New York’s plan to kill coal lifts power prices

Bloomberg

New York’s plan to put the state’s last coal-fired power plants out of business hasn’t even been approved yet and electricity is already trading like they’re shut.
The price of power in 2021 in New York City and other regions surged more than 30 percent beginning in May. The only major difference between then and now: a pending state rule to limit power-plant emissions that was designed to eliminate coal-burning power plants by the end of 2020.
States that are taking more aggressive steps to curb climate change should pay attention to this early reaction. Governor Andrew Cuomo has set a target of getting half of New York’s electricity from renewable sources by 2030, and this is the first time a state has targeted coal by using its regulatory authority to limit carbon emissions. While the plan wouldn’t kick in until 2021, it’s already affecting power markets and shows that these efforts may come with a cost.
“New York is a cautionary tale,” said Nicolas Loris, an energy economist at the Washington-based Heritage Foundation. “You’re going to have some negative implications from shuttering coal, from business passing those higher energy costs onto consumers or absorbing those costs themselves.”
The New York Department of Environmental Conservation’s proposed rule announced in May creates a carbon emissions standard that’s all but impossible for coal plants to meet. The only way for New York’s last two coal-fired facilities to comply would be to invest in costly upgrades, switch to natural gas or shut down. Regulators have said they don’t expect any coal plants to remain open once it takes effect at the start of 2021.
In addition to the pending rule, New York is pricing emissions through the Regional Greenhouse Gas Initiative, and its grid operator wants to price carbon in the wholesale markets. New York City Councilman Costa Constantinides, a Queens lawmaker, has introduced legislation requiring the city to study the
impact of closing about two dozen gas-fired power plants.
“At the end of the day, the bids are going to be more expensive and power prices are going to be more expensive,’’ said Armagan Yavuz, regional director for New York and New England at Genscape, a provider of real-time power-market data. “Generators are going to have pay for putting carbon in the air.’’
That had an immediate effect on power futures. Forward prices for 2021 and 2022 in regions including New York City, Albany and the Hudson Valley surged as much as 33 percent in the following weeks. That’s caught the attention of big power consumers. “Electricity markets
are already beginning to experience the price effects of the DEC’s proposed rulemakings and other policy-related efforts,’’ Multiple Interv- enors, a trade group representing about 60 big power users, said in public comments submitted in response to the proposal.