New York emissions-reduction bill would push natural gas out of power sector by 2040

New York emissions-reduction bill would push natural gas out of power sector by 2040

New York — Net-zero GHG emissions by 2050

 

70% renewables by 2030; 100% zero power emissions by 2040

The New York State Senate overnight Tuesday into Wednesday passed a bill that codifies the goal of achieving net-zero greenhouse gas emissions by 2050 through steep power emissions cuts and a 100% emissions-free power by 2040. Specific impacts on natural gas-fired generators will unfold through regulation, but the law would significantly alter the state's power system and make gas generation illegal by 2040, experts said Wednesday.

"This will mandate a transition to a much cleaner power generation fuel mix and ultimately zero emissions," Miles Farmer, senior attorney with environmental group Natural Resources Defense Council, told S&P Global Platts.

The New York State Assembly is expected to vote on the legislation Wednesday, and if passed, Governor Andrew Cuomo is expected it sign it into law.

"The law sends a message to power generation investors in New York that clean energy is the technology of the future," Farmer said.

The legislation called the New York State Climate Leadership and Community Protection Act includes two features that will impact the power sector. First it creates a framework to meet the economy-wide zero emissions by 2050 goal that the Department of Environmental Conservation is responsible for administering.

Second is a strengthening of the existing Clean Energy Standard and the Public Utilities Commission is responsible for implementing those measures with the New York State Energy Research and Development Authority. That involves a process to strengthen existing goals of 50% renewable energy by 2030 to 70% renewables by 2030, while setting a path toward 100% zero power sector emissions by 2040.

The law creates a Climate Action Council and road map to achieve the goals that include policy work on energy efficiency, regulations for heat pumps and building upgrades that will ultimately lead to burning less fossil fuel in buildings, a state official said in a phone call.

The DEC is finalizing a rule that will limit emissions from 3,300 MW of peaking unit capacity in the state and "something similar" could be advanced for gas-fired power plants, the official said, even though that is not directly part of this legislation.

GAS PHASE-OUT

The law indirectly drives gas and other fossil fuels out of the power system by 2040 through its mandate of net-zero emissions by that date.

GHG-emitting facilities that can prove to the DEC through an application process that it is not "technologically feasible" to further reduce emissions and they have already reduced emissions to the "maximum extent practicable," according to the senate bill, will be permitted to use emissions offsets.

Such offsets include measures like reforestation or wetlands restoration, but power plants will not be eligible.

"Given that it will be illegal for any fossil-emitting generator to operate beyond 2040, but that flexible gas generation will be needed to balance the variability of renewables, investors must be able to recover their long-term costs by 2040," Gavin Donohue, president of generator trade group Independent Power Producers of New York, said in an email.

"No longer can it be presumed that an investment today will be recouped over a 20-year, or even 10-year, lifespan," Donohue said.

The law significantly alters the power generation investment calculus in New York and makes completion of the New York Independent System Operator's wholesale power market carbon dioxide emissions pricing initiative more urgent.

The NYISO's plan for building renewables, reducing power sector emissions and signaling where transmission is most needed -- called carbon pricing -- must be "adopted immediately," Donohue said in a statement.

By telegraphing these long-term market signals the law makes clear what investors should expect, NRDC's Farmer said, "gas plant owners should not expect revenue from a GHG-emitting facility beyond 2040."

"Our long-term modelling assumes these goals are partially met, but it's noteworthy to point out that although gas-fired generation loses market share in the long-term, it is largely stagnant throughout the forecast period and is relied-upon to meet demand with the presence of increasing intermittent generation," Kieran Kemmerer, power market analyst with S&P Global Platts Analytics, said in an email.

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