RGGI in the Weeds

Tom Shepstone at Natural Gas Now has graciously re-posted several of my posts including this post Regional Greenhouse Gas Initiative on the Fast Track to Nowhere based on this post. Unfortunately, the arcane world of pollution control programs is difficult to understand without a lot of background and my posts presume more than a little background. As a result there are some things that need to be clarified with respect to Tom’s conclusions from my post.

Tom made the following four conclusions. My indented and italicized comments follow.

First a bit of background. The Regional Greenhouse Gas Initiative (RGGI) is a cap and trade program. In order to understand the point I was trying to make you need to understand the fundamentals of cap and trade. What you need to know about this pollution control approach is that there are two components: the cap and tradable allowances for the pollutant covered. The cap sets a limit on the total regional emissions that must be met over a trading season. The cap is set at a level such that the pollutant of interest will be reduced to levels that are supposed to improve air quality to the appropriate standard. Setting the cap level correctly is critically important: too high and the environmental objectives won’t get met and too low and the market mechanism won’t work.

 There is a wrinkle for RGGI. Instead of a traditional cap and trade program it is a cap and auction program. Normally allowances are allocated to the affected sources based on some past historical performance metric. In RGGI allowances are sold off in quarterly auctions. The affected sources universally consider this a tax inasmuch as they have to pay for the allowances they need to operate. Seriously, no one is claiming that RGGI is going to have any impact on global warming but proponents can claim that they use the auction proceeds to fund all sorts of feel-good initiatives that in some cases actually do reduce CO2 emissions. I described my thoughts whether RGGI was a success here, here, here and here.

Natural gas has reduced emissions faster than anyone thought possible, making it necessary to actually increase emission allowances in 2017 for the obvious purpose of giving renewables at least a chance to catch up.

When the RGGI program was being implemented the forecasts of future generation and emissions assumed much higher gas prices which resulted in high coal unit usage and high CO2 emissions. As a result the cap was set high but the natural gas revolution made those estimates inappropriate. As a result when RGGI started the auction price of allowances was so low that proponents of the program were not getting as much money as they wanted.

There is a scheduled program review component in RGGI and during that process the existing caps were lowered significantly and future reductions were incorporated that are more ambitious than I believe is warranted. The RGGI states and environmental organizations believe that RGGI was the reason for most of the reductions and argued that because reductions had been so significant to date that lower caps were appropriate. However, they missed the point that the reductions were mostly due to reduced operations in the RGGI states and fuel switching from coal and residual oil to natural gas. RGGI had very little to do with it.

Renewables are not catching up much, if at all, because investments in them are dependent on Federal subsidies and, therefore, their potential is limited.

RGGI auction proceeds are supposed to be used to reduce emissions or provide ratepayer relief. The fact of the matter is that the record of RGGI investments actually reducing emissions is poor.   As Tom notes the potential is limited for further reductions based on RGGI’s own data.

Because of these facts, the opportunities to achieve meaningful reductions in greenhouse gases by rewarding investment in “compliance” entities are dissipating like a sunset and faster than the wind dies down in severe cold.

I did not adequately describe the terms “compliance entities” and “non-compliance” entities. Compliance entities are those fossil-fired generating units that have the compliance obligation to surrender a RGGI allowance for every ton of CO2 emitted. Non-compliance entities are those organizations that have purchased RGGI allowances as investments.

This means the Regional Greenhouse Gas Initiative is headed nowhere in terms of the strategy the public has been sold by the politicians; it is approaching a situation (if not already there) where it will have to reward investment in non-compliance entities such as natural gas fired power plants or fine these entities, which will then pass the costs onto consumers who will never know what hit them.

I agree that RGGI is headed nowhere but the problem is different than Tom described. The problem is that the non-compliance entities (think Morgan Stanley and other investment companies) now hold the majority of the RGGI allowances. The RGGI states reduced future allowances allocated to the auctions and their cap presumes that further reductions are possible when the fact is that most of the fuel switching has already occurred. As a result, there are not enough allowances for compliance entities to purchase at upcoming auctions in order to operate. Therefore they will have to go to the non-compliance entities and purchase their allowances if they want to run. This shortage will increase the price and the non-compliance entities will profit. However, the public will not get any benefit from the increased price of the non-compliance entity allowance sales because they only get benefits from auction proceeds.  In other words, the non compliance entities have already purchased the allowances so the higher price of the allowances due to profiteering will simply be passed on to consumers. Worse if the compliance entities are not able to get the allowances they need to run their only compliance option is to not run which could lead to reliability issues.

My final point is that this is uncharted territory for RGGI. No one knows how the market will react or what the prices on the market relative to auctions will be when this allowance shortage hits. Consumers in the RGGI states will be the guinea pigs for this experiment.

RGGI Emission and Allowance 2018 Status

This is a post on the status of emissions and allowances in the Regional Greenhouse Gas Initiative (RGGI). It is another in a series of posts on RGGI that discusses how RGGI has fared so far and what might happen in the future. The fact is that RGGI is edging towards uncharted territory where affected sources that have to comply with the regulations are going to have to get the allowances they need for compliance from investors.

I have been involved in the RGGI program process since its inception. Before retirement from a non-regulated generating company, I was actively analyzing air quality regulations that could affect company operations and was responsible for the emissions data used for compliance. After years dealing with RGGI I worry that whether due to boredom or frustration, that there is very little dissent to the program. It may be because, contrary to EPA and State agency rulemakings, RGGI does not respond to critical comments and rebut concerns raised by stakeholders. After years of making comments that disappear into a void, industry does not seem to think there is value to making comments. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Emissions

RGGI Annual CO2 Emissions lists the total CO2 emissions from the states currently in RGGI. After pretty consistent reductions over time last year there was a six million ton increase from 2017. Stay tuned to another post that looks into the emissions data in more detail. However, note that I have previously posted on the reductions to date which suggest that further reductions will be much more difficult than in the past.

Allowance Status

RGGI is a cap and auction program. Allowances are sold in quarterly auctions to anyone and the proceeds are supposed to be invested in programs that reduce CO2 or ratepayer impacts. RGGI states have modified the original auction allocations to reduce the number or bank of the allowances that have been purchased but not used yet because the original estimate did not account for the possibility that natural gas would supplant coal to the extent observed. Up to this point the affected sources or compliance entities have been able to purchase the allowances needed to cover emissions from auctions. This is going to change in the next couple of years.

RGGI relies on Potomac Economics to provide technical analyses. Frankly, my impression is that the purpose of those reports is to obfuscate and confuse rather than clearly show the status of the program. One of my biggest frustrations is that there is no summary status report and I have inconsistencies in my summary estimates. I have made a couple of guesses at the status of the number of allowances that are held for compliance purposes after the 2018 RGGI emissions are fully surrendered.

According to the Potomac Economics Secondary Monitoring Report for the 3rd quarter of 2018, there were 155 million allowances in circulation and 72 million were held for “compliance purposes”. According to the Potomac Economics Market Monitor Report for the fourth quarter of 2018 entities purchasing allowances for “compliance purposes” bought 77% of the 13,360,649 allowances sold. In RGGI Allowance Allocation Status End of 2018 I added the fourth quarter allowances to get 168 million allowances in circulation and 82 million allowances held for “compliance purposes”. RGGI-wide CO2 emissions were 72 million tons in 2018. Ultimately only 10 million allowances will be in the “compliance purpose” bank. In all of 2018 54 million allowances were auctioned and barring a major reduction in emissions the 10 million ton “compliance purpose” bank will be gone next year.

The Potomac numbers do not include other transfers to the allowance banks. I tried to calculate the allowance bank based on the RGGI allowance distribution reports. (Note that RGGI compliance periods are three years long.) In RGGI Compliance Period Allowance Allocations and Compliance Period Emissions I list the allowances in circulation at the end of 2017 (total allowances released less total emissions). Adding the allowances added this year gives a bank of 140.7 million. I used Potomac Economic’s estimate that 50% of allowances were for compliance purposes to get 70.4 million allowances. In 2018 CO2 emissions were 72.3 million tons so according to this approach compliance entities are already in debt to the non-compliance entities.

Conclusion

I cannot emphasize enough that RGGI is headed towards a situation where the affected sources will have to go to the non-compliance entities to get enough allowances to cover their emissions. If you recall the proceeds that RGGI receives from the auctions are supposed to be used to reduce emissions and provide ratepayer relief. Ideally, the added costs of this carbon tax are offset by those investments. Now, however, the investors will be able to charge whatever they want for the allowances and their profit will be covered by increased costs to the consumer. (In the interests of full disclosure I bought 11,000 allowances in 2018 and will profit from this situation.) In my opinion, affected sources should buy allowances as needed and never run without enough to cover current emissions.

 

If an affected source does not have enough allowances on hand to cover their current emissions they are faced with two issues. When a source bids into the market they prefer to know the price of allowances so they can price their bid appropriately but if they don’t have them they don’t know the cost. Worse would be the case where a facility assumes that they can get allowances but eventually find out none are available at any cost. In that case then they would be out of compliance and would face significant fines. The worst case scenario is that a facility does not have allowances in hand, cannot purchase what is needed and then declines to bid. While unlikely, that could lead to reliability issues because you cannot force an owner/operator to run knowing they are out of compliance without a whole lot of histrionics.

Finally, note that RGGI has closely guarded the ownership of allowances. The market monitoring reports name who has bid but does not list who owns what. Instead they list ownership by three categories:

  • Compliance-oriented entities are compliance entities that appear to acquire and hold allowances primarily to satisfy their compliance obligations.
  • Investors with Compliance Obligations are firms that have compliance obligations but which hold a number of allowances that exceeds their estimated compliance obligations by a margin suggesting they also buy for re-sale or some other investment purpose. These firms often transfer significant quantities of allowances to unaffiliated firms.
  • Investors without Compliance Obligations are firms without any compliance obligations.

In my opinion those categories are pretty broad. In a transparent program there would be examples of which company is in which category but we are left in a position where we have to hope they got the definitions right. Finally, note that investors without compliance obligations could also include those who want to hold allowances to prevent emissions. If that is the case for a significant fraction of investors, then the market is in trouble.

NYS Green New Deal Announcement Summary

Governor Cuomo recently announced the New York State Green New Deal a “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”. I think that the Governor and advocates for this agenda need to explain how this will work, how much it will cost and how much it will affect global warming before we are committed to this path.

This summary of the program is one of a series of posts on the New York State Green New Deal. Cuomo billed this as part of his 2019 Justice Agenda: “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”. There were 12 proposals in part 4 “Launching the Green New Deal” of this agenda. I reference my summary posts on each below and include my indented and italicized comments.

Components of the Green New Deal

Mandate 100 Percent Clean Power by 2040 – This will mandate that all electricity will be “carbon free by 2040.

In 1977 there was a blackout in New York City and the New York System Independent Operator now has a rule that requires 80% of generation to be provided in-City. In 2017 the daily energy needed for the peak hour period was 219,078 mWh. Because renewable energy is diffuse the area needed for that much renewable power is likely unavailable within the City. This could be a fatal flaw in this mandate and the State must develop a plan to confront this reality.

New York’s Path to Carbon Neutrality – The heads of relevant state agencies and other workforce, environmental justice, and clean energy experts will develop a plan to make New York carbon neutral.

The path re-establishes a Climate Action Council and mandates a plan to meet the goals. Presumably they will use existing programs as a template. If the New York Green New Deal were to rely on the “successful” RGGI program for the reductions proposed the State is looking at a cost of $35.2 billion.

A Multibillion Dollar Investment in the Clean Tech Economy that will Reduce Greenhouse Gas Emissions – There will be $1.5 billion in competitive awards to support 20 large-scale solar, wind, and energy storage projects across upstate New York.

The competitive awards announced in January 2019 total $1.5 billion and are supposed to provide more than 2 million tons of carbon reductions. Assuming that they really meant carbon dioxide for the 2 million tons that means 750 dollars per ton reduction cost. In 2015 NYS electric sector CO2 emissions were 32 million tons. If the New York Green New Deal were to rely on the NYSERDA competitive award process for those reductions the State is looking at a cost of $24 billion.

Expand NY Green Bank and Catalyze at Least $1 Billion in Private Capital – The NY Green Bank is a $1 billion investment fund designed to accelerate clean energy deployment and they will expand its charter.

In order to reach the 100% clean power goal by 2040 the plan doubles distributed solar deployment to 6,000 megawatts by 2025, up from 3,000 megawatts by 2023. If the Green Bank were to finance the deployment of 3,000 MW at the rate observed with their existing investments they would need over $2 billion. In 2015 NYS electric generation sector emissions were 32,000 tons. If the Green Bank was to finance the replacement of solar at the rate observed they would need over $41 billion.

 Chart a Path to Making New York’s Statewide Building Stock Carbon Neutral – There are plans for more energy efficiency investments.

New York State is the fourth most energy efficient state in the country now which is no small part due to investments already made which presumably improved the most efficiency at the lowest rate available. Given that the cost-effectiveness of future projects will be less the 20% further reduction goal is ambitious.

Direct State Agencies and Authorities to Pursue Strategies to Decarbonize their Investment Funds and Ramp Up Investment in Clean Energy – Commence a process to review and evaluate the feasibility and appropriateness of divesting from fossil fuels for agencies and authorities.

I think the most important investment strategy for the $240 billion dollars in New York funds should be economic rather than signaling virtue. The rationale for this mandate to divest is clear: divestment is not an investment strategy, or a way of putting direct economic pressure on energy companies. It is a political statement.

Increase Carbon Sequestration and Meet the U.S. Climate Alliance Natural and Working Lands Challenge – This will establish a carbon sequestration goal for our natural and working lands.

Based on results to date it is not clear how cost-effective these programs will be. However, the program that facilitates carbon sequestration in soil is a “no regrets” solution.

Create a Carbon-to-Value Innovation Agenda and Establish the CarbonWorks Foundry – This will create a Carbon-to-Value Innovation Agenda as a blueprint for the future of carbon-to-value technology as well as carbon capture, utilization and storage in New York.

The concept is to turn carbon dioxide into fuel and wasteful chemicals. While I am not a chemical engineer the idea that the waste products can be turned into a fuel without a whole lot of energy going back into the system seems a bit far-fetched. On the other hand the concept of using CO2 instead of sequestering it underground is appealing.

Deliver Climate Justice for Underserved Communities – The Green New Deal will help historically underserved communities prepare for a clean energy future and adapt to climate change by codifying the Environmental Justice and Just Transition Working Group into law and incorporating it into the planning process for the Green New Deal’s transition.

While no one argues that underserved communities should not be treated better, I am concerned that the direct costs of these programs will out-weigh any directed benefits. In my opinion the primary goal of the task force should be to keep electric energy affordable but it is not clear that is the first priority of this component of the plan.

Create a Fund to Help Communities Impacted by the Transition Dirty Power – This will provide funding to help communities that are directly affected by the transition away from conventional energy industries and toward the new clean energy economy

In my opinion this is an example of the political pandering of the Green New deal. If some block of voters is going to be disadvantaged then simply buy them off.

Develop Clean Tech Workforce and Protect Labor Rights – The Green New Deal will continue to require prevailing wage, and the State’s offshore wind projects will be supported by a requirement for a Project Labor Agreement.

In my opinion this is an example of the political pandering of the Green New deal. If some block of voters may benefit from this pork barrel spending then make sure they know there is pork available.

Make New York the National Hub for Offshore Wind and Deploy 9,000 Megawatts by 2035 -The Green New Deal will accelerate offshore wind progress in three specific areas: port infrastructure, workforce development, and transmission infrastructure.

According to the NREL’s 2017 Cost of Wind Energy Review, the levelized cost of energy of off-shore wind is over two and a half times more expensive ($124 per MWh vs $47 per MWh) than on shore wind. For the 9,000 MW of offshore wind mandated the estimated cost would be $6.3 billion.

 Conclusion

A recent opinion piece in the New York Times notes that relying entirely renewable power systems is much more expensive and still not practical than a system that incorporates nuclear, geo-thermal and fossil-plants. The research paper notes:

Whichever path is taken, we find strong agreement in the literature that reaching near-zero emissions is much more challenging—and requires a different set of low-carbon resources—than comparatively modest emissions reductions (e.g., CO2 reductions of 50%–70%). This is chiefly because more modest goals can readily employ natural gas-fired power plants as firm resources.

However the opinion piece claims that Cuomo’s Green New Deal did not mandate an all-renewables system. I agree that the plan accepts existing nuclear power but I do not believe there is any indication that existing fossil fueled power would be replaced by anything but renewables aside from a platitude that mentions carbon sequestration. The Cuomo administration has consistently delayed or disapproved fossil fuel infrastructure so I believe it is appropriate to assume that the 51,473,000 MWhr of electric energy produced by coal, oil and natural gas in 2017 would be replaced entirely by renewables in the Green New Deal.

This is the challenge that Climate Action Council must address. How will that electrical energy be replaced, how much will that cost and what effect will that have on the environment.

NY Green Deal: Mandate 100 Percent Clean Power by 2040

This is one of a series of posts on Governor Andrew M. Cuomo’s New York State Green New Deal. As part of his 2019 Justice Agenda he included a “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”.

Not surprisingly there are no details other than the announcement, no mention of potential costs, and no explanation how all this will affect any of the many impacts that he claims are caused by climate change. There is a proposal to provide the plan to make New York carbon neutral and I will blog on those plans as they become available. In the meantime this post discusses the language used to describe the proposal to mandate 100 percent clean power by 2040 in the New York Green New Deal.

In the following sections I list the text from the announcement and my indented and italicized comments follow.

As part of the Green New Deal, Governor Cuomo is proposing a mandate of 100 percent clean, carbon-free electricity in New York State by 2040, the most aggressive goal in the United States and five years sooner than the target recently adopted by California. The cornerstone of this new goal is an increase of New York’s successful Clean Energy Standard mandate from 50 percent to 70 percent renewable electricity by 2030. This globally unprecedented ramp-up of renewable energy will include:

Quadrupling New York’s offshore wind target to 9,000 megawatts by 2035, up from 2,400 megawatts by 2030

I addressed the offshore wind target in a different post.

Doubling distributed solar deployment to 6,000 megawatts by 2025, up from 3,000 megawatts by 2023

As a meteorologist I fail to see how solar this far north and in a climatic regime with as many clouds and as much snow as New York in general and near the Great Lakes in particular makes much sense. Furthermore a study by Ferroni & Hopkirk 2016 shows that after 25 years, solar panel farms in Germany & Switzerland produced only 82% of the energy required to manufacture, install, & maintain them. It also demonstrated that at this point in time (at current solar panel efficiency) latitude 35N (approximately the southern border Tennessee) is the solar energy break even line. After 25 years of operation, solar farms north of this line produce LESS energy than it takes to manufacture, install, & maintain them, while solar farms south of this line produce more. There is more discussion of this analysis and its conclusions here. In any event, I believe that adherents for the New York Green New Deal should explain how solar in New York is immune to these issues.

More than doubling new large-scale land-based wind and solar resources through the Clean Energy Standard

I hope that the State eventually provides a roadmap that quantifies which resources get which subsidies under which programs but I am not optimistic.

Maximizing the contributions and potential of New York’s existing renewable resources

I support this platitude but hope that this was part of the plan all along.

Deploying 3,000 megawatts of energy storage by 2030

None of the announcements for energy storage have included the amount of energy in MWh in their goals. Instead they always use MW or the power capacity to describe the projects. Because the amount of energy is the key parameter this suggests energy innumeracy on the part of the State’s politicians. I also note that I agree with those that believe that grid storage is impossible.

Achieving 100 percent carbon-free electricity will require investments in resources capable of meeting diverse demands throughout the state, as well as a substantial increase in cost-effective energy efficiency. Harnessing a complementary set of carbon-free energy resources will assure reliability and affordability for all New Yorkers as the electricity system is both modernized and optimized. To ensure that clean energy opportunities are available for those that need it most, as part of this nation-leading commitment, Governor Cuomo is directing the New York State Energy Research and Development Authority (NYSERDA), in concert with the Department of Public Service (DPS), to expand and enhance their Solar For All program and couple it with energy savings opportunities, increasing access to affordable and clean energy for low-income, environmental justice and other underserved communities.

I am not confident that renewables can ever supply enough energy to New York City to maintain reliability. Given that a blackout in the City is a bad thing this could be a fatal flaw. Consider that in order to prevent the situation that caused the 1977 New York City the New York Independent System Operator currently requires at least 80% of New York City’s electric generating capacity needs be met through in-City generation. The problem is that diffuse renewable generation needs space which is at a premium in the City. The State needs to show how they can possibly provide enough carbon-free electricity to cover peak generation. On the peak hour of generation in 2017 the load in the New York City zone was 10,671 MW. If the City were to rely on solar power to provide the load from the time that solar power added to the system until the next day you would need (219,078 MWh) and 80% of the total load would have to come from in-City or 175,262 MWh. I did a back of the envelope estimate of the solar and storage necessary to cover this peak in Table 1 New York City peak load generation with solar and storage. I used a solar hourly distribution curve for California in July which should be conservative to estimate hourly variation. I estimated the amount of solar needed by subtracting the daily solar output energy in MWh (daily sum of the Generation column) against 80% of the actual NYC load (the Limit column). I took a naïve approach and determined the necessary solar generation as the level that would eliminate any negative value in the Difference column. On the peak day there was a minimum positive difference of 10 MWh at hour 6 when the system would still rely on storage to provide power and determined that if there were 26,045 MW of solar capacity the needs could be met. That is a low estimate because there is no provision for clouds, battery charging times or charging efficiencies. Nonetheless, using a rule of thumb that 1kW needs 100 square feet of space that estimated capacity would need 629 square miles which is more than double the size of New York City.

This crude analysis is only meant to serve as an indication just how work has to be done to develop this plan. I think that the Governor and advocates for his agenda need to explain how this will work, how much it will cost and how much it will affect global warming before we are committed to this path.

 

NY Green Deal: Offshore Wind

This is one of a series of posts on Governor Andrew M. Cuomo’s New York State Green New Deal. As part of his 2019 Justice Agenda he included a “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”.

Not surprisingly there are no details other than the announcement, no mention of potential costs, and no explanation how all this will affect any of the many impacts that he claims are caused by climate change. There is a proposal to provide the plan to make New York carbon neutral and I will blog on those plans as they become available. In the meantime this post discusses the language used to describe the plan to make New York the national hub for offshore wind and deploy 9,000 megawatts by 2035 as part of the New York Green New Deal.

In the following sections I list the text from the announcement and my indented and italiczed comments follow.

New York is leading the nation on offshore wind, which, as an emerging clean energy industry in the U.S., has tremendous potential for both the energy sector and economic development in the state. Called for by Governor Cuomo and released in 2018, New York’s Offshore Wind Master Plan is the most comprehensive offshore wind strategy in the country and has charted the course for this energy resource to play a significant role in achieving a carbon-free electricity grid. In November 2018, New York issued its first major offshore wind solicitation for at least 800 megawatts, which will set the stage for large-scale development of this important resource and the economic advantages that come with it.

Although the course has been charted, aside from issuing a solicitation there really hasn’t been any implementation progress.

To ensure New York State is the focal point for offshore wind development and this growing industry, Governor Cuomo is proposing nearly quadrupling the State’s target for offshore wind deployment from 2,400 megawatts by 2030 to 9,000 megawatts by 2035, the most aggressive offshore wind goal in U.S. history.

The more relevant number is MWh or megawatt hour which is the measure of energy. New York State energy announcements usually report new facilities in MW or megawatts or power capacity. I believe this is mis-leading because a cursory comparison of this announcement’s 2,400 MW is close to Indian Point’s 2,311 MW capacity. However because wind energy is intermittent, the 2400 MW will only produce 8,977,000 MWh using National Renewable Energy Laboratory’s (NREL) 42.7 capacity factor while Indian Point produced 15,305,000 MWh.

 I used the NREL capacity factor to determine the energy produced.   According to the NREL’s 2017 Cost of Wind Energy Review, the levelized cost of energy off-shore wind is over two and a half times more expensive ($124 per MWh vs $47 per MWh). For the 6,000 MW of offshore wind mandated the estimated cost would be $4.174 billion.

To complement this bold statement of national and global leadership, Governor Cuomo is directing new actions, as part of the Green New Deal, to accelerate offshore wind progress in three specific areas: port infrastructure, workforce development, and transmission infrastructure.

Ports: Invest $200 million in New York port infrastructure to unlock private supply chain capital and maximize the long-term economic benefits to the state from the regional development of offshore wind. This multi-location investment would represent the nation’s largest infrastructure commitment to offshore wind and would solidify New York’s position as the hub of the burgeoning U.S. offshore wind industry.

Workforce Development: Establish a New York State Advisory Council on Offshore Wind Economic and Workforce Development and invest in an offshore wind training center that will provide New Yorkers with the skills and safety training required to construct this clean energy technology right here in New York.

Transmission: Initiate a first of its kind effort to evaluate and facilitate the development of an offshore transmission grid that can benefit New York ratepayers by driving down offshore wind generation and integration costs.

In order to get the off-shore wind power to market, we have to add $200 million for port upgrades, train workers at some cost, and build an off-shore transmission grid. The NREL estimate of over $4 billion does not cover all the costs of off-shore wind!

The development and adoption of offshore wind is a critical component of the transition to a clean energy economy and presents a major economic opportunity for New Yorkers, including the creation of thousands of high-quality jobs. With these new commitments, the New York will continue to lead in this exciting and developing field.

Denmark has offered to help New York’s offshore wind development. However, in 2016 the Danish government decided to abort the plans to build five offshore wind power farms, which were to stand ready by 2020.  At the same time, Denmark is also scraping its green energy tariffs and abandoning some of its climate goals. “Since 2012 when we reached the political agreement, the cost of our renewable policy has increased dramatically,” said Minister for Energy and Climate Lars Christian Lilleholt to Reuters.  The real lesson maybe to beware this source of renewable energy.

NY Green Deal: Make Building Stock Carbon Neutral

This is one of a series of posts on Governor Andrew M. Cuomo’s New York State Green New Deal. As part of his 2019 Justice Agenda he included a “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”.

Not surprisingly there are no details other than the announcement, no mention of potential costs, and no explanation how all this will affect any of the many impacts that he claims are caused by climate change. There is a proposal to provide the plan to make New York carbon neutral and I will blog on those plans as they become available. In the meantime this post discusses the plan announcement for a path to make New York buildings carbon neutral as part of the New York Green New Deal.

In the following sections I list the text from the announcement and my indented and italicized comments follow.

Chart a Path to Making New York’s Statewide Building Stock Carbon Neutral

Buildings – and the fossil fuels traditionally used to heat and cool them – are a significant source of energy-related carbon pollution. As such, Governor Cuomo has made the improvement of energy efficiency in buildings a major priority. The Governor’s New Efficiency: New York agenda, released on Earth Day 2018, contains a comprehensive portfolio of proposals and strategies to meet an ambitious new target of reducing on-site energy consumption by 185 trillion BTUs by 2025. In addition, Governor Cuomo launched RetrofitNY in 2016 to stimulate the development of an energy efficiency industry that can tackle the challenge of deep building retrofits that will enhance building performance, reduce energy usage, and improve the quality of life for low- and moderate-income New Yorkers.

The Green New Deal announcement lays out some specific goals. In order to be credible those goals should be quantified. For example, what is the starting point for on-site energy consumption? An initial guess could use the NYSERDA Patterns and Trends documents table 3-3a nys primarary consumption of energy by sector and assume that residential and commercial sectors represent “on-site energy consumption”. In 2016 residential sector energy consumption was 558 TBtu and commercial sector energy consumption was 379 TBtu for a total of 937 TBtu so a 185 TBtu reduction represents a 20% lower value.

In my opinion energy efficiency is a classic energy example of the Pareto principle or the 80:20 ratio which states that 80% of the effects come from 20% of the causes. For energy efficiency it means that you can get 80% of the available reductions at 20% of the cost of doing all the reductions. Consider the anecdote of insulating your home. Adding insulation in the attic gets you a big benefit and is relatively cheap. Adding insulation to the walls gets you less of a benefit but is more expensive. Replacing the windows and doors with more efficient ones is a big expense but doesn’t get that much of a reduction. Those are the easy energy efficiency projects and anything else is going to cost a lot and not get much of an improvement.

  Wallet Hub analyzed state energy efficiency (https://wallethub.com/edu/most-and-least-energy-efficient-states/7354/). Their conclusions are highlighted below[1]:

To identify the most energy-efficient states, WalletHub analyzed data for 48 states based on two key dimensions, including “home-energy efficiency” and “car-energy efficiency.” We obtained the former by calculating the ratio between the total residential energy consumption and annual degree days. For the latter, we divided the annual vehicle miles driven by gallons of gasoline consumed. Each dimension was weighted proportionally to reflect national consumption patterns.

In order to obtain the final ranking, we attributed a score between 0 and 100 to correspond with the value of each dimension. We then calculated the weighted sum of the scores and used the overall score to rank the states. Together, the points attributed to the two major categories add up to 100 points.

Home-Energy Efficiency – Total Points: 55

Home-Energy Efficiency = Total Residential Energy Consumption per Capita / Degree-Days

Car-Energy Efficiency – Total Points: 45

Car-Energy Efficiency = Annual Vehicle Miles Driven / Gallons of Gasoline Consumed

The Wallethub rankings are listed in Table 1 2015 energy efficiency RGGI state rankings. New York ranked number one. This suggests to me that New York has already implemented most of the easy low hanging fruit of the available energy efficiency opportunities.

 Because buildings are one of the most significant sources of greenhouse gas emissions, Governor Cuomo is announcing a comprehensive strategy as part of the Green New Deal to move New York’s building stock to carbon neutrality. The agenda includes:

Advancing legislative changes to support energy efficiency including establishing appliance efficiency standards, strengthening building energy codes, requiring annual building energy benchmarking, disclosing energy efficiency in home sales, and expanding the ability of state facilities to utilize performance contracting.

All these requirements add to the regulatory burden for doing business in New York and it is not clear how much value for carbon reduction they will get.

Directing the Public Service Commission to ensure that New York’s electric and gas utilities achieve more in scale, innovation, and cost effectiveness to achieve the state’s 2025 energy efficiency target, especially through their energy efficiency activities and clean heating and cooling programs, and that a substantial portion of new energy efficiency activity benefits low- and moderate-income New Yorkers.

All these efforts disguise costs. The Public Service Commission will require that these programs be included in rate case submittals and the costs will be passed on to the customers. There is no unaffiliated voice for keeping consumer costs low vis-à-vis climate goals and myriad special interests involved in rate cases to fund these programs. Moreover the utilities have no reason to question these costs because it is a pass through.

Directing State agencies to ensure that their facilities lead by example through energy master planning, net zero carbon construction, LED retrofits, annual benchmarking, and by meeting their electricity needs through clean and renewable sources of energy, specifically including the exploration of clean energy solutions at State Parks and at State facilities within the Adirondack Park to dramatically reduce emissions, create jobs, and increase resiliency.

We will have to wait to see what this means.

Developing a Net Zero Roadmap to articulate policies and programs that will enable longer-term market transformation to a statewide carbon neutral building stock.

We will have to wait to see what this means.

Together, these bold actions will establish New York as a global leader on environmentally sustainable buildings while catalyzing major economic development opportunities and helping to create good jobs.

It is not clear to me what benefits accrue to the citizens if New York is a global leader on environmentally sustainable buildings.

[1] Wallethub reports that “Data used to create these rankings were obtained from the U.S. Census Bureau, the National Climatic Data Center, the U.S. Energy Information Administration and the Federal Highway Administration.”

New York Green Deal: Strategies to Decarbonize Agency Investment Funds

This is one of a series of posts on Governor Andrew M. Cuomo’s New York State Green New Deal. As part of his 2019 Justice Agenda he included a “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”.

Not surprisingly there are no details other than the announcement, no mention of potential costs, and no explanation how all this will affect any of the many impacts that he claims are caused by climate change. There is a proposal to provide the plan to make New York carbon neutral and I will blog on those plans as they become available. In the meantime this post discusses the language used to describe the mandate for New York agencies and authorities to study strategies to decarbonize their investment funds and invest in clean energy as part of the New York Green New Deal.

In the following sections I list the text from the announcement and my indented and italicized comments follow.

Direct State Agencies and Authorities to Pursue Strategies to Decarbonize their Investment Funds and Ramp Up Investment in Clean Energy

In 2018, Governor Cuomo called on the New York Common Fund, which manages over $200 billion in retirement assets for more than one million New Yorkers, to adopt a serious and responsible plan for decarbonizing its portfolio. Over the past year, the Governor has worked with the Office of the Comptroller to establish an advisory panel of experts to develop a decarbonization roadmap and guide the Common Fund toward investment opportunities that combat climate change.

I am guessing but I think that the plan to decarbonize the portfolio of the State agencies is publicly intended to publicize and signal the reality of climate change and change the economics of the fossil energy industry. It seems to me that rather than publicizing the issue for the unaware people in New York it is really intended to cater to the environmental activists who want to signal the virtue of New York State. The economics of the fossil industry will unlikely be affected: “Sin stocks”, such as tobacco shares, get a small discount because many investors will not touch them. But the main effect of this is that those who buy the stocks earn better returns. There is plenty of low-cost, environmentally insensitive capital available for energy companies that need it.”

 I am not going to bother doing a detailed comparison of the long-term financial viability of investment opportunities that combat climate change relative to the fossil assets but it seems to me that I have heard about more renewable company failures than fossil company failures. Given that renewables appear to be dependent upon subsidies suggests to me that their long term investment prospects are not that good. Investing in those stocks is yet another subsidy.

As part of the Green New Deal, Governor Cuomo is taking the next step, by directing State authorities, public benefit corporations, and the State Insurance Fund, which collectively hold approximately $40 billion in investments, to commence a process to review and evaluate the feasibility and appropriateness of divesting from fossil fuels. To scale up investment in renewable energy, green infrastructure, and climate solutions, agencies and authorities will also work to educate plan administrators and investment consultants regarding investment opportunities in the clean energy sector.

I think the most important investment strategy for the $240 billion dollars in New York funds should be economic rather than a signaling virtue. The rationale for this mandate to divest is clear: divestment is not an investment strategy, or a way of putting direct economic pressure on energy companies. It is a political statement.