April 14, 2004
235 East 42^nd Street
New York, New York

Summaries of Speakers' Comments 

Panel One – The Evolving Electric Energy Sector 10:00 am – 11:00 am

Richard Anderson, President, Building Congress: Moderator

The NYC energy picture is complex.  Mr. Anderson remarked that we need more electric power in NYC now and over the next 20 years.  NYC is faced with a growing energy gap.  According to Mr. Anderson, we need more electric power and more efficiency too.  We need to do more with having impacts on demand.  He asked what do we need to do regarding law, planning, design and the ways we operate in our City.  What do we need to do to create a high performance city?

Stephen Hammer, Consultant, Mesa Cosa LLC

View Presentation as PDF

Mr. Hammer observed that we must look at renewable electric policy in urban areas.  NYC has a long history of interest in renewable power sources, but little action on the ground.  At present, NYC has 8000 MW of installed electric power from conventional sources. Renewable power sources provide approximately 2 MW of power generation capacity, and most of this is installed in public buildings, including anaerobic sludge digesters at sewage treatment plants, and photovoltaic panels on residential and commercial properties.  The tide power project in the East River is in a testing phase he noted.

Mr. Hammer asked, how does NYC compare in its electric power supply to other big cities?  According to Mr. Hammer, no one is doing a great job with in-City renewable power source MW capacity – but in the field Barcelona, Berlin and Los Angeles are leaders.  He posed the question, what are NYC’s prospects?

According to Mr. Hammer, there is no sense of urgency for installation of renewables and alternative power sources.  Renewables are not seen by some major players as particularly viable for large scale energy sources.  The gains made in the installation of natural gas and the repowering of old electric power plants are themselves big environmental gains, but it takes the focus off of renewables.  There is also resistance linked to the perceived cost of renewables.  But the cost of tide power is very competitive, 7 – 9 cents/KWh wholesale, he noted. 

Mr. Hammer said that interconnection (to the distribution grid) problems are critically important.  When using distributed sources of power (like renewables) the potential exists for power to flow back into the grid (“backfeed”), which is not allowed.  Therefore, either circuit-breakers must be installed or the distributed power generating capacity must be sized smaller so that all power will be used on-site, noted Mr. Hammer.

Because these technical limits harm the cost-competitiveness of distributed power technologies, Mr. Hammer asserts that we should be exploring ways to marry distributed power with the existing grid system.  This may include developing micro-grids that overly on top of the existing grid; much like the high speed telecom network is an overlay on top of the existing telephone wire system.

According to Mr. Hammer, other disincentives to action include the fact that renewable power deployment is entirely voluntary.  Compare the NYC Department of Design and Construction voluntary standards to the Battery Park City Authority, which imposes mandates for on-site generation of power using renewable technologies, he suggested.

Finally, according to Mr. Hammer, in NYC we don’t make the connection between how we generate our electric power and global warming.  Local electric power policy is made in an environmental policy vacuum.  Renewables provide impetus for local economic and job growth in construction, design and technology.

Marc Brammer, Financial Analyst, Innovest

View Presentation as PDF

Mr. Brammer laid out five key issues when considering investment and the growth of markets for alternative energy:

● It takes a long time to commercialize technologies like fuel cells. 

● We should try to focus on off-the-shelf technologies that are available now, like wind power (which is also cheap to operate);

● The performance of a firm in the NASDAQ is important.  The prospects for green power technologies are considered to be like a “basket” of stocks that move together based on the perception investors have about the sector’s future performance.  This perception is also linked to the performance of the NASDAQ as a whole.  Financiers are more inclined to invest in a firm whose stock is trading well.  Good news about a firm attracts investment;

● The price and price volatility of conventional energy.  High prices and high levels of price volatility can help to spur investment in alternative energy sources; and

● The critical role of public policy in shaping financial interests.

According to Mr. Brammer, large amounts of money are beginning to move into alternative power investment – including large cap and small cap companies.  $10 billion in US tax credits will be available over the next decade.  However, he believes that investors’ options are influenced by the great number of subsidies in non-renewables.  In contrast, European markets are growing for alternative energy and technologies because there are major benefits driven by public policy.  For example, policy concerns about climate change have already had an impact on the insurance industry due to concerns about potential disasters associated with climate change, he noted.

Mr. Brammer asked, what are viable options for NYC?  We pay very high prices for energy, most of it coming from conventional sources.  Now, natural gas prices are going up.  High prices can help to attract investment in alternative power.  Also consider that many real costs of conventional power are externalized, such as the costs associated with the health impacts and environmental degradation of air pollutants from conventional energy sources.   Public policy must force these costs to be re-internalized to help to make alternative power more financially attractive.  Mr. Brammer’s final comment was a sober assessment of the risks and costs of global warming.

Michael Gerrard, Attorney, Arnold & Porter

(See articles published in the New York Law Journal, September 26, 2003 on the “Approval Process for Electric Transmission Lines in New York” and May 23, 2003 on “Shortcuts and Bypasses in the Project Approval Process” for a detailed presentation of the regulatory requirements in NYS for power lines and power plants.)

Mr. Gerrard explained that, until the expiration of Article X, power plants with a capacity of 80 MW or larger met the State Article X threshold requirement.  The idea of Article X was to establish a “one-stop permitting” scheme that is both SEQRA-exempt and provides clear time lines.  Article X also eliminated the need to comply with local land use and siting procedures, though their substantive requirements still apply unless they are unreasonably restrictive.  It provided for the payment of intervener fees (maximum $300,000) and an array of adjudicatory-type hearings, according to Mr. Gerrard.

Mr. Gerard observed that at present, there are 10 power plant projects that have been approved under the Article X process.  There are two notable exceptions – 1. a barge-floated power plant in Sunset Park, Brooklyn where the application was dismissed as incomplete and the applicant failed to notify interested citizen groups about certain proceedings.  2. The TransGas power plant proposed for Greenpoint, Brooklyn, where State hearing officers recently recommended that the permit application be denied.  Both these decisions highlight the importance of local, community concerns.  Despite Article X’s formal requirements, it is a mistake to ignore the power of local concerns, he said.

Mr. Gerrard noted that for electric power plants smaller than 80 MW, SEQRA governs and the speed of the process in based on the incentive of the permitting agency to move fast or not and whether an EIS is required to be produced by the applicant.  The 79.9 MW plants, which did not submit EIS’s, were “neg-dec-ed” under SEQRA.  The courts ruled that there had been a lack of a sufficient PM_2.5 analysis, but allowed construction and operation of these facilities to proceed and required that an environmental analysis be done after the fact.  Subsequently, Mr. Gerrard noted that several plants were build on Long Island based on an adequate PM _2.5 analysis but without EIS’s; these survived judicial challenge.

Highlights of Panel One Questions and Answers

Q; Are you suggesting that electric power and technology markets won’t do anything without government regulation on renewables?

A: (Mr. Brammer) Markets want to make money, so the question is how to structure the incentives.  Many people are waiting on a global warming public policy.  Timing will be important.  Investors are waiting for the government signal through legislation and regulation and this will get the market moving.  Then the market can determine the best way to generate and deliver power.  But air pollutants and public health limits are set by the government.

Q: Where is the greatest return for the environment in the energy sector?

A: (Mr. Gerrard) Larger, cleaner, combined-cycle power plants will play a great role.  The current system, however, creates an incentive to build 79.9 MW plants because it is easier and faster than getting approvals to build big plants.