Getting your state to Net Zero: An interim review of New York’s decarbonization journey
Key takeaways
New York State’s Climate Leadership and Community Protection Act (CLCPA) set a nationwide example as an ambitious vision for the state’s energy transition.
To achieve these impressive climate goals, New York must overcome challenges in areas that many states will face on their journeys to Net Zero, including:
New York’s climate goals are ambitious but achievable and require that utilities, regulators, and policymakers work together. New York’s experience may provide helpful lessons to other states on their decarbonization journeys.
A vision for Net Zero
New York State (NYS) set a nationwide example when it passed the Climate Leadership and Community Protection Act (CLCPA) in July 2019. The CLCPA is one of the most ambitious and earliest pieces of comprehensive climate legislation ever passed in the US — requiring net-zero emissions by 2050 and mandating that 40% of investments go toward disadvantaged communities — and is an impressive commitment to address the climate crisis in a just and equitable manner. As NYS addresses critical challenges in its decarbonization journey, policymakers and practitioners across the country can learn from the state’s choices, successes, and future opportunities. While NYS has made significant progress in the past few years, there is still much to be done to achieve the grid decarbonization aspects of the core CLCPA milestones (Exhibit 1).
NYS is still capable of meeting the ambitious goals it set for itself, but there are significant challenges along the way and addressing them requires strong, coordinated action between policymakers, regulators, and utilities. We outline a few of the challenges New York continues to face and the steps stakeholders can take to realize the goals of the CLCPA. There is much to learn here for states across the country, as many of these challenges are not unique to New York.
Challenge I: Ensuring reliability and controlling costs in the face of a changing grid mix
Increasing renewable energy resources still requires a portfolio of dispatchable carbon-free electricity to power NYS; many of these options have faced hurdles in recent years. Enhanced regulatory support for transmission, DER interconnections, and grid upgrades are also needed for the expected expansion of the electricity needs in the state.
To meet its decarbonization goals, NYS needs to more than triple its renewable generation capacity (to ~27 GW) by 2030 while maintaining reliability. Since solar panels and wind turbines only generate electricity when the sun is shining or the wind is blowing, NYS still requires a portfolio of clean, firm, dispatchable power sources. However, many options for dispatchable carbon-free electricity in the state — nuclear, hydroelectric, battery storage, and offshore wind — have faced hurdles in recent years:
Transmission and distribution capacity is also needed to effectively decarbonize the grid. Locational Capacity Requirements (LCRs) in the most populous areas of NYS require meeting >80% of local demand with local generation to support reliability during high demand periods. This essentially splits the state into two grids: (1) a “cleaner” northern / western grid, where a large share of hydroelectric and nuclear generation is spread across fewer customers and (2) a southern grid that is more populous and more reliant on fossil fuels.
New transmission lines would accelerate decarbonization if these constraints are relaxed, but only if delays from siting and permitting are also addressed. For example, NYISO currently takes an average of ~3 years to complete an interconnection study (exceeding 5 years in extreme cases). In addition, the Public Service Commission (PSC) siting process can take over two years to complete. NYS recently passed the Accelerated Renewable Energy Growth and Community Benefit Act in 2020 to ensure siting decisions are predictable, responsible, and timely; this is good progress, but the full impact remains to be seen as few permits have been granted to date. Large projects connecting to the transmission grid and DER developers can face similarly lengthy timelines at the transmission and distribution level, respectively.
Grid upgrades are taking longer and getting more expensive as utilities grapple with ongoing supply chain issues and rising prices. The lead time for critical grid components, such as transformers and conductors, has increased by ~2-3x in the past year, and many grid component prices have risen by ~1.5-3x in the past year.
Potential solutions: Ensuring reliability and controlling costs in the face of a changing grid mix
What utilities can do
Utilities often lead the implementation of Net Zero policies. They will need to execute on approved transmission upgrades and expansions and should consider leading-edge DER management capabilities to reduce frictions for developers and customers. Specific solutions here include intuitive, detailed hosting capacity maps to help developers identify optimal locations for new renewables projects and more streamlined internal engineering and review processes for new DER connections.
It is also important to take a customer-centric perspective to topics related to the energy transition, which some of the NY utilities have done well. For example, utilities should house critical topics like electrification of vehicles and buildings with energy efficiency and DER under one part of the organization. This enables coordinated outreach to customers on different but highly related topics, which helps prevent confusion and can improve customer adoption rates.
In light of increasing volatility and component shortages, utilities need to adopt supply chain management practices focused on resilience. For example, utilities can (i) construct 2–5-year demand plans that are shared with suppliers, (ii) strategically engage key suppliers via C-Suite level relationships, (iii) enter long-term contracts and/or framework agreements to secure capacity, (iv) diversify by adding high quality suppliers for key components, and (v) leverage digital tools to improve their core supply chain processes.
What regulators and policymakers can do
NYS has already taken impressive steps to streamline permitting and siting for renewable energy projects. The Renewable Action Through Project Interconnection and Deployment (RAPID) Act, introduced in Gov. Hochul’s 2024 State of the State Address, would consolidate these functions under the Department of Public Service (DPS) and is expected to help reduce some of these timelines.
The primary action for regulators and policymakers is to streamline and expedite the interconnection process. FERC recently affirmed last year’s interconnection reform order, which establishes penalties for delayed interconnection studies and requires RTOs to take steps to address long backlogs, but we recommend moving quickly here as NYISO already trails behind other markets in terms of MW of new generation connected to the grid each year.
ERCOT provides a helpful example, as the only grid operator to adopt a “connect & manage” approach to interconnection studies. This approach focuses interconnection studies on local grid upgrades, rather than broader network upgrades, but requires developers to bear the increased risk of curtailment. This more focused approach streamlines the process to ~1-2 years, and we recommend that NYISO — where the process takes 3 years on average — consider where adopting a similar process may make sense.
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Challenge II: Securing funding & providing access to capital
The energy transition comes at a cost, and it is critical to ensure it is not borne by those least able to afford it. Utilities and policymakers should work together to continue making the right investments while also considering how to provide relief to the most vulnerable.
Meeting NYS’ climate goals requires investing billions of dollars into generation, transmission, and distribution infrastructure and into electrification and EE measures. This cost is rising: for example, NYSERDA adjusted the estimated cost of reaching the state’s energy storage goals up by $300 million. Policymakers and regulators must make difficult decisions to determine who will bear the cost of this unprecedented transition and provide strategic direction to stakeholders. However, there has been no agreement yet on who will provide the remaining funding needed to meet the state’s goals.
Some funding may come from federal programs through the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), as well as potential new state programs like New York Cap-and-Invest. Developers willing to take risks on new generation and storage technologies will also provide investments, but rising interest rates discourage them. Inevitably, ratepayers will bear at least part of the costs. This last point is important, because there’s a real danger that customers will wind up shouldering a large part of the costs if alternative funding does not materialize — and without intervention, these costs may be disproportionately borne by those customers who can least afford it.
Potential solutions: Securing funding & providing access to capital
What utilities can do
Utilities have rightfully raised the question of bill impacts from many of the necessary interventions and spending to meet the state’s decarbonization goals. Programs focused on disadvantaged communities (DACs) and low and moderate income (LMI) customers, such as those for energy efficiency, are a helpful starting point. To address financing concerns, utilities have some available options, such as cost-sharing agreements between developers and applying for new sources of funding through IIJA and IRA.
When it comes to cost-sharing agreements, utilities should work to distribute the costs of necessary grid upgrades between multiple renewables projects / developers. Right now, many utilities require developers to pay the full cost of a grid upgrade when their project is the incremental one that triggers a grid upgrade. The resulting expanded grid capacity benefits projects later in the queue, who essentially get the benefit for free. Utilities can explore crafting agreements that share costs between developers so that multiple developers in the queue financially contribute to the required grid upgrade.
Utilities should also apply for the new grants and financing made available for clean energy investments by IIJA and IRA. These two laws have allocated over $479 billion in federal funding for investments in climate and energy solutions. Utilities must build internal capabilities to identify funding opportunities when they are announced, prioritize the best opportunities to apply for, mobilize their organizations to complete the application in a short timeframe, and negotiate and comply with the terms of the final award.
Recently, Governor Hochul announced a Cap-and-Invest program in NY that aims to establish a declining cap on greenhouse gas emissions. Utilities should provide input into funding and how to thoughtfully use the “invest” portion to lower utility bills of the most vulnerable customers. This will help drive the energy transition in a just manner.
What regulators and policymakers can do
Regulators and policymakers can also support the NYS climate goals by clarifying how the cost of the transition will be covered (see above) and by providing more funding and financing for decarbonization efforts. For example, NYS could:
Challenge III: Thoughtfully managing gas infrastructure while ensuring safety and reliability
Gas service will remain critical in the near term, even as New York homes and buildings electrify. Utilities, regulators, and policymakers must work together to ensure gas infrastructure can be safely and reliably maintained through New York’s energy transition.
Based on analysis by the Climate Action Council (CAC), CLCPA targets require reducing the use of fossil gas by at least 33% by 2030 and by 57% by 2035. Transitioning the gas system without compromising reliability, safety, energy access, and resiliency is critical, and this must occur without imposing undue cost burdens on customers — particularly those who can least afford it. Gas infrastructure will remain critical for the near-to-medium term in industrial processes, in homes before they can be electrified, and as back-up heat service in many electrified buildings.
Successfully transitioning the gas system requires working through multiple issues, such as: ensuring sufficient electrical infrastructure exists to support load growth from electrification, maintaining the safety and reliability of gas networks despite lower usage, finding alternative uses for existing gas assets, defining the role of low carbon fuels, and maintaining customer affordability.
Potential solutions: Thoughtfully managing gas infrastructure while ensuring safety and reliability
What utilities can do
To understand the future role of their gas networks, utilities should develop capabilities in “integrated energy planning,” where future gas and electric networks are modeled and co-optimized together. For utilities with overlapping gas and electric networks, this can be done internally; for others, this will require coordinating with other utilities and NYS regulators. Collaborating on system planning will allow utilities to make investments that optimize overall energy costs to customers.
What regulators and policymakers can do
Regulators can facilitate statewide, cross-utility planning exercises — particularly where gas and electricity networks are owned and operated by different parties. Regulatory agencies should lead with a clear vision and targeted analyses to determine a cost-effective gas network transition strategy. Potential tools for regulators include revenue decoupling (to maintain infrastructure as gas usage declines, which New York adopted in 2007), accelerated depreciation (as the energy transition leads to early decommissioning of gas assets), and trackers and riders (to accurately reflect actual costs on gas bills). Policymakers should also explore other innovative options, such as establishing renewable heating standards.
New York’s climate goals are ambitious but achievable
New York State has established itself as an early leader in addressing the climate crisis. The state set ambitious goals and has already made impressive progress. New York’s path to decarbonization has faced significant — and sometimes unanticipated — challenges.
Government agencies and regulatory bodies must reform internal processes and adopt a more entrepreneurial culture. For decades, these agencies were tasked with “keeping the lights on,” as they oversaw an industry with relatively consistent business models and predictable growth. Now, the energy industry is constantly faced with new technologies, policies, and customer incentives. To meet this challenge, agencies must adopt new ways of working and foster a dynamic culture that attracts new ideas and talent.
But if utilities, policymakers, and regulators work together and act quickly, these hurdles can be overcome to establish a cleaner, more sustainable future for New York. Other states can and should learn from New York’s leadership and path to address major challenges.
This article was written by Tina Zuzek-Arden, Dan Eichelsdoerfer, and Sarah Baldinger