The New York State Department of Environmental Conservation[1] (“NY DEC”), the state regulatory body charged with conserving, improving, and protecting New York’s natural resources and environment[2], has proposed a new rule aimed at curtailing New York’s nitrogen oxide (“NOx”) output.[3]

The United States Environmental Protection Agency, under the Clean Air Act, sets National Ambient Air Quality Standards (“NAAQS”) for harmful pollutants, including ozone.[4]   As of October 1, 2015, the eight-hour NAAQS for ozone is 0.070 ppm.[5]  Ozone comes in “good” and “bad” varieties.  “Bad” ozone is formed from a chemical reaction in which NOx is a main ingredient.[6]

Presently, the New York metropolitan area is in nonattainment for the 2015 ozone NAAQS.[7]  Additionally, New York has “good neighbor” obligations under the Clear Air Act, and must implement measures to avoid contributing to the nonattainment of downwind regions.[8]   In response, the NY DEC has turned their attention to a major source of NOx pollution – New York’s aging arsenal of simple-cycle and regenerative combustion turbines (“SCCTs”).[9]  SCCTs are sometimes referred to as peaking units, power plants that only run when there is a high demand for electricity.  Electricity demand is typically at its highest on hot summer days, during the “ozone season,” which lasts annually from May 1 through October 31.[10]

Newer (post-1986) SCCTs are far more efficient than their older counterparts.  The NY DEC estimates that replacing the older SCCTs would reduce overall New York metropolitan area ozone season NOx emissions by 3.5 percent.[11]

The proposal would impose a NOx emissions limit during the ozone season on all SCCTs larger than 15 MW that bid into the New York Independent System Operator’s (“NYISO”) wholesale market of 100 ppm by May 1, 2023.[12]  The limit would then lower on May 1, 2025 to 25 ppm for gaseous fuels and 42 ppm for distillate oil or other liquid fuels.[13]  Additionally, after May 1, 2023, SCCTs may only average their NOx emissions with other SCCTs at the same facility or with approved electricity storage or renewable energy resources during the ozone season.[14]

Due to their age and site limitations, older SCCTs cannot be easily retrofitted to achieve these NOx emissions numbers.[15]  This leaves the operators of older, non-compliant SCCTs with three compliance strategies:[16]

  1. Meet the limits as proposed – Operators may opt to retrofit, shut down, or replace the non-compliant, older SCCTs. Estimated overnight costs for full replacement of a SCCT range from $1,054 to $1,558 per kW.[17]
  1. Cease operating during ozone season – Since the proposal limits NOx emissions during the ozone season, non-compliant SCCTs may operate outside of the ozone season. This election must be recorded in the operating permit.[18]
  1. Employ averaging using electric storage and renewable energy – Non-compliant SCCTs may achieve the NOx emissions limits by employing approved electricity storage or renewable energy resources during the ozone season. To allow averaging, these sources must be (1) directly connected to the same substation as the SCCT, (2) within a one-half mile radius of the SCCT, and (3) under common control as the SCCT.[19]

The NY DEC recognizes the potential for impacts to the power grid, and reportedly collaborated with the NYISO, the New York State Department of Public Service, and the New York State Energy Research and Development Authority in developing this proposal.[20]  The NY DEC also solicited feedback from impacted stakeholders.[21]  The NYISO forecasts that approximately 3,300 MW of peaking units could be impacted by the proposal.[22]  This includes 1,758 MW of generation in Zone J (New York City) and 1,445 MW of generation in Zone K (Long Island).[23]  The NYISO forecasts reliability issues in pockets of New York City and Long Island if all of the affected units were to deactivate without the addition of system reinforcements.[24]

Affected facilities will be required to submit compliance plans by March 2, 2020.[25]  It should be noted that impacted facilities opting to employ electric storage and renewables must identify these resources in detail (i.e. location, nameplate capacity, a demonstration of common control and – in the case of storage – duration of discharge).[26]  The NYISO will then include the compliance selections it its 2020 Reliability Needs Assessment.[27]  If the NYISO identifies reliability concerns, necessary facilities may stay online for up to four additional years while a solution is found.[28]

Regarding other externalities stemming from the proposal, it is unclear from the NY DEC’s impact statements whether the proposal will impact energy pricing.  However, the NY DEC does not expect the proposal to adversely impact jobs at affected facilities.[29]