A surge in chip fabs could make climate targets hard to reach

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Richard Dewey, president and CEO of the New York Independent System Operator, looks over the grid on Nov. 29, 2022, at the company headquarters in Rensselaer, NY. (Jim Franco/Times Union)

In microchip fabs, workers cover up from head to toe to avoid bringing any dirt into the "clean rooms" where the ultra-precise manufacturing can be impacted by even a speck of dust.

A wafer that will be split into microchips at the GlobalFoundries Fab 8 campus during an open house event in 2013. (Lori Van Buren/Times Union)

Technical trainer Julian Serda, right, talks about manufacturing microchips on wafers at the GlobalFoundries Fab 8 campus during an open house event in 2013. (Lori Van Buren/Times Union)

Richard Dewey, president and CEO of the New York Independent System Operator, on Nov. 29, 2022, at the company headquarters in Rensselaer, NY. (Jim Franco/Times Union)

ALBANY — New York plans to spend up to $10 billion in the coming years on tax incentives to expand semiconductor manufacturing in the state, casting the subsidies as crucial investments in green jobs.

But microchip plants, which consume enormous amounts of electricity, will strain the state grid just as operators rush the transition to renewable and emissions-free sources. Industry voices are warning of possible brownouts as "reliability margins" may be stretched to a breaking point as early as this year.

Fossil fuel-powered plants that had been feeding the largest share of energy into the grid are already being taken offline faster than renewable sources can be added. Indeed, modeling shows "reliability margins narrowing to concerning levels as early as 2023," said Zach G. Smith, vice president of system and resource planning at the grid's Independent System Operator, the not-for-profit that runs the state's electric system. The system's total resource capability was already lower last year than it had been in 2021.

The group's assessments found this may lead to brownouts and an increased reliance on emergency energy purchases from neighboring states or regions.

In exchange for massive tax breaks which eclipse any previous industry-specific handouts by the state, firms benefiting from New York's Green CHIPS program will develop their own annual "sustainability plans." These need state approval. But if a plant fails to meet their milestones, draft regulations show, companies can still be approved to shift timelines or pay "a local non-profit organization of related mission" and keep collecting the tax breaks.

On paper, the companies would be required to utilize "100 percent renewable energy" to operate. But records indicate the additional drain on the power supply from any new plants built soon is likely to lead to an increase in the use of other fuels including natural gas, which still produces more of New York's electricity than any other source.

Most of the gas processed in New York power plants is brought through pipelines from Pennsylvania's Marcellus Shale, according to the Northeast Gas Association.

The microchip sites' sustainability targets would likely be met by purchasing from the state's finite supply of renewable energy credits — payments that will not necessarily accelerate the pace at which New York is able to add more renewable sources to the grid.

"There's really nothing green about Green CHIPS — it's just complete, disingenuous nonsense," said John Kaehny, the executive director of Reinvent Albany, a government transparency organization.

While he doesn't oppose microchip manufacturing, Kaehny is critical of the extra incentives the industry is getting: "In terms of environmental benefit to the state, there's zero, and in fact because fabricating chips requires lots of energy and lots of water, there's no doubt they'll have an overall negative environmental impact," he said.

Kristin Devoe, a spokeswoman for the state development agency, pointed to how Micron "is set to create nearly 50,000 jobs and $100 billion in investment — all with a commitment to aggressive sustainability standards and complying with our nation-leading climate goals."

"Projects like Micron show us the path forward: clean, green jobs that grow our economy and protect our climate," Devoe said, pointing to the "state-approved clean energy plan" program participants have to "create and comply with."

New York has ambitious environmental targets, codified by the Climate Leadership and Community Protection Act of 2019. It mandates that 70 percent of the state's energy come from renewable sources by 2030, and 100 percent must be emissions-free by 2040.

In December, the state's Climate Action Council passed the road map meant to guide New York to those goals. But Gavin Donohue, president of the Independent Power Producers of New York and one of three members who rejected the plan, said he wasn't satisfied with the response he got on how the state would supply the microchip industry's mammoth electricity needs.

"New York is striving to be the chip-fab hub of the country. Chip fabs are an important economic resource, particularly in upstate New York where they're located, but they are going to require an incredible amount of electricity. And it has to be available 24 hours a day, seven days a week," Donohue said. "In my judgment, the vagueness around how that's going to impact reliability in the future is concerning."

Many energy projects are in the pipeline for New York, and while officials have expressed confidence that renewable and emissions-free supplies will catch up to demand by the time new microchip fabs come online, reporting shows retrofitting the aging grid with environment-dependent sources like wind and solar has proven a daunting task.

New York's state lawmakers are not the only American officials prioritizing microchips. The federal government, wary of supply chain and national security issues, wants to bring the manufacturing process stateside.

When the White House announced its adoption of a grant program to attract global chip companies in August, the same week Gov. Kathy Hochul signed New York's Green CHIPS into law, the federal announcement credited the program for two major projects: tens of billions in investment from Micron, which is building a massive manufacturing site near Syracuse, and the expansion of the existing GlobalFoundries facility in Saratoga County.

While neither manufacturer has provided data in response to questions about their planned electricity use, records show that utilities expect Micron's new facility could require 928 megawatts by 2035, while GlobalFoundries plans on file with local municipalities show its updated structures will run on 195 megawatts when completed.

At these levels, if the facilities both have a 95 percent load factor (as the Micron term sheet assumes for that project), they could use a combined 9,346 gigawatt-hours of electricity per year when completed — more than 6 percent of New York's total 2021 electricity usage, and enough overall energy to power 309,597 average New York homes.

And these figures don't account for the resources used by other preexisting sites, such as Wolfspeed's newly finished 450-acre fab near Utica, or semiconductor supply chain businesses like Edwards Vacuum that appear poised to take advantage of Green CHIPS as well.

Pandemic-driven demand for computers and smart phones has led to a boom in microchip production at facilities such as Global Foundries' Fab 8 plant in Malta.

In "fabs" across the globe, silicon disks the size of frying pans are sliced into microchips smaller than a fingernail that power computers, tractors, cars and wind turbines.

They take several months to make, as robotic machinery layers each with microscopic connections in rooms so pristine that floor workers don head-to-toe protective "bunny" suits. That time and equipment come with a price.

"There's this looming environmental cost of building electronics and using those electronics over their lifetimes that we have to be cognizant of," said David Brooks, an electrical engineer at Harvard University who works on implementation challenges for computing systems.

A recent article Brooks co-authored with Udit Gupta and others shows that by 2030 the computing sector will use 20 percent of electricity globally, and that chip manufacturing "accounts for most of the carbon output attributable to hardware systems," both due to its energy consumption and its release of greenhouse gasses during the process.

A preliminary air quality analysis GlobalFoundries submitted in May to local officials said a state Department of Environmental Conservation representative confirmed the company was not required to report the expected emissions from energy it had purchased. GlobalFoundries did report natural gas use directly, saying the National Grid pipeline supplying their Saratoga County site uses "fossil fuels" that are "delivered to terminals via a barge and are imported from various external sources assumed to be from out of state."

These are far from the only emitters in the process, which also uses significant amounts of water and hazardous chemicals.

But Huili Grace Xing, a Cornell Engineering materials scientist, said that for microchip fabrication "it is actually very, very challenging to come up with something that is dramatically different. The chemistry dictates certain processes have to happen this way."

Xing, like many in the field, believes these are challenges that researchers should keep innovating on. And advocates for bringing the industry to New York do not think they eclipse its promise.

"The timing is critically important: New York has been preparing for this moment for 20 years," said Michael Francher, director of the state's Center for Advanced Technology in Nanomaterials and Nanoelectronics. "We are at an inflection point in technology, artificial intelligence, quantum computing, 6G, all of these new paradigms in computation. It's happening here, in Albany."

He said companies like GlobalFoundries, Wolfspeed and Micron have been drawn by the state's emphasis on "open innovation," where research institutions collaborate with companies; but they also "look at New York's relative abundance of raw material, water and power, and relatively safe environment from a weather perspective."

But fabs in New York will consume the same energy and release the same process contaminants as those in a hub like Taiwan. While some might have access to renewable energy credits in New York, neither the companies nor the state have indicated who would pay for the installation of new generating capacity at the high levels they will use. Without the companies themselves adding capacity, they would be draining a portion of the state's limited supply, stretching the gap between its current renewable and emissions-free energy production and the total needed to meet the state's climate commitments.

And their challenges are likely to get trickier: more advanced technology is requiring increasing amounts of power in the microchip fabrication process.

"As the node size of chips continues to shrink, energy requirements at production facilities are expected to rise significantly," according to a report issued in May by the consulting firm McKinsey & Company. It's a dynamic echoed by various academic reviews on the subject.

Yet state and federal officials have not publicly acknowledged the added energy grid and climate target challenges that growing the microchip industry at this time will create. They have instead advertised the high-tech projects as environmentally friendly.

"New York is poised to lead the nation in semiconductor manufacturing — and as always, we're doing it in the cleanest, greenest way possible," Gov. Kathy Hochul said after signing the bill that codified the Green CHIPS handouts into law.

The program allows Empire State Development to dole out tax exemptions to companies in the semiconductor field: those that fabricate chips, like Micron, and those in the supply chain like Edwards Vacuum, a British company that produces equipment used for manufacturing semiconductors. It was rushed through the state Legislature with pressure from Hochul days before the end of the last legislative session, ostensibly to prepare New York to be particularly attractive for manufacturers once the federal incentives passed.

But in spite of environmental concerns, microchip incentives were repeatedly mentioned in the Climate Action Council's scoping plan as a means to achieve state climate targets. Following the group's final vote in December, Empire State Development Commissioner Hope Knight even cited the state program by name.

"Our Green CHIPS program is setting a nation-leading gold standard for economic development that prioritizes good jobs and a clean environment," Knight said. In earlier statements, she has made stronger claims about its impact: "By tying financial assistance to sustainable methods of manufacturing, we are ensuring that more semiconductors are made in a more sustainable way," she said.

But there is no evidence that such a program has the power to shift the strategy of multinational corporations. Several industry experts said the incentives that are driving more sustainable practices in microchip manufacturing are coming largely from the companies themselves, spurred by new requirements from clients like Apple and Samsung who want to "green" their own supply chains.

And since Green CHIPS companies can set their own sustainability goals and "cure" missed targets through non-profit payments, it is unclear how the state would ensure sustainability measures beyond the companies' own ambitions. While a draft template released by the agency contains a prompt which says companies "will be required to utilize 100 percent renewable energy" for their operations, that stipulation is not in the draft regulations themselves.

Empire State Development contends that the tax breaks incentivized their first recipient, Micron, to set up in New York, and "by entering into the Green CHIPS program, the company's aspirational sustainability targets have been elevated into legal obligations with significant consequences for non-compliance."

Records show the program's first adherents intend to use ample electricity from the grid, which means they would likely meet those goals by purchasing from the state's finite renewable energy credits. Those would put the company's name on the necessary wattage entering the grid, which would then co-mingle with power generated by non-renewable sources.

New York's electric grid has multiple constraints on how much renewable energy can course through its statewide arteries. Its current energy sources are limited, and both solar and wind farms only generate power at certain times of day or in specific weather conditions; the state system does not currently have any way to store that energy at scale. The volume of supply is also constrained by capacity limitations and bottlenecks within the network of energy lines that bring it around the state.

The renewable sources hooked up to New York's grid had just 6,470 megawatts of total generating capability last summer. That tally, documented by the state's Independent System Operator (NYISO), accounted for just 17 percent of the 37,431 megawatt capacity within New York's control area, not including "special case" resources or energy purchased from neighboring states.

And whenever that renewable supply can be running and powering the state's current infrastructure, it's already in use.

In order to prevent outages and maintain reliability, the system needs a buffer of electricity to call on. For that, a recent system operator report said, "the pace of deactivation of current fossil-fueled resources must not exceed the pace of development and deployment of new, non-emitting electricity supply" — the state, that is, shouldn't remove energy producers or add energy-guzzlers faster than they can add renewable sources of electricity. But right now, that buffer is narrowing because fossil-fuel resources are coming offline, "primarily due to emissions concerns," faster than clean energy can enter.

"New proposed large loads, including new cryptocurrency mining facilities located in western, central, and northern New York ... are served primarily by increased output from fossil fueled generation located upstate. As a result, CO2 emissions and zonal demand congestion increase as such large demand centers are added to the grid," according to a forecast released last fall by the Independent System Operator.

The independent operator's president, Richard J. Dewey, said those large loads don't only include major industrial projects, but also the rapid implementation of state targets such as the electrification of buildings.

"That's all going to create an influx on the load," Dewey said. Meeting that demand would increase net fuel-related emissions if done today because "there's no excess (renewable energy on the grid). The current profile of the generation system that we have today is mostly fossil fuel."

The state's climate goals have already proved reason enough for Hochul to sign off on a temporary moratorium on most cryptocurrency mining operations. Those "mines," which have a poor reputation among environmentalists, are rooms full of high-energy-consumption servers solving complex math problems to "unlock" new unique units of currencies like Bitcoin in a digital ledger.

But the wattage used in individual mining facilities in New York is dwarfed by the proposed energy consumption of the prominent first Green CHIPS recipient: Micron. And central New York, one of the locations the Independent System Operator pointed out as a place where large loads like crypto mines are leading to increased fossil fuel use, has been touted by lawmakers as the site of Micron's megafab.

The term sheet for Micron's new site suggests it will get the power it needs, and it is expected to only pay about $41 per megawatt-hour of electricity once its build-out plateaus in 2035. On average, New York's industrial consumers paid more: $68 dollars per megawatt-hour in October 2021, and $76 a year later. Average residential energy prices are even higher, and have been rising more quickly. They jumped from $207 per megawatt-hour to $233 in the same timeframe.

Micron, which has yet to start construction on its New York facility but has already been touted as the first "Green CHIPS project," could draw on nearby renewable power sources via energy credits; its presence in central New York could also stimulate new power projects. But that is not a given. And with a finite supply of renewables on the state's grid, its purchase of the existing resources could price out other local consumers.

GlobalFoundries, which broke ground on its original Fab 8 facility in Malta in 2009, was an early test case for New York's microchip model. It has long had aspirations to open a second building and increase its own manufacturing capacity. And while a construction logistics plan from last May for its new "Fab 8.2" did not mention Green CHIPS incentives (they were reviewed and passed by the state Legislature later that week), it did note that follow-through on the fab was "assumed to be conditional" on federal passage of the CHIPS Act.

GlobalFoundries representative Michael Mullaney said the company thinks the state's Green CHIPS plan is "visionary" and "will be submitting an application for funding." It has been working since 2021 toward its own 25 percent greenhouse gas reduction goal by 2030.

The federal grant program, designed to be nationwide but championed by New York's U.S. Sen. Charles E. Schumer, was passed in a legislative package that would also be "fighting the climate crisis," according to a release.

When asked if he was confident the state would be able to meet the energy needs of incoming chip fabs even while pushing towards its climate change goals, Schumer said he was.

"The Inflation Reduction Act has a huge investment in new energy, and clean energy, which New York will benefit from dramatically in wind and solar. There are dramatic tax breaks, we're going to increase the production of energy many times," Schumer said.

GlobalFoundries was built on the Luther Forest Technology Campus, a former top-secret rocket testing site that was retrofitted with its own 400-megawatt-capacity power substation to service the fab, according to a source close to the process.

How its actual energy usage volume compares to other industrial manufacturers is less clear: A spokesman for the state Public Service Commission said the agency does not keep data on energy used by specific regions, localities or industries. GlobalFoundries' Mullaney declined requests to provide local data for competitive reasons, saying that, "we release aggregated global data in our annual Corporate Responsibility Report, but not individually by site."

National Grid services both GlobalFoundries and central New York's White Pine Commercial Park, where microchip manufacturer Micron will set up shop. National Grid spokesman Patrick Stella would not share usage data by industry, region or use category, whether actual or projected, "due to confidentiality and security reasons."

A decade ago, such silence on energy use was not the norm. Stella told the Daily Gazette in 2010 that GlobalFoundries' then-under-construction Fab 8 would use about 60 megawatts of power when operational, all drawn from the Luther Forest substation. To facilitate that usage, he said, National Grid had built a high-voltage, 115-kilovolt power line after applying for permission from the Public Service Commission.

The company appears to have far surpassed that 60-megawatt estimate in the years since, with recently filed company documentation suggesting that in 2019 the peak demand from that original Fab 8 was 105 megawatts.

A site plan amendment from July for Fab 8.2 suggested that the estimated "average electric power usage" for the new building would be 90 megawatts, while the total peak energy demand for the two facilities together would reach a 195-megawatt threshold. That means its expected energy needs from the grid will have more than tripled since it set up in New York a decade ago.

"This increased electric power usage rate can be accommodated by the electric service providers, National Grid and (New York State Electric & Gas)," the site plan said. "Natural gas service will continue to be delivered by National Grid, utilizing the current gas main within the Fab 8 Campus."

Alongside the New York Power Authority, National Grid will also be servicing Micron, a company with impressive emissions-reduction goals but a low percentage of renewable energy use in their current international operations.

Micron's spokeswoman Erica Rodriguez Pompen noted the company "aims to achieve 100 percent renewable electricity at the new facility," which supports its preexisting "global target to achieve a 42 percent reduction in greenhouse gas emissions from operations by 2030 and net-zero emissions from operations and purchased energy by 2050."

It's unclear what additional impact, if any, New York's rules will have on Micron's decisions.

The term sheet between government entities and the company confirms a guaranteed "allocation" of up to 140 megawatts of ReCharge NY power, an incentive that offers lower-cost electricity from the grid. Those 140 megawatts would be "supplemented as necessary" with up to 788 megawatts of "High Load Factor" power — all from the New York Power Authority, a state public benefit corporation. Meanwhile, National Grid confirmed its ability to do tens of millions' worth of electric and natural gas infrastructure upgrades at a discount in order to ready the site for Micron's fabs.

While the terms include mention of green hydrogen, battery storage systems and on-site renewable energy, their grid-related commitments suggest the majority of the fab's power will still come from the state's general supply.

The power grid, of course, does not differentiate between the various sources of energy coursing through its lines. Even if microchip fabs have their name on green energy in the system, someone will need to pay for enough renewable and emissions-free additions to meet the extra demand. By the time that electricity reaches households, everyday New Yorkers will only be able tell whether the lights go on, and how much it will cost them.