With New York City power demand growing faster than previously forecast and several peaker plants set to go offline due to a new environmental rule, the New York Independent System Operator Inc. is warning that the city could face a significant transmission shortfall in summer 2025.
In a Short-Term Assessment of Reliability (STAR) report issued July 14, NYISO projected that power demand on a summer day with a maximum temperature of 95 degrees Fahrenheit in the city would exceed transmission capacity by 306 MW to 446 MW. Should a heatwave with 98-degree temperatures occur, NYISO warned that the shortfall could hit 555 MW.
That forecast marked a major deterioration from NYISO's last STAR report, issued in April, which projected that under normal weather conditions, the city would squeak by with a narrow transmission security margin of around 50 MW in summer 2025. The more precarious outlook reflects updated figures for peak power demand.
"It's increased economic activity still coming out of the pandemic," said Kevin Lanahan, NYISO's vice president of external affairs and corporate communications. "It's population growth in the city; it's electrification technology adoption," Lanahan said, citing increased deployment of heat pumps and electric vehicles as factors contributing to the growth in power demand.
As in the April report, NYISO attributed the city's transmission issues to a 2019 rule from the state Department of Environmental Conservation (DEC) cutting nitrogen oxide (NOx) emissions from fossil fuel peaker plants. The first phase of that rule, limiting NOx emissions to 3 pounds/MWh from May through September, went into effect May 1. The final rule, which sets the limit at between 1.5 pounds/MWh-2 pounds/MWh, takes effect in 2025.
"As of May 1, 2023, 1,027 MW of affected peakers have deactivated or limited their operation," NYISO said in its latest report. "An additional 590 MW of peakers are expected to become unavailable beginning May 1, 2025, all of which are in New York City. With the additional peakers unavailable, the bulk power transmission system will not be able to securely and reliably serve the forecasted demand in New York City."
However, even before the peaker rule came into effect, the DEC was moving to shut down gas-fired power plants in the city and elsewhere in downstate New York, arguing that the facilities' greenhouse gas emissions ran counter to state climate mandates. In October 2021, the DEC denied air permits to revamp two gas-fired plants — NRG Energy Inc.'s 647-MW power plant in Astoria, Queens, and Danskammer Energy's 532-MW plant near Newburgh, in Orange County.
Generators respond
In response to the new NYISO report, the Independent Power Producers of New York (IPPNY) called for a policy revamp. The generators' trade group has often criticized state officials for paying too little attention to grid reliability and cost when setting climate targets.
"The pace of play is not keeping up with the pace of promises, and this report makes that clear," IPPNY President and CEO Gavin Donohue said in a statement. "There have been repeated cautions from the NYISO regarding grid reliability, and this report highlights the reality that generator retirement cannot outpace the addition of new generation with the attributes needed by the NYISO to maintain reliability. This report should draw attention from state officials in shaping realistic public policies."
Donohue called for NYISO "to identify solutions that are market-based so we can set ourselves on the pathway to a cleaner energy future, while maintaining the reliability of our grid at affordable rates."
One step NYISO could take is to extend the lifetime of the peaker plants that are set for closure. Under the DEC's peaker rule, a generator may remain in operation for up to four additional years beyond the compliance deadline if NYISO or the plant's local transmission owner determines that the facility is needed to ensure reliability.
However, Lanahan said NYISO would take that step only as a last resort. First, he said, the grid operator will work with local utility Consolidated Edison Inc. to see if the company can find a solution. At the same time, NYISO will seek proposals from other market participants to address the issue — including new transmission lines, new generation facilities, and energy-efficiency measures. That effort will begin later this month and will likely continue until November, Lanahan said.
"If we end up at the end of that process with no market-based solutions available, then we are going to take a look at having to retain some of those peaker plants," Lanahan said. "We won't be there until we go through the process and exhaust all proposed solutions."
As in the previous quarter's report, NYISO expects New York City's transmission pressures to ease upon the completion of the giant Champlain Hudson Power Express (CHPE) transmission line, scheduled to go into service in mid-2026. The CHPE would bring up to 1.25 GW of hydropower from dams in Quebec to the city via a 339-mile underground route.
However, even if the CHPE goes into service as planned, NYISO warned that New York City could find itself with a transmission deficiency again as soon as 2032 due to increasing power demand.
S&P Global Commodity Insights reporter Jason Fargo produces content for distribution on Connect by S&P Global. S&P Global Commodity Insights is a division of S&P Global Inc.
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