Gov. Cuomo proposes New York Energy Highway

Gov. Andrew M. Cuomo, in his 2012 State of the State address, put forward a sweeping public-private initiative to upgrade and modernize New York State’s electric power system.

This proposal for an “Energy Highway” promises to help provide reliable, afford- able power to New York’s homes and businesses for the next half century while creating jobs, energizing private-sector investment and protecting the state’s environment and the well-being of its citizens.

As we continue to emerge from the greatest economic downturn since the Great Depression, there is no better time than today to take courageous action to build a stronger economic future for New York State.

The New York State Energy Highway initiative addresses these realities:

“- Dependable energy infrastructure is essential for economic growth.

“- Excess electrical power is available in upstate New York.

“- The potential to develop new resources.

“- Demand for energy is increasing, particularly in downstate New York.

“- New York’s transmission system requires rebuilding and upgrading.

“- The transmission system has bottlenecks, or congestion points, preventing

power from flowing easily from upstate to downstate.

“- A number of power plants are facing uncertainties that could impact their future operations and they could retire, affecting communities where they are located.

The Energy Highway initiative envisions a broad range of projects through- out the state: building new transmission lines or rebuilding and upgrading existing ones; repowering aging power plants to increase their efficiency, and making them more environmentally friendly; and building new plants, including those powered by natural gas, and by wind and other renewable fuels.

While taking action to reduce demand through the state’s on-going energy efficiency initiatives remains critical to the current and future sustainable energy system, this initiative focuses on supply-side and infrastructure projects that generate and transmit energy.

This request for information is the first step in the process of partnering with the private sector in proposing, financing and developing the projects that will make the governor’s vision a reality. We seek the very best ideas that project developers, financial experts, utilities and others have to offer.

It was in New York City that the nation’s first central power plant was built. And it was in Western New York that the first long-distance transmission of electricity occurred, from Niagara Falls to Buffalo. Now, with the Energy Highway, New York State is poised to reclaim its historic place as a leader in the electric power industry.

Meeting the Challenges

New York State’s infrastructure system for producing and delivering electricity stands among the most reliable and complex in the world. But the status quo is not acceptable. We must modernize the transmission system and eliminate the bottlenecks. We must build and repower generating plants, and we must plan now to take advantage of opportunities.

It is in light of these challenges that Gov. Cuomo has called on the private sector to join the state in building the new Energy Highway – an opportunity for developers, utilities and others to invest in New York’s future.

Energy conservation and efficiency remain important components of the state’s energy policy. These can be cost-effective strategies to reduce energy use, protect our environment and promote economic competitiveness.

The state supports demand-side measures, including those promoted through its System Benefits Charge and Energy Efficiency Portfolio Standard and its investment of billions of dollars in energy efficiency and technological innovation annually. However, we must complement our commitment to efficiency with additional investments to upgrade and modernize our electric system.

The Power NY Act of 2011, passed by the New York State legislature and signed by Gov. Cuomo in August 2011, has advanced this goal by establishing a new process for the siting of electric-generating facilities and for repowering projects. The new law encourages investments in cleaner power plants and affords communities more opportunities to meaningfully participate in the siting process.

In announcing the Energy Highway initiative in his State of the State Address on January 4, 2012, Gov. Cuomo likened the effort to the federal interstate highway project of the 1950s and to New York’s own construction of the Thruway and the Interstate 87 Northway. He also presented the Energy Highway as a key element in a series of diverse initiatives to use strong partnerships between the private sector and the state to generate billions of dollars in economic growth and create thousands of jobs for New Yorkers.

To implement the Energy Highway initiative and work with the private sector, the governor has created a Task Force consisting of the heads of the principal State agencies and public authorities that deal with the state’s energy and environmental policies.

The Task Force has set an aggressive timetable. With the issuance of this request for information, experienced and knowledgeable parties, including the state’s investor-owned utilities and other industry participants, are invited to submit information concerning projects that will advance one or more of the Task Force’s specific objectives, as outlined in the RFI.

An Opportunity for the Private Sector

The Energy Highway initiative comes against a backdrop of excitement and innovation in New York State’s efforts to collaborate with the private sector to develop infrastructure to meet important public needs while at the same time creating jobs and strengthening the State’s economy.

Gov. Cuomo’s other proposals to achieve these goals range from building the nation’s largest convention center to repairing bridges, roads and state parks. Like the Energy Highway, these and other initiatives will rely on private-sector investment and commitment.

The Energy Highway initiative also reflects the business-friendly climate that is becoming more apparent in New York. Last year marked the start of the New York Open for Business Campaign, which encourages private enterprises to locate and invest in the state; the establishment of Regional Economic Development Councils to enhance business and economic growth through strategic planning and financial grants; and legislative approval of Recharge New York, a multi-year program to provide lower-cost electricity to businesses that pledge to bring investment and jobs to the state.

Building on these and other programs, Gov. Cuomo has now proposed a New York Works Fund to facilitate joint efforts with the private sector in financing and developing major infrastructure projects.

Private interests that participate in the Energy Highway project will benefit from New York’s varied financial and technical incentives and assistance; its nationally-recognized colleges, universities and research centers; and its outstanding work force.

Transmission: An Aging System

More than half of the demand for electricity in New York comes from the Southeastern region of the state–New York City, Long Island and Westchester County. But much of the state’s excess lower-cost electricity is produced by power plants, including those using renewable energy sources, located in the state’s Northern and Western regions.

Most of New York State’s transmission lines were built more than 50 years ago. It is estimated that about 25 percent of the state’s transmission system will have to be replaced within the next 10 years and nearly 50 percent will require replacement in the next 30 years.

The utilities that own the transmission lines continue to invest in them, and the system can still be operated with utmost reliability. However, physical limitations and congestion on the grid at times prevent excess power supplies from upstate and Canada from reaching the downstate region, where demand is greatest.

These transmission bottlenecks have a number of actual and potential consequences in terms of economics, the reliability of the power supply, the environment and public health:

“- Many higher-cost downstate power plants must run even when cheaper plants are available because power from the cheaper plants cannot be delivered. This can result in higher costs for consumers and cost-effective solutions need to be sought.

“- The downstate area lacks diversity in its power supply and relies mostly on natural gas-fired generation to meet its needs.

“- Older plants in urban areas must run at peak hours, increasing air pollution and health risks in the summer months when these effects are most pronounced.

“- At times, bottlenecks limit downstate access to renewable power.

In addition to addressing these concerns, investments in new and upgraded transmission lines will provide substantial economic benefits. For example, a recent national report concluded that every $1 billion of transmission investments “supports approximately 13,000 full-time-equivalent years of employment and $2.4 billion in total economic activity.”

Generation: An Uncertain Future

Along with the problems of an aging and congested transmission system, New York State faces uncertainties concerning the continued operation of some of its existing power plants. Recent bankruptcy filings by plant owners, notices of plant retirements and suspended operation, the effect of the currently low natural gas prices on the viability of coal- and oil-fired plants, and the pendency of federal relicensing applications for the Indian Point 2 and 3 nuclear power plants and related state water quality proceedings all cloud the future.

Many older plants may need to make investments to comply with increasingly stringent environmental requirements intended to protect public health, preserve our natural resources and reduce greenhouse gas emissions. Some older generating units may choose to cease or reduce operation, creating potential demand for new and more efficient generating capacity and impacts on local communities.

Moreover, predictions of future electricity use are subject to change. A rebounding economy could require new power resources sooner than is now expected. A strong electric system must be in place to ensure that New York is ready for growth in the near- and long-term.

Energy Highway Objectives

The Task Force is seeking information from parties on proposed projects that would address one or more of the following objectives:

Reduce constraints on the flow of electricity to, and within, the downstate area; and expand the diversity of power generation sources supplying downstate. The reduction of in-state transmission constraints and development of additional inter-regional transmission capacity would afford consumers improved access to sources of electricity.

For example, increased transmission capability could provide increased access to underutilized upstate generating facilities as well as provide transmission access and deliverability for major new renewable projects upstate and elsewhere. Moreover, an expanded transmission system could provide increased capacity to accommodate future generation retirements.

There may be project opportunities that could increase transmission capability between upstate and downstate, reduce congestion costs and thereby allow more electricity to flow to downstate customers. There may also be project opportunities that could be financially beneficial to ratepayers even if the existing generation fleet continues to operate.

Assure that long-term reliability of the electric system is maintained in the face of major system uncertainties: Potential retirements of existing generating facilities, along with uncertainty in energy-demand growth, present opportunities for new projects to be positioned to meet the future needs of the state. Additionally, the replacement requirements of the aging transmission system present opportunities for potentially increasing capacity in existing rights-of-way.

Encourage development of utility-scale renewable generation resources throughout the state: The state’s current goal is that renewable resources will provide 30 percent of the state’s electricity consumption by 2015. In the longer-term, increased reliance on renewables, including projects with in-service dates after 2015, will help support energy security and contribute to the diversity of the power supply while reducing greenhouse gas emissions and providing other important environmental benefits. Increased transmission capacity could better assure deliverability of energy from major renewable projects.

Increase efficiency of power generation, particularly in densely populated urban areas: Repowering, or upgrading, existing generation potentially offers multiple benefits. These include increasing efficiency and reducing air emissions. Repowering plants located in high-demand areas is an efficient alternative to delivering power over long distances, reduces congestion across the electric system, and assures more efficient power supplies are available to meet local reliability needs.

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Gov. Cuomo proposes New York Energy Highway

Gov. Andrew M. Cuomo, in his 2012 State of the State address, put forward a sweeping public-private initiative to upgrade and modernize New York State’s electric power system.

This proposal for an “Energy Highway” promises to help provide reliable, afford- able power to New York’s homes and businesses for the next half century while creating jobs, energizing private-sector investment and protecting the state’s environment and the well-being of its citizens.

As we continue to emerge from the greatest economic downturn since the Great Depression, there is no better time than today to take courageous action to build a stronger economic future for New York State.

The New York State Energy Highway initiative addresses these realities:

“- Dependable energy infrastructure is essential for economic growth.

“- Excess electrical power is available in upstate New York.

“- The potential to develop new resources.

“- Demand for energy is increasing, particularly in downstate New York.

“- New York’s transmission system requires rebuilding and upgrading.

“- The transmission system has bottlenecks, or congestion points, preventing

power from flowing easily from upstate to downstate.

“- A number of power plants are facing uncertainties that could impact their future operations and they could retire, affecting communities where they are located.

The Energy Highway initiative envisions a broad range of projects through- out the state: building new transmission lines or rebuilding and upgrading existing ones; repowering aging power plants to increase their efficiency, and making them more environmentally friendly; and building new plants, including those powered by natural gas, and by wind and other renewable fuels.

While taking action to reduce demand through the state’s on-going energy efficiency initiatives remains critical to the current and future sustainable energy system, this initiative focuses on supply-side and infrastructure projects that generate and transmit energy.

This request for information is the first step in the process of partnering with the private sector in proposing, financing and developing the projects that will make the governor’s vision a reality. We seek the very best ideas that project developers, financial experts, utilities and others have to offer.

It was in New York City that the nation’s first central power plant was built. And it was in Western New York that the first long-distance transmission of electricity occurred, from Niagara Falls to Buffalo. Now, with the Energy Highway, New York State is poised to reclaim its historic place as a leader in the electric power industry.

Meeting the Challenges

New York State’s infrastructure system for producing and delivering electricity stands among the most reliable and complex in the world. But the status quo is not acceptable. We must modernize the transmission system and eliminate the bottlenecks. We must build and repower generating plants, and we must plan now to take advantage of opportunities.

It is in light of these challenges that Gov. Cuomo has called on the private sector to join the state in building the new Energy Highway – an opportunity for developers, utilities and others to invest in New York’s future.

Energy conservation and efficiency remain important components of the state’s energy policy. These can be cost-effective strategies to reduce energy use, protect our environment and promote economic competitiveness.

The state supports demand-side measures, including those promoted through its System Benefits Charge and Energy Efficiency Portfolio Standard and its investment of billions of dollars in energy efficiency and technological innovation annually. However, we must complement our commitment to efficiency with additional investments to upgrade and modernize our electric system.

The Power NY Act of 2011, passed by the New York State legislature and signed by Gov. Cuomo in August 2011, has advanced this goal by establishing a new process for the siting of electric-generating facilities and for repowering projects. The new law encourages investments in cleaner power plants and affords communities more opportunities to meaningfully participate in the siting process.

In announcing the Energy Highway initiative in his State of the State Address on January 4, 2012, Gov. Cuomo likened the effort to the federal interstate highway project of the 1950s and to New York’s own construction of the Thruway and the Interstate 87 Northway. He also presented the Energy Highway as a key element in a series of diverse initiatives to use strong partnerships between the private sector and the state to generate billions of dollars in economic growth and create thousands of jobs for New Yorkers.

To implement the Energy Highway initiative and work with the private sector, the governor has created a Task Force consisting of the heads of the principal State agencies and public authorities that deal with the state’s energy and environmental policies.

The Task Force has set an aggressive timetable. With the issuance of this request for information, experienced and knowledgeable parties, including the state’s investor-owned utilities and other industry participants, are invited to submit information concerning projects that will advance one or more of the Task Force’s specific objectives, as outlined in the RFI.

An Opportunity for the Private Sector

The Energy Highway initiative comes against a backdrop of excitement and innovation in New York State’s efforts to collaborate with the private sector to develop infrastructure to meet important public needs while at the same time creating jobs and strengthening the State’s economy.

Gov. Cuomo’s other proposals to achieve these goals range from building the nation’s largest convention center to repairing bridges, roads and state parks. Like the Energy Highway, these and other initiatives will rely on private-sector investment and commitment.

The Energy Highway initiative also reflects the business-friendly climate that is becoming more apparent in New York. Last year marked the start of the New York Open for Business Campaign, which encourages private enterprises to locate and invest in the state; the establishment of Regional Economic Development Councils to enhance business and economic growth through strategic planning and financial grants; and legislative approval of Recharge New York, a multi-year program to provide lower-cost electricity to businesses that pledge to bring investment and jobs to the state.

Building on these and other programs, Gov. Cuomo has now proposed a New York Works Fund to facilitate joint efforts with the private sector in financing and developing major infrastructure projects.

Private interests that participate in the Energy Highway project will benefit from New York’s varied financial and technical incentives and assistance; its nationally-recognized colleges, universities and research centers; and its outstanding work force.

Transmission: An Aging System

More than half of the demand for electricity in New York comes from the Southeastern region of the state–New York City, Long Island and Westchester County. But much of the state’s excess lower-cost electricity is produced by power plants, including those using renewable energy sources, located in the state’s Northern and Western regions.

Most of New York State’s transmission lines were built more than 50 years ago. It is estimated that about 25 percent of the state’s transmission system will have to be replaced within the next 10 years and nearly 50 percent will require replacement in the next 30 years.

The utilities that own the transmission lines continue to invest in them, and the system can still be operated with utmost reliability. However, physical limitations and congestion on the grid at times prevent excess power supplies from upstate and Canada from reaching the downstate region, where demand is greatest.

These transmission bottlenecks have a number of actual and potential consequences in terms of economics, the reliability of the power supply, the environment and public health:

“- Many higher-cost downstate power plants must run even when cheaper plants are available because power from the cheaper plants cannot be delivered. This can result in higher costs for consumers and cost-effective solutions need to be sought.

“- The downstate area lacks diversity in its power supply and relies mostly on natural gas-fired generation to meet its needs.

“- Older plants in urban areas must run at peak hours, increasing air pollution and health risks in the summer months when these effects are most pronounced.

“- At times, bottlenecks limit downstate access to renewable power.

In addition to addressing these concerns, investments in new and upgraded transmission lines will provide substantial economic benefits. For example, a recent national report concluded that every $1 billion of transmission investments “supports approximately 13,000 full-time-equivalent years of employment and $2.4 billion in total economic activity.”

Generation: An Uncertain Future

Along with the problems of an aging and congested transmission system, New York State faces uncertainties concerning the continued operation of some of its existing power plants. Recent bankruptcy filings by plant owners, notices of plant retirements and suspended operation, the effect of the currently low natural gas prices on the viability of coal- and oil-fired plants, and the pendency of federal relicensing applications for the Indian Point 2 and 3 nuclear power plants and related state water quality proceedings all cloud the future.

Many older plants may need to make investments to comply with increasingly stringent environmental requirements intended to protect public health, preserve our natural resources and reduce greenhouse gas emissions. Some older generating units may choose to cease or reduce operation, creating potential demand for new and more efficient generating capacity and impacts on local communities.

Moreover, predictions of future electricity use are subject to change. A rebounding economy could require new power resources sooner than is now expected. A strong electric system must be in place to ensure that New York is ready for growth in the near- and long-term.

Energy Highway Objectives

The Task Force is seeking information from parties on proposed projects that would address one or more of the following objectives:

Reduce constraints on the flow of electricity to, and within, the downstate area; and expand the diversity of power generation sources supplying downstate. The reduction of in-state transmission constraints and development of additional inter-regional transmission capacity would afford consumers improved access to sources of electricity.

For example, increased transmission capability could provide increased access to underutilized upstate generating facilities as well as provide transmission access and deliverability for major new renewable projects upstate and elsewhere. Moreover, an expanded transmission system could provide increased capacity to accommodate future generation retirements.

There may be project opportunities that could increase transmission capability between upstate and downstate, reduce congestion costs and thereby allow more electricity to flow to downstate customers. There may also be project opportunities that could be financially beneficial to ratepayers even if the existing generation fleet continues to operate.

Assure that long-term reliability of the electric system is maintained in the face of major system uncertainties: Potential retirements of existing generating facilities, along with uncertainty in energy-demand growth, present opportunities for new projects to be positioned to meet the future needs of the state. Additionally, the replacement requirements of the aging transmission system present opportunities for potentially increasing capacity in existing rights-of-way.

Encourage development of utility-scale renewable generation resources throughout the state: The state’s current goal is that renewable resources will provide 30 percent of the state’s electricity consumption by 2015. In the longer-term, increased reliance on renewables, including projects with in-service dates after 2015, will help support energy security and contribute to the diversity of the power supply while reducing greenhouse gas emissions and providing other important environmental benefits. Increased transmission capacity could better assure deliverability of energy from major renewable projects.

Increase efficiency of power generation, particularly in densely populated urban areas: Repowering, or upgrading, existing generation potentially offers multiple benefits. These include increasing efficiency and reducing air emissions. Repowering plants located in high-demand areas is an efficient alternative to delivering power over long distances, reduces congestion across the electric system, and assures more efficient power supplies are available to meet local reliability needs.