The operator of New York state's power grid ordered the retention of over 500 MW of fossil fuel-fired power generation in New York City past its scheduled 2025 retirement date, saying the loss of that generating capacity would threaten grid reliability.
In a Nov. 20 report, the New York ISO designated four generating facilities — Gowanus Gas Turbines Station 2 and 3 and Narrows Generating Station 1 and 2 — as critical to meeting reliability needs past May 2025. NYISO said its designation will run for two years, with the possibility of a two-year extension if a permanent reliability solution has not been put in place by 2027.
Each affected facility is a floating barge moored off the Brooklyn waterfront holding numerous generating units that burn either natural gas or fuel oil. Those generating units are used only occasionally to provide power to the city during periods of peak demand. According to NYISO, the four barges have a combined generation capacity of 564.92 MW and contribute 508 MW toward the city's transmission security margin.
Eastern Generation LLC, an affiliate of private equity infrastructure investment company ArcLight Capital Partners LLC, owns all four barges.
In its new report, NYISO noted that its second-quarter Short-Term Assessment of Reliability (STAR), published in July, found that New York City would face an expected deficiency of up to 446 MW beginning in mid-2025. The grid operator blamed that projected shortfall largely on a state rule aimed at curbing nitrogen oxide (NOx) emissions from peaker plants, with higher power demand also playing a role.
The first phase of that rule, implemented by the state Department of Environmental Conservation in 2019, cut NOx emissions to 3 lb/MWh from May through September, beginning May 1, 2023. The final rule sets the limit at between 1.5 lb/MWh and 2 lb/MWh and is set to take effect May 1, 2025.
"As of May 1, 2023, 1,027 MW of affected peakers have deactivated or limited their operation. An additional 590 MW of peakers are expected to become unavailable beginning May 1, 2025, all of which are in New York City," NYISO said in its latest report.
"With the additional peakers unavailable, the bulk power transmission system will not be able to securely and reliably serve the forecasted demand in New York City according to applicable reliability criteria," the grid operator added.
NYISO has said the reliability need will ease only with the entry into service of the Champlain Hudson Power Express transmission line, which will bring up to 1,250 MW from Hydro-Québec dams in northern Quebec to New York City. That project is scheduled to be operational in spring 2026.
Following the publication of the July STAR and discussions with local utility Consolidated Edison Co. of New York Inc., a subsidiary of Consolidated Edison Inc., NYISO on Aug. 4 issued a solicitation for solutions to the forecast reliability need, with proposals due by Oct. 3. In its report, NYISO said it received only two proposals — one from Con Edison and another from battery storage developer Orenda — and neither one was sufficient to meet the identified need.
According to NYISO, Con Edison proposed building about 16 miles of 345-kV underground transmission cable along with a 345-kV switching station and reconfiguring two substations already in place. However, the grid operator noted that the proposed project would not be complete until "well after" Champlain Hudson Power Express' expected 2026 startup date.
Meanwhile, NYISO said Orenda's proposal would have involved installing "several small battery storage projects" with total maximum storage capacity of just 27 MW over four hours — far less than necessary to meet the projected shortfall.
In a statement, NYISO Executive Vice President and COO Emilie Nelson stressed that the continued reliance on fossil fuel-fired generation does not mean the grid operator is abandoning the state's climate goals. New York has set a target of fully decarbonizing its power grid by 2040.
"The NYISO is committed to a reliable transition of the electric grid to emission-free resources," Nelson said. "The electric system supports the health and safety for all New Yorkers and the state's economy. We must also be cognizant of the impacts peaker plants have on surrounding communities. This means running these units only when conditions require and closing them when no longer necessary for reliability."
Indeed, NYISO's report also suggested that reliance on the barges will likely be sporadic because, under most circumstances, the city will have other, more attractive sources of power available.
"The operating characteristics of the units, primarily their high operating costs relative to other New York City generation and their ability to start quickly and operate with short run times, will result in the NYISO limiting the run times of the units to the duration of real-time energy needs," the grid operator said.
S&P Global Commodity Insights reporter Jason Fargo produces content for distribution on Connect by S&P Global. S&P Global Commodity Insights is a division of S&P Global Inc.
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