditionsAccordingtotheNYISOdata,8,348MWofgenerationcapacityhasbeenaddedinNewYorkStatesince2000. Thefollowingfiguresillustraterecentadditions.

NERAEconomicConsulting 81Figure14showsannualcapacityadditionsinNewYorkStatefrom2000to2011byenergytype.As showninthefigure,naturalgaswasthedominanttypeofnewcapacityinmostyears,butlargeamountsofwindwasalsoaddedinsomeyears,mostpredominantlyin2008.FigureA-6.AnnualGenerationCapacityAdditions(MW) 0200 4006008001,000 1,2001,4001,600 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) 05001,000 1,5002,0002,5003,0002012201320142015201620172018N/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(measuredin2011dollarspermillionBritishthermalunits"2011$/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 EIA'sAnnualEnergyOutlookreferencecaseprojectionsoftheHenryHubspotpricefornaturalgasforthereportyearsfrom2007to2012.Themostrecentprojectionforfuturenaturalgaspricesisbetween$1to$3perMMBtucheaperthanpreviousprojectionsduetotheexpandingavailabilityofunconventionalgas.2.NewYorkStateDeliveredPricestoElectricity GeneratorsFigureA-12displays EIA'sAnnualEnergyOutlookreferencecaseprojectionsofthedeliveredpricethatelectricitygeneratorsinNewYorkStatewillpayfornaturalgasforthereportyearsfrom2006to2012.Asinthepreviousfigure,itcanbeseenthatthemostrecent projectionforfuturenaturalgaspricesisbetween$1to$3perMMBtucheaperthanpreviouslyforecasted.FigureA-11.AEOProjectionsofHenryHubNaturalGasPrices0.001.002.003.00 4.005.006.00 7.008.009.002012201320142015201620172018201920202011$/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&2012regionis"NortheastPowerCoordinatingCouncil/UpstateNewYork."Forallotheryears,AEOreported"NortheastPowerCoordinatingCouncil/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:Theproject'sEnvironmentalManagementandConstructionPlanappearstoincludeonlydirectimpactsandnoindirectimpactsintheelectricitymarket(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

.FederalEnergyRegulatoryCommission("FERC").2012."NewYorkIndependentSystemOperator."http://www.ferc.gov/images/market-oversight/mkt-electric/reg

-maps/2007_ny_elect_map.gifNationalBureauof EconomicResearch("NBER").2010."BusinessCycleDatingCommittee,NationalBureauof EconomicResearch."September20.http://www.nber.org/cycles/sept2010.htmlNewYorkIndependentSystemOperator("NYISO").2010a.2010 ReliabilityNeeds Assessment

.http://www.nyiso.com/public/webdocs/newsroom/press_releases/2010/2010_Reliability_Needs_Assessment_Final_09212010.pdfNewYorkIndependentSystemOperator("NYISO").2010b.2010Q1- EnergyUpdate

.http://www.nyiso.com/public/webdocs/committees/bic_espwg/meeting_materials/2010-05

-28/2010_Q1_-_Energy_Update_Revised_May_25,_2010.pdfNewYorkIndependentSystemOperator("NYISO").2011a.2011Load&CapacityData("GoldBook").April.http://www.nyiso.com/public/webdocs/services/planning/planning_data_reference_documents/2011_GoldBook_Public_Final.pdfNewYorkIndependentSystemOperator("NYISO").2011b.CommentsonCase07-M-0548

.August22.http://documents.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId={42E788F9-A36F-4406-B450-078ED98F1652}

NERAEconomicConsulting 91NewYorkIndependentSystemOperator("NYISO").2011c.PowerTrends2011: EnergizingNewYork'sLegacyofLeadership.April.http://www.nyiso.com/public/webdocs/newsroom/power_trends/Power_Trends_2011.pdfNewYorkIndependentSystemOperator("NYISO").2011d."2011NYCAGeneratingFacilities."April21.http://www.nyiso.com/public/webdocs/services/planning/planning_data_reference_documents/2011_NYCA_Generating_Facilities_Final.xlsNewYorkIndependentSystemOperator("NYISO").2011e."InterconnectionQueue."December31.http://www.nyiso.com/public/webdocs/services/planning/nyiso_interconnection_queue/nyiso_interconnection_queue.xlsNewYorkIndependentSystemOperator("NYISO").2012.2012Long-TermForecastUpdate

.Draft.March6.http://www.nyiso.com/public/webdocs/committees/bic_espwg/meeting_materials/2012-03

-06/2012_Long_Term_Forecast_Update.pdfNewYorkStateEnergyResearchandDevelopmentAuthority("NYSERDA").2011a.NewYorkState RenewablePortfolioStandardPerformance Report:ProgramPeriodDecember31, 2010.http://www.nyserda.ny.gov/Page-Sections/Energy-and-Environmental

-Markets/Renewable-Portfolio-Standard/~/media/Files/Publications/NYSERDA/2011-rps-annual-report.ashxNewYorkStateEnergyResearchandDevelopmentAuthority("NYSERDA").2011b."MainTierSolicitations."http://www.nyserda.ny.gov/en/Page-Sections/Energy-and-Environmental

-Markets/Renewable-Portfolio-Standard/Main-Tier-Solicitations.aspxNewYorkStateEnergyResearchandDevelopmentAuthority("NYSERDA").2011c."RPSSolicitations."http://www.nyserda.org/rps/PastSolicitations.asp . NewYorkStatePublicServiceCommission("NYPSC").2004.Order Regarding RetailRenewablePortfolioStandard.Case03-E-0188.IssuedandEffectiveSeptember24,2004.http://documents.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId=%7BB1830060-A43F-426D-8948-F60E6B754734%7D

.NewYorkStatePublicServiceCommission("NYPSC").2008.Order EstablishingEnergyEfficiencyPortfolioStandardandApprovingPrograms.Case07-M-0548-ProceedingonMotionoftheCommissionRegardingan EnergyEfficiencyPortfolioStandard.June23.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7BD9F7E0DF-A518-4199-84CC-C2E03950A28D%7DNewYorkStatePublicServiceCommission("NYPSC").2010a.Order AuthorizingCustomer-SitedTierProgramthrough2015and ResolvingGeographic BalanceandOtherIssuesPertainingtothe RPSProgram.Case03-E-0188.Issuedand EffectiveApril2,2010.

NERAEconomicConsulting 92http://documents.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId=%7BC05CD0D6-8EA5-4CB9-A9FA-6ADD3AECB739%7D

.NewYorkStatePublicServiceCommission("NYPSC").2010b.Order EstablishingNew RPSGoaland ResolvingMainTierIssues.Case03-E-0188.Issuedand EffectiveJanuary8,2010.http://documents.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId=%7B30CFE590-E7E1-473B-A648-450A39E80F48%7D

.NewYorkStatePublicServiceCommission("NYPSC").2011a.Order AuthorizingEfficiencyPrograms, RevisingIncentiveMechanism,and EstablishingaSurchargeSchedule.Case07-M-0548-ProceedingonMotionoftheCommissionRegardingan EnergyEfficiencyPortfolioStandard;Case07-G-0141-ProceedingonMotionoftheCommissionastotheRates,Charges,RulesandRegulationsofNationalFuelGasDistributionCorporationforGas Service.October25.http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7BC0BD1A5B-6E4F-4C4A-A0E9-BC78799DAA23%7DNewYorkStatePublicServiceCommission("NYPSC").2011b.EnergyEfficiencyPortfolioStandardProgram ReviewWhitePaper.Case07-M-0548-ProceedingonMotionoftheCommissionRegardingan EnergyEfficiencyPortfolioStandard.July6.

http://documents.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId=BDD432F1

-2C88-4375-A18D-A2047CCCAFF4U.S. EnergyInformationAdministration("EIA").2012."StateElectricityProfiles."January20.http://www.eia.gov/electricity/state/Wald,MatthewL.2011."HowEssentialIsIndianPoint?"TheNewYorkTimes.October18.http://green.blogs.nytimes.com/2011/10/18/how-essential-is-indian-point/

NERAEconomicConsulting 93AppendixB:TheNationalEnergyModelingSystemThisappendixprovidesdetailsontheNational EnergyModelingSystem("NEMS"). ThetextandfiguresareadaptedfromdocumentationdevelopedbytheU.S. EnergyInformationAdministration("EIA")foritsAnnual EnergyOutlook2011 (EIA2011).WeusedtheAEO2012versionofNEMSforourmodelinginthisstudy,but EIAhasnotyetreleasedadocument summarizingtheassumptionsintheAEO2012version.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.NEMSisorganizedandimplementedasamodular 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.MacroeconomicActivityModule TheMacroeconomicActivityModule("MAM")providesasetofmacroeconomicdriverstotheenergymodulesandreceivesenergy-relatedindicatorsfromtheNEMSenergy componentsaspartofthemacroeconomicfeedbackmechanismwithinNEMS.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,theIEMchangestheworldoilprice-whichisdefinedasthepriceofforeignlight,lowsulfurcrudeoildeliveredtoCushing,Oklahoma(inPADD2)-inresponsetochangesinexpectedproductionandconsumptionofcrudeoilandproductliquidsintheUnitedStates.

NERAEconomicConsulting 963.ResidentialandCommercialDemandModulesTheResidentialDemandModuleprojectsenergyconsumptionintheresidentialsectorbyhousingtypeandenduse,basedondeliveredenergyprices,themenuofequipmentavailable,theavailabilityandcostofrenewablesourcesofenergy,andhousingstarts.TheCommercialDemandModuleprojectsenergyconsumptioninthecommercialsectorbybuildingtypeandnon-buildingusesofenergyandbycategoryofenduse,basedondeliveredpricesofenergy,availabilityofrenewablesourcesofenergy,andmacroeconomicvariablesrepresentinginterest ratesandfloorspaceconstruction.Bothmodulesestimatetheequipmentstockforthemajorend-useservices,incorporatingassessmentsofadvancedtechnologies,includingrepresentationsofrenewableenergytechnologies,andtheeffectsofbothbuilding shellandappliancestandards,includingthe2009and2010consensusagreementsreachedbetweenmanufacturersandenvironmentalinterestgroups. TheCommercialDemandModuleincorporatescombinedheatandpower("CHP")

technology. Themodulesalsoincludeprojectionsofdistributedgeneration.Bothmodulesincorporatechangesto"normal"heatingandcoolingdegree-daysbyCensusdivision,basedona10-yearaverageandonState-levelpopulationprojections. TheResidentialDemandModuleprojectsanincreaseintheaveragesquarefootageofbothnewconstructionandexistingstructures,basedontrendsinnewconstructionandremodeling.4.IndustrialDemandModule TheIndustrialDemandModule("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,thebaseyearoftheIDMwasupdatedto2006inkeepingwithanupdatetoEIA's2006Manufacturing 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.ElectricityMarketModule Therearethreeprimarysubmodulesofthe 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 GasSupplyModuleTheOilandGasSupplyModulerepresentsdomesticcrudeoilandnaturalgassupplywithinanintegratedframeworkthatcapturestheinterrelationshipsamongthevarioussourcesofsupply-onshore,offshore,andAlaska-byallproductiontechniques,includingnaturalgasrecoveryfromcoalbedsandlow-permeabilityformationsof sandstoneand shale. Theframeworkanalyzescashflowandprofitabilitytocomputeinvestmentanddrillingforeachofthesupplysources,basedonthepricesforcrudeoilandnaturalgas,thedomesticrecoverable resourcebase,andthestateoftechnology.Oilandnaturalgasproductionactivitiesaremodeledfor12supplyregions,including sixonshore,threeoffshore,andthreeAlaskanregions.TheOnshoreLower48OilandGasSupplySubmoduleevaluatestheeconomicsoffutureexplorationanddevelopmentprojectsforcrudeoilandnaturalgasattheplaylevel.Crudeoilresourcesaredividedintoknownplaysandundiscoveredplays,includinghighlyfracturedcontinuouszones,suchastheAustinchalkandBakken shaleformations.Productionpotential fromadvanced secondaryrecoverytechniques(suchasinfilldrilling,horizontalcontinuity,andhorizontalprofile)andenhancedoilrecovery(suchasCO 2flooding,steamflooding,polymerflooding,andprofilemodification)areexplicitlyrepresented.Naturalgasresourcesaredividedintoknownproducingplays,knowndevelopingplays,andundiscoveredplaysinhigh-permeabilitycarbonateandsandstone,tightgas,shalegas,andcoalbedmethane.DomesticcrudeoilproductionquantitiesareusedasinputstothePMMinNEMSforconversionandblendingintorefinedpetroleumproducts.SupplycurvesfornaturalgasareusedasinputstotheNaturalGas TransmissionandDistributionModule("NGTDM")fordeterminingnaturalgaswellheadpricesanddomesticproduction.8.Natural GasTransmissionandDistributionModule TheNGTDMrepresentsthetransmission,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,andbiofuels-ethanol,biodiesel,biomass-to-liquids("BTL"),CTL,andgas-to-liquids("GTL").Costs,performance,andfirstdatesofcommercialavailabilityfortheadvancedalternativeliquidstechnologiesarereviewedandupdatedannually.ThemodulerepresentsrefiningactivitiesinthefivePADDs,aswellasalessdetailedrepresentationofrefiningactivitiesintherestoftheworld.Itmodelsthecostsofautomotivefuels,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.coalproductionisrepresentedintheCMMby41separatesupplycurves-differentiatedbyregion, 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.RenewableFuelsModule TheRenewableFuelsModule("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-hourfor electricityproducedinthefirsttenyearsofplantoperation.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

.

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,wouldfacilitatedeliveryofpowerfromQuebecandperhapsLabradortoNewYorkCity(Champlain Hudson2012).Althoughtheprojectsponsorshaverecentlyaffirmedthattherearenosupplycontractsfortheproject,thereareplansforthedevelopmentofnewlarge-scalehydrofacilitiesinQuebecandLabrador,asdiscussedbelow.2.OverviewofCanadianHydroProjects Hydro-Quebeccurrentlyisconstructingtwolargehydroprojects,bothofwhichwillgenerateinexcessof8million MWhperyear(Hydro-Quebec2009). Thefirst,the Eastmain-1-A/Sarcelle/Rupertproject,isunderdevelopmentandisscheduledtobecompletedin2012. Thesecondproject,theRomaineComplex,isalsoalreadycommittedandisproceeding.Hydro-Quebecisalsoplanningotherhydroprojectsaspartofits"NorthernPlan."Inaddition,NalcorEnergy-autilityownedbythegovernmentofNewfoundlandandLabrador-iscurrently exploringtheLowerChurchillFallsprojectin EasternCanada.3.BaselineConditionsvs.No-ActionAlternative WeunderstandthatthereissubstantialuncertaintyregardingwhetherornottheChamplainHudsonprojectandanyfutureCanadianhydroprojectswillbeconstructed.Aswithotherenergydevelopmentsdiscussedinthereportbody,however,theseprojectsarenotrelevanttoevaluationofthepotentialadverseenvironmentalimpactsoftheno-actionalternativeunlesstheyaffecthowelectricity systemswouldrespondtolossofIPEC'sbaseloadgeneration.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 GasEmissions AllthreehydroprojectswouldleadtoincreasesinGHGemissions,baseduponestimatesdevelopedbyHydro-QuebecandNalcor Energy.The Eastmain-1-A/Sarcelle/Rupertproject wouldleadtopeakincreasesingrossCO 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 2aretheprimarycausesofacidrain-whichcanleadtoacidificationofwaterbodiesandothereffects-andcanalsoleadtovarioushealtheffects.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,theprojectwillhave"major"impactstofishcommunitiesbecausesuchcommunitieswillbepermanentlytransformed(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(NalcorEnergy2009).Finally,aswiththeotherfacilities,theLowerChurchillprojectwillchangesratesandpatternsoferosionand sedimentationinthevariousaffectedwaterbodies(Nalcor Energy 2009).C.AdverseEnvironmental ImpactsofTransmissionLinesfromCanadaAdditionaltransmissionlineswouldberequiredifnewCanadianhydropowerweretobeexportedtotheNortheastUnitedStates. Therearecurrentlytwosuchlinesthathavebeenproposed,oneofwhichistheChamplainHudsonlinediscussedabove.Asnoted,thiswouldestablisha1,000MWDCconnectionfromtheNewYork-QuebecbordertoNewYorkCity.A secondtransmissionlineistheNorthernPass TransmissionProject,whichwouldestablisha1,200MWDCconnectionfromtheNewHampshire-QuebecbordertosouthernNewHampshire. Thissubsectionoutlinessomeoftheadverseenvironmentalimpactsexpectedtooccurfromconstructionofthesetransmissionlines.ChamplainHudson'sJointProposaldetailssomeoftheenvironmentalimpactsthatareanticipatedfromtheinstallationoftheproposedtransmissionline. Theseimpactsincludethe following(ChamplainHudson2012):DredgingwouldberequiredtolaycablesintheHudsonRiverandportionsofLakeChamplain,resultingintemporarysedimentresuspensionandotherimpacts;Constructionwouldresultintemporaryimpactsto56acresofwetlandsaswellastostreamsandtributaries; 105About10.7acresofforestedwetlandcovermaybepermanentlyconvertedtomarshorscrub-shrubcommunities;Approximately236acresofexistingforestcovermaybeclearedduringconstruction,60acresofwhichwouldbepermanentlycleared;ThreemilesofcablewouldbeinstalledwithinthecitystreetsintheboroughofQueens,NewYorkCity;and138,040linearfeetofright-of-waywithinAgriculturalDistrictswouldbeincludedintheConstructionZone.NorthernPass'Presidentialpermitapplicationcontainsapreliminaryassessmentoftheenvironmentalimpactsofthetransmissionproject.Accordingtotheapplication,potentialU.S.impactsoftheprojectincludethefollowing(NorthernPass2010):Approximately5.5milesofwetlandswillbetraversedalongthepreferredroute;however,atthistimethequantityofforestedwetlandsthatwillbetraversedmaybeunderestimated.Stateendangeredspeciesthatoccurwithin1,000ofthepreferredrouteincludethenorthernharrier,wildcomfrey,goldenfruitedsedge,andthemuskflower.StatethreatenedspeciesthatoccurwithinthesamerangeofthepreferredrouteincludetheKlam'slobelia,theperegrinefalcon,Pickering'sbluejoint,theblackracer(snake),andthewildlupine.NorthernPassalsosubmittedanaddendumtotheirapplicationspecifyingthattheirpreferredroutewouldspantheConnecticutRiver,aDesignatedRiverandAmericanHeritage River.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

Retrieved from "https://kanterella.com/w/index.php?title=ML12090A842&oldid=1766713"