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FEATURE: Gas-fired power increased with nuclear plant closure; path to climate goals unclear

Highlights

Gas burn higher despite higher price climb

Emissions-free power needed by 2040

Mixed views on technology incentives

Despite a sharp rise in natural gas prices on year, gas burn for power generation is up significantly in New York, with nuclear power output down after the Indian Point facility permanently retired in April. The increased gas burn comes amid an aggressive decarbonization agenda that will effectively ban gas-fired power by 2040.

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With the 1,041-MW Indian Point Unit 3 permanently shutting down on April 30, the state is entering its first winter without power from the nuclear plant, which had provided roughly 25% of New York City's and Westchester County's electricity.

The 1,299-MW Indian Point-2 nuclear reactor was deactivated on April 30, 2020 and Indian Point Unit 1 was shut down in October 1974. The plant is currently being decommissioned.

When Unit 3 shut down in April, S&P Global Platts Analytics said that during periods of higher load, the nuclear generation would likely be replaced by gas-fired generation in the region and recent data shows that to be the case.

Gas demand elasticity

Gas-fired generation averaged 72 GWh/d in the New York Independent System Operator footprint during the first half of November, up around 30% from the same time last year, generation data collected by Platts Analytics shows.

The 18 GWh/d increase in gas-fired generation accounts for the bulk of the state's 26 GWh/d year-over-year decrease in nuclear generation, with stronger hydropower providing the rest.

With alterative options for reliable baseload generation limited, gas-fired generation has been ramped up this autumn despite the headwinds of dramatically higher spot gas prices.

Transco Zone 6, New York spot gas has averaged $4.69/MMBtu so far this month (Nov. 1-16), nearly quadruple the $1.30/MMBtu observed for the same time last year.

The greater reliance on gas has made consumption of the fuel in the NYISO footprint less elastic, exposing the area to spot price increases when demand spikes.

An early sign of this new dynamic was observed in the state's first cold snap of the winter.

On Nov. 3-6, the average temperature in New York City fell to five to eight degrees below normal. Platts Analytics data shows that LDC gas demand spiked to 3.3 Bcf/d during the cold spell, up from the 2.3 Bcf/d observed during the seven days prior.

The 43% surge in gas demand triggered a spot gas price increase, with Transco Zone 6, NY averaging $5.42/MMBtu for flow days Nov. 3-6. This is up nearly 80 cents from the spot gas price location's prior 30-day average of $4.65/MMBtu.

Incentivizing new technology

New York has an aggressive greenhouse gas reduction initiative anchored by the Climate Leadership and Community Protection Act, which among numerous goals, mandates a non-emitting electricity system by 2040.

The CLCPA, enacted in 2019, strengthened the state's renewable energy target from 50% by 2030 to 70% by 2030, and included an offshore wind mandate requiring load-serving entities to obtain Offshore Wind Renewable Energy Certificates procured by the New York State Energy Research and Development Authority.

In October 2020, the state's Public Service Commission updated its clean energy standard adding a new Tier 4 to incentivize delivering renewable energy to New York City.

New York power generators and labor groups in August called on the commission to establish a zero-emissions program to help create a market for 1 GW of zero-emissions dispatchable technology needed to reliably meet the state's 2040 zero-emissions electricity target.

Specifically, the trade association Independent Power Producers of New York, the New York State AFL-CIO and the New York State Building and Construction Trades Council filed the joint petition with the service commission.

The petitioners argued that immediate private sector investment is needed develop commercially viable zero emissions dispatchable resources that will be required in less than 20 years.

The commission's comment period for the petition has ended, with stakeholder input ranging from supporting the petition to arguing it is premature.

"Given technologies to provide this [zero emissions dispatchable] service do not currently exist on a commercial scale and due to the extended amount of time to develop, permit and construct new assets in New York ... a market-based program to incent these resources is needed now," power producer NRG Energy, said in comments dated Nov. 15.

However, a group of large power consumers known as Multiple Intervenors, said the petition is "premature" and it is not clear that another program "dependent upon out-of-market payments – presumably funded by customers – is needed at this time."

A draft scoping plan for the climate law is due by Jan. 1, 2022, and the New York Independent System Operator is examining wholesale power market rule changes to encourage developing non-renewable zero emission facilities, Multiple Intervenors said, adding that the result of these initiatives may not require creating another class of generation facilities dependent upon out-of-market payments.

Environmental group Natural Resources Defense Council also called the petition premature given the number of "more pressing priorities" for achieving the CLCPA's nearer-term targets focused on deploying renewables.