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Nearly 650 MW of peakers to retire to comply with tighter NY regulations


Essential Energy Insights - February 2021


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Six trends shaping the industries and sectors we cover in 2021

Nearly 650 MW of peakers to retire to comply with tighter NY regulations

The owners of 648.3 MW of peak power generation capacity in and around New York City have elected to retire the natural gas- and oil-fired units to comply with stricter air emissions regulations, while approximately 1,300 MW will be retrofitted with pollution control equipment.

S&P Global Platts reviewed the compliance plans submitted to the New York State Department of Environmental Conservation totaling 5,482 MW of peaking capacity. The filings were obtained through a Freedom of Information Act request.

The regulations are officially known as Subpart 227-3, Ozone Season Oxides of Nitrogen (NOx) Emission Limits for Simple Cycle and Regenerative Combustion Turbines.

Power market participants have been anticipating the results of the compliance filings in order to determine how much generation capacity could retire as a result of the rules.

"The elections to retire or retrofit within New York City come as little surprise, as the age of many of these facilities is telling in their decision to retire or to continue to invest," Kieran Kemmerer, power market analyst with S&P Global Platts Analytics, said in an email on April 7.

"That being said, with a sizeable amount of oil-fired capacity retiring, a severe winter could pose challenges, particularly with the known gas deliverability issues to the NYC region, and as a result put upward pressure on power prices," Kemmerer said.

The units identified for retirement include LS Power Group's Ravenswood CT plant, a collection of 17 simple-cycle combustion turbines that have been operating since the late 1960s. Others, according to the S&P Global Platts review of the compliance filings, are Consolidated Edison Inc. subsidiary Consolidated Edison Co. of New York Inc.'s Hudson Avenue CT plant in New York City and National Grid PLC subsidiary National Grid Generation LLC's Glenwood CT and West Babylon plants, both on Long Island. All of the plants, according to S&P Global Market Intelligence data, are about 50 years old and little-used.

Newsday reported March 2 that National Grid had said it would close the two plants because of the emissions regulations and also, potentially, because of a stalled agreement with officials in Nassau County, N.Y., over a proposed reduction in tax payments.

In addition to supporting the power grid in the New York City region during extremely cold weather, peaking capacity could be needed if renewable energy capacity increases in that area.

"Significant amounts of peaking capacity must be retained to compensate for the growing proportion of intermittent renewable sources," Matthew Cordaro, a former CEO of the Midcontinent ISO and current trustee of the Long Island Power Authority, said in an email.

"This will be necessary no matter how the pace of adding clean energy facilities may slow because of things like the coronavirus and permitting hurdles or an acceleration in the retirement of traditional steam units," Cordaro said.

Blackstart resources

Several generation units totaling 86 MW of nameplate capacity will be reclassified as "blackstart only" by 2023 and 2025, the dates when the stricter emissions limits go into effect. Blackstart resources are generating units and associated equipment which have the ability to be started without support from the power grid. They are used to restart the system after a power failure.

"Fortunately, over the years many combustion turbines were modified to meet more stringent emission controls. Those that have not can continue to operate as blackstart generators under the new air pollution requirements," Cordaro said.

Approximately 1,600 MW of capacity will be able to meet the tighter emissions limits using existing pollution controls, according to the filings.

Astoria Generating Co. LP, a subsidiary of Eastern Generation LLC and ultimately owned by investment firm ArcLight Capital Partners LLC, owns a large share of the pre-1990 peaking units covered by the regulations.

Astoria Generating's current plan to comply with the new requirements is to stop burning oil during the summer in 2023 and to stop burning natural gas during the summer in 2025 at the company's facilities in Brooklyn and Queens, Eastern Generation Senior Vice President John Reese said.

That could mean the New York City area has roughly 900 MW less capacity in the summer in addition to the 650 MW that will have retired, which could result in reduced capacity in summer 2023 of about 1,550 MW.

As an alternative, Astoria Generating is considering installing pollution controls which may or may not be economically or logistically feasible, and the company has proposed a repowering of its Gowanus Gas Turbines Station and retirement of its Narrows Generating Station, Reese said.

"These retirements also coincide with the implementation of carbon pricing in NYISO, which poses substantial upside to power prices in Zones J and K," Platts' Kemmerer said.

"We anticipate battery storage will help replace some of this peaking capacity, given New York's procurements and targets, but will have little impact on prices at the outset with low concentrations of storage/renewables downstate," he said.

The information contained in the compliance plans will also be a key input into the New York ISO's Reliability Needs Assessment that determines how much power generation is required, and where on the system it is needed to maintain reliability.

The final rule includes a provision that allows the NYISO to designate units to continue to operate on a temporary basis if needed to maintain electric system reliability while a permanent solution is implemented.

Jared Anderson is a reporter for S&P Global Platts. S&P Global Platts, S&P Global Platts Analytics and S&P Global Market Intelligence are all owned by S&P Global Inc.