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New York Passed an Ambitious Climate Bill for Publicly Owned Power. The Perfect Partner? McKinsey

New York's power authority was given the mandate to build publicly owned renewable energy. Advocates are worried they've chosen the exact wrong people to ask for advice.

New York Power Authority’s Smart Path clean energy transmission infrastructure project in the upstate New York. (NYPA)

In 2022, Justin Driscoll, the then-interim head of the New York Power Authority, was no fan of the Build Public Renewables Act, which would empower the organization to build renewable energy projects to help the state to meet its climate goals. At a hearing, Driscoll told lawmakers that New York state was unable to undertake its own renewable power buildout, calling it "simply unworkable." Which is why it was surprising when, this past March, Driscoll was seemingly ebullient about the new "expanded authority" that the passage of the BPRA in last year's budget had given NYPA

At a New York Power Authority board meeting last month, he talked about the "excitement we're seeing around the organization to be involved in this." He discussed how well-positioned the authority was to begin delivering clean, cheap energy to New Yorkers: "It's an opportunity for NYPA to make a big impact on the state's energy infrastructure and footprint."

What changed his mind in the intervening 18 months? For one, Governor Kathy Hochul, his boss, got on board with the BPRA. But a second clue came during that board meeting, when he shared who exactly would be helping to plan the buildout of NYPA's ability to once again build, own, and possibly operate new renewable energy infrastructure—the global consulting firm McKinsey & Company.

"[We're] closely with McKinsey, as I previously discussed with you," Driscoll said. "They're helping us ensure our operating model internally and our internal governance around the buildout of renewables for the state, and with that support, we're finalizing a target operating model that leverages our strength and development, ownership, and commercialization to quickly deploy renewable projects for the benefit of the state and its residents." 

Buried within that consultant-speak was insight into what exactly McKinsey was going to be working on with NYPA—essentially, forming the operating model for a buildout of public renewables that Driscoll had spent years fighting, but is now implementing at the behest of the governor. 

In a statement, NYPA spokesperson Paul DeMichele told Hell Gate that McKinsey would be helping NYPA identify how they could better help the private sector develop renewable energy projects. 

"McKinsey was engaged, through an open bidding process, to help us better understand where private developers have been challenged while developing renewable projects. By doing so, we can better understand where NYPA will find the best opportunities to help the state achieve its decarbonization goals."

Currently, it's unclear exactly what McKinsey is doing for NYPA. Hell Gate has filed a Freedom of Information Law request for the contract between NYPA and McKinsey. 

The contract with McKinsey immediately rang alarm bells for environmental advocates, who had pushed for NYPA to begin building publicly owned renewable energy infrastructure as it became clear that the state would miss hitting its clean energy targets, which relied almost entirely on the private sector. They pointed to Driscoll's opposition to the BPRA, NYPA's own backtracking on climate goals, and the secretive nature of the rollout of NYPA's "expanded authority" as reasons to be worried that just a year after its passage, the BPRA is already in peril. 

The BPRA was meant to fast-track a cleaner, publicly owned power grid—and passed after a concerted push by environmental groups and the Democratic Socialists of America, when New York included the first-in-the-nation climate measure as part of the state budget in 2023. The BPRA gives NYPA the ability to build out renewable energy infrastructure—wind, solar, battery storage, and more—if it found the private sector was unable to meet the state's legislated goal of 70 percent clean energy in its grid by 2030, and 100 percent clean energy by 2040. 

McKinsey, known for aggressively advocating for privatization and market-oriented solutions, most recently made headlines in New York for its botched report on the danger posed to nursing homes by COVID-19. When it comes to its work in the energy industry, McKinsey has been implicated in everything from the Enron scandal, to rolling blackouts in South Africa, to undermining United Nations climate talks on behalf of the fossil fuel industry

In their 2022 book "When McKinsey Comes to Town," reporters Michael Forsythe and Walt Bogdanich wrote that McKinsey found efficiencies for businesses by "disinvestment in people," meaning cutting public services to the bare bone, and privatizing the rest. 

The consulting firm now seems integral to New York's clean energy buildout.

"McKinsey is playing Big Brother in helping us move forward appropriately?" asked John R. Koelmel, the chair of the NYPA board, during the March meeting. 

"They've got a wealth of information that they bring to us from around the globe," Driscoll replied. "They've helped us develop our internal processes, and what structures might look like, where the partnership opportunities might be, and what does the industry look like right now." 

Driscoll told the board that while NYPA was ramping up staffing to fulfill its new mission, it would take years to get the right kind of expertise in-house to help run a renewable energy buildout. 

"Horrified" is how Eleanor Stein, a long-time former member of the New York Public Service Commission, which regulates and oversees the electric power industry in New York, described her reaction when she found out that McKinsey would be helping to shape New York's renewable buildout. "To me, it signaled they're not actually serious about building anything—they're more interested in partnerships, in contracting out the work," she said. 

Stein worries that by once again offloading the work to private actors, much of the spirit of the BPRA would be gutted, and that the BPRA's goal of providing cheap, clean energy to communities that need it the most won't be achieved. 

She pointed to the fact that NYPA has now backed off an announced (but not legally mandated) plan to get rid of carbon-spewing "peaker plants," many located in low-income communities with high rates of asthma, as an example of the authority not taking the state's climate goals seriously. Instead of filling the gaps with renewable energy it could site and build relatively quickly, NYPA instead now plans to keep those "peaker plants" operating well into the future

Already, NYPA isn't taking advantage of its unique place in the energy market. 

Investor-owned energy companies, like ørsted and Equinor, which are leading the state's wind turbine buildout, finance projects through private investment. The companies then recoup the cost for those projects by baking in high rates for the energy they produce, ensuring healthy profits for their investors. This model led to a costly standoff, in both time and money, earlier this year, when Equinor and other wind power developers canceled contracts with New York state after being denied a rate hike by the state's utility regulator. After the companies canceled their contracts, those projects were rebid by the state, with higher rates now baked into the winning contracts. With the 2030 deadline for 70 percent renewable energy fast-approaching, the delay in building these wind farm projects has thrown the state's climate goals into jeopardy, with no promise that other energy companies won't do the exact same thing when they can't have their way with state regulators. 

NYPA, however, isn't financed by investors. Instead, it can wield a tool that helped it build out the state's massive hydroelectricity sector, one which it still possesses: the power to issue bonds. With investors expecting steady, but not atmospheric, returns on those bonds, NYPA would be able to both quickly finance projects and also offer electricity at rates that undercut those coming from private developers. Add to that the possible infusion of financing from the state itself, and NYPA could once again be a nimble and powerful player in New York's energy market. That is, if it wants to be. 

Stein is skeptical. "I see no sign from Drsicoll that they're interested in issuing bonds at this point. They're playing ball because the governor asked them to." 

Driscoll, a former Republican whose appointment was opposed by many progressive members in the State Senate, was only formally appointed chairman and CEO after Hochul used a loophole to install him at the end of the last legislative session without a confirmation vote (legislators then quickly moved to close that loophole). During the special 2022 legislative session, called specifically to hear testimony regarding the BPRA, Driscoll testified that “the bill’s mandate, like those directing NYPA to develop renewable energy projects and provide energy services and imposing limits on what NYPA may charge for that power, are simply unworkable."

Despite the pressing nature of the climate crisis, the timeline laid out by the BPRA is still quite slow. By January 2025, NYPA is mandated to release its first strategic plan, identifying where the state will fall short of its climate goals, and how NYPA can help fill the gap. 

The authority has already issued two requests for proposals from private partners on how they can work together on projects to continue the state's renewable energy buildout. At the board meeting, Driscoll said that partner interest was "very strong." 

While any project built under the BPRA (which Driscoll refuses to reference as such, instead preferring to describe it as "expanded authority") must ultimately be owned by the state, legislators who pushed for the measure worry that off-loading too much production to the private sector might lead to a worst-case scenario of public money leading to private profits, undercutting the explicit aim of the bill. 

Assemblymember Sarahana Shrestha, who advocated for the BPRA before being elected to represent parts of the Hudson Valley in 2022, is concerned about the lack of transparency she's seen so far from NYPA. Shrestha and State Senator Michael Gianaris have introduced a bill this session to make NYPA shed more light on how they're implementing the BPRA.

"McKinsey's way of doing business is the complete opposite of what we designed the bill for," said Shrestha. "And we want NYPA to see itself as a powerful public authority. And the way in which it's just delegating these core jobs to the private sector shows that that's not how they see their role." 

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