Report forecasts declining congestion and capacity pricing
HUDSON VALLEY—New research by a highly respected firm, with core expertise in utility markets, forecasts a pending steep decline in electric transmission congestion and consumer electricity prices for the Mid and Lower Hudson Valley regions. The research report was submitted yesterday by the Hudson Valley Smart Energy Coalition (HVSEC) to the New York State Public Service Commission (PSC) for its review of proposed high-voltage power lines that would run through a major swath of the Hudson Valley. The report provides an independent viewpoint from an authoritative source—a firm typically engaged by utilities and government—and the research is significant to the PSC’s review because it deals directly with the issues cited as the rationale for a costly project with documented potential impacts to the environment and agricultural, historic and community resources.
The HVSEC hired London Economics International, LLC (LEI) to provide an independent outlook for the New York wholesale electricity market and the potential level of congestion costs that could be expected. LEI is a global advisory firm specializing in energy and infrastructure with clients that include American Electric Power, Con Edison, Exelon, Green Mountain Energy and PSEG Energy Resources. LEI’s proprietary simulation model used for electricity market forecasting has been used successfully in New York and other jurisdictions for regulatory proceedings.
LEI’s report is a forward-looking study of the energy and capacity prices in the New York wholesale electricity market over the period of 2016 to 2034. LEI used several factors, including three different natural gas fuel price forecasts. The firm then evaluated the markets relevant to the proposed high-voltage transmission lines project—the area from western New York to the eastern zones of the Lower Hudson Valley, New York City and Long Island. Historically this system is constrained in how much of the less expensive electricity generated in the western part of New York can be supplied to the eastern and downstate areas. The LEI study also looked at the upstate to downstate interface, which under certain circumstances can limit electricity supply to the Lower Hudson Valley.
LEI concluded that the annual congestion pricing is forecasted to decline by between 70 and 85 percent by 2030 as compared with 2016-2017 levels. Under all three natural gas pricing scenarios, congestion is predicted to decrease as compared to recent historic levels. The main drivers of this trend are additional downstate supply resources and changes to the natural gas price differences between western and eastern New York.
Another factor that has led to higher downstate energy prices has been capacity pricing, as a result of a New Capacity Zone (NCZ) created to encourage investment in power plants within the Hudson Valley. Creation of the NCZ already has attracted new electricity generation and this will significantly lower capacity prices beginning in 2018.
LEI’s forecasted declines in congestion and capacity pricing support the HVSEC position that need has not been shown for the proposed high-voltage power lines—proposed under the state’s Energy Highway initiative—that could reach a height of 120 feet and cut through 25 communities in seven Hudson Valley counties.
Scenic Hudson President Ned Sullivan said, “This rigorous science-based report indicates that we don’t need a hugely expensive transmission project. We now have the basis that would allow the PSC to halt further consideration of the developer proposals. Previously the PSC recognized the unique importance of the Hudson Valley’s natural, historic and cultural assets. It also has acknowledged that even the best of the proposed projects could cause significant impacts to this ‘green infrastructure’ for which numerous federal and state public policies and investments have been aimed at protecting. Without an overwhelming need to justify the project, there is no reason to pursue an initiative that would damage natural resources that bring our region significant jobs and quality of life.”
“We’ve heard again and again from proponents of this project that we need it, it will help us. The main reason given is that it will lower our electricity bills,” said Ian Solomon of Farmers and Families for Claverack. “People in New York who pay utility bills could be forgiven for some skepticism regarding this claim, as our electricity bills are already among the highest in the nation, and virtually no action undertaken to date has lowered them, quite the opposite in fact. Now we have independent verification that this project would very likely raise our bills again, while also potentially scarring our landscape. We hope our state government will side with New York’s ratepayers in this proceeding. Anything that would cost New Yorkers more without improving service cannot be good public policy.”
Greg Quinn of Walnut Grove Farm said, “The findings by this analysis from LEI not only demonstrate the irrationality of this particular project but further complement the recent in-depth study and presentations by Gidon Eshel, Bard College research professor of Environmental Physics, which conclusively demonstrate that there is no need for this proposal. Congestion is being progressively eliminated and electrical usage is steadily declining as more efficient appliances and new local generation technology is being developed and utilized throughout New York State. The damage to the crucial agricultural and environmental elements and growing tourism in the proposed corridor, in conjunction with the $1.3-billion cost, which is several times more than the financial benefit, disqualifies this project. To proceed would be a major blunder in New York energy policy.”
Preservation League of New York State President Jay A. DiLorenzo said, “LEI’s findings make clear that there is simply no compelling reason to compromise the unique historic, cultural and natural resources of this region. These resources are important because the Hudson Valley’s historic buildings, communities and landscapes have played host to the people and events that have shaped our state and our nation. Visitors to this day can see the vistas that inspired Hudson River School painters, walk through the homes of our nation’s early patriots and enjoy the vibrant communities that continue to attract gifted entrepreneurs.”
In addition to LEI’s report, Dr. Gidon Eshel, research professor of Environmental Physics at Bard College, prepared a report presenting results of a model of future downstate peak electricity loads, which concludes that no additional infrastructure is needed to meet them. Dr. Eshel used population ratio, population increases and temperature to predict peak energy loads in the downstate New York region. He then determined that anticipated supply in the region, even with closure of the Indian Point nuclear facility, will be sufficient to meet peak demand, concluding that no additional generation or transmission capacity is needed in the region.
The New York Independent System Operator (NYISO), which is responsible for operating the state’s electricity grid as well as administrating the wholesale power market, issued a Reliability Needs Assessment (RNA) in September 2014. The NYISO study is based on standards designed to ensure the occurrence of less than one day of electricity supply shortfall every 10 years. This most recent RNA concluded that without repowering the Danskammer generating plant in Newburgh or including other Hudson Valley projects that are quickly moving forward, the Hudson Valley will meet or exceed this stringent standard for at least the next 10 years. In July 2015, when NYISO released a Comprehensive Reliability Plan it stated that with returned capacity in the critical region that includes the Hudson Valley, and with transmission upgrades in other regions, New York’s power system has adequate resources to reliably meet the state’s electric demand over the next 10 years under expected system conditions.
The Hudson Valley Smart Energy Coalition includes municipal officials; environmental, cultural, historic and land preservation organizations; businesses; and residents who support creation of a modern, comprehensive energy plan for the Hudson Valley and New York State. More information available at www.hvsec.org.