Child care and housing have long been the key pain points on affordability in New York (and around the country), but another big thing has been on the minds of Gov. Kathy Hochul and residents statewide lately: energy. Energy costs have jumped as a result of the U.S. and Israeli attack on Iran, though they’ve been rising for other reasons as well.
The issue has featured prominently in Hochul’s budget proposal and economic agenda for the year. It has also set up a showdown between the governor and legislators and climate advocates as she pushes to roll back aspects of the landmark 2019 state climate law intended to, among other things, decarbonize the state’s energy grid. Hochul is expected to release more details of her plan this week, but advocates are already pushing back, including some who have already sued over the state’s slow-rolling of the law’s goals.
There are a few different strands here. One is the volatility and generally rising costs of natural gas, which is still the fuel that powers a large portion of New York’s grid, particularly upstate. Another has to do with the shortages now sparked by the U.S. and Israeli attack on Iran and the subsequent wider conflict. Asia will be affected first, but the disruption will undoubtedly spread to the United States.
Investments in fossil fuel plants in New York had already largely tapered off as companies looked to comply with the 2019 law, which set a requirement for the state’s grid to eliminate all fossil fuel emissions by 2040. And even if utilities wanted to upgrade, crucial components like gas turbines are in short supply and backordered for years.
The idea of the 2019 law was for renewable energies to fill in the gaps, but that’s run into some trouble. New York has been slow to build out a strong renewables sector for a variety of reasons that run from difficult terrain to bureaucratic inertia, so much so that some local policymakers have been looking to states like Texas for inspiration. That red state has managed to add more solar and wind power in the last two years than New York has in the last 20, partly through more rapid build-outs in solar farms and longer-term investment in high-voltage transmission lines.
Environmental reviews and local pushback can tie up projects here for years. Of course, Texas’ light regulatory touch has its own downsides and New York probably shouldn’t adopt that kind of free-for-all approach, but there could be a happy medium. The state has also arguably worked against its own goals to phase out fossil fuels, such as by closing the Indian Point nuclear power plant in 2021, which increased reliance on natural gas to make up for the plant’s lost output. Hochul has now reembraced nuclear power as one of the solutions to the energy crisis, though some Albany lawmakers are already pushing back on that.
There are complications when it comes to renewables, too. President Donald Trump’s disastrous tariffs have significantly driven up costs in a way that has already put several projects slated to serve some 2 million homes on ice.
Less indirectly, the federal government under Trump is now openly hostile to clean energy developments. It is actually considering offering a nearly $1 billion settlement to a French energy company in exchange for not building wind farms off the New York and North Carolina coasts, after an effort to block the construction outright was struck down in court. The administration’s losing streak in litigation may not matter to companies considering billions of dollars’ worth of investments in the sector. They might quite reasonably be wary of spending more while the administration is on the warpath to render those investments worthless.
The flip side of the electricity generation question is consumption. Traditionally, the summer has been the period of peak use, but as more buildings and homes transition from gas to electric heat, grid utilization rates have been climbing in the winter as well, with this particularly brutal winter demonstrating the phenomenon. Increases in efficiency have been offset by increases in use, as the number of appliances and electric vehicles climb.
That’s without even accounting for data centers, which have been hogging energy and driving costs up nationwide as demand tied to the AI boom surges, as well as cloud computing more generally. Hochul wants to make the companies running these data centers pay for the strain they might cause to the grid, though some lawmakers are moving in the direction of pausing data center construction entirely, especially as fears mount that the AI boom might be a bubble.
One way to potentially reduce the impact and cost of usage spikes in NYC is through community battery storage projects. These are facilities that charge during low-usage hours, usually at night, and then release their stored energy at peak times. That trend has now run into issues, as Con Edison has begun demanding that battery project developers pay for tens of millions of dollars in upgrades to substations; it argues that without improvements, an influx of electricity from too many batteries will overload the grid where they are clustered. The battery industry has now petitioned the state energy regulator to intervene, but in the meantime, dozens of projects are at risk.
This all adds up to a picture in which energy costs around the state are being driven by a huge number of interlocking factors ranging from local permitting battles to geopolitics. It’s a situation that’s very difficult for any political leader, including the governor, to tackle as a whole. It’s unlikely that energy prices will come down significantly in the near term, especially with Trump doing all he can, from tariffs to the renewables crackdown to his disastrous adventure in the Middle East, to make things worse.