Environmental Advisory Council Discusses Investments in Renewables and Large Loads

(PHOTO: EAC members Daniel Zarrilli, Special Advisor for Climate and Sustainability at Columbia University; C. Lindsay Anderson, Professor and Chair of the Department of Biological & Environmental Engineering at Cornell University; Dr. Burçin Ünel, Executive Director of the Institute for Policy Integrity at New York University School of Law; and Karen Palmer, senior fellow at RFF)

The 10-member council — comprised of experts in areas of energy, academia, and environmental policy — heard from NYISO executives and industry leaders and made recommendations at the fall conference.

The EAC was formed in 2005 to provide the NYISO with information, analysis, and perspectives on the dynamics between evolving state and federal environmental policies and the NYISO’s mission of maintaining reliability of the bulk electric system and administering competitive wholesale electricity markets.

Lively discussions followed a pair of presentations from Granville Martin, former managing director of Sustainable Finance at JPMorgan Chase and Kevin Younis, COO and Executive Deputy Commissioner at Empire State Development.

Martin, in his remarks, highlighted positive signals that government policies and economic conditions are spurring interest in clean energy from financial institutions. The federal Inflation Reduction Act, which provides renewable energy investment tax credits, is a major factor in this trend. Notably, investment in clean energy exceeding investment dollars in oil and gas in North America in 2023.

Prior to the war in Ukraine, “anemic” oil and gas returns were prompting investors to look for opportunities outside that sector. Tax equity transactions, in which investors share a portion of the federal tax credit, “continue to be good business” and are critical to financing renewables, Martin said.

Retail investors, driven by popular concern for the environment, are interested about how they can contribute through their investment decisions. Meanwhile, equity-only investors, including some of the nation’s largest asset managers, have formed groups like Climate Action 100+, an advocacy coalition that encourages companies and governments to reduce emissions.

“For institutional investors, who own the entire market or large parts of it, it’s the argument that by engaging on climate and seeking out climate friendly opportunities, they can manage their systemic risk,” Martin said. “By engaging this way, they can make themselves more resilient to any kind of climate risks that manifest in the market.”

“That argument has been around for a while,” he added. “We are still watching to see the practical market impact it reflects, but it is a motivator for asset managers.”

Martin mentioned several other catalysts of change, including the growth of AI and power-hungry data centers that are driving interest in small nuclear reactors.

Younis spoke about “Large loads,” referring to factories and data centers that consume large amounts of electricity. Ongoing economic development projects like Micron Technology’s planned microchip plant in Syracuse, which has asked to connect to the state’s power grid by 2025, are expected to drive unprecedented growth in electricity demand over the next decade.

Younis highlighted the growth of the semiconductor industry in upstate New York, the nation’s only federally designated chip manufacturing tech hub, and how it has revitalized the economy. The market cap of the semiconductor industry is four times that of the auto industry, and semiconductors are a critical input in virtually every technology, Younis said. Micron, for example, will generate $300 billion GDP in New York State and $5.4 billion in disposable income to New Yorkers.

Despite providing an undeniable boon to the economy in upstate New York, these factories also pose reliability challenges. It is estimated that Micron will need 1.4-2 GW of electricity. The electric system will simultaneously be strained by the planned retirement of gas turbine power plants and the electrification of housing and transportation. While the grid can accommodate new industry in the short-term, whether of the development of clean energy resources can keep up with this growth in demand remains to be seen.

NYISO leaders noted that large loads are difficult to plan for and questioned to what extent CLCPA goals vs. the electric grid’s reliability needs are driving state policy.

“We are at a crossroads,” when it comes to determining which generation technologies are best suited to power large loads, NYISO Chief Executive Officer Rich Dewey said. He noted that intermittent technologies introduce reliability considerations, and gas turbines, while providing certainty, do not comply with the CLCPA.

Younis said that the state is actively exploring nuclear power.

Discussions about the shifting investment climate and large loads seeking access to the grid underscored the importance of NYISO’s biennial Reliability Needs Assessment (RNA), which forecasts grid reliability challenges 10 years out.

In presenting the findings of the 2024 RNA, NYISO Senior Vice President of System and Resource Planning Zach Smith noted that recent reliability reports have identified concerning trends, with more generating capacity exiting the market than entering, while demand for electricity is expected to grow due to electrification and other state policies.

To account for changing conditions, the RNA uses a base-case of assumptions to model out a range of scenarios that could positively or negatively impact reliability. To account for an increasingly dynamic economic and regulatory landscape in its reliability planning process, among other factors, NYISO publishes a Comprehensive Reliability Plan every other year and releases quarterly, short-term reliability assessments, called STAR reports.

“The world is changing around us,” Smith said. “We always face this challenge in planning that we have to, at some point, establish a set of assumptions to study. The moment we do that, something else changes that wasn’t captured in our study. Our way to deal with that is to keep relooking at things, especially through our short-term quarterly assessments.”

The 2024 RNA identifies a reliability need in the New York City area while pointing to a slew of conditions that, in various combinations, could create serious reliability challenges down the line. In addition to identifying a NYC-specific reliability need, the RNA notes that statewide reliability margins are also continuing to narrow, driven in part by the emergence of these new large loads.

The declaration of a reliability need triggers a process in which the NYISO solicits proposals for addressing the problem, prioritizing market-based solutions first.

“The purpose of our reliability planning is to establish a base case of assumptions to which we have the authority to act upon,” Smith said. “And with that in mind, to think about what scenarios might be important to inform policymakers, stakeholders in terms of decisions that would need to be made in the future, even if we are not officially declaring a reliability need.”

EAC members in attendance were Dr. C. Lindsay Anderson, Dr. Burçin Ünel, Frank Murray Jr., Karen Palmer, Daniel Shawhan, and Daniel Zarrilli.

Learn more about the NYISO's Environmental Advisory Council

Read the NYISO’s RNA factsheet here