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The Empire State just passed legislation to try to live up to its climate goals. Will other states follow?
The Empire State took a big leap toward a carbon-free future this week.
Late Tuesday night, after more than a month of negotiations, the New York state legislature passed a $229 billion budget, enacting three major climate policies in the process. The legislation will not only give teeth to ambitious emissions targets the state established four years ago, but it also forms a sort of blueprint for state-level clean energy transitions around the country.
New York passed a law setting up targets to cut emissions across its economy back in 2019 when Andrew Cuomo was governor. But it didn’t stipulate how the state was supposed to achieve them. Instead, the law set in motion a multi-year process for state leaders and appointed advisors to work out the best path forward. The group’s findings were finally published in December, and two of the climate policies enacted this week — a ban on natural gas in new buildings and a cap-and-invest program — are key recommendations from that document. The third, which creates a new avenue for publicly-owned renewable energy projects, was not part of that plan, but was born out of a vigorous, four-year grassroots campaign by the Democratic Socialists of America.
New York’s budget deal won’t fill in all the gaps in its strategy to decarbonize. But it does accomplish a number of big and essential first steps, like limiting the growth of natural gas and developing sources of funding to pay for the transition. About half of the country has enacted greenhouse gas reduction targets, but few states have put in place the policies to achieve them.
Below, a look at New York’s three big climate moves and why they could be a model for other states looking to live up to their own climate goals.
Buildings are by far the largest contributor to climate change in New York, accounting for 32% of the state’s greenhouse gas emissions. They are also an exceedingly hard source to tackle, as those emissions come from a bunch of long-lived appliances like natural gas heating systems, stoves, and clothes dryers. But electric alternatives, which can be powered by renewable energy, are readily available. One easy first step any state can take is to stop the problem from getting worse by requiring that new buildings forego fossil fuels.
A few municipalities in the Empire State, like New York City and Ithaca, have already enacted bans on fossil fuel-burning appliances in new buildings. Now, Governor Kathy Hochul is set to pass a similar state-wide ban that will begin to go into effect in 2026. This is a year later than what was recommended by the state’s climate plan. But it will still send a powerful message that gas is no longer a growth industry in one of the biggest economies in the U.S.
“It is very, very clear now what the direction of travel is,” Pete Sikora, climate and inequality campaigns director of New York Communities for Change, a grassroots organization, told me. “That’s a monumental shift, as I see it, from an earlier environment, where Democrats were mouthing that ‘gas is a bridge fuel to the future.’ We’ve blown up that bridge. That bridge is collapsing into a ravine.”
While a few other states, like California and Washington, have effectively done the same thing via changes to their building codes, New York is the first state to build enough political support to cut off gas growth through its legislature. Jonny Kocher, a manager for the Carbon-Free Buildings Program at the clean energy group RMI, told me he anticipates that New York’s approach will have fewer exemptions than other states, and expects California and Washington to follow suit with legislation in order to strengthen their own policies. Washington State is currently facing a lawsuit for sidestepping the legislature.
Kocher said a gas ban isn’t necessarily a step that all states need to take in order to limit emissions from new buildings. The latest electric appliances, like heat pumps, are more efficient than gas-burning boilers or furnaces, and all-electric new construction will save consumers money in many parts of the country, so many states will move in this direction anyway. “We believe that states with existing (or new) energy efficiency goals will inevitably shift towards an all-electric code because it is simply the least expensive pathway to reach those energy efficiency goals,” he said in an email.
Implementation of New York’s climate plan has been somewhat piecemeal to date. Like many states, New York has a clean energy standard that requires utilities to buy an increasing amount of renewable energy each year. It also participates in a regional effort to cut emissions from power plants. That program raises some money for clean energy programs, like energy efficiency and electric vehicle rebates.
But while these policies are serving to clean up New York’s grid, they leave out other parts of the economy that also produce emissions, like fuel suppliers, natural gas utilities, and industrial facilities. The state has also failed to figure out how to pay for its energy transition, which is estimated to cost some $300 billion over the next 30 years. To address both of these gaps, Hochul announced in January that New York will establish a cap-and-invest program like those used by California and Washington State. The legislation passed this week fleshes out the “invest” side of the plan.
Cap-and-invest is similar to a price on carbon, and is often called a “polluter pays” program. Companies with big carbon footprints will have to purchase permits to pollute, and the number of permits available will shrink over time to ensure that the state hits its emissions targets.
These programs are complex and notoriously hard to implement well. Policy experts and environmental justice advocates have criticized California’s program for giving companies too much leeway to purchase carbon offsets instead of reducing their pollution, and for auctioning off more permits than needed.
Many of the details in New York have yet to be worked out. But the budget deal ensures that at least 30% of the proceeds raised by the program will be returned to New Yorkers to offset higher costs that may result from it. The rest will go into a climate action fund to pay for all kinds of clean energy projects and incentives.
A growing number of climate advocates are starting to unite around a more radical vision for the transition to clean energy — a shift toward publicly-owned power. Some consider it a key tenet of the Green New Deal, others just see it as a way to bring more accountability to energy companies. Utilities have historically been some of the biggest obstructors of climate action. Proponents argue that publicly-owned utilities would be better equipped to usher in the energy transition since they aren’t beholden to shareholders and can prioritize clean energy and equity over profit.
“If you’re leaving it up to the market, you can create incentives, but you have less power over where this energy is sited, who is benefitting,” said Johanna Bozuwa, executive director of the Climate and Community project.
In New York, advocates discovered that they had a “sleeping giant” in the New York Power Authority. The state-owned utility operates several big hydroelectric dams and a number of fossil fuel power plants, but its ability to build and operate solar and wind projects was severely curtailed under statute. After a four year push, and the election of a slew of DSA candidates into the legislature, the public power movement successfully pressured Hochul into changing that.
The budget deal mandates strong labor standards for any new generation built and also instructs NYPA to retire its fossil fuel plants by 2030, five years earlier than previously planned.
It remains to be seen whether authorizing NYPA to build will actually result in it using that authority. But the odds are better than they were a year ago, thanks to the Inflation Reduction Act. The law made a key change to the country’s clean energy tax credits, allowing public institutions and nonprofits to claim them for the first time. Bozuwa told me that this means other states will be looking at what happens in New York and could follow its lead.
“Not every state has a NYPA, but I think that people will look to NYPA and say, ‘oh, my gosh, we could be doing that too,’” she said. “Because there’s so much money flowing in, this is the perfect time for states or even municipalities to start to develop a renewable energy generation fleet.”
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PJM is projecting nearly 50% demand growth through the end of the 2030s.
The nation’s largest electricity market expects to be delivering a lot more power through the end of the next decade — even more than it expected last year.
PJM Interconnection, which covers some or all of 13 states (and Washington, D.C.) between Maryland and Illinois, released its latest long-term forecast last week, projecting that its summer peak demand would climb by almost half, from 155,000 megawatts in 2025 to around 230,000 in 2039.
The electricity market attributed the increased demand to “the proliferation of data centers, electrification of buildings and vehicles, and manufacturing,” and noted (not for the first time) that the demand surge comes at the same time many fossil fuel power plants are scheduled to close, especially coal plants. Already, some natural gas and even some coal plants in PJM andelsewhere that were scheduled to close have seen their retirement dates pushed out in order to handle forecast electricity demand.
This is just the latest eye-popping projection of forthcoming electricity demand from PJM and others — last year, PJM forecast summer peak demand of about 180,000 megawatts in 2035, a figure that jumped to around 220,000 megawatts in this year’s forecast.
While summer is typically when grids are most taxed due to heavy demand from air conditioning, as more of daily life gets electrified — especially home heating — winter demand is forecast to rise, too. PJM forecast that its winter peak demand would go from 139,000 megawatts in 2025, or 88% of the summer peak, to 210,000 megawatts in 2039, or 95% of its summer peak demand forecast for that year.
Systems are designed to accommodate their peak, but winter poses special challenges for grids. Namely, the electric grid can freeze, with natural gas plants and pipelines posing a special risk in cold weather — not to mention that it’s typically not a great time for solar production, either.
Aftab Khan, PJM’s executive vice president for operations, planning, and security, said in a statement Thursday that much of the recent demand increase was due to data centers growing “exponentially” in PJM’s territory.
The disparity between future demand and foreseeable available supply in the short term has already led to a colossal increase in “capacity” payments within PJM, where generators are paid to guarantee they’ll be able to deliver power in a crunch. These payments tend to favor coal, natural gas, and nuclear power plants, which can produce power (hopefully) in all weather conditions whenever it’s needed, in a way that variable energy generation such as wind and solar — even when backed up by batteries — cannot as yet.
Prices at the latest capacity auction were high enough to induce Calpine, the independent power company that operates dozens of natural gas power plants and recently announced a merger with Constellation, the owner of the Three Mile Island nuclear plant, to say it would look at building new power plants in the territory.
The expected relentless increase in power demand, power capacity, and presumably, profits for power companies, was thrown into doubt, however, when the Chinese artificial intelligence company DeepSeek released a large language model that appears to require far less power than state of the art models developed by American companies such as OpenAI. While the biggest stock market victim has been the chip designer Nvidia, which has shed hundreds of billions of dollars of market capitalization this week, a number of power companies including Constellation and Vistra are down around 10%, after being some of the best stock market performers in 2024.
A conversation with Carl Fleming of McDermott Will & Emory
This week we’re talking to Carl Fleming, a renewables attorney with McDermott Will & Emory who was an advisor to Commerce Secretary Gina Raimondo under the Biden administration. We chatted the morning after the Trump administration attempted to freeze large swathes of federal spending. My goal? To understand whether this chaos and uncertainty was trickling down into the transition as we spoke. But Fleming had a sober perspective and an important piece of wisdom: stay calm and remain on course.
The following conversation has been lightly edited for clarity.
How are you seeing the private sector respond to all of this news?
My view is, you can read a lot into what people publish in the EOs and what’s written and what’s issued and you can sometimes read a good deal into what hasn’t been issued and what hasn’t been said. In the executive orders that got first issued in a flurry we saw a few that got pointed directly at onshore wind, some on offshore wind, but solar and standalone storage – as predicted – remained pretty much intact.
We were under the impression and we stood by it that we had the guidance in hand, bankable guidance, from the IRS prior to the change in administration and prior to any look-back window that people had been transacting on over the past year at kind of a record pace. Standalone storage has just had a breakout year. Solar continues to go, to continue to be put on the grid. And we also have manufacturing of solar panels, the domestic supply chain. This year we stood up is nowhere near what we need to fulfill our requirements to get everything we need to do domestically to fill our generation requirements [but] its a pretty great step in the right direction. And those credits have been pretty good to the economy and Republican states.
The way I’ve seen people react is, I’ve probably been busier than ever the past two weeks, not only fielding questions like that but also for tax credit transfers, all of the corporates we work with. We work in both the buy and the sell side of all these credit transfers. We’re working with a lot of solar module manufacturers to sell the credits under the IRA. We’re working with a lot of buyers to purchase those credits. And we’re working with the buyers and sellers under the generation of these projects.
All of the buyers have come out and continued with their 2025 strategy to buy more of these credits, if not more so. And all of the developers we represent continue to produce more of these credits. So I haven’t seen a hiccup or slowdown in actual transactions. If anything, I’ve seen stuff pick up in the solar space and in the manufacturing space. I continue to be very optimistic about those two fundamental parts of the energy transition, because if you need to go be an energy superpower, you wouldn’t want to turn off solar, turn off storage –
Is that argument that if you were trying to deal with “energy security,” you wouldn’t turn off solar and storage – is that enough to assuage uncertainty in the investor space?
I think it’s helpful. If you’re a private equity investor or you’re any sort of lender or a developer, you’re probably not going to base your whole model on the hopes that our energy security strategy syncs up with what most people think it should look like. But when you layer it on top of some of the fundamentals… I want to say that solar did not go away eight years ago. When Trump first came in, we saw more renewables deployed in his administration. At times, we saw more beneficial guidance, issuance of tax guidance under that administration, than we would hope for from some more favorable administrations.
The fact that the IRA has disproportionately benefited red states is just a fact that can’t be overlooked. I met with a group of about two dozen lawmakers a few weeks ago to talk about the IRA and there’s quite a few of those folks in the room that say, “Whatever we do, we can’t dismantle the IRA.”
But how has the chaos in the last week and a half impacted investment in renewable energy, though?
I think the renewable energy industry is used to a lack of predictability. It’s kind of a lawyer’s job, our team’s job, to help folks mitigate risk [and] to see what potential pitfalls there may be and to structure and draft around those.
You might see as things get more unpredictable, as folks go out to investors to raise capital, you might see a little bit of tightening around different portfolios or different types of companies based on their pipelines or how they’re put together. But I think one investor’s look on a project or pipeline may vary widely from another investor who’s got a different project or pipeline. There’s a lot of capital out there to be deployed. I think people are looking to invest.
I think you just need to partner the right developers with the right investors.
Are you seeing any slowdown in solar investment though?
I don’t see folks taking a hardline approach or stopping any time soon.
This is not an existential crisis while the ITC [investment tax credit] and PTC [production tax credit] exist. It’s not even, could you go back in time to unwind these credits. It’s moreso, going forward, what will the IRA look like? Will there be additional technologies added to the IRA? That’s possible to help stand up other technologies. Will the runway for the credit, instead of it being unlimited for at least 10 years, will [it] be pared back a bit? There’s potential, but it’s unlikely.
Okay last question and it’s a fun one: what was the last song you listened to?
I’m not going to lie, I’m an Eagles fan. And I’m from Philly and a huge Meek Mill fan. So “Uptown Vibes” by Meek Mill is in the car.
1. Freeze, don’t move – The Trump administration this week attempted to freeze essentially all discretionary grant programs in the federal government. A list we obtained showed this would halt major energy programs and somehow also involve targeting work on IRA tax credits.
2. Sorry, California – The Bureau of Ocean Energy Management canceled public meetings on the environmental impact statement for offshore wind lease areas in California, indicating the Trump wind lease pause will also affect pre-approval activities.
3. Idaho we go – Idaho Gov. Brad Little this week signed an executive order dubbed the SPEED Act aimed at expediting all energy projects, including potentially renewables, transmission, and mining projects.