The final Scoping Plan (Plan) for New York State’s Climate Leadership and Community Protection Act (“CLCPA” or the “Act”) was passed overwhelmingly by the Climate Action Council (“Council” or “CAC”) on December 19, 2022. The vote was 19 to 3. The Scoping Plan provides recommendations to meet the Act’s mandates, including significantly reducing greenhouse gas emissions, accelerating building and transportation electrification, and securing climate justice.
Based on the Council’s integration analysis, major recommendations in the Plan include:
The Council approved the Scoping Plan following the release of the Draft Scoping Plan on December 30, 2021, and a robust public comment period that included 11 public hearings across the state and more than 35,000 written comments. Yet, there appears to be a great deal of confusion in terms of what the Plan may mean to the average citizen, as well as to business and industry energy consumers.
The recent controversy surrounding gas stoves is an example of policy becoming real in the eyes of the consumer. Unfortunately, most business and industry energy consumers actively engage when policy impacts energy bills or mandates are placed into law, which tend to occur years after the debate has concluded. There are challenges and opportunities within the Scoping Plan, and it is critical that more be done to educate the market and become less policy and more market-driven in achieving balanced environmental and economic results.
Despite being applauded by state leaders, environmental groups and other constituents as a bold, monumental achievement, not all CAC members felt they could support the Plan, including CAC member and co-author of this blog, Dennis Elsenbeck, head of Phillips Lytle’s Energy Consulting Services. This dissenting cohort is concerned that a number of issues could have been better thought out, and that others failed to include key metrics in order to be able to dimension success in the future. They also believe that engaging more subject matter experts in the fields of supply, demand and distribution — and not just utility experts ― would bring a more robust economic focus to the Plan’s implementation.
A major concern is the mechanics of the proposed transition away from fossil fuels that currently supply the bulk of the electric grid’s power, as well as residential, business and industry thermal needs. Attendant issues include the anticipated cost to achieve key objectives of individual New York State consumers; the need to use existing natural gas systems, particularly in upstate New York where more heating is required; the lack of concrete metrics to ensure accountability to disadvantaged communities (DACs); and the absence of a market assessment to develop a green energy eco-structure for economic and supply chain development. As New Yorkers, we cannot be tied when the next state “program” is released; rather, we need sound, proactive marketing strategies that proclaim New York as open for business in the green energy innovation and manufacturing space.
The CLCPA set ambitious climate and clean energy goals to safeguard the state’s resources for future generations while reinvesting in disadvantaged communities. Yet much of the Council’s discussion focused on shutting down the natural gas transmission and distribution network rather than on achieving the mandated 85% greenhouse gas (GHG) reduction by 2050. Although these goals appear similar, shutting down the natural gas network and achieving GHG targets are separate objectives requiring different technical paths. The focus should be on meeting the GHG reduction goals which could include optimizing the natural gas asset and limiting capital costs to the energy consumer by exploring available and evolving non-fossil options.
Discussions surrounding the natural gas transition should explore, with equal weight, what we are transitioning from and what we may be transitioning to. Utility portals in upstate New York indicate that there is a general lack of hosting capacity at the electric distribution level. This shortcoming must be addressed if we are to revitalize and electrify in a cost-effective manner. As we focus on any transition, limiting options decreases the probability of meeting aggressive climate goals.
Much of the CLCPA outlines a transition from a fossil fuel economy to an all-electric economy. Like most states and countries, New York climate activity prioritizes the supply side of the electric system. Current fossil-based generation is tied into the electric transmission network, which represents 13% to 15% of New York’s GHG emissions. Due to the scale of renewable objectives, land and water rights acquisition is a key driver, rather than proximity to electric transmission and/or load centers leading to reactive planning. As New York builds out renewable supply, additional transmission planning must account for renewable energy projects to ensure system resiliency. In recent New York State Public Service Commission (PSC) and utility negotiations, the PSC approved $4.4 billion to $6.6 billion in new transmission projects to ensure supply connectivity. Resiliency was a constant topic throughout CAC discussions, as fossil systems are “dispatchable” upon need. We must better understand resiliency from the perspective of intermittent supply and long-duration storage.
As the Scoping Plan objectives evolve to the demand side ― which includes buildings and transportation, for example ― early estimates indicate that electric demand will increase by over 50%, raising serious doubt that utilities in New York have the electric distribution-level infrastructure to support such demand at this time. Unlike the Reform the Energy Vision (REV) policy, the CLCPA is not committed to the co-location of supply and demand which could have limited the level and cost of transmission required to balance the electric system. As we develop programs and associated incentives for heat pumps, electric appliances, electric vehicles, electric charging stations and other devices, we must anticipate the impact, in terms of cost and timing, on the electric distribution system. Without a PSC Order requiring utilities to pursue action, the electric distribution system ― which does not appear to be equipped to accommodate such a transition without major investment ― we will find ourselves, designing systems reactively, much like the manner in which we are doing on the supply side. The Scoping Plan begins to frame this challenge but falls short on how to resolve the matter.
As noted, given New York’s aggressive and substantial renewable generation agenda, initial climate initiatives have begun on the supply side of the electric system. Regulatory agencies like the New York Independent System Operator (NYISO) ― the organization responsible for managing New York’s electric grid and its competitive wholesale electric marketplace ― must be given the opportunity to respond to the Scoping Plan (and additional legislation put forth) before it reaches the governor’s desk. System stability and reliability has been discussed at great length and should be deferred to the Federal Energy Regulatory Commission, NYISO and the Northeast Reliability Council for validation at the supply and transmission levels, and to the PSC and local electric utilities at the distribution level. All should take a more prospective view to ensure that cost to achieve is considered throughout, and that all options are considered prior to the development of programs and incentives that may have unintended consequences.
Transitioning to an electric economy must involve projecting the impact of electrification on the electric distribution system prospectively, so that the market may be engaged to explore innovative distributed energy resource solutions such as battery/thermal storage and microgrids to compete against traditional regulatory and utility infrastructure solutions. Armed with adequate cost projections, developers, energy service companies, energy management firms and local communities can become players in meeting climate objectives. Along with meeting the needs of CLCPA objectives, all transmission and planning activities should include formal input from the economic development community to ensure that new transmission and distribution considers and builds in capacity for defined economic development identified sites. Current tariffs at the utility and NYISO level require developers to pay for engineering studies simply to determine if there is adequate capacity to market a given site, regardless of the amount of site selector activity on a given site.
The community protection intent of the CLCPA mandates that up to 40% of the investment “spend” must benefit disadvantaged communities. And yet, no clear metrics have been developed to ensure that the “spend” provides measurable and accountable results. The Scoping Plan should have a deeper understanding of the value proposition to DACs, moving the issue from one of “cost” to one of “investment.” Our DACs need to be prioritized as leaders in smart growth, just revitalization and green energy supply chain development.
From an electric delivery point of view, Rust Belt neighborhoods, for the most part, lack electric infrastructure and/or capacity to revitalize, let alone electrify. Utilities are not incentivized to upgrade electric systems in areas in decline, nor do they “speculate” the potential for redevelopment. Electric upgrade investment is, therefore, left to developers, which limits interest where interest needs to be heightened. If we are purposeful, we can bring jobs and opportunity back to our Rust Belt neighborhoods through sustainable development, green energy supply chains and green energy-oriented services. Our local neighborhoods are where the majority of energy is consumed, and it is where climate solutions can and should be most active.
In sum, many Rust Belt communities require additional investment into electric infrastructure to fuel their economic revitalization. For New York to decarbonize, these communities cannot be left behind. There is an enormous opportunity for sustainable development in DACs and to incentivize utilities to upgrade electric systems in areas of decline. Metrics should be developed to ensure that all state agencies are aligned to ensure that the “spend” in these communities addresses identified needs and value as determined by the communities themselves.
To be a true leader in the global fight against climate change, we must tap into New York’s robust technology and manufacturing capabilities, and we cannot rely on products from countries that limit and offset New York’s contribution to GHG reduction. Developing green energy product supply chains, focused on expanding existing manufacturing infrastructure, will revitalize traditional Rust Belt neighborhoods and allow expansion of current industry. We should not be driven to achieve goals without ensuring that we are leaders in developing the solutions that lead to the goals.
Green energy products sourced from countries such as China and India limit New York’s contribution to global climate change and may offset the value of the state’s contribution. While China is a leading exporter of solar, wind, heat pump, lithium-ion battery and other green energy technologies that may be employed to meet the climate goals of New York and other climate leading states and countries, China does not itself prioritize renewable energy. In fact, China leads the world with over 1,100 coal-fired generation facilities and more under construction. Utilizing New York’s manufacturing and technological capabilities to build green supply chains, though initially costly, is arguably more sustainable and beneficial to New York’s economy. It is difficult to rationalize a dependence on manufacturing powered by coal while placing undue burdens on manufacturing powered by natural gas and potential substitutions for natural gas. And, if properly integrated into a strategic economic development market and incentive plan, supply chain development can contribute to DAC investment through focused attraction and local community and business commitment.
A focus on local manufacturing expansion and attraction, aligned with products and services to meet New York’s climate objectives, will increase the probability that taxpayer and ratepayer subsidies build wealth within the state. Having environmental sustainability without addressing economic sustainability relegates both to sub-optimization and potential for failure.
Additionally, the Scoping Plan does not broadly address one of New York’s greatest assets — the State University of New York (SUNY) educational system. The University at Buffalo (UB) has been designated a “flagship” university to develop a green energy workforce development pipeline. With further investment, UB and other SUNY institutions can emerge as green innovation hubs and lead research and development as a focused Clean Tech Center of Excellence, as identified by the governor’s office. New York has the critical mass and potential to become a self-sufficient green energy epicenter. The Scoping Plan needs to revisit the opportunities offered by New York’s existing resources to meet the full promise of the CLCPA.
Discussions surrounding the CLCPA have raised the issue of who “pays” and who “funds” the initiatives to achieve the Act’s objectives. While the focus has remained on the net benefit, it does not capture cost as experienced by consumers through their energy bills. Clearer direction for issues of cost, emphasizing the return on investment, should be vetted, including discussion on how “polluters” may fund state climate goals, to ensure that additional costs are not simply passed onto consumers.
One opportunity could be to view cost as a market investment that requires new regulatory and business models to expand the Value Stack, New York’s mechanism to compensate energy resources, such as solar photovoltaic cells, based on when and where they provide electricity to the grid. This would facilitate placing an investment value on distributed energy resources such as microgrids, thereby opening up opportunities for community, developer, economic development agency and utility ownership models.
It’s critical to set dates and ambitious goals, but we cannot lose sight of the fundamentals that will allow us to sustainably achieve them in a timely manner, to bring opportunities to disadvantaged communities, and to make a difference in ensuring any costs are diminished by a substantial return on investment.
The Climate Action Council has made significant progress over the past three years, but its Scoping Plan has missed the mark in balancing environmental and economic sustainability. These viewpoints are intended to build toward a higher probability of achieving deep GHG reductions, while establishing New York as a leader in the development of green energy supply chains, especially in disadvantaged communities.
This blog post has also been published on the Chambers website as part of their Expert Focus series.