New York State has set ambitious decarbonization goals. What needs to happen to reach them? (article by McKinsey, July 2019)

The below is an extract of an article by McKinsey.

You can read the entire article at McKinsey’s homepage here.

“The global relevance of New York State’s clean-power targets

In the past year, several US states have announced 100 percent clean-power targets—meaning complete reliance on low-carbon sources such as wind and solar—to be achieved over the next 20 to 30 years. The European Union hopes to go even further: it wants to decarbonize almost its whole economy—not just the power sector—by 2050. Meeting these targets will require extensive efforts across sectors (including power, transportation, industry, and building heating), successful bets on technology, and complex policy changes that incorporate market incentives, costs, customer acceptance, and electrical interconnections with adjacent regions.

New York’s decarbonization strategy and the power sector

The state of New York provides an interesting case study that could prove relevant to other markets, given its level of ambition, its customer and policy trajectory, and the physical characteristics of its current power system. In 2018, 41 percent of the electricity generated in the state came from fossil fuels, almost all of it gas and dual-fuel (oil and gas) plants; 32 percent from nuclear power, and 21 percent from hydropower. There are long-term issues associated with each of these sources. The Indian Point nuclear plant, which provides 2.1 gigawatts (GW)1 of power, is scheduled to close in 2021. There are no plans to build new hydroelectric plants, which are unpopular with many environmentalists. New gas pipelines have been restricted, and in most of Westchester County and Long Island, suburbs of New York City, there is a moratorium on new natural-gas service. For context, non-hydro renewables, such as wind, solar, and biomass, together account for a little over 5 percent of New York’s electricity generation.

In June 2019, the state legislature passed the Climate and Community Protection Act. Among its specific goals are 70 percent renewable energy production by 2030 (up from 26 percent now, of which more than 80 percent is hydroelectric); 100 percent zero-emissions electricity (including hydropower and nuclear) by 2040; and a reduction in greenhouse-gas (GHG) emissions of 40 percent by 2030 and 85 percent by 2050 (compared to 1990).

As can be seen in the deadlines it has chosen, the state is targeting the power sector first, in a bid to accelerate decarbonization of the larger economy. To do that, it is emphasizing the rapid deployment of specific green-energy technologies, such as the following:

  • nine GW of offshore wind by 2035 (compared to none now)
  • six GW of distributed solar generation by 2025 (compared to 1.6 GW as of 2018)
  • three GW of energy storage by 2030 (compared to very little now)
  • a 60 percent increase in energy efficiency by 2030

Experience has demonstrated that market-stimulating policies can accelerate mobilization of an industry and thus improve economies of scale—think of Denmark’s long-term support for its wind industry, and the use of renewable standards in Texas that has supported its sizeable deployment of wind. In New York State’s case, aggressive targets for clean-power generation mean that, if these are met, the subsequent electrification of other sectors, such as cars and heating, happens on a cleaner grid. To put it another way, decarbonization depends on not only what policies are enacted but in what order.”

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