Status of Climate Change Science October 2019

Several recent blog posts have come to my attention that I want to pass on to readers of this blog because all three make good points and, ultimately justify a pragmatic approach in my opinion.  I have summarized them below but recommend that you read them all in their entirety.

Judith Curry argues that the science does not support the claims that climate change in an existential threat.  I believe it is safe to say that Cliff Mass is more worried about the threats of climate change but makes the point that there is an active group in the climate debate, “mainly on the political left, that is highly partisan, anxious and often despairing, self-righteous, big on blame and social justice, and willing to attack those that disagree with them” that he believes may in the end do more harm than good.  Finally, Larry Kummer offers suggestions that could be implemented today with widespread support from most of society.

Judith Curry writing on her Climate Etc blog posted her response to a reporter’s questions about the current state of climate limits and timelines.  The reporter asked about the deadlines (e.g., the 12 years to act) currently in the news. She concluded:

Bottom line is that these timelines are meaningless.  While we have confidence in the sign of the temperature change, we have no idea what its magnitude will turn out to be.  Apart from uncertainties in emissions and the Earth’s carbon cycle, we are still facing a factor of 3 or more uncertainty in the sensitivity of the Earth’s climate to CO2, and we have no idea how natural climate variability (solar, volcanoes, ocean oscillations) will play out in the 21st century.  And even if we did have significant confidence in the amount of global warming, we still don’t have much of a handle on how this will change extreme weather events.  With regards to species and ecosystems, land use and exploitation is a far bigger issue.

Cleaner sources of energy have several different threads of justification, but thinking that sending CO2 emissions to zero by 2050 or whenever is going to improve the weather and the environment by 2100 is a pipe dream.  If such reductions come at the expense of economic development, then vulnerability to extreme weather events will increase.

There is a reason that the so-called climate change problem has been referred to as a ‘wicked mess.’

Cliff Mass has his own blog on weather and climate.  He recently posted on the Real Climate Debate.  The point of his post was that there are two groups of people active in the climate change debate covered by media and politicians.  He defines the two groups as the ACT group (Apolitical/Confident/Technical) and the the ASP group (Anxious, Social-Justice, Partisan).  The ACT group thinks that global warming is a technical problem with technical solutions while the ASP group see that social change is necessary to deal with global warming and that will require re-organizing society.  His bottom line:

Progress on climate change is being undermined by the efforts of the highly vocal, partisan, and ineffective ASP group.  They are standing in the way of bipartisan action on climate change, efforts to fix our forests, and the use of essential technologies.   They are a big part of the problem, not the solution.

In contrast to the ASP folks, the ACT group generally tries to stay out of the public eye, quietly completing the work  needed to develop the technologies and infrastructure that will allow us to mitigate and adapt to climate change.  In the end, they will save us.  That is, if the ASP folks don’t get in their way.

Larry Kummer writing at the Fabius Maximus blog recommended issues that he hopes a presidential candidate can adopt that will address serious threats. One of the issues he included was Climate Change.  The only disagreement I have with his recommendations concerns conversion to non-carbon-based energy. I think this needs to be included but would prefer that the emphasis be on R&D to find alternatives that are cheaper than fossil fuels.  Until that happens I believe that Roger Pielke Jr.’s Iron Law of Climate Policy will make implementation impossible.  His “iron law” simply states that “while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits”.  Larry’s recommendations are:

   “We don’t even plan for the past.”
— Steven Mosher (member of Berkeley Earthbio here), a comment posted at Climate Etc.

We are locked into two camps, with a large confused mass between the climate extremists and those who deny that global warming is a threat. The resulting gridlock leaves us vulnerable to the inevitable repeat of past extreme weather and the effects of the continuation of the two centuries of warming (from a combination of natural and anthropogenic factors). We can continue to do almost nothing, waiting for one side to stampede the American public into acquiescence – or for the weather to decide for us. Or we can immediately take smaller but still effectual steps. I gave these recommendations six years, and they remain sound today. They could command popular support.

        1. Increased government funding for climate sciences. Many key aspects (e.g., global temperature data collection and analysis) are grossly underfunded. But this research should be run with tighter standards (e.g., posting of data and methods, review by unaffiliated experts), just as we do for biomedical research – and for the same reason, to increase its reliability.
        2. Fund a review of the climate forecasting models by a multidisciplinary team of relevant experts who have not been central players in this debate. Include a broader pool than those who have dominated the field, such as geologists, chemists, statisticians and software engineers. This should include a back-test of the climate models used in the first four Assessment Reports of the IPCC (i.e., run them with forcing data through now, and compare their predictions with actual weather). This will tell us much (details here).
        3. We should begin a well-funded conversion in fifty years to mostly non-carbon-based energy sources. We need not wreck the economy or defund defenses against the many other threats we face. This is justified by both environmental and economic reasons (see these posts for details). As we learn more about climate change, this program can be accelerated if necessary.
        4. Begin more aggressive efforts to prepare for extreme climate. We’re not prepared for repeat of past extreme weather(e.g., a major hurricane hitting NYC), let alone predictable climate change (e.g., sea levels climbing, as they have for thousands of years).

Conclusion

My pragmatic take based on these posts.  Climate change is an extraordinarily difficult problem to understand but the extremely bad projections are very unlikely.  Unfortunately those worst-case projections have the attention of a segment of society that is convinced otherwise and their passion may make reasonable and no regrets responses impossible.  Because we don’t understand natural variability well enough to pick out the small signal of human-caused global warming and, more importantly because the current alternatives to will be extremely expensive we need to monitor the climate better, focus our climate research on results and natural variability, develop a research program to develop alternative to fossil fuels that are cheaper than they are, and finally develop resiliency to observed extreme weather.

RGGI Investment Report for 2017

In October 2019 the Regional Greenhouse Gas Initiative (RGGI) released their annual Investments of Proceeds update.  This post compares the claims about the success of the investments against reality.

I have been involved in the RGGI program process since its inception.  I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. 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.

Background

RGGI is a market-based program to reduce greenhouse gas emissions. It is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector.  According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.”

Released in October 2019, The Investment of RGGI Proceeds in 2017 report tracks the investment of the RGGI proceeds and the benefits of these investments throughout the region. According to the report, the lifetime benefits of RGGI investments made in 2017 include:

      • 9 million MWh of electricity use avoided
      • 6 million MMBtu of fossil fuel use avoided
      • 3 million short tons of CO2 emissions avoided

The report’s press release quotes Ben Grumbles, Secretary of the Maryland Department of the Environment and Chair of the RGGI, Inc. Board of Directors: “The 2017 report shows why RGGI is a climate leader globally and nationally, not only cutting emissions in half but generating revenues to strengthen local economies and communities.” Katie Dykes, Commissioner of the Connecticut Department of Energy and Environmental Protection and Vice Chair of the RGGI, Inc. Board of Directors said “RGGI states’ investments accelerate clean energy, reduce climate risk, and improve lives”.  Bruce Ho at the National Resources Defense Council blogged that the report “confirms that RGGI is a tremendous success story whose benefits continue to grow, and it shows how, in the absence of national leadership, states are forging ahead to protect our health, environment, and economy from the worst impacts of climate change.”

As I will show below, I disagree with these assertions of success.  I believe that the report mis-characterizes some of the numbers relative to the value of the program as an emission reduction approach.  This is because they present “lifetime” benefits of the investments.  Everyone is talking about emissions reductions from some annual value, usually 1990.  In order to determine effectiveness to meet those goals the only benefits that count are annual reductions due to RGGI.  While it may be appropriate to document the lifetime dollar savings for energy efficiency, I am convinced that using lifetime values for any other parameter is bogus.

Emissions Reductions

In the first year of the RGGI program, 2009, the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont emitted 123,880,601 tons of CO2.  This report was for 2017 and those states emitted 66,349,058 tons of CO2 so emissions the emission reduction was 46% which is close enough to half to accept the claim.  However, the real question is why did the emissions go down.  I believe that the real measure of RGGI emissions reductions success is the reduction due to the investments made with the auction proceeds.

The report does not provide the annual RGGI investment savings values accumulated since the beginning of the program.  In order to make a comparison to the CO2 reduction goals we have to sum the values in the previous reports to provide that information.  The table Accumulated Annual Regional Greenhouse Gas Initiative Benefits lists the annual avoided CO2 emissions generated by the RGGI investments from three previous reports as well as the lifetime values.  The total of the annual reductions is 2,818,775 tons while the difference between total annual 2009 and 2017 emissions is 57,531,543 tons.  The RGGI investments are only directly responsible for 5% of the total observed reductions!

Cost Efficiency

In order to argue that RGGI emission reduction programs are a good investment relative to the expected societal cost of CO2 emissions the Obama Administration developed a value for the social cost of carbon.  This parameter was developed to estimate the cost of the long-term (that is to say hundreds of years) damage done by a ton of carbon dioxide (CO2) emitted today. This dollar figure also represents the benefit of a CO2 reduction. I have posted on some of the issues with this parameter but for the purposes of this post you need to know that the values range widely depending on assumptions.  For example, if you use a discount rate of 3% and consider global benefits like the Obama-era Environmental Protection Agency (EPA) did then the 2020 SCC value is $50.  On the other hand, the current Administration EPA SCC value for SCC is $7 for a 3% discount rate and $2 for a 5% discount rate that represents only benefits to the United States.  The Institute for Policy Integrity report “Expert Consensus on the Economics of Climate Change” projected a higher 2020 SCC value of ~$140 based on a survey of experts.  A 2015 paper in Nature Climate Change “Temperature impacts on economic growth warrant stringent mitigation policy” suggest that the SCC value should be $220.

The Accumulated Annual Regional Greenhouse Gas Initiative Benefits table lists the data needed to calculate the RGGI CO2 reduction cost per ton.  From the start of the program in 2009 through 2017 RGGI has invested $2,527,635,414 and reduced CO2 2,818775 tons annually.  The result, $897 per ton reduced, is four times greater than the highest SCC value and two orders of magnitude greater than the current EPA SCC value for United States benefits.

Conclusion

The fact is that for policy purposes the annual reductions from RGGI have to be considered because that is the “apples to apples” comparison.  I have to believe the reason why the RGGI investment reports no longer report the accumulated annual benefits and only report the lifetime benefits is because the values appropriate for determining the effectiveness of this program as a control program reflect so poorly on the program.  Reductions of CO2 directly attributable to investments made from the auction proceeds only total %5 of the observed CO2 reductions from 2009 to 2017.  Those poor results combined with $2.5 billion investments costs result in a nearly $900 cost per ton of CO2 reduced.  That value far exceeds the social cost of carbon value contrived to prove the value of CO2 reductions.

Analysis Group “Potential New Carbon Pricing in the NYISO Market” Presentation October 2019

After nine months without posting on the New York State Carbon Pricing Initiative some things have come up that have led to posts as the initiative relates to New York’s Climate Leadership and Community Protection Act (CLCPA).  I am motivated to submit comments and prepare blog posts on the carbon pricing initiative so that there is at least one unaffiliated critical voice that has an understanding of the basis of the rationale for a carbon price and understands some of the complexities associated with implementing such a program. New York State energy planning is trying to choose between many expensive policy options like pricing carbon in the electric sector while at the same time attempting to understand which one (or what mix) will be the least expensive and have the fewest negative impacts on the existing system. If they make a good pick then state ratepayers spend the least amount of a lot of money, but if they get it wrong, the State will be left with lots of negative outcomes and even higher costs for a long time.

At the time of this writing in October 2019, the New York Independent System Operator (NYISO) carbon pricing initiative is being addressed by internal working groups without the opportunity for public input.  On October 3, 2019 the Market Issues Working Group, Installed Capacity Working Group, and Price Responsive Load Working Group Meeting included a presentation by the Analysis Group entitled “Potential New Carbon Pricing in the NYISO Market”.  This post addresses that presentation.

Background

The Analysis Group was hired by the NYISO to examine potential economic impacts of the proposed carbon-pricing mechanism for NY’s wholesale power markets.  In the latest round of work conducted without the public input component, they were supposed to evaluate the latest round of modeling impacts and incorporate other economic considerations.  The enactment of the CLCPA in the summer of 2019 required changes to their approach and, in fact, the entire premise of the analysis.  It has changed from whether New York would pursue aggressive goals for reducing carbon emissions and do so through administrative and other mechanisms, to how New York will best accomplish its goals and meet the CLCPA mandates for reducing GHG emissions in the power sector and in the economy at large.

The report notes that the different premise fundamentally changed the nature of the study.  Now it examines “how NYISO’s proposed carbon-pricing mechanism can help the State meet its new statutory requirements for decarbonizing the electric system through efficient market design and at the lowest cost, and how New York’s wholesale competitive electric markets can help the state achieve its climate goals more broadly, efficiently, and effectively.”

Presentation

The presentation at this meeting was a typical power point slide deck.  The summary for policy makers, full report and technical appendix will be made available later this month.  The presentation itself included a list of fourteen key findings that I will address below.

  1. New York has the strongest set of climate policies in the U.S

The basis for this finding is the passage of the CLCPA that includes “a requirement for the state to eliminate greenhouse gas (GHG) emissions from all man-made sources in New York by 2050”.  The CLCPA “codifies a mandate for the electric system to rely on renewables for 70 percent of supply by 2030 and on zero-emitting resources for 100 percent of supply by 2040”. To the extent that New York now has bragging rights I agree.  However noble the intent, the fact is that no one has proposed a plan to get to a 100% zero-emitting electric system supply by 2040.  This presentation glibly assumes that these goals can be met with no caveats about the difficulties of this task.

  1. New York State has long been a policy leader

This slide is thinly veiled cheer-leading.  Their basis for supporting this leadership is this: “Considering that New York’s economy accounts for one out of every 200 tons of energy-related carbon dioxide (CO2) emitted anywhere in the world, the Act’s new commitments represent a significant action to reduce and mitigate the costly impacts of global climate change”.  Frankly, I was surprised at that number so I did some checking.  The World Resources Institute listed global CO2 emissions since 2010.   In 2016, the last year that the NYSERDA Patterns and Trends document has New York State total CO2 emissions data, the world emissions total was 35,700 million metric tons and NY’s emission total was 167 million metric tons which works out to one out of every 214 tons, close enough.  However, what was not mentioned was that between 2016 and 2017 global emissions increased 500 million metric tons – three times the NY total and between 2017 and 2018 global emissions increased 900 million metric tons – over five times the NY total.

  1. This work will not be easy

This statement is certainly true.  The slide concludes: “To keep these costs as low as possible, New York will need to draw on the long and successful history of market-based policies and pursue every effective tool at its disposal”.  Here is the problem.  There is no consideration of why previous market-based policies were successful.  I believe that switching to a fuel that was not only lower polluting, but as cheap or cheaper, was the primary cause for the success of the EPA Acid Rain program and to whatever success can be claimed for the Regional Greenhouse Gas Initiative (RGGI).  The problem is that the opportunities for fuel switching are used up.  Reductions in New York’s future will have to increase the cost of energy because future reductions will have to displace a cheaper source of energy.  I should also note that the premise that carbon pricing is “an effective tool” is an assumption, particularly in the context of this proposal.  The theory of carbon pricing is that an economy wide program covering as many jurisdictions as possible will provide incentives to make the transition more efficiently than other approaches.  This proposal is for one jurisdiction and one energy sector.  It is not clear how the program can deal with all the interface issues that causes.

  1. The CLCPA envisions using an array of measures

This statement is necessarily true.  The slide also notes that the CLCPA “anticipates putting measures in place as soon as possible”.  I think this is a prescription for problems.  This initiative is roaring ahead without the time and effort to develop a feasibility study, an implementation plan and outside critical review.  Given the scope and potential impacts to New York society that seems rash.

  1. The CLCPA envisions a big role for the electric grid

“The provisions to expand the role of electricity into transportation and buildings will go hand in hand with the Act’s requirements that the state’s electric system eventually eliminate its carbon emissions by 2040.”  I cannot over-emphasize that the CLCPA is legislation that did not include provisions to develop a plan to see if this goal is feasible.  The Brattle Group recently released a report entitled “Achieving New England’s Ambitious 2050 Greenhouse Gas Reduction Goals Will Require Keeping the Foot on the Clean Energy Deployment Accelerator”.   That report expects that the New England electrical load will need to double to meet an 80% reduction by 2050 so that “beneficial electrification” will CO2 displace emitting sources.  I see no reason why New York should not expect an even bigger increase in load in order to eliminate GHG emissions from all man-made sources in New York by 2050.  How much renewable energy will be needed, where does it have to be located, and how much will all this cost are all reasonable unresolved questions.

  1. New York has a home-grown policy proposal: a carbon-pricing mechanism

“NYISO can unleash the power and creativity of market forces through adoption of a carbon price in the state’s wholesale electricity market.  In fact, if NYISO were a state agency (which it is not), it would be obligated under Sections 7 and 8 of the Act to contribute to achieving the statewide GHG emissions limits, and adoption of a carbon price would be a natural response to such a mandate.”

The last I checked the NYISO was supposed to be independent.  Until such time as the NYISO or the State has come up with a feasibility study showing that the aspirational goals of the CLCPA can be met without endangering the goals of safe, adequate, and reliable service at just and reasonable rates, I think that it is premature to adopt a carbon price just because of this mandate.  Only when there is a plan can we really analyze how the carbon-pricing mechanism will work for New York.

  1. A NYISO carbon price can help deliver NY’s clean-energy transition in faster, cheaper, more reliable, more efficient, and more creative ways

“NYISO and key stakeholders have already developed a carbon-pricing proposal that—once in place—can send positive signals to encourage early action, consistent with the Act’s intent.”  I do not dispute that the carbon-pricing proposal can send a price signal.  However, I have seen no evidence that price signal from the proposal will actually send a strong enough signal to provide all the benefits suggested.  For example, according to the NYSERDA Patterns and Trends document in 2016 the electric sector emitted 27.7 million metric tons of CO2.  At a social cost of carbon value of $50 the carbon price initiative revenues would be $1.386 billion.  At the same time the CLCPA was signed, Governor Cuomo “executed the nation’s largest offshore wind agreement and the single largest renewable energy procurement by any state in U.S. history – nearly 1,700 megawatts -with the selection of two offshore wind projects”.  According to the Electricity Market Module chapter of the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2019 the New York region cost per kW is $8,380.  This means that the “overnight capital costs” of the two announced offshore projects (1,696 MW) will cost $14.212 billion.  Is an indirect price signal that is less than 10% of the cost of just these two projects amongst the many more that will be required really going to spur investments?

The second slide with the same title goes on to say that the price will also “help retain existing generating units with zero or low carbon emissions in operation as long as safely possible”.  While it surely cannot hurt, I again wonder if this is strong enough a signal.

  1. A carbon price will position private investment and operations in the direction of State goals

“Since 2000, private power companies and public power authorities have added nearly 13,000 MW of new power-production capacity (which now equals more than one-third of the capacity on today’s NYISO system). Most of these more-modern and more-efficient power plants have located in downstate New York where most of the state’s power consumption occurs, and where the operation of competitive and efficient markets minimizes production costs and investment risks for the state’s consumers of electricity.”  The report claims that the carbon price will incentivize even more investment where it is needed.  I cannot argue with that but the record shows that investment is occurring where it is needed anyway.  Is this untried theoretical approach needed?

  1. A carbon price in NYISO markets creates synergy between the state’s wholesale electricity market design and the Act’s GHG-reduction targets

The presentation claims “Adoption of a carbon price would help to send efficient price signals to market participants about the value of clean energy resources, and would establish an electric system strongly aligned with the goals of the Act.”  I don’t question the theory and it makes sense that this is an added incentive.  The real issue is whether the social cost of carbon price adder provides a strong enough signal to create “synergy”.

  1. A carbon price can work hand in hand with other policies to amplify innovation in clean-energy products and services, the control of air pollution, investment in advanced energy infrastructure, and improvements in public-health outcomes

I think this argument is weak.  The unresolved question is whether the social cost of carbon price indirect cost adder will be strong enough to provide more incentives for clean energy than direct subsidies.  I have analyzed the results of RGGI investments in New York and it appears to me that direct subsidies reduced emissions more effectively than indirect subsidies.  A carbon pricing scheme is the ultimate indirect approach.  If it covers the entire energy sector, I think this effect will be reduced but we simply don’t know.

  1. There will be out-of-pocket costs to transition NY’s energy economy

“Certainly, it will be difficult to achieve the goals of the Act without incurring costs”.  This is a big understatement.  This is the biggest unknown for New York’s “strongest set of climate policies”. How can anyone know what the costs will be until we have a plan how the goals will be met.  The relevant question for the carbon pricing initiative is whether it is worth the risk trying to implement a theoretical solution at the same time all these other unresolved plans are developed.

The presentation goes on to say:

“New York policy makers have decided, at least implicitly in the findings of the Act, that the real costs of climate change are significant enough to warrant urgent, aggressive action to transition the state’s economy away from fossil fuels.”  The legislative approach ignores numbers.  If, as I believe is likely, the cost of this transition exceeds the social cost of carbon what is the value of urgent, aggressive action?  We won’t know until there is a plan.

“The Act is premised on policy makers’ recognition that New Yorkers are already experiencing hardships and real economic costs—in the form of air pollution, harm to public health (especially for vulnerable populations), damage to property and critical infrastructure, declines in fish populations, and injury to key industries like ‘agriculture, commercial shipping, forestry, tourism, and recreational and commercial fishing’.”  This is an emotional rather than quantitative argument because the potential economic costs and benefits have not been quantified.  I believe it is appropriate for an independent organization to make this claim.

“The Act seeks to reduce and mitigate even worse impacts from a changing climate by requiring the actions the state will undertake to reduce GHG emissions.”  The state has never quantified the expected reduction and mitigation of worse impacts.  The reality is that it is inappropriate to expect that there will be any alleged impacts when the reduction in global warming potential cannot be measured if the State manages to eliminate CO2 emissions.

  1. The Act is still new.

“None of the prior studies that have modeled consumer cost impacts from a carbon price in NYISO markets reflects the timing and depth of changes that will be needed in NY’s electric system under the Act.”   At the risk of repeating myself again, if there is not plan then we cannot calculate consumer cost impacts.  The slide goes on to say “we observe that various studies to date indicate that a carbon price will lead to billions of dollars of positive economic benefits”.  Rather than argue about the value of the alleged benefits I will simply note that it is not clear why this report advocates for the rationale for the program.

  1. A carbon price will help move NY’s clean-energy economy forward in ways that are hard to predict

“Just as we are unable to quantify the actual costs to consumers of New York’s transition to a lower-carbon electricity system and lower-carbon economy, we are unable to quantify the actual costs (or net benefits) of adding a carbon price into NYISO’s market.”  Even if the theory works out, there significant logistical implementation issues.  The possibility that there may be dis-benefits, unanticipated problems and negative unintended consequences is ignored.

“Yet we strongly expect—based on the efficiencies achieved in electricity pricing since the start of competitive wholesale electricity markets, and on the similarly successful history of SOx and NOx emissions pricing in electricity markets—that NY’s economy and consumers will benefit from the operation of a carbon price to internalize into market prices the costs of carbon emissions alongside the deployment of myriad other public policies aimed at advancing the state’s energy transition.”  Because of fundamental differences between control options the success of historical SOx and NOx emissions pricing is no guarantee of future performance of a different market approach for CO2.

  1. Powering more of NY’s economy on electricity will help lower the costs of reducing GHG emissions from buildings and vehicles, compared to other approaches

In order to further justify their approach the report states: “This positioning of the electric system to help lower carbon emissions in the economy is consistent with the academic literature which strongly suggests that an electric system comprised of diverse, zero-carbon supplies coupled with an economy that is more reliant on electricity increases the possibility of significantly reducing GHG emissions at lower costs than other approaches.”  I agree electrification is probably the cheapest reduction approach for economy-wide GHG emissions.  The questions that remain are how much will the approach cost and how will it be implemented?

Conclusion

The report concludes with 14 outcomes that the authors believe provide incremental value for the NYISO carbon-pricing mechanism.  I don’t necessarily disagree with any of them.  The problem is the matter of degree.  I have seen no evidence that the price signal will be strong enough to drive investments.  For example, this initiative certainly will not be a dis-incentive for innovation but will it provide enough value to be worth the risks.

I describe a number of potential issues with the carbon pricing initiative in this post.   Among the implementation issues are the requirement to track CO2 emissions not only within the state but also from outside sources and reporting requirements that are incompatible with existing regulations. The carbon price will generate over a billion dollars.  In theory the money will flow where and reward who it is supposed to but there could be issues such as getting back the money so that it does not negatively impact consumers. The biggest unresolved question is whether the social cost of carbon signal proposed for this initiative will be strong enough to produce any of the claimed benefits.  No one has addressed that to date.

Finally, I believe that there is one over-arching issue that dictates caution and delay.  The regulations were written without a feasibility requirement.  Until such a study has been done so we have a planning scenario for the amount of renewable power needed, the amount of storage needed to back the intermittent renewable power up and the amount of transmission needed to move the diffuse renewable power to where it is needed, I don’t believe we should be assuming that a carbon price approach will be the best way to pay for it.  Therefore, it only seems logical to delay implementation until you know what you are going to do.

Can Carbon Pricing Support the New York CLCPA

It has been a long time since I have posted anything about the New York State Carbon Pricing Initiative.  A couple of recent events precipitated my desire to do another post especially as it relates to New York’s Climate Leadership and Community Protection Act (CLCPA).  This post describes my concerns with carbon pricing in general and the New York proposal in particular.

Reason to Post

I am posting because of two recent items.  According to Marie French in Politico’s New York Energy September 18, 2019 edition:

“The state’s top utility regulator said Gov. Andrew Cuomo’s administration continues to await evidence on whether carbon pricing offers a better way to achieve New York’s energy policy goals before offering a verdict on the proposal’s fate. Public Service Commission Chairman John Rhodes spoke to a gathering of energy industry executives at the Independent Power Producers of New York’s annual fall conference at the Gideon Putnam. He was asked head-on about the administration’s position on carbon pricing and reiterated the wait-and-see tack taken by policymakers thus far. “When carbon pricing was first proposed, we were interested and as it’s been shaped and subjected to analysis we have remained interested,” Rhodes said. “But from the very beginning we stated the basis on which we would be interested … which is as long as it’s a more effective instrument of state policy.” The New York Independent System Operator (NYISO) has been grappling with how to implement carbon pricing since a process was kicked off by Rhodes and then-NYISO leader Brad Jones in August 2017. NYISO has indicated it doesn’t plan to take a vote on the proposal without support from the Cuomo administration, and the state would have to set the price for carbon under the scheme.”

The other item is a video entitled How carbon pricing can help support the CLCPA posted by the NYISO on August 14, 2019.  The video features NYISO principal economist Nicole Bouchez who explains “how injecting a “social cost of carbon” into wholesale electricity markets provides an efficient dispatch mechanism for selecting energy resources with the lowest emissions. This offers the state another tool for achieving its aggressive carbon reduction goals.”

It sounds to me like the Administration is nervous about this approach and so won’t make a commitment.  Bouchez who has spent the last 18 months or so developing the proposal is lobbying for its use.  I have not been following the proposal this year because my comments to the NYISO during their development phase last year were ignored and this year it went to a different phase with a different committee that does not even allow comments from outside parties.  I have plenty of other things to do to so wasting my time commenting on this topic to an organization that ignores comments was not a priority. I will post once again on this topic for your edification.

New York Carbon Pricing

In its simplest form, the carbon pricing initiative would add a carbon cost adder to all electric generation sources in New York.  This is supposed to reflect the social cost of carbon dioxide emissions.  My last post on this initiative translated the Carbon Pricing Proposal Prepared for the Integrating Public Policy Task Force for an outside the New York Capital District energy wonk audience.  Upon further review of that post I still stand by all of my concerns.  There are significant logistical issues associated with implementation of the proposed scheme.  NYISO has consistently downplayed those issues.  I am concerned that implementation will be a logistical nightmare for the people who have to do the work but that is not my biggest worry.  There are so many unknowns in how this will work that I think it is likely that there will be inadvertent gaming of the system and the potential for intentional gaming that will not be in the interest of the public’s need for just and reasonable electric rates.

When I came back to this topic after stepping away from the nitty-gritty details of this initiative for eight months, I realized that my primary concern was not in the details of the application but in the theory.  For some reason my top viewed post at my blog is Academic RGGI Economic Theory of Allowance Management and there is a similar problem with the carbon pricing theory.  Economist theorize that the CO2 allowances in the Regional Greenhouse Gas Initiative are treated as storable commodities.  As such the current price and the plan for accumulation of allowances should depend on the expected long-run total supply compared to the expected long-run total demand.  However, in the real-world, allowances are not treated as storable commodities by the affected sources.  Instead, allowances are treated as compliance requirements with short-term horizons by sources who own the most allowances.  I am not about to disagree that they should not be taking a longer-term view but the reality is that for a variety of reasons it does not happen that way.  Eventually I predict that the departure from reality in the theory that has driven the RGGI plan will cause problems because the latest round of revisions to the rule depended on the theory more than the history of the program.

For the NY carbon pricing initiative, I have a similar concern rationalizing theory and practice.  The theory says that when the price of electricity is raised by pricing carbon, the increased costs at the higher CO2 emitting facilities will reward existing lower emitting units and will incentivize investment in new lower emitting facilities.  If the market is efficient then the most cost-effective reductions will occur and everyone will be happy.  I think that there are a number of practical reasons that this will not work as proposed in the New York market.

My most general concern is that the carbon pricing initiative is just for the electric sector in one market.  Ideally you want a carbon price on all sectors across the globe.  I don’t think that is ever going to happen because of the tradeoff between the benefits which are all long term versus the costs which are all short term.  I don’t see how anyone could ever come up with a cost scheme that equitably addresses the gulf between the energy abundant “haves” and those who don’t have access to reliable energy.  Trying to force fit this global theory into the New York electricity market will likely bring up many unintended consequences.  The biggest problem is simply leakage between New York and every other neighboring electric market.

I also don’t think that advocates for this approach have fully considered how reductions could be implemented.  Who is going to invest in the alternatives?  Existing fossil-fired generating sources in New York are on death row if we are to believe that the CLCPA target to eliminate CO2 emissions from the electric sector by 2040.  Even if there were cost-effective add-on CO2 controls for existing sources, I doubt that anyone would invest given that end date.  I don’t think that there are any existing power facilities with room for much in the way of diffuse renewable generation.  Solar cells could work but there isn’t enough room for much at existing facilities.

Ultimately, I think that the investment problem boils down to an indirect signal versus a direct signal. In a recent post, I analyzed NYSERDA’s investment of RGGI auction proceeds.  Comparing different programs, I concluded that the more there is a focus on direct investments in emission reductions the better the cost benefit ratio.  On one hand it could be seen as intuitively obvious but the point is that carbon pricing proposals rely on a completely indirect impetus for emission reductions.  As such those proposals, as theoretically appealing as they may be, may be much less cost effective than suggested.

That same post showed that RGGI investments are not very cost efficient.  New York will likely propose to use the Obama era Social Cost of Carbon value which is $50 in 2019.  The best NYSERDA investment program category cost benefit ratio is three times greater than that value.  The cost benefit ratio for all the NYSERDA investments is over nine times greater than the $50 SCC value.  If a mix of investments has this poor a record of cost efficiency then how could can an indirect price signal at that level trigger any response?  It may well be that the carbon price SCC value is not a strong enough signal to drive investment.

Before New York commits to this “bright and shiny object” that advocates can brag about, someone should do some analysis of market price signals for actual investments.  While the theory might sound grand, if the proposed signal does not actually drive investments the only thing this will do is raise electricity prices. Among the many logistical implementation issues is how the money collected will be equitably returned to ratepayers.  Even if there were a logical and equitable way to apportion costs back across the state, the Cuomo Administration has a record of diverting funds intended for climate mitigation to suit its purposes.

NYSERDA RGGI Investments – Status Through 2018

I have written previously on the Regional Greenhouse Gas Initiative (RGGI) investment report such as The Investment of RGGI Proceeds in 2016  in this post.  This post covers the analogous New York State Energy Research and Development Authority (NYSERDA) report New York’s RGGI-Funded Programs Status Report – Semiannual Report through December 31, 2018 (“Status Report”).  I believe that the reported benefits for these investments fall far short of what is necessary to meet the RGGI reduction goals and are a warning sign that the Climate Leadership and Climate Protection Act goals are going to be even tougher to meet.

I have been involved in the RGGI program process since its inception.  I blog about these details of the program because very few seem to want to provide any criticisms of the program. 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.

Background

RGGI is a market-based program to reduce greenhouse gas emissions. It is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector.  The program sets a limit on CO2 emissions and auctions allowances for each ton in the cap.  As the cap is ratcheted down over time emissions necessarily have to go down.  The auction proceeds are used for investments in CO2 emissions reductions.

According to the NYSERDA Status Report:

The State invests RGGI proceeds to support comprehensive strategies that best achieve the RGGI CO2 emission reduction goals. These strategies aim to reduce global climate change and pollution through energy efficiency, renewable energy, and carbon abatement technology. Deploying commercially available renewable energy and energy efficiency technologies help to reduce greenhouse gas (GHG) emissions from both electricity and other energy sources in the short term. To move the State toward a more sustainable future, RGGI funds are used to empower communities to make decisions that prompt the use of cleaner and more energy-efficient technologies that lead to lower carbon emissions as well as economic and societal co-benefits. RGGI helps to build capacity for long-term carbon reduction by training workers and partnering with industry. Using innovative financing, RGGI supports the pursuit of cleaner, more efficient energy systems and encourages investment to stimulate entrepreneurial growth of clean energy companies. All of these activities use funds in ways that accelerate the uptake of low-to-zero emitting technologies.

That is the theory. In practice the results have been mixed and even environmental advocacy organizations have voiced their displeasure.  For example, Environmental Advocates of New York (EANY) recently released a report, “RGGI at a Crossroads”, that details the allocation of funds raised by the Regional Greenhouse Gas Initiative (RGGI) in New York State.  I published a post that agreed with their findings.  The overview for RGGI at a Crossroads states:

“For the past seven years, the Cuomo Administration has used funding made available to New York through the Regional Greenhouse Gas Initiative (RGGI) for some authentic climate mitigation purposes as well as some highly questionable ones. While programs like Green Jobs – Green New York, 76West, and the Drive Clean Rebate owe their success to RGGI funding; the Governor has also diverted RGGI funds to subsidize power rates for Long Islanders and plug budget holes. These diversions are bad policy precedents that squander the opportunity to better the environment. An upcoming revision to state regulations offers the Governor an opportunity to take his hand out of the cookie jar and invest RGGI proceeds in a way that will propel New York to the forefront of climate justice.”

However, while I agree that if RGGI is supposed to be a CO2 reduction program that the auction proceeds should only be used for CO2 emissions reductions, I am less impressed with the value of their investments than EANY as I will show in the following.

Social Cost of Carbon

In order to put the value of RGGI investments in context of potential benefits some background on the social cost of carbon (SCC) is necessary.  Regulators necessarily have to balance costs and benefits.  This parameter was developed to estimate the cost of the long-term (that is to say hundreds of years) damage done by a ton of carbon dioxide (CO2) emitted today.  This dollar figure also represents the benefit of a CO2 reduction. I have posted on some of the issues with this parameter but for the purposes of this post you need to know that the values range widely depending on assumptions.  For example, if you use a discount rate of 3% and consider global benefits like the Obama-era Environmental Protection Agency (EPA) did then the current SCC value is $50.  On the other hand, the current Administration EPA SCC value for SCC is $7 for a 3% discount rate and $2 for a 5% discount rate that represents only benefits to the United States.  Needless to say, New York’s preference is to use the $50 value.

December 2018 Semi-Annual Report Status Report

According to the Status Report, New York State has accumulated $1,184,631,180 either from direct auction proceeds from the sale of more than 366 million CO2 allowances or interest earnings as of December 31, 2018.  Note that while the allowance prices are increasing over time the total number of allowances sold is decreasing.  For the three-year control period ending in 2011 144,305,904 allowances were sold but in the control period ending in 2017 only 72,401,365 were sold.  The increase in allowance costs does not offset the drop in allowances sold so annual proceeds are decreasing over time.

The Status Report  2018 Investment Summary Table 1 deserves special comment.  The lifetime net energy savings 62,466,470 mmBtu, renewable generation 8,243,824 MWh, net efficiency electricity savings 17,446,899 MWh, and net CO2 emissions reductions of 20,762,489 tons are all big numbers.  When you consider that total investments are $558 million you could be led to believe that the cost benefit ratio dollars invested per ton of CO2 reduced is $26.88.  That is well below the NY SCC target of $50.  However, using expected lifetime savings is bogus.

The CLCPA has a target to reduce annual CO2 emissions to zero compared to the 1990 emissions.  The key is that we need to know what the program investments do to annual emissions.  The New York State Energy Research and Development Authority Patterns and Trends document provides CO2 emissions data and that shows that in 1990 the NY total was 235.8 million metric tons.  In order to assess progress against that goal annualized reductions are the only ones that matter so the only cost benefit values that matter are for annual reductions.

The Status Report  2018 Investment Summary Table 2 and Table 2 notes provides the information necessary to determine progress relative to the goals.  There are six program categories: Green Jobs – Green New York, Energy Efficiency, Renewable Energy, Community Clean Energy, Innovative GHG Abatement Strategies, and Clean Energy Fund. The Consolidated Summary of Expected Cumulative Annualized Program Benefits through 31 December 2018 table summarizes the benefits and costs for those categories.  Note that the cost benefit ratio is $463.54, nearly ten times the NY SCC value.

Green Jobs – Green New York

As shown in my Consolidated Summary table total program costs were $172.5 million through the end of 2018 for programs that reduced CO2 264,048 tons for a cost benefit ratio of $653.29 per ton reduced.  Green Jobs – Green New York provides “funding for energy assessments, low-cost financing for energy upgrades, and technical and financial support to develop a clean energy workforce”. It is administered by NYSERDA and made available by the Green Jobs – Green New York Act of 2009.  As I recall the administrative costs associated with this program are notable.

Energy Efficiency

As shown in my Consolidated Summary table total program costs were $260.2 million through the end of 2018 for programs that reduced CO2 611,898 tons for a cost benefit ratio of $425.23 per ton reduced.  These programs provide “comprehensive energy efficiency services for single and multifamily existing buildings and new construction, including low-income households”. RGGI funds are provided to the Long Island Power Authority support energy efficiency programs administered by PSEG Long Island.  RGGI funds were also used to “fill gaps in residential energy efficiency services, offering incentives to implement energy efficiency measures related to petroleum fuel opportunities, or opportunities on Long Island and municipal electric districts”.

Renewable Energy

As shown in my Consolidated Summary table total program costs were $79.9 million through the end of 2018 for programs that reduced CO2 144,408 tons for a cost benefit ratio of $553.29 per ton reduced.  One program in this category tries to increase the use of biomass for renewable heating. NY-Sun provides “declining incentives for the installation of systems and works to reduce solar electric balance-of-system costs through technology advancements, streamlined processes, and customer aggregation models” with a goal to “achieve a sustainable solar industry that does not depend on incentives”.  There is another solar incentive program that funded “221 solar electric system installations outside of Long Island”.  The Advanced Renewable Energy Program supports “projects that foster the market introduction of a broad range of promising new and advanced renewable energy technologies, including advanced biomass, tidal, and offshore wind technologies”.

Finally, in a vivid example of Cuomo Administration creative accounting, RGGI funds the New York Generation Attribute Tracking System that records “electricity generation attribute information within NYS, and processes generation attribute information from energy imported and consumed within the State as a basis for creating tradable generation attribute certificates”.  Although there is a tortuous path linked to emission reductions linked to this program it really is an example of the type of program that really should be funded by the State and not RGGI that the EANY RGGI at a Crossroads report described.

Community Clean Energy

As shown in my Consolidated Summary table total program costs were $21.8 million through the end of 2018 for programs that reduced CO2 130,662 tons for a cost benefit ratio of $166.84 per ton reduced.  There are seven component programs in this general category.  It is notable that this category’s emphasis on funding specific GHG reduction projects makes this most cost-effective program area.  Mind you the Reforming the Energy Vision Campus Competition Program component award for Bard College’s Micro Hydro for Macro Impact project that will use local dams to develop micro hydropower is probably not going to help much meet the CLCPA target.  The Status Report breathlessly notes that “the  project is expected to avoid 335 metric tons of GHG emissions annually, equivalent to taking 70 cars off the road”.

Innovative GHG Abatement Strategies

As shown in my Consolidated Summary table total program costs were $6.2 million through the end of 2018 for programs that reduced CO2 1,804 tons for a cost benefit ratio of $3,436.81 per ton reduced.  This includes a longer-term Industrial innovations program that “supports development and demonstration of technologies with substantial GHG reduction potential and technologies relevant to NYS manufacturing industries and building systems”.   Another creative accounting effort includes the Climate Research and Analysis Program that “supports research studies, demonstrations, policy research and analyses, and outreach and education efforts”. According to the report these activities address “critical climate change related problems facing the State and the region, including the needs of environmental justice communities”.  All well and good but this is a mission of NYSERDA and should be funded out of the Administration’s budget and not detract from the RGGI mission to reduce CO2 emissions.  Also included in this program is the Clean Energy Business Development program that “seeks to support emerging business opportunities in clean energy and environmental technologies while maintaining the goal of carbon mitigation”.  Perhaps I have been reading to much of this but I am getting a wift of crony capitalism for the well-connected in Albany.  There are several programs similar to those listed here.

Clean Energy Fund

As shown in my Consolidated Summary table total program costs were $17.4 million through the end of 2018 for programs that reduced CO2 50,961 tons for a cost benefit ratio of $341.44 per ton reduced.  This program area is not described in the document.

Cost Recovery Fee

For your information, this is another example of New York State bureaucracy at its best.  The New York State Cost Recovery Fee is imposed on the New York State Energy Research and Development Authority (NYSERDA) by law to reimburse the State for the cost attributable to the provision of central government services to NYSERDA.  The available RGGI funding budget at the end of 2018 is $1.245 billion and $11.9 million is reimbursed to the state for the privilege of adding money for reducing emissions.

Remarks

There is a wide range of cost benefit ratios for the six program areas. At the high end Innovative GHG Abatement Strategies have a cost benefit ratio of $3,347 per ton reduced and the at the low end Community Clean Energy has a cost benefit ratio of $167 per ton reduced. Overall the cost benefit ratio was $464.  The cost benefit ratios can be used to estimate the total costs to meet the CLCPA target to eliminate CO2 emissions from the NY electric sector.  The  Status Report cost to reduce NYS fossil fuel 2018 CO2 emissions to zero table multiplies the 2018 CO2 emissions from the electric sector (27,786,614 tons) by the cost benefit ratios.  If NY eliminates CO2 emissions using the approaches in use for the RGGI investments, the total costs range from $4.6 billion to $95 billion with an overall cost of $12.9 billion.

Another important point is that there is likely a reason for the range of cost benefit ratios.  At the high end, the GHG Abatement Strategies category emphasizes long-term research and development.  Because this research could make a cost breakthrough the investments make sense.  Looking at the other categories it appears that the more investments are focused on direct reductions rather than indirect investments the better the cost benefit ratio.  For example, the best ratio is in Community Clean Energy and that category includes direct support for renewable energy projects.  Although the Renewable Energy category would seemingly meet the criteria for direct support, remember that the Cuomo Administration has diverted funds for other program areas that do not directly support climate mitigation efforts.  The Energy Efficiency category is a better example of indirect support.  Investments in this category do not directly reduce emissions.  Instead reducing energy use reduces the need for energy production and indirectly reduces emissions.

Conclusions

The most important conclusion is that none of the NYSERDA investments of RGGI auction proceeds meet the social cost of carbon criterion of a cost-effective benefit.  New York proposes to use the Obama era SCC value which is $50 in 2019 and the best investment category cost benefit ratio is three times greater than that value.  The cost benefit ratio for all the investments is over nine times greater than the $50 SCC value.

I also believe that there are important ramifications to the apparent reason for the range of cost-benefit ratios.  I think that the more focus on direct investments in emission reductions the better the ratio.  On one hand it could be seen as intuitively obvious but the point is that carbon pricing proposals rely on a completely indirect impetus for emission reductions.  As such those proposals, as theoretically appealing as they may be, may be much less cost effective than suggested.

The Status Report includes a table that lists the expected lifetime benefits of the projects.  Because our primary concern is meeting annual limits those numbers are at best a distraction and at worst a coverup attempt of the poor return on investments.

Finally, the total costs are staggering.  I estimate that the projected costs will be over $25 billion for just the electric sector to meet the CLCPA targets.  If NY relies on the approaches used by NYSERDA for the RGGI investments to eliminate fossil fuel CO2 emissions, the overall cost is $12.9 billion.  I earlier made an estimate of the costs for energy storage if fossil fuels generation is eliminated and that came out to $12.5 billion.

New York Resource Adequacy Proceeding Comments

The New York State Public Service Commission (PSC) issued an order commencing a proceeding to examine how to reconcile resource adequacy programs and the State’s renewable energy and environmental emission reduction goals. This post describes the comments I submitted in this proceeding.

Materials and information are available in the Department of Public Services (DPS) resource adequacy matters docket Case 19-E-0530.  .  According to the Order Instituting Proceeding and Soliciting Comments, the inquiry is “necessitated by the Commission’s statutory obligations to ensure the provision of safe and adequate service at just and reasonable rates. Costs to consumers are a primary and ultimate consideration, recognizing that the necessary investments in resources must have sound economics.”

The PSC order solicited comments on the following questions.  Does the New York Independent System Operator (NYISO) have sufficient resource adequacy evaluation mechanisms in place to deal with the State’s ambitious renewable energy and environmental emission reduction goals?  Do the policies and market structure mechanisms insure just and reasonable consumer rates? There were several specific questions about existing products and their value with respect to costs.  Finally, there was a general question about the State’s role with respect to resource adequacy and request for recommendations for what to do next.

I submitted comments because I am not sure that the Climate Leadership and Community Protection Act (CLCPA) can be implemented so that it does not jeopardize safe and adequate energy service at just and reasonable rates. I based the comments on evaluations I did for previous posts on Solar Issues in Upstate New York , CLCPA Solar and Wind Capacity Requirements and CLCPA Energy Storage Requirements.

My filed documents (dated 9/16/2019 as a filing on behalf of an individual) illustrate my concerns with two examples.  I prepared a white paper that provides an initial estimate of the likely energy storage component requirement based on real world data.  It shows that at night when winds are light the energy produced from these sources will have to be supplanted with stored energy if New York shuts down all its fossil generation.  Given the extraordinary cost of battery energy storage I estimate that the batteries alone will cost over $12 billion to replace existing fossil generation and Indian Point after it retires.  The second example describes a potential problem with winter peak loads once the CLCPA is implemented.  Because of the stringency of the law, home heating is going to have to be electrified.  The preferred retrofit option is an air source heat pump.  However, they don’t produce heat when the temperature gets below zero so homeowners will need a backup system and the cheapest alternative is radiant heat which is much more inefficient.  As a result there will be a spike in electrical load that cannot be avoided.

Both examples used data from the NYS Mesonet.  I believe the best way to determine resource adequacy is to base the analysis on historical meteorological information as shown in the examples.  In order to determine the amount of energy storage you have to calculate how much wind and solar power is available and when.  In order to determine the effect of air source heat pumps meteorological data from the winter 2017-2018 peak load period was used.  I recommended that historical meteorological data be used to characterize potential solar and wind energy production to determine the feasibility of the CLCPA emission reduction target that eliminates emissions from electricity production by 2040.

In addition, I believe that the State needs to do a cumulative environmental impact assessment of this regulation.  The problem is that while an individual industrial wind facility or solar facility may not have a significant environmental impact the cumulative impact of all the facilities necessary to provide enough power to meet the reliability needs of the state could have significant environmental impacts.  For example, if one raptor gets killed by every ten wind turbines that might be acceptable but if we need a thousand wind turbines is one hundred raptors per year acceptable?

My final recommendation is for an independent review of the findings of the feasibility studies.  The CLCPA is the result of political pandering and the likelihood that a feasibility study would be subject to political influence is high.  The only way I can think of to prevent that is to establish an independent group to review the findings.  Membership should deliberately be chosen to represent both “sides” of vested interests in the outcomes.  They may not be able to come agree but their evaluation report can list where they have agreed to disagree and that will be useful for the public.

I think it is obvious that the resource adequacy proceeding must determine if the CLCPA can be implemented such that it does not jeopardize safe and adequate energy service at just and reasonable rates.  If renewable resources and energy storage are inadequate during the winter peak, then safe and adequate energy service could easily be jeopardized.  No jurisdiction has ever successfully reduced greenhouse gas emissions by developing renewable energy resources and managed to keep prices down and I see no reason that New York will be able to reverse that result.  Most importantly, the increase in energy prices will affect those who can least afford the increased costs.

If you are a resident of New York I ask that you submit comments to the DPS resource adequacy matters docket Case 19-E-0530 supporting the request for comprehensive, independent feasibility and cumulative environmental impact assessments.

Rocky Mountain Institute – Natural Gas Plants are Doomed

According to Bloomberg author David Baker Gas Plants Will Get Crushed by Wind, Solar by 2035.  The basis for this claim is a Rocky Mountain Institute (RMI) study.  This post looks at this claim in the context of New York State energy requirements.

Baker’s description of the study “The economics of clean energy portfolios”, states:

“Natural gas-fired power plants, which have crushed the economics of coal, are on the path to being undercut themselves by renewable power and big batteries, a study found.  By 2035, it will be more expensive to run 90% of gas plants being proposed in the U.S. than it will be to build new wind and solar farms equipped with storage systems, according to the report Monday from the Rocky Mountain Institute. It will happen so quickly that gas plants now on the drawing boards will become uneconomical before their owners finish paying for them, the study said.”

The RMI study claims that a “clean energy portfolio” can “provide the same services as power plants, often at net cost savings”.  These portfolios combine the following different resources: energy efficiency, demand flexibility, distributed and utility-scale battery energy storage, and variable renewable energy.  In previous work I have come to the conclusion that for New York State the critical planning scenario will be winter time heating caused high energy demand night-time loads when winds are calm. Keep in mind that during winter it is not only a short-term load concern but the shorter days and generally weaker winds mean that seasonal solar and wind resources are so low that seasonal storage will likely be necessary.  Let’s look at each of these resources in more detail in that context.

According to RMI the energy efficiency resource includes “Physical measures, software controls, or other strategies to reduce the amount of energy required to perform a given service (e.g., insulation and smart thermostats to reduce heating and cooling energy use)”.  Because there are tangible savings many structures already have insulation and smart thermostats.  In fact, I doubt that my home is all that unusual in that since we purchased the home in 1981, we added insulation to the attic a couple of times, insulated the walls, put in double paned insulated windows and doors, and have a smart thermostat.  Anything else we do will cost quite a bit and not get that big an energy reduction.  As a result, I believe that there is a limit to how much energy can be reduced with the proposed energy efficiency resource.  More importantly, the New York Climate Leadership and Community Protection Act has a greenhouse gas emission reduction target that will require electrification of wintertime heating.  RMI cannot claim a reduction in wintertime electric energy when there is a requirement for more winter electric energy use.

The study describes demand flexibility as: “Load controls to enable electricity consumption to shift through time without reducing overall energy use or service quality (e.g., thermal storage in water heater tanks, managed charging of electric vehicles)”.  In general, the theory that load controlling smart meters can make a significant difference is mostly “theory”.  As before in the case of wintertime heating, how much load shifting will be possible?  It is appropriate to point out that the four case studies that “proved” their claims were on the west coast, Florida, mid-Atlantic and in Texas.  None of these regions have winter peaks now and I doubt that even if winter heating is electrified it is unlikely to shift the peak to winter.

The RMI study defines variable renewable energy as: “Behind-the-meter and front-of-the-meter distributed and utility-scale solar photovoltaics (PV) and wind turbines that provide weather-dependent, non-dispatchable energy”.  The resources necessary in this study use a “clean energy portfolio optimizer” that “draws on the other components to define the constraints and objective function of a linear program that finds the lowest-cost portfolio of resources that can provide at least as much monthly energy, capacity during the 50 peak hours, and single-hour ramp capability during the highest period of system-level net-load ramp as the announced natural gas-fired power plant, while staying within resource potential limitations.”  Therein lies a potential fatal flaw for New York.  RMI minimizes the magnitude of peak load impacts with its energy efficiency and demand flexibility resources but averages out renewable energy deficits by using monthly energy and a limited number of peak hours.  The only way to determine if their portfolio will work is by evaluating shorter time periods, at longest an hourly period but even shorter would be better, over years of real-world data.  Based on my analysis of real-world examples I believe it is possible that the worst-case planning scenario will not be the peak load but the minimum renewable energy output.

Finally, the study includes battery energy storage: “Dedicated battery storage assets, either in front of the meter or behind the meter, providing energy balancing and flexibility via controlled charging and discharging.”  RMI published a study in 2015 that describes 13 different services that battery energy storage can provide.  There is a large gap between saying that batteries can provide the services and how they would do that.  Again, an hour-by-hour feasibility needs to be done to determine if this is possible.  In addition, RMI claims more value by stacking these services from “the same device or fleet of services”.  In other words, they claim that one battery system might be used, for example, for frequency regulation, voltage support, and energy storage.  A much more sophisticated study than this overview study is needed to determine whether that is feasible.  Frequency regulation and voltage support might require batteries to be at mid-charge levels to balance peaks and valleys whereas you want your energy storage to be at the maximum charge for use when renewables are not available.

In general, this study chooses how it wants to treat its resources.  There are hopeful assumptions for distributed resources and battery energy storage that have no track record.  There is no consideration of life-cycle resources needed for all the batteries, solar panels and wind turbines. Finally, while the treatment of the technological components necessary to provide the resources are overly optimistic in my opinion, their treatment of costs is much worse.  Both current costs and expected cost expectations in the future are more aspirational than rational.

No doubt this study will be cited as proof that natural gas is not necessary for the future because renewables can do everything they do cheaper.  It would take an electrical engineer with transmission and generation expertise to fully evaluate this study.  However, there are enough broad assertions and convenient assumptions that I do not take this study as definitive evidence that a clean energy portfolio will be able to replace natural gas fired power plants anytime soon in New York.