What New York’s plans to decarbonize mean for the world

New York State expressed its commitment to fight global warming with local solutions when it passed the Climate and Community Protection Act in June, joining a handful of other U.S. states that have announced similarly ambitious clean-power targets. The Act commits the state to ambitious decarbonization goals, including a reduction in greenhouse-gas emissions of 40 percent by 2030 and 85 percent by 2050.

To understand the implications of these policy goals, McKinsey & Company simulated the future of the power generation system to 2040 to see what investment and system changes it would take to meet them cost effectively and reliably. Our research led us to several interesting conclusions, spelled out in detail in the full report, including these three surprising ones.

  1. Power demand will rise

    For New York to meet its GHG-emission reduction targets, decarbonizing power generation will not be enough. The state’s power sector accounts for only 17 percent of its GHG emissions, so the building and transport sectors will also need to decarbonize, most likely through electrification, to meet the goal. While the growth in sales of electric vehicles (EV) will help stimulate the broader electrification of the transportation sector, the electrification of heating will be less straightforward: The economics of electric heat pumps and the difficulty of retrofitting existing buildings creates real challenges. Nevertheless, electricity demand, if cars and buildings go electric, will rise. By 2040, we project New York state’s electric load will grow by one-third, or an additional 51 terawatt-hours.

  2. New technology will need to integrate renewables

    In tandem with increased demand for electricity, we predict that green-energy sources such as solar and wind will largely replace conventional fuels and provide more than 60 percent of New York’s electricity by 2040. Because wind and solar are intermittent sources of power, the state will need to deploy a range of support technologies to manage consumer demand. For example, states can adopt a mechanism that sends signals to EV owners to stop charging when renewables generation is low and pay them for their cooperation. Excess energy stored in EV batteries could similarly be sold back to the grid. Although there are a few vehicle-to-grid projects today, ironing out the most effective market mechanisms remains a challenge.

  3. States will need significant grid alterations

Electricity in New York generally flows from north to south, as most hydro and nuclear plants are located upstate. The Indian Point nuclear plant, which provides the state 2.1 gigawatts of power, is scheduled to close in 2021 and there are no plans to build new hydroelectric plants, unpopular with many environmentalists. The sunsetting of these sources of power together with the rise of solar and wind power will affect the flow of electricity generation. In the future, downstate will likely account for a significantly larger portion of the state’s electricity generation, using offshore wind and solar sources. The potential reversal of the direction of electricity flow will call for significant grid updates and network changes.

Global relevance

New York State is demonstrating ambitious plans to decarbonize. It will need to prioritize smaller goals efficiently in order to meet its long-term target of 100 percent clean power by 2040.

If New York meets its aggressive targets for clean-power generation, the subsequent electrification of other sectors, such as cars and heating, happens on a cleaner grid. In other words, in focusing first on the power sector, New York could trigger a decarbonization domino effect that spreads to other sectors.

Although our model looks specifically at New York, we believe the insights here are relevant to other markets looking to decarbonize, such as the European Union, Australia, and China. While unique in their own ways, New York’s set of challenges share a familiar outline to those felt in other markets, thus making New York an interesting case study as it pursues its own investments and system changes to achieve tangible goals.

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