Will New York’s Big Socialist Climate Policy Be Led by ... McKinsey?

It’s been nearly a year since New York passed the Build Public Renewables Act via its annual budget, a rare attempt from the Empire State’s Democratic supermajority to make good on state climate goals first enshrined into law in 2019. The measure—pushed for by a coalition of climate justice and community groups called Public Power NY, helmed by the Democratic Socialists of America and several legislators they helped elect—mandates that the New York Power Authority, a state-owned power provider, build renewables in order to meet the state’s goal of generating 70 percent of electricity from such sources and cutting greenhouse gas emissions by 40 percent by 2030.

A year in, NYPA is continuing to sort out the details of what that looks like: What kinds of green energy projects will it develop and where? How can NYPA take advantage of new pots of federal funding for renewable energy development furnished by the Inflation Reduction Act? What role will partners in the private sector play? It’s also facing criticisms from the same groups who championed the law. In particular, members of Public Power NY and the Democratic Socialists of America point to a lack of transparency around NYPA’s work with the controversial consultancy McKinsey and Associates.

During a March 26 meeting of NYPA’s board of trustees, NYPA president and CEO Justin Driscoll delivered a presentation outlining the authority’s progress thus far in implementing the BPRA. He explained that, as far as a renewables build-out is concerned, NYPA has been working with McKinsey to “mature our operating model internally and internal governance around the buildout of renewables for the state,” which he had referenced in previous meetings without as much elaboration on their work together. NYPA had just concluded the second of two “sprints” with McKinsey, Driscoll later said, focusing on the authority’s “internal processes” as well as “what project structures might look like, where the partnership opportunities might be, what does the industry look like right now. They’ve got a wealth of information that they bring to us from around the globe.”

NYPA’s expanded authority to build renewables requires that it have a 51 percent ownership stake in any project it develops. “Fundamentally what we’re trying to find is, what’s the NYPA sweet spot? We know what the private sector is doing,” Driscoll added. “What’s our role going to be as we try to identify gaps and fill those gaps so the state can meet its goals?” NYPA’s approach to renewables, he added, is meant to leverage “our strengths in development, ownership, and commercialization to quickly deploy renewable projects for the benefit of the state and its residents.” Driscoll mentioned, as well, that NYPA was working to develop its own internal expertise around a wind and solar build-out, including by hiring a vice president of renewables.

Zack Jones, an organizer with the DSA who attended the meeting, was happy to see some of the progress NYPA was making toward a renewables build-out, but alarmed by the prospect of McKinsey shaping its plans. “There’s still a big lack of transparency into what they’re doing overall, and that’s a concern for us. There have been a few instances where they’re signaling that they’re taking this seriously. In the board meetings it’s a big topic for them, and it seems like they’re taking steps toward putting a band together,” Jones said, referring to NYPA’s work to develop its capacities around a renewables build-out, “but it’s really unclear what the details are of that.”

McKinsey’s role in everything from the opioid crisis to the Puerto Rican economy has generated considerable controversy and even cost it work with the federal government. Still, “the firm,” as it’s known, continues to play a major role in advising government agencies the world over, in some cases providing a rubber stamp for austerity plans and helping—over time—sap those agencies of their own expertise. McKinsey’s work with governments, in particular, has garnered a reputation for dispatching bushy-tailed, handsomely paid consultants to public sectors the world over to “rightsize” operations, often pushing for privatization and harsh cuts to vital social services and benefits.

Public procurement reports published each year by NYPA detail the contracts the authority enters into for everything from I.T. support to construction, parts, and consultant services. The most recent report shows that its current overall contract with McKinsey, for “consulting support services,” began in July 2019 and is scheduled to end this coming July. It’s currently valued at $9.7 million. An NYPA spokesperson declined to comment as to whether McKinsey’s work with NYPA on renewables was part of that broader contract or a new one, or about whether the authority planned to enter into another contract with McKinsey after that one expires.

NYPA has large contracts with other major consultancies, as well, including Ernst & Young, KPMG, and PwC. Currently, it has $40 million worth of active contracts for a range of services with Deloitte, many of which span multiple years. Those include a six-year, $21.5 million contract for I.T. consulting sourcing services as well a five-year, $3.5 million contract for “diversity, equity, and inclusion services.”

Over email, NYPA media relations manager Paul DiMichele said NYPA “occasionally retains consultants to assist with tasks and help drive strategic priorities forward. NYPA selects consultants based on their qualifications and expertise. 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.”

In the year since last year’s budget passed, NYPA has, per the text of the BPRA statute, been consulting with the public and private-sector actors around what implementing its expanded authority on renewables will look like. Last month, the authority issued a Request for Qualifications, or RFQ, to vet renewable developers and investors to work with in developing renewable energy generating projects and storage systems. That RDQ ends this week, and NYPA is due to publish its first biennial strategic plan for renewable energy development in January 2025, which is also required by the text of last year’s budget.

The controversy around McKinsey’s role in that process highlights a tension at the heart of the energy transition. Over the last year, large-scale renewables projects that are eligible to be supported by generous federal subsidies have struggled to get off the ground amid supply chain shocks and rising interest rates. The problem, however, could be a more structural one: Can the investors needed to finance the massive up-front costs of these projects expect attractive enough returns from them to come on board? Companies including the Danish wind developer Ørsted have walked away from major offshore wind projects in recent months after utilities failed to offer more lucrative power-purchase agreements—essentially, contracts to buy a certain amount of electricity—and when state and local governments refused to furnish additional subsidies.

Experts and campaigners have made the case that public ownership offers a possible alternative, leveraging the massive borrowing capacity and lack of profit motive inherent in state-run institutions in order to get cleaner energy built, whatever the cost. The United States, after all, already has a robust network of public power providers: from state-level firms like NYPA all the way up through juggernauts like the Tennessee Valley Authority; Nebraska’s entire grid is publicly owned, whether in public power districts or rural electric cooperatives. Building public renewables at scale, though—as campaigners in New York are experiencing now—involves coming face-to-face with the realities of existing public power institutions.

That means dealing with bodies (i.e., power authorities, power districts, coops) that have lost expertise and funding, are deeply enmeshed in local or state-level politics, or have internalized the idea that the public sector’s role in provisioning public services ought to be as minimal as possible. Political economist Rosie Collington is the co-author, with Mariana Mazzucato, of The Big Con, tracking the rise of major consultancies and the ways that businesses and governments alike have come to rely on them. As they show, consultants’ promise to bring “efficiency” to government operations can sometimes seem like a parody of itself; the British government was at one point paying upward of $1.2 million per day to the consultants tasked with running the country’s Covid-19 test-and-trace program.

Collington notes that government agencies might contract with McKinsey and other consultancies for any number of reasons. For “public sector authorities or bodies that have been underfunded for a very long time,” she told me by phone, there’s often a “combination of genuinely lacking capabilities and capacities to do a bunch of analysis themselves. But that has to be understood within a context where the public sector is seen as the least efficient actor to do analysis itself. That increases the motivation to use external sources of advice.” She noted, as well, that governments might also see a big contract with McKinsey or Deloitte as a means to legitimate major public works projects in the eyes of investors they might hope to court to fund them.

While consultants are now a ubiquitous part of many government operations, their involvement could pose a particular danger to work building out renewables. With lower costs of borrowing and without profit-hungry shareholders, that is, public-sector renewables development has the potential to transcend some of the factors that have constrained private-sector renewable energy development, taking a much broader, public-interest approach to meeting New York state’s climate goals. But relying too heavily on consultants might sacrifice some of the qualities that could otherwise allow the NYPA—and not McKinsey—to share its expertise with public power providers looking to take a similar path. Given McKinsey’s track record, moreover, it’s not exactly outlandish to imagine it would encourage the NYPA to look at potential wind and solar projects like the investors that have balked on renewables before: prioritizing those projects that promise the highest and steadiest returns rather than those best suited to decarbonize New York’s grid as quickly and equitably as possible. As a public-sector entity, NYPA has unique capabilities that private developers simply don’t. It’s also subject to democratic accountability, which Public Power NY campaigners say they hope to take full advantage of in ensuring that the NYPA lives up to its potential.