NEW YORK – A panel of power experts today warned that the East Coast’s most populous state will have to replace 40 percent of its electricity transmission over the next three decades to keep up with regulations and replace aging generation with more diverse supply.
Appearing at Columbia University here, the experts said three drivers – power plant age, transmission congestion and new Clean Air Act rules that go into effect in 2015 – will accelerate the Empire State’s need for an unprecedented wave of line construction.
Also on the table is the state’s 30 percent renewable power mandate by 2015 and the possibility that Indian Point’s nuclear reactors won’t be relicensed. Together, these factors mean the state has little choice but to upgrade a system that restricts electron movement from rural areas in the north to urban centers in the south, they said.
“It is not a robust system,” said Stephen Whitley, president and CEO of the N.Y. Independent System Operator. “Power can’t be moved efficiently.”
Whitley explained that transmission bottlenecks due to narrow rights of way and a shortage of high-voltage lines limits the fuel diversity downstate. Upstate, nuclear, hydropower, natural gas and renewables keep the supply equation diverse and able to respond to crisis, but for New York City and its environs, the situation is quite different, he said.
One executive present here estimated that New York will have to replace 4,700 miles of its 12,000 mile transmission system to cope with policy directives and other factors.
“Ladies and gentleman, it’s time,” said James Laurito, president of Central Hudson Gas and Electric Corp., in comments to a conference on the transmission situation.
Laurito described a “traffic jam of electricity” that has some calling for a major cross-state transmission project – the first since the 1980s – to connect Canada’s hydro resources to the Big Apple. He said such a project would enable renewables development as well as help avoid $1.1 billion in added annual costs caused by congestion relief.
Laurito added that New York will need $25 billion over the next decade for the upgrades.
The comments came during a forum on Gov. Andrew Cuomo’s (D) call for a “New York Energy Highway.” Cuomo called the summit to field ideas and begin laying the groundwork to attract private capital.
Notably absent from the discussion was talk of demand growth. Because demand is flat in New York and natural gas prices are so low, some have said such a big infrastructure investment is premature, but Whitley bristled at that suggestion.
Whitley said “things other than demand affect balance on the power system” such as lower capacity prices that push power companies to shutter older plants. He also argued for more flexibility to rural areas, where wind and solar might flourish.
“We have an old system that’s aging and needs to be replaced,” he said. “The question is, do we replace it like it is.”
He added: “You don’t ever want to get behind the demand curve. It’s hard to catch up.”
As for private markets, the consensus seemed to be that the money would be more than available if the state sends a signal that new transmission is happening.
“Capital is not constrained,” Laurito said. “There is capital available at very competitive rates.”
Timothy Kingston, a managing director at Goldman Sachs, confirmed that would be the case. He said infrastructure was one of the few sectors that “had access to capital markets” throughout the worst of the financial crisis that started in 2008.
“This energy highway will attract investor interest from the world,” Kingston said. “Much more capital is interested in transmission than opportunities exist.”
Kingston explained that investment in energy infrastructure is considered secure because power transmission and gas pipeline capacity are “agnostic” to the underlying price volatility of the transmitted commodity.
|Wind Watch relies entirely
on User Funding