NYISO Climate Impact Study Energy Storage Requirements

On December 17, 2019, the New York Independent System Operator (NYISO) Installed Capacity Working Group meeting included a presentation on the NYISO Climate Change on Resilience Study – Phase 1 by Eric Fox from Itron.  The study included estimates of future load expected as a result of the Climate Leadership and Community Protection Act.  This post primarily addresses that aspect of the study as it pertains to energy storage requirements.

Background

The purpose of the analysis was to develop long-term energy, peak, and 8,760 hourly load forecasts that reflect the potential impact of climate change.  Itron evaluated temperature trends using state climate impact studies and developed scenarios that reflect state policy goals with climate change impacts.  The summary of results states:

      • Analysis of weather trends across the state show statistically significant increase in average temperatures of 0.5 to 1.1 degree per decade
      • State average 0.7 degrees per decade
      • Temperatures on the coldest days are increasing faster than temperatures on the hottest days
      • Trend likely to continue through the future and could be worse depending on long-term greenhouse gas path
      • Warming trend will contribute to increase in summer peak demand and lower winter peak demands. Increase in cooling energy requirements will partially be offset by declining heating related requirements.
      • State policy to address greenhouse gas emissions will have more impact on loads than the impact due to temperature trends. The end-use modeling approach provides a framework for translating energy policy into impacts on energy, hourly loads, seasonal peak demands, and changes in emissions of greenhouse gases.

The primary topic of this post is the impact of state policies but I have to address the weather trends in this report.  As far as I can tell the primary source for the temperature trends presented is a study by two economists.  While on the face of it measuring temperature trends should be relatively simple in fact it is not and I have no faith that a couple of economists are aware of any nuances to these numbers.  To cut to the chase I do not find a claim that over my lifetime (approaching 70) that the average temperature of New York State has gone up nearly 5 degrees.  I am sure that if I dug out representative climatic data that I would find a different story but I don’t have the time.  Instead I refer readers to a recent post at a different site that shows that the temperature sensing network that was designed to be representative does not show such alarming trends.

More important is the report’s conclusion that temperatures on the coldest days are increasing faster than temperatures on the hottest days.  This is a typical result from analyses of the data but is often ignored.  The only reason I can imagine that it is not publicized more is that it can be argued that warmer winter days are more beneficial than not.  That is to say it does not fit the alarmist narrative.

Future Load Analysis

Itron’s analysis of the load impacts of the CLCPA focused on the residential sector.  They estimated the reduction in residential emissions needed to meet the CLCPA targets.  Then they calculated the cumulative increase in electricity needed overall and on the average per residence.  They found that in their policy case with accelerated energy efficiency gains and behind-the-meter PV adoption that the savings outweigh gains from electric vehicles and electrification. However, the CLCPA scenario has much higher electrification targets and state-wide annual energy use goes up about 50%.  They predict that the summer peak will increase from 43,317 MW in their reference case to 57,109 MW in the CLCPA scenario.  Importantly they expect that the electric load peak will shift from summer to winter.  They predict that the winter peak will increase from 31,131 MW in their reference case to 71,859 MW in the CLCPA scenario.

My primary concern in this post is to estimate the amount of energy storage that will be needed to meet the CLCPA targets.  My initial thought when I saw the projections available in this analysis was that I could repeat the evaluation of energy storage necessary that I did using the Citizen’s Budget Commission report with another projection.  While doing this analysis I came to the conclusion that the emphasis of this post should not be on those results but rather the future load projection calculations.

My methodology for estimating energy storage requirements is based on evaluation of an example worst-case meteorological period.  In the future CLCPA electric energy sector of New York, electricity will only be generated from hydro, nuclear, on-shore wind, off-shore wind, utility-scale solar, behind-the-meter (residential) solar, and other renewable.  I estimate capacity for each renewable source category and apply those estimates to the energy requirements during the worst-cast period to calculate deficits and then estimate how much power will be needed to cover those deficits.  All my analyses show that there are periods when the winds are light at night so significant energy storage will be required.

The NYISO Climate Change on Resilience Study – Phase 1 Forecast Comparison of Winter Peak figure lists four different projections for the winter peak electric capacity for 2020, 2030, 2040, and 2050.  The most notable thing is the massive increase in capcity needed for electrification of the residential, commercial, industrial and transportation sectors in the CLCPA scenario.  I calculated energy storage required for their 2040 and 2050 capacity projections for a light wind night time worst-case period on Jan 3-4 2018.

The Comparison of Energy Storage Required and Potential Price Necessary to Prevent Deficit on January 3-4 2018 table lists the results for the two projections.  For the 2040 capacity projection of 56,071 MW $52.5 billion would be needed for the Li Ion storage batteries necessary to provide electricity during the renewable deficit periods.  The increased capacity projected for 2050, 71,859 MW, reduces the battery storage cost to $43.1 billion.  As long as batteries are this expensive over-building renewable capacity is a cheaper alternative so developing a  way to optimize the costs of energy storage relative to the cost of additional renewable development would be a worthwhile investment.

My work on the CLCPA impacts on the electric system has emphasized energy storage requirements. My approach has three components: the potential renewable resources available, the generating resources capacity from each generation type, and how much load will be needed by the system. As shown below, the load projection for worst-case energy storage may differ from a worst-case analysis that uses the traditional peak energy load.

 

I believe an analysis of state-wide solar and wind resources is absolutely necessary in order to ultimately determine what could be available.  NYISO had the Analysis Group do a forward-looking assessment of the fuel and energy security of the New York electric grid during winter operations that targeted potential reliability risks and impacts under severe winter conditions and adverse circumstances regarding system resources, physical disruptions, and fuel availability.  The November 2019 final report was titled: Fuel and Energy Security In New York State: An Assessment of Winter Operational Risks for a Power System in Transition.  I have previously analyzed the effect of winter peaks and used a period, 12/29/17 to 1/12/2018, chosen based on a cursory check of extreme conditions.  The Analysis Group did an analysis over the last 25 years and this period was called out.  They defined extreme weather events including the largest increase above average daily load over a long period as 14 days from 12/25/2017 to 1/8/2018 and more extreme shorter periods where they found in the last 25 years the fourth lowest 3-day cold snap was 1/4/2018 to 1/7/2018.  Note that my attempt to estimate potential solar and wind resources came up with an overlapping time frame because energy storage requirements are driven by the renewable resources available.  The question that needs to be answered is whether there are periods when the loads are unremarkable but the availability of renewables is so low that even greater energy storage resources are needed.

The second component needed is the generating resources capacity from each generation type.  For my analysis of the Citizens Budget Commission results I calculated the MW capacity based on their power (GWh) estimates.  Itron listed capacity in MW for 2040 and 2050.  I arbitrarily split the relative amount for each renewable type and matched their totals.  Eventually I hope that the State does a least-cost optimization study that balances how much of each renewable generating source and energy storage is needed.

The final component is how much load will be needed by the system.  In this evaluation I arbitrarily chose to scale the observed load during the Jan. 3-4 2018 study period by the Citizen’s Budget Commission projected annual load in 2040 over the existing annual load.  As far as I can tell, both the CBC report and the Itron analysis estimated future loads from increased electrification based on annual numbers.  I believe that the increased load from heating electrification will increase the magnitude of the peak load more than the annual load will increase.  In particular, the preferred option for retrofitting home heating is an air source heat pump.  During extreme cold (less then zero degrees F) air source heat pumps don’t work efficiently so in order to keep warm people will have to rely on much less efficient radiant heating.  I have shown that this will exacerbate the winter peak and further complicates the winter peak load projections.  In order to incorporate this effect into the future winter peak projections detailed temperature and wind data should be used.

Conclusion

The NYISO Climate Change on Resilience Study – Phase 1  is a useful report and makes a couple of important points.  I am not a big fan of studies that try to estimate the impact of climate change on future operations simply because weather variability is larger than climate variability.  I believe trying to tease out a small climate effect is mostly bogus.  The report does note that “state policy to address greenhouse gas emissions will have more impact on loads than the impact due to temperature trends”.  They also come to the same conclusion that I have that the winter peak will be more important in the future.

There also are important limitations.  I think that future capacity estimates based on annual energy usage have to be replaced by estimates based on shorter time periods and that the air source heat pump inefficiency issue has to be considered.  The analysis underscores the importance of a comprehensive study of renewable resource availability relative to expected load when the CLCPA electrification requirements kick in because the peak energy storage requirement may not necessarily occur during the peak load period.

Two points need to be emphasized for the energy storage calculations using my methodology and the projected capacity from this report.  Energy storage costs are extraordinariy high.  In 2040 energy storage could cost $52.5 billion for 56,071 MW of capacity and in 2050 the cost would be $43.1 billion for , 71,859 MW of capacity.  Incredibly according to the NREL report Life Prediction Model for Grid-Connected Li-ion Battery Energy Storage System on the life expectancy of lithium-ion energy storage systems: “Without active thermal management, 7 years lifetime is possible provided the battery is cycled within a restricted 47% DOD operating range. With active thermal management, 10 years lifetime is possible provided the battery is cycled within a restricted 54% operating range.”  In other words the energy storage costs for the 2040 to 2050 time frame needs to sum the costs for a total of $95.6 billion! These numbers certainly support the notion that over-building renewable capacity will reduce energy storage costs and point to the need to optimize the tradeoff between renewable capacity and energy storage.

Citizens Budget Commission Getting Greener Report Summary

On December 9, 2019 the Citizens Budget Commission (CBC) released a report entitled Getting Greener: Cost-Effective Options for Achieving New York’s Greenhouse Gas Goals  that addresses the impacts of the Climate Leadership and Community Protection Act (CLCPA).   There is much to like about the report but I disagree with a few of their recommendations and have concerns about some of the methodology.  In order to do this report justice, I prepared three technical posts.  Once completed I realized that those posts were too wonky for a general audience so I have prepared this summary post.

If you have an interest in New York energy policy I recommend that you read the entire document.  It is well written, comprehensively covers many of the issues associated with the CLCPA, and makes estimates of the resources needed to implement the CLCPA.  My first post discussed their findings, the second post addressed their renewable energy forecast to meet the CLCPA and the final post calculated the energy storage requirement for an example winter peak period.  The numbers and analyses described in this summary are documented in those three posts.

Background

The CBC is a nonpartisan, nonprofit civic organization whose mission is “to achieve constructive change in the finances and services of New York City and New York State government”.  They claim to serve the public rather than narrow special interests try to preserve public resources, whether financial or human; and focus on the well-being of future New Yorkers which they say are “the most underrepresented group in city and state government”.

The CBC Energy Policy Committee managed the development of the report.  It was prepared for CBC by Seth Hulkower, President of Strategic Energy Advisory Services.  Apparently, this project has been in the works for a long time because the “initial findings of this report were presented at a CBC research conference held in New York City in December 2018”. The report was not completed until December 2019 because of New York’s changing policies over the past year.  In particular, the Climate Leadership and Community Protection Act (CLCPA) was promulgated in July 2019. They made revisions based on feedback from external reviewers and staff at the Public Service Commission and the New York League of Conservation Voters but noted that their willingness to assist in the research does not “imply any endorsement of the report’s findings and recommendations”.

Findings

In my post on the CBC findings  I annotated their summary.  The CBC findings support my position that the State needs to do a feasibility study to determine how the CLCPA could be implemented. The 2040 requirement to eliminate the use of fossil fuels by 2040 will require enormous investments and their findings point out the financial and flexibility risks if those investments are funded incorrectly.  They also raise the concern that existing sources of nuclear and hydro zero emitting generating power are not currently encouraged to remain in operation and suggest that discouraging natural gas infrastructure is counter-productive.  The final finding is the observation that there is much work to be done to implement the CLCPA targets for other sectors.  I agree with all these concerns.

The report makes a number of recommendations.   I agree that the State should prioritize investments based on performance, look beyond New York for additional sources of reduction support, eliminate self-imposed constraints on natural gas use, and retain our existing nuclear energy capacity as long as possible.  I do not think that a carbon pricing system will work if it only applies to New York or a limited region so I disagree with their recommendation for one even if it is across all sectors. Their transportation recommendation to think beyond electric vehicles for reductions makes sense where public transit investments could be cost-effective but that precludes rural areas.

Renewable Resources Projection

The CBC report is useful because it provides an estimate of the renewable resources required to meet the CLCPA 2040 fossil-free electric sector target.  The State has not admitted that 2040 load is going to be substantially higher than the current levels but this report makes a compelling case for a significant increase in annual load.  Their results indicate that “as New York moves to a path of decarbonizing heating and transportation in New York, the total electric demand will rise to 211,100 Gwh by 2040. To serve that demand with 100 percent non-emitting resources, nearly 94,000 Gwh of additional renewables will need to be added, a total that is roughly double the amount to be added from offshore wind (37,800 Gwh) and distributed solar (8,400 Gwh) now set by the CLCPA.”

I used their projections of the resources needed to meet the energy requirements (GWh) to estimate the power capacity (MW) needed.  As shown in the CBC Forecast of 2040 Capacity (MW) Resources to Meet CLCPA Goals table I calculated that New York would have to build 11,395 MW of residential solar, 16,117 MW of utility-scale solar, 18,457 MW of on-shore wind and 16,363 MW of off-shore wind to meet the increased load estimated by CBC.

I put those numbers in perspective.  For residential solar I used the rule of thumb that you need 66 square feet to generate 1kW of solar energy and that would require 36 solar panels.  That means that nearly 27 square miles of residential roofs would have to be covered by over 364.6 million solar panels to meet the 11,395 MW estimate.  For utility-scale solar I found a recent application that showed that each MW of utility scale solar will cover 7 acres so 112,816 acres or 176 square miles will be needed to meet the 16,117 MW of utility scale solar output estimate.  Assuming a 4.8 MW on-shore wind turbine would mean that over 3,845 on-shore wind turbines would be needed to meet the 18,457 MW output estimate.  One of the recently awarded off-shore wind project proposes to use 10.2 MW turbines and that means that 1,604 wind turbines would be needed to meet the 16,363 MW output estimate.

I do have one concern about the CBC forecast of resources to meet CLCPA goals.  In order to make a better estimate of the resources it is necessary to look at peak periods rather than just annual loads.  It is inappropriate to assume that a “smart” grid and more energy efficiency is going to eliminate electric load peaks so that they do not have to be considered.  Residential heating and transportation electrification will impact the winter peak very likely shifting the annual peak to winter simply because you cannot shift heating when it is very cold.   However, it is unfair to ask the CBC to address the winter peak expected load because it is a very complicated problem and would take a lot more effort.

I took a look at a winter peak period renewable resources derived from the CBC forecast.  I made a first cut attempt to estimate the capacity necessary to meet future energy load but I made a crude assumption that the peak load could be met with the resources needed to meet the annual energy estimate.  The results shown in the January 3-4 2018 Winter Peak With CBC Forecasted 2040 Capacity Resources to Meet CLCPA Goals table are influenced by the assumptions I made for off=shore wind turbine output because there were two no-wind energy output periods during the two-day winter peak period I analyzed.   I was surprised to see that the wind resource went to zero not only when the winds were light on January 3 but also when a deep low pressure developed and the wind speeds exceeded the upper wind speed cut-off I used on the very next day.  As a result of these conditions, there were twenty hours out of 48 hours that the output from all the resources available to New York in the CBC scenario for 2040 were negative and would require energy storage to keep the lights on, homes heated and vehicles charged.

Energy Storage

If the state goes ahead to build the amount of renewable energy that the CBC estimated would be necessary to meet the 2040 goal, it still does not preclude the need for energy storage.  The table with the January 3-4 data shows that there was a fifteen-hour period from January 3, 2018 at 1600 until January 4, 2018 at 0600 with hourly storage deficits totaling 134,545 MWh.  I used that period to calculate the amount of storage needed.

I assumed that the least cost energy storage approach would maximize energy storage duration based on lower costs per MWh in a recently released report from the National Renewable Energy Lab (NREL): “2018 U.S. Utility-Scale Photovoltaics-Plus-Energy Storage System Cost Benchmark”.  I arbitrarily chose different duration and capacity systems so that the battery systems covered the negative load to generation hours.  The Estimated Energy Storage Required and Potential Price Necessary to Prevent Deficit on January 3-4 2018 table summarizes the energy storage needs and my projection for the amount of different duration energy storage systems needed.  Finally, I adapted the results from the NREL study to estimate the cost of this amount of storage.  The table lists the estimated cost for the energy storage necessary to meet this winter peak period at a staggering $47 billion.

But that’s not all.  NREL reported on an analysis of the life expectancy of lithium-ion energy storage systems in 2017 in Life Prediction Model for Grid-Connected Li-ion Battery Energy Storage System.  The study tested batteries to simulate how long they would last in real-world conditions by reaching a certain depth of discharge rates and testing battery degradation over time.  Under NREL’s scenarios, an energy storage system is expected to last between seven and 10 years. The report states: Without active thermal management, 7 years lifetime is possible provided the battery is cycled within a restricted 47% DOD operating range. With active thermal management, 10 years lifetime is possible provided the battery is cycled within a restricted 54% operating range.”

Conclusion

Although I am not on board with the CBC’s desire to do something because it is “necessary”, I think it is important that an organization that feels that is necessary realizes the magnitude of the effort and the very real possibility of massive future financial exposure.  The CBC report underscores the potential that doing something wrong would not be in the best interests of the State no matter how noble the intention.

There is great value in the estimate of future energy use provided in the CBC report because the State has yet to provide their estimates.  Although I think that there are limitations to their analysis, I also think they have erred on the conservative side.  The actual resources needed for peak period planning could well be substantially higher.

I need to re-iterate the inescapable conclusion that over-building more wind turbines or solar cells does not preclude the need for substantial energy storage.  The cost of the energy storage using LI ion batteries needed to meet an example winter peak period is estimated to be $47 billion dollars.  That value is probably conservative because of limitations on the operating range to extend life expectancy out to ten years.  The size of the numbers shown is sobering and cries out for an “official” projection from the State.

I can only conclude that the State of New York must do a feasibility study to refine the CBC analysis of future renewable resources needed as soon as possible.  The analysis has to be detailed enough that the energy storage requirements can be projected so that a full cost estimate of compliance with the CLCPA can be estimated.  In the absence of this analysis the State could well be headed down a financial sinkhole that will do much more harm than good.

Citizens Budget Commission Getting Greener – Energy Storage Estimate

Update: I have prepared three technical posts on this report: Once I completed these three posts, I realized that they were too wonky for a general audience.  The first post discussed their findings, the second post addressed their renewable energy forecast to meet the CLCPA, and the third post calculates the energy storage requirement for a winter peak period.  Because the CBC study is so important, I have prepared a less-technical summary that hits the highlights of all three posts.

On December 9, 2019 the Citizens Budget Commission (CBC) released a report entitled Getting Greener: Cost-Effective Options for Achieving New York’s Greenhouse Gas Goals  that addresses the impacts of the Climate Leadership and Community Protection Act (CLCPA).   There is much to like about the report but I disagree with a few of their recommendations and have concerns about some of the methodology.  In order to do this report justice, I have prepared three posts.  If you have an interest in New York energy policy I recommend that you read the entire document.  It is well written, comprehensively covers many of the issues associated with the CLCPA, and makes estimates of the resources needed to implement the CLCPA.  The first post discussed their findings and the second post addressed their renewable energy forecast to meet the CLCPA.  This post calculates the energy storage requirement for a winter peak period.

Background

The CBC is a nonpartisan, nonprofit civic organization whose mission is “to achieve constructive change in the finances and services of New York City and New York State government”.  They claim to serve the public rather than narrow special interests try to preserve public resources, whether financial or human; and focus on the well-being of future New Yorkers which they say are “the most underrepresented group in city and state government”.

The CBC Energy Policy Committee managed the development of the report.  It was prepared for CBC by Seth Hulkower, President of Strategic Energy Advisory Services.  Apparently, this project has been in the works for a long time because the “initial findings of this report were presented at a CBC research conference held in New York City in December 2018”. The report was not completed until December 2019 because of New York’s changing policies over the past year.  In particular, the Climate Leadership and Community Protection Act was promulgated in July 2019. They made revisions based on feedback from external reviewers and staff at the Public Service Commission and the New York League of Conservation Voters but noted that their willingness to assist in the research does not “imply any endorsement of the report’s findings and recommendations”.

Future Energy Storage Requirements

One of my primary concerns with the CLCPA is how much energy storage would be needed.  In order to determine how much is needed we need to know the difference between expected generation and expected load at the time of the greatest difference.   I applaud the CBC for developing an estimate of the renewable energy requirements of this legislation.  The MW capacity I derived from the CBC work can be used to estimate how much energy storage would have been required to meet an example winter peak period in January 2018 for a scenario that includes the added load due to heating and transportation and the 2040 renewable energy resources.  I previously made an estimate of the energy storage requirements for a summer peak period but I only considered existing load.

The first step is to determine the renewable capacity in MW expected to be necessary to meet the future load.  The CBC Forecast of 2040 Capacity (MW) Resources to Meet CLCPA Goals table lists those resources.  In the previous post I described how I used a combination of historical and meteorological data to estimate future output for the two-day winter peak period.  Results are shown in the January 3-4 2018 Winter Peak With CBC Forecasted 2040 Capacity Resources to Meet CLCPA Goals table. This table shows that there was a fifteen-hour period from January 3, 2018 at 1600 until January 4, 2018 at 0600 with hourly storage deficits totaling 134,545 MWh.  That period will be used to calculate the amount of storage needed.  In the earlier analysis I looked at five-minute data but this one will only look at hourly values.

In the absence of some sophisticated methodology to determine how best to provide the necessary energy storage, I arbitrarily limited the battery resource duration to eight hours and then picked different battery capacities until I had a positive margin (generation plus storage minus load).  I assumed that the least cost energy storage approach would maximize energy storage duration based on lower costs per MWh in a recently released report from the National Renewable Energy Lab (NREL): “2018 U.S. Utility-Scale Photovoltaics-Plus-Energy Storage System Cost Benchmark”.

In the Estimated Energy Storage Required and Potential Price Necessary to Prevent Deficit on January 3-4 2018 table I summarize the energy storage needs and my projection for the amount of different duration energy storage systems needed.  I chose three 8-hour duration battery systems of 1,200, 7,600 and 7,700 as the primary systems and four other battery systems to erase the remaining deficits.  Note that when I did this kind of analysis using 5-minute data that there were higher peaks amongst the hourly values.  If that is the case for this scenario, then it would require even larger batteries.

Future Energy Storage Costs

The aforementioned NREL battery benchmark report estimated costs for a limited number of battery durations.  I calculated costs for different duration energy storage costs in a post at What’s Up With That.  The Calculated Cost Breakdown $ per kWh Parameters for a US Li-ion Standalone Storage System for Different Durations table shows the methodology used to calculate the battery costs for this estimate.  The estimated cost for the energy storage necessary to meet this winter peak period is a staggering $47 billion.

But that’s not all.  NREL reported on an analysis of the life expectancy of lithium-ion energy storage systems in 2017 in Life Prediction Model for Grid-Connected Li-ion Battery Energy Storage System.  The study tested batteries to simulate how long they would last in real-world conditions by reaching a certain depth of discharge rates and testing battery degradation over time.  Under NREL’s scenarios, an energy storage system is expected to last between seven and 10 years. “Without active thermal management, 7 years lifetime is possible provided the battery is cycled within a restricted 47% DOD operating range. With active thermal management, 10 years lifetime is possible provided the battery is cycled within a restricted 54% operating range,” NREL said.

My estimate of the batteries needed assumed 100% discharge and the NREL results indicate that smaller battery discharge is necessary in order to prolong the life expectancy up to ten years.  In other words if by magic we could install all the renewable resources and all the necessary battery energy storage today, then by the time 2040 rolled around most of the renewable resources would be reaching the end of their life expectancy and we would have to start installing the third round of a significantly larger number of batteries than I projected.

 Conclusion

As documented in my previous post, energy storage will be required to keep the lights on, homes heated and cars charged on calm nights.  No amount of over-building solar and wind will remove that constraint.  The cost of the energy storage using LI ion batteries needed to meet an example winter peak period is estimated to be $47 billion dollars.  That value is probably conservative because of limitations on the operating range to extend life expectancy out to ten years.

I can only conclude that the State of New York must do a feasibility study to refine the CBC analysis of future renewable resources needed.  The analysis has to be detailed enough that the energy storage requirements can be projected so that a full cost estimate of compliance with the CLCPA can be estimated.

Citizens Budget Commission Getting Greener – How Much Renewable Energy?

Update: I have prepared three technical posts on this report: Once I completed these three posts, I realized that they were too wonky for a general audience.  The first post discussed their findings, the second post addressed their renewable energy forecast to meet the CLCPA, and the third post calculates the energy storage requirement for a winter peak period.  Because the CBC study is so important, I have prepared a less-technical summary that hits the highlights of all three posts.

On December 9, 2019 the Citizens Budget Commission (CBC) released a report entitled Getting Greener: Cost-Effective Options for Achieving New York’s Greenhouse Gas Goals  that addresses the impacts of the Climate Leadership and Community Protection Act (CLCPA).   There is much to like about the report but I disagree with a few of their recommendations and have concerns about some of the methodology.  In order to do this report justice, I have prepared three posts.

If you have an interest in New York energy policy I recommend that you read the entire document.  It is well written, comprehensively covers many of the issues associated with the CLCPA, and makes estimates of the resources needed to implement the CLCPA.  The first post discussed their findings and this post addresses their renewable energy forecast to meet the CLCPA.  The final post will address the energy storage requirement.

Background

The CBC is a nonpartisan, nonprofit civic organization whose mission is “to achieve constructive change in the finances and services of New York City and New York State government”.  They claim to serve the public rather than narrow special interests try to preserve public resources, whether financial or human; and focus on the well-being of future New Yorkers which they say are “the most underrepresented group in city and state government”.

The CBC Energy Policy Committee managed the development of the report.  It was prepared for CBC by Seth Hulkower, President of Strategic Energy Advisory Services.  Apparently, this project has been in the works for a long time because the “initial findings of this report were presented at a CBC research conference held in New York City in December 2018”. The report was not completed until December 2019 because of New York’s changing policies over the past year.  In particular, the Climate Leadership and Community Protection Act was promulgated in July 2019. They made revisions based on feedback from external reviewers and staff at the Public Service Commission and the New York League of Conservation Voters but noted that their willingness to assist in the research does not “imply any endorsement of the report’s findings and recommendations”.

Background

The CBC is a nonpartisan, nonprofit civic organization whose mission is “to achieve constructive change in the finances and services of New York City and New York State government”.  They claim to serve the public rather than narrow special interests try to preserve public resources, whether financial or human; and focus on the well-being of future New Yorkers which they say are “the most underrepresented group in city and state government”.

The CBC Energy Policy Committee managed the development of the report.  It was prepared for CBC by Seth Hulkower, President of Strategic Energy Advisory Services.  Apparently, this project has been in the works for a long time because the “initial findings of this report were presented at a CBC research conference held in New York City in December 2018”. The report was not completed until December 2019 because of New York’s changing policies over the past year.  In particular, the Climate Leadership and Community Protection Act was promulgated in July 2019. They made revisions based on feedback from external reviewers and staff at the Public Service Commission and the New York League of Conservation Voters but noted that their willingness to assist in the research does not “imply any endorsement of the report’s findings and recommendations”.

Resources Needed to Meet CLCPA Goals

Section 3.5 of the report forecasts the renewable energy resources needed to meet the CLCPA goals including the 2040 requirement to no longer use fossil fuels for electric generation.  The report lays out the problem well:

The twin goals of shifting from fossil fueled and nuclear-powered generation and electrifying heating and transportation in New York will transform the mix of generation and increase total electric consumption significantly. At this writing, neither the NYISO nor any New York State agency or authority has provided a long-range projection of what the result of these policies might be. In order to get a sense of whether the current program set out by the CLCPA will meet the goals, an analysis is provided in Appendix C to add up the total energy requirements on one side and the existing, planned and further resources needed on the other to determine how much renewable generation New York may need.

The report describes the methodology used to provide an estimate of future renewable energy requirements in Appendix C.  The first step was to estimate the annual energy load.  In the next step they used the New York Generation Attribute Tracking System (NYGATS) data to determine the amount of energy provided to the grid in 2017 from existing renewables, nuclear, natural gas, coal, oil and solid waste.   For each sector they made assumptions about future use.  For example, they assumed that coal, oil and solid waste energy would go to zero by 2025.  Then they determined how much would be available from New York State Energy Research and Development Authority (NYSERDA) projects that are being considered, solar and wind projects announced as part of CLCPA, and then calculated how much more would be needed simply by summing everything else and subtracting that from their estimate of total annual energy load in 2030 and 2040.

Their results indicate that “as New York moves to a path of decarbonizing heating and transportation in New York, the total electric demand will rise to 211,100 Gwh by 2040. To serve that demand with 100 percent non-emitting resources, nearly 94,000 Gwh of additional renewables will need to be added, a total that is roughly double the amount to be added from offshore wind (37,800 Gwh) and distributed solar (8,400 Gwh) now set by the CLCPA.

Future Energy Load Concerns

The report provides an estimate of future renewable energy requirements in Appendix C.  The first step was to estimate the annual energy load.  NYSERDA, Department of Pubic Service, and New York Independent System Operator forecast a drop in load use from 153,163 GWh in 2017 to 141,000 GWh in 2030 as a result from all the energy efficiency and load reduction programs.  However, that does not include the additional load needed for electrification of transportation and heating.  The CBC report developed those numbers.

Unfortunately, there are inconsistencies in the numbers provided that I think go beyond any interpretation errors I might have.  The Annual Energy Load Estimates (GWh) in Appendix C table lists annual energy load estimates from 2017 to 2040 when the CLCPA mandates that there be no fossil-fired electric generation.  In the first section of Appendix A the report estimates the energy load reduction as 936 GWh per year from 2017 to 2030 and that works out to give 141,000 GWh in 2030.  However, they estimated the annual impact of increased load as electrification of transportation and heating take effect between 2021 and 2050 as an increase of 3,000 GWh per year.  The numbers listed in the CBC estimate column are from the first section of Appendix C and are inconsistent with these rates.  Further in the appendix there is a table that lists the total generation forecast, CBC forecast column, and those numbers are also inconsistent with the calculated values shown in the total load column.  At least those values show that load increases with increased electrification.

Future Resource Assumption Concerns

This is a complex problem and CBC is to be congratulated for this work and the effort it represents.  However, there are some issues that should be noted with their assumptions for generation from different sources.  In my opinion, the impact of these issues would be to make compliance with the CLCPA even more difficult and make their estimates unusable for estimating cost.  Most importantly, these issues do not change their bottom-line estimate of energy needed in 2040.  It only affects the transition output of different sectors in prior years.

In particular, I note these minor issues.  CBC assumes that all existing renewable energy will be available in 2040 but many of those sources will be older than their life expectancy.  CBC assumes that imported nuclear energy will continue to be available at the same levels through 2040 and that might be overly optimistic.  The analysis assumes that coal, oil and solid waste will go to zero by 2025.  Coal will be zeroed out in 2020 because the last coal plant shut down in 2019.  However, oil generation provides a valuable backup to natural gas generation so I expect that there will be some oil burned as long as natural gas is used.

Additional Renewable Energy Resources Concerns

The second substantive issue I want to highlight is the apparent inconsistency between some of the numbers in Table 3 in the text and a table in Appendix C as shown in the CBC Getting Greener Comparison of Energy Resourcess table.  In the 2030 data, there is a small difference between the existing renewables numbers in the two tables that I believe is just a rounding difference.  However, the sum of the total renewables or the target energy to be provided by renewable resources in Table 3, 98,700 GWh is not close to the sum (119,700 GWh) of the renewable categories in the Appendix C table.  In the 2040 data, the existing nuclear available is different and the total renewables in Table 3 is 141,000 GWh and in Appendix C the total renewables are 211,100 GWh.

Although the “smart” grid is supposed to reduce peak loads and make the difficulties providing power at the peak, the fact is that electrification of heating and transportation is necessary to meet the strict CLCPA goals  The CBC analysis suggests that “electrification of transportation and heating could add nearly 90,000 GWh to statewide consumption, which was approximately 160,000 GWh in 2015 but is projected by NYSERDA to fall to 141,000 by 2030”.  They go on to say that “This new energy will have to be provided from non-emitting sources in order to reduce GHG emissions and will be in addition to the offshore wind resources and distributed solar presently mandated by the CLCPA. To meet the CLCPA’s goals New York will need to add 55,600 GWh (refer to Table 3) for existing electric use; this 90,000 GWh would be additive to that total.”  Assuming the CBC load reductions from 2030 to 2040 with an added 90,000 GWh then the Appendix C value of total energy needed of 211,100 GWh is consistent with their conclusions.  Therefore, I used their Appendix C numbers in my analysis of the implications of their work.

Implications of Future Renewable Energy Resources

The CBC Forecast of 2040 Capacity (MW) Resources to Meet CLCPA Goals table in CBC Getting Greener Comparison of Energy Resources provides enough information to estimate the renewable capacity in MW to determine how many windmills and solar panels would be needed as shown in the CBC Forecast of 2040 Capacity (MW) Resources to Meet CLCPA Goals table.  In 2017, the existing NYCA renewable resources generating capability totaled 6,351 MW.  This total includes hydro (4,253 MW), large wind generation (1,739 MW), -scale solar PV (32 MW), and other renewable resources (327 MW).  CBC estimates resources needed in GWh so we need an estimate of capacity factor to project the MW capacity.  The CBC analysis used median figures from the National Renewable Energy Laboratory for these technologies: Residential/Distributed Solar 16%; Utility Scale Solar 20% and Offshore Wind 48%.  For Land based Wind they used a historical value of 26%.  I used those capacity factor values to estimate MW for each of the categories in their table.   There is one last calculation needed because the CBC table has a category for additional renewables rather than a break out of solar and wind types.  I simply apportioned the renewables to 33% on-shore wind, 33% off-shore wind, 17% residential solar, and 17% utility-scale solar to get a first cut estimate.  Using these assumptions New York would have to build 11,395 MW of residential solar, 16,117 MW of utility-scale solar, 18,457 MW of on-shore wind and 16,363 MW of off-shore wind.  Remember this does not include replacing existing renewables that we expect to shut down before 2040.

Let’s put those numbers in perspective using numbers from the most recent projects in the Article 10 permitting queue for on-shore wind and utility scale solar.  On December 16, 2019 the DPS Siting Board approved the Bluestone Wind Project and their most recent application update listed five potential wind turbine models.  The highest rated power for these turbines was 4.8 MW which would mean that over 3,845 on-shore wind turbines would be needed to meet the 18,457 MW output assumption.  On September 26, 2019 the East Point Energy Center application was submitted for a solar project that will have a generating capacity of 50 MW.  According to the summary description the area inside the fences (which I assume is the area where the panels are located) will cover 352 acres.  Using those numbers each MW of utility scale solar will cover 7 acres so 112,816 acres or 176 square miles will be needed to meet the 16,117 MW of utility scale solar output assumption.  There are no off-shore wind facilities in the DPS queue so I used press release information for the Equinor 816 MW winning project: “The project is expected to be developed with 60-80 wind turbines, with an installed capacity of more than 10 MW each”.   I found a specific capacity of 10.2 MW and that means that 1,604 wind turbines would be needed to meet the 16,363 MW output assumption.  For residential solar I used the rule of thumb that you need 66 square feet to generate 1kW of solar energy and that would require 36 solar panels.  That means that nearly 27 square miles of residential roofs would have to be covered by over 364.6 million solar panels to meet the 11,395 MW assumption.

Future Peak Wind Renewable Resources

While the CBC analysis does a laudable job trying to estimate the impact of long-term electrification (see section 3.4.1 in the report), I believe more of an emphasis on the peak load problem should have been included.  That effort is significantly more difficult to do.  I made an attempt to look at a winter peak period using the CBC load projections.  I have previously evaluated the solar and wind resource potential during a summer peak period and I have used the same approach for this analysis.

Briefly, my approach uses a combination of historical and meteorological data to estimate future output for the two-day period.  The results are shown in the CBC Forecasted 2040 Capacity Resources to Meet CLCPA Goals During January 3-4 2018 Winter Peak table.  I used historical generation output for the on-shore wind, other renewables, nuclear and hydro sectors from the New York Independent System Operator (NYISO) for January 3 and 4 2018 and calculated future output as the ratio between the CBC derived MW and actual MW capacity in 2018.  I assumed no change in hydro capacity.  (Note that there are a pair of columns for each category in the table and that at the top of the category the left column lists the actual value and the right column lists the derived value.) There was no off-shore wind generation in 2018 so I used meteorological data from an off-shore buoy and estimated the output from a 10.2 MW wind turbine for the period.  I calculated the future energy output as the ratio between the CBC derived MW and the single turbine.  There were no hourly values available for solar for this period so I made a crude assumption about the solar output available and assumed that clouds were not an issue.  For utility-scale solar I used the NYISO 2017 total capacity of utility-scale solar and the NYISO residential behind the meter solar capacity for residential solar, then scaled both by the CBC derived MW capacity.  In order to estimate the hourly load, I took the ratio of 2017 total energy load and the CBC calculated 2040 annual load.

The results are strongly influenced upon my assumptions for off-shore wind output.  In this analysis I characterized wind energy output as a function of observed wind as follows.   I used a wind turbine power output variation curve that had a cut-in speed of 3.5 m/s and a cut-out wind speed of 25 m/s. Using that wind variation curve, I estimated that the straight line output of each 10.2 MW wind turbine will equal 0.971 times the wind speed minus 3.4.  For the input meteorological data, I used a National Oceanic and Atmospheric Administration buoy located 30 nautical miles south of Islip, NY (40°15’3″ N 73°9’52” W) that I used to represent NY offshore wind resource availability. The observed wind speed at the hub height is proportional to the logarithm of the height above ground.  For that calculation I assumed a hub height of 173 m and a surface roughness of 0.0003 using the buoy anemometer height of 4.9 m. I downloaded hourly NDBC data for 2018 and calculated the wind energy output for every hour in the two-day period using that relationship and the wind turbine output variation equation I derived.

Those assumptions are important because there were two no-wind energy output periods on 3-4 January 2018.   I was surprised to see that the wind resource went to zero not only when the winds were light on January 3 but also when a deep low pressure developed and the wind speeds exceeded 25 m/s on the very next day.  On January 3 there was a high pressure strong enough over the New York offshore wind region that winds were less than 3.5 m/s for five hours.  However, a storm system moved eastward from the Midwest and re-developed into a strong storm just off the coast on January 4 with an eleven-hour period of greater than 25 m/s wind speed 13 hours after the light wind period ended.

Conclusion

The Citizens Budget Commission report entitled Getting Greener: Cost-Effective Options for Achieving New York’s Greenhouse Gas Goals is a very good study because it provides an estimate of the renewable resources required to meet the CLCPA 2040 fossil-free electric sector target.  The State has not admitted that 2040 load is going to be substantially higher than the current levels but this report makes a compelling case for a significant increase in annual load.  I used their projections of the resources needed to meet the energy requirements (GWh) to estimate the power capacity (MW) needed.  I doubt that many people understand just how many wind turbines and solar panels will be needed.

The CBC forecast of resources to meet CLCPA goals is not without its faults, however.  In order to make a better estimate of the resources it is necessary to look at peak periods.  It is inappropriate to assume that a “smart” grid and more energy efficiency is going to eliminate electric load peaks so that they do not have to be considered.  Residential heating and transportation electrification will impact the winter peak very likely shifting the annual peak to winter simply because you cannot shift heating when it is very cold.   However, it is unfair to ask the CBC to address the winter peak expected load because it is a very complicated problem and would take a lot more effort.

I took a look at a winter peak period renewable resources derived from the CBC forecast.  I made a first cut attempt to estimate the capacity necessary to meet future energy load but I made a crude assumption that the peak load could be met with the resources needed to meet the annual energy estimate.  A better estimate of the resources necessary for peak loads will have to wait until some State agency prepares it.

Despite the limitations of this initial assessment one conclusion can be drawn.  Intuitively it is obvious that wind and solar renewable energy is going to be low to non-existent when the winds are calm at night. The inescapable conclusion is that adding more wind turbines or solar cells does not preclude the need for substantial energy storage.  The size of the numbers shown is sobering and the next post will address the resulting energy storage requirement.  While all the New York on-shore and off-shore wind resources may not go to zero simultaneously as shown in my estimate, that resource is going to be highly correlated across the available area in New York so all renewable resources will track closely and enormous energy storage resources will be needed.  The only reason that New York State will not become utterly dependent upon its neighbors to provide reliable electric power for winter peak periods are the New York City transmission-related reliability constraints.

Citizens Budget Commission Getting Greener – Findings

Update: I have prepared three technical posts on this report: Once I completed these three posts, I realized that they were too wonky for a general audience.  The first post discussed their findings, the second post addressed their renewable energy forecast to meet the CLCPA, and the third post calculates the energy storage requirement for a winter peak period.  Because the CBC study is so important, I have prepared a less-technical summary that hits the highlights of all three posts.

On December 9, 2019 the Citizens Budget Commission (CBC) released a report entitled Getting Greener: Cost-Effective Options for Achieving New York’s Greenhouse Gas Goals  that addresses the impacts of the Climate Leadership and Community Protection Act (CLCPA).   There is much to like about the report but I disagree with a few of their recommendations and have concerns about some of the methodology.  In order to do this report justice, I have prepared three posts.  If you have an interest in New York energy policy I recommend that you read the entire document.  It is well written, comprehensively covers many of the issues associated with the CLCPA, and makes estimates of the resources needed to implement the CLCPA.  This post concentrates on their findings.  The second post addresses their energy forecast to meet the CLCPA and the final post calculates the energy storage needed.

Background

The CBC is a nonpartisan, nonprofit civic organization whose mission is “to achieve constructive change in the finances and services of New York City and New York State government”.  They claim to serve the public rather than narrow special interests try to preserve public resources, whether financial or human; and focus on the well-being of future New Yorkers which they say are “the most underrepresented group in city and state government”.

The CBC Energy Policy Committee managed the development of the report.  It was prepared for CBC by Seth Hulkower, President of Strategic Energy Advisory Services.  Apparently, this project has been in the works for a long time because the “initial findings of this report were presented at a CBC research conference held in New York City in December 2018”. The report was not completed until December 2019 because of New York’s changing policies over the past year.  In particular, the Climate Leadership and Community Protection Act (CLCPA) was promulgated in July 2019. They made revisions based on feedback from external reviewers and staff at the Public Service Commission and the New York League of Conservation Voters but noted that their willingness to assist in the research does not “imply any endorsement of the report’s findings and recommendations”.

Annotated CBC Findings

The report notes that New York is already green: “compared to other states it produced the fewest per-capita GHG emissions in 2016 and experienced the greatest percentage decrease in emissions– 13 percent– between 1990 and 2016”. Most of New York’s decrease occurred in the electric power sector as NY power plants shifted almost entirely away from coal and oil to increased use of natural gas and nuclear power.  They also say that during this time GHG emissions also decreased significantly in the industrial sector and declined slightly in the residential and commercial sectors. In contrast, emissions grew 25 percent in the transportation sector and that represents more than one-third of all GHG state emissions and over 40 percent of end-use energy.

The report explains that New York’s ability to continue to make such gains and to meet CLCPA goals is uncertain and gives the following reasons.  My comments are italicized.

    1. “Immense scaling up of renewable generation capacity is necessary and is likely infeasible by 2030. Much of New York’s GHG strategy rests upon continued reductions in the electric sector; specifically, state plans are to more than double renewable generation capacity, mostly from offshore wind turbines. However, it will be challenging to install the required resources by 2030: too few projects are underway and project timelines are lengthy and are likely to be delayed by extensive permitting procedures and often community opposition. New York is poised to direct the expenditure of billions of dollars and still fall short of the stated goals.”
      • I agree with these concerns. It is not clear to me what the amount of offshore wind turbines relative to other renewables will be because there is no state comprehensive plan.
    2. “The focus on building renewable resources, particularly offshore wind, and entering into long-term power contracts limits flexibility and diminishes consideration of other cost-effective approaches. Efforts to scale up renewables are necessary, but projects planned require the State to offer supplemental payments to make them work. Furthermore, the massive infrastructure investment required to procure offshore wind capacity will require long-term contracts that will lock in increased costs for electric customers for years to come. Based on analysis of a recent offshore wind project contract, meeting the renewable target entirely with offshore wind will increase electricity costs by $2.3 billion annually, an increase of between 8 and 12 percent to New Yorkers’ electric bills, which could be a significant increase in monthly living expenses for some low-income and working class New Yorkers. Other options may be more cost-effective, particularly as technology evolves in the long term.”
      • The importance of concern about locking in long-term contracts cannot be over-estimated. If the State does this wrong then we will be locked into significant cost increases for a long time.  Moreover, I think that their cost estimates are low because they only consider the cost of the turbines themselves and do not include the extra costs necessary to make off-shore wind power dispatchable.
    3. “State policies on nuclear, natural gas, and hydropower are counterproductive. First, the state’s six nuclear power plants are scheduled to shut down between 2020 and 2046. Elimination of the nuclear fleet will erase nearly all previous emissions gains as that power supply by necessity will likely be replaced in the near-term by natural gas, which produces greater emissions than nuclear power. Second, attempts to expand natural gas pipelines have been blocked, which resulted in moratoria on new gas installations downstate. Natural gas provides an economical alternative to dirtier fossil fuels and is a dependable source when renewable sources like solar and wind are not available. Third, while hydro is a key renewable resource, state policies have not supported use of hydro when construction of a new dam is involved, limiting the ability to access additional affordable and clean power from Canada.”
      • I admire the restraint of this section. Calling the policies counterproductive is kind.  The massive hypocrisy of on one hand calling for a response to an existential threat while at the same time shutting down operating nuclear plants begs out to be called stupid at least.  Energy facts undermine the current administration’s irrational war on fracked natural gas which is based purely on emotions.  Throw in the lack of support for hydro and the State’s energy future is not going to go through tough times.
    4. “The focus on other sectors—particularly transportation—is insufficient. The State’s strategy to tackle growing transportation emissions is focused on facilitating expanded use of electric vehicles, which is expensive and challenging for some parts of the state. Furthermore, achieving the long-term goals to cut GHGs by 85 percent will require electrifying almost all heating and transportation, affecting every home and business and nearly every vehicle in the state. This conversion from direct fossil fuel consumption to electric power will necessitate a dramatic further increase in renewable energy supply and energy efficiency: New York State will need to add an additional 94,000 Gigawatt hours of renewables, more than double existing renewable resources. It will also require an expansion of the state’s transmission capacity, which is already constrained from upstate to the downstate area, where most energy is used. The construction of offshore wind facilities will bring more renewable energy directly to the downstate market, but a larger mix of resources, some operating intermittently, will require an expanded transmission grid to deliver power throughout the state.”
      • This paragraph summarizes a fundamental issue with the CLCPA very well. On one hand the State proposes to completely re-make the energy production system while simultaneously increasing our dependency upon reliable power.  The only thing I would add to this discussion is a concern about resiliency.  What happens when everyone depends on electric heat and an ice storm takes out the power lines?

The report introduces the recommendation summary with the following:

While GHG emissions have risen in other large states like Texas and Florida, New York has been a leader in reducing GHG emissions; the focus on further emissions reductions is necessary and important. The challenge now is to find the most efficient approaches to secure the greatest amount of incremental carbon reduction per each dollar spent. Doing so will require tackling emissions across all sectors; maintaining optionality in the approaches used; and partnering with other states and Canada.

        • I take exception to the comment “the focus on further emissions reductions is necessary and important” because the State has never provided its estimates of the effects these policies on global warming potential. By my calculations, the ultimate impact of a 100% reduction of New York’s 1990 218.1 million metric ton of emissions on projected global temperature rise would be a reduction, or a “savings,” of approximately 0.0032°C by the year 2050 and 0.0067°C by the year 2100.  This small a temperature difference cannot be measured.  I don’t accept those changes as necessary and important.

The report offers the following six recommendations:

  1. Establish an economy-wide carbon pricing system to deliver effective price signals to energy consumers. Two options for such a system are: (1) a carbon fee and (2) a cap-and-trade system. To be most effective, these policies should be implemented on at least a regional, if not national, scale, so that dollars are directed most effectively toward the dirtiest energy sources and states. CLCPA tasks the New York State Department of Environmental Conservation with estimating a “social cost of carbon,” that is, a monetary figure capturing the costs of an incremental increase in carbon emissions, an important step for implementing a pricing scheme. New York is already a member of the Regional Greenhouse Gas Initiative (RGGI), an effective 9-state cap-and-trade system covering the electrical generation power sector. To be most effective RGGI should be expanded to other sectors of the economy, including transportation.
    • Carbon pricing has theoretical appeal but in practice I am very pessimistic that the results will work out as planned based on the results of the Regional Greenhouse Gas Initiative. CBC correctly recognizes that carbon pricing should be economy-wide and regional, if not national, to be successful but appears to favor a tax where “dollars are directed most effectively”.  The problem with that is that it is regressive and hurts those least able to afford it the hardest.  Trying to address a regressive tax makes this approach less effective.
    • CLCPA notes that determining a social cost of carbon is part of the CLCPA. Aside from the very real issues associated with that value it is not clear that the social cost of carbon is an adequate price signal for renewable energy development.
    • CBC states that RGGI is an “effective 9-state cap and trade system”. In the first place it is not a cap and trade program it is simply a tax masquerading as a cap and auction   More importantly, it is not particularly effective because I have shown that RGGI itself was responsible for only 5% of the observed reductions since the inception of the program.  Finally, the Accumulated Annual Regional Greenhouse Gas Initiative Benefits table shows that the cost per ton reduced from RGGI investments ($897) are far in excess of the $50 global social cost of carbon at a 3% discount rate.  Because the social cost of carbon is an estimate of the economic damages that would result from emitting one additional ton of greenhouse gas this means that RGGI investments are much more costly than the economic damages.
  2. Look beyond New York’s borders for low-cost, low-emission energy supplies and to cut GHG emissions. New York should explore the possibility of a multi-state buyers’ consortium to purchase large-scale low- and zero-GHG energy resources. New York, New Jersey, Connecticut, Rhode Island, and Massachusetts are all in the process of developing offshore wind energy projects. The states are seeking low-cost electricity, but also vying for jobs from the burgeoning offshore wind industry. Rather than compete, these states should work together to bring the most cost-effective resources to the market. Another opportunity is to import Canadian hydropower, which is competitively priced and clean.
    • No comment – this seems reasonable.
  3. Retain nuclear energy to retain the benefits of carbon avoidance. The state’s nuclear facilities operate with the help of subsidies, known as Zero Emissions Credits, that expire in 2029. If these subsidies are not extended, the nuclear plants may shut down while still holding valid operating licenses. The state should explore further extensions of these operating licenses with the U.S. Nuclear Regulatory Commission. The implementation of a properly priced carbon fee would be a benefit to the nuclear plants, which generate no greenhouse gases.
    • CBC recognizes that if there is a climate emergency then reducing power from the largest source of carbon free electric generation in the state is counter-productive.
  4. Avoid self-imposed constraints such as limiting gas pipeline capacity. A strong preference for renewable energy has resulted in constraints on expansion of natural gas. Denying permits to several natural gas pipelines is constraining energy markets to the point that New York will not be able to reap the GHG reduction benefits of converting home heating from oil to natural gas. Likewise, a lack of stable natural gas supply for new businesses may harm the state’s economic competitiveness. Regulatory and legal actions should not hamper use of resources that can continue to reduce GHG emission and provide reliable energy solutions. New York should create a competitive market of options to reduce greenhouse gases.
    • CBC recognizes that renewable energy implementation for the entire energy sector is a long-term process and that natural gas should be an interim part of the transition or a rational energy plan when the State realizes it cannot afford the CLCPA boondoggle.
  5. Promote broad transportation solutions that build on existing infrastructure. New York has made a large commitment to electric vehicles that will subsidize both car buyers and the construction of charging stations. This is an expensive GHG emissions reduction strategy. Greater emphasis should be placed on one of the areas that has made New York a low GHG-emitting state: energy-efficient public transportation. While a hybrid or electric vehicle produces fewer GHGs than a gasoline powered vehicle, public transportation produces even less per passenger mile traveled.
    • CBC recognizes that the commitment to electric vehicles is expensive and suggest greater emphasis on energy-efficient public transportation. I agree with the sentiment but the problem is what do you do in rural and suburban areas where cost-effective public transportation is out of the question.
  6. Establish a prioritization system to pursue renewables that provide the greatest GHG reductions at lowest cost. Renewables are and must be an increasing part of the state’s energy portfolio; however, policymakers should allow price signals to determine how much wind capacity, distributed solar, utility-scale solar, and hydropower is built rather than mandating specific technologies. All these projects should be put on a common basis of cost to consumer for tons of GHG avoided and those with the lowest net cost should be prioritized for development and contracts. A balanced portfolio of resources and contract term lengths will provide New York with the greatest security and stability to reach its long-term GHG reductions goals. This also will allow for competition from new resources so that if newer projects can be completed at lower cost, New York will reap the benefit. It also allows for the possibility that leaps in technology will be able to fill the mix rather than being locked into old technology for 20 years. New York is now leading the way on greenhouse gas reductions, but it should also lead the way in using competition to provide the greatest emissions reductions at the lowest cost.
    • I agree that spending priorities should be established based on emission reduction cost effectiveness but I think if CBC spent some time looking at the numbers, they would be surprised how expensive these technologies are. I fully support their suggestions to minimize future financial exposure.

Summary

The findings support my position that the State needs to do a feasibility study to determine how the CLCPA could be implemented. I will address their renewables analysis in a future post but the spoiler alert is that it requires massive renewable development.  This will require enormous investments and the findings point out the financial and flexibility risks if those investments are funded incorrectly.  They also raise the concern that existing sources of nuclear and hydro zero emitting generating power are not currently encouraged to remain in operation and suggest that discouraging natural gas infrastructure is counter-productive.  The final finding is the observation that there is much work to be done to implement the CLCPA targets for other sectors.  I agree with all these concerns.

The report makes a number of recommendations.   I agree that the State should prioritize investments based on performance, look beyond New York for additional sources of reduction support, eliminate self-imposed constraints on natural gas use, and retain our existing nuclear energy capacity as long as possible.  I do not think that a carbon pricing system will work if it only applies to New York or a limited region so I disagree with their recommendation for one even if it is across all sectors. Their transportation recommendation to think beyond electric vehicles for reductions makes sense where public transit investments could be cost-effective but that precludes rural areas.

Although I am not on board with the CBC’s desire to do something because it is “necessary”, I am encouraged that an organization that feels that is necessary realizes the magnitude of the effort and the very real possibility of massive future financial exposure.  The CBC report underscores the potential that doing something wrong would not be in the best interests of the State no matter how noble the intention.

RGGI – A Cap and Tax Market Program

I think it is wrong to assume that the success of market-based cap and trade pollution control programs for sulfur dioxide (SO2) and nitrogen oxides (NOx) guarantees that market-based trading variations such as cap and dividend or a carbon price will work for carbon dioxide (CO2) reductions.  This post describes the reasons why I think the results from RGGI show that success is unlikely and could end badly.

My Background

I think it is important to understand where I come from on this topic.  You won’t find any papers by me in the literature and I have no background in economics.  However, I have been involved with cap and trade programs since the start of the EPA Acid Rain Program in the early 1990’s.  At the beginning I was responsible for compliance submittals to EPA in a traditional utility but as the electric generation business transitioned to de-regulation in New York my responsibilities grew to helping to develop trading program compliance strategies for affected sources across the country in a non-regulated generating company.  From that time until the present I have evaluated numerous national, regional, and state-only trading programs for SO2, NOx, and CO2.  As a result, I have a niche understanding of the information necessary to critique trading programs from the seldom heard background of affected source staff complying with the rules.

Since my retirement I have turned to blogging with an emphasis on a pragmatic approach to pollution control.  My posts can be very technical because that was necessary to submit substantive comments to regulatory agencies.  I regularly post on the Regional Greenhouse Gas Initiative and update the status of investment proceeds and allowance holdings regularly.  The opinions expressed on this blog and 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.

Cap and Trade

In a standard cap and trade program i a cap is established, allowances are allocated to sources based on historical operations, and affected sources are required to submit an allowance for every ton emitted.  Sources are in compliance if their allowances are less than the cap established.  As long as there are sources that can over-control cost-effectively below their cap limits and trade allowances so that sources that don’t have options to meet their limits, then overall costs are cheaper to meet the cap.  The Environmental Protection Agency’s Acid Rain Program (ARP) is a standard cap and trade program and has been an unconditional success in my opinion.   Annual SO2 emissions are down 92% since 1990 and annual NOx emissions are down 84% since 1990 at a much lower cost than expected at the beginning of the program.

Despite the success of the ARP there are caveats that should be considered.  When the ARP cap was proposed it was assumed that sources would have to install control equipment to significantly reduce SO2 emissions.  However, it turned out that fuel switching was a very effective option because power companies figured out how to burn low-sulfur coal and railroad de-regulation made it cost effective to ship low sulfur coal everywhere.  My point is that the primary reason that the ARP was cheaper and produced greater reductions than expected had much more to do with the fuel switching to meet the cap than trading resulting from pollution control installation providing over-control and generating tradable allowances.

On the other hand, pollution control technology advancements have played a role in the reductions in NOx cap and trade programs.  I feel more comfortable arguing that cap driven technological solutions contributed to the success for those programs than fuel switching.  Importantly though, I believe trading on the open market is not a widespread compliance option.  Rather than depending on the vagaries of the allowance market, power plant operators implemented control programs based on system-wide compliance across their facilities.  The majority of trades necessary for compliance have been within operating systems and not on the open market.

There are some misconceptions about cap and trade programs within the environmental advocacy community.  For example in a description of the cons of cap and trade this author states many of the emissions credits are just given away: “Sometimes these credits are just given away, creating no trade benefit at all. This means it costs a business nothing to expand their emissions and that can harm a local economy, which receives no economic gain in return.”  However, because the cap is lower than the existing emissions even if a business expands their emissions others have to reduce their emissions so the cap is met.  The perception that there is a give-away colors the opinion of traditional cap and trade opponents such as the author’s comment that giving them away creates “no economic gain in return”.  Actually, the allowance credits only have economic value because they are a compliance obligation.  That economic value has to be earned by a facility that invests in pollution control equipment to over-control their emissions.  In doing so they earn the right to sell their excess and fund their investment.

Over time, the concept that the affected sources have received a “windfall” has led to program adjustments where regulators set aside allowances for sale and a variation on cap and trade where the allowances are sold at an auction.  The Regional Greenhouse Gas Initiative (RGGI) is a prime example of cap and auction program.  Note that these programs are commonly branded as “cap and dividend” programs where the money earned is a dividend to the public.

Cap and Auction

It is commonly accepted that RGGI cap and auction program has been successful.  As shown in the RGGI Nine-State EPA CAMD Annual CO2 Emissions table the total emissions have decreased from over 127 million tons prior to the program to just under 75 million tons in 2018, for over a 40% decrease.  However, as I have shown, when you evaluate emissions by the primary fuel type burned it is obvious that emissions reductions from coal and oil generating are the primary reason why the emissions decreased.  Both coal and oil emissions have dropped over 80% since the baseline.  Natural gas emissions increased but because of the inherent low emission rate overall emissions declined.  I believe that the fuel switch from coal and oil to natural gas occurred because natural gas was the cheaper fuel and had very little to do with RGGI because the CO2 allowance cost adder to the plant’s operating costs was relatively small.

I think that there are fundamental differences with CO2 trading programs as compared to SO2 and NOx trading programs that make CO2 trading programs inherently suspect.  Most importantly, there are no cost-effective add-on pollution control systems available to reduce CO2 emissions at existing sources so they have limited options to reduce emissions to meet the cap.  For example, there is no evidence that any affected source in RGGI installed add-on controls to reduce their CO2 emissions.  The only other substantive option at a power plant is to become more efficient and burn less fuel.  However, because fuel costs are the biggest driver for operational costs that means efficiency projects to reduce fuel use means have always been considered by these sources.   In other words, if it made financial sense it was implemented long before this program.  Because the cost adder of the RGGI carbon price was relatively small I do not believe that it changed the business case at any affected source to install an efficiency project as part of its RGGI compliance strategy.  Therefore, because affected sources in RGGI and, arguably any other CO2 cap and auction program, do not have any viable control options, they simply treat the cost of purchasing allowances at an auction as a tax.

Conclusion

Cap and trade programs have proven successful for SO2 and NOx.  The primary reason that those programs have reduced emissions at lower costs as opposed to simply requiring every facility to meet a specified limit is that there were technology or fuel-switching options available to the owners and operators of the affected sources that allowed some facilities to over-control and trade with facilities that did not have cost-effective control options.  Note however, that to date, SO2 and NOx trading programs have not constrained allowances beyond the control option capabilities.  Future cap reductions will have to push this limit so I think future cap and trade reductions will not be as cost-effective as in the past.

There are ramifications to the success of the SO2 and NOx trading programs that have not been acknowledged by the regulators or advocates for stringent CO2 cap programs.  If there are no control options then affected sources provide power as long as they have allowances to cover their emissions.  While in an idealized world advocates may think that a fossil-fired plant operate would invest in carbon-free generation, I think the reality is different simply because the owners background, resources, and expertise is mostly inapplicable to fossil generation.  Those owners simply treat the auction cost as a tax.

In the real world, there is another problem if the cap and auction program actually constrains emissions.  Because RGGI is “successful” the latest program review reduced the number of allowances available in the future so we will conduct an experiment to see what happens.  Because the allowances were sold in an open auction anyone can purchase them[1].  There is a problem associated with the allowances purchased in the past and banked for future use (see posts here and here). At this time, non-compliance entities own the majority of the surplus or banked allowances that were sold in earlier auctions.  When the number of allowances available in future auctions is reduced, the inevitable result will be that entities that have compliance obligations will necessarily have to buy allowances on the market with the non-compliance entity knowing that it is a seller’s market.  Obviously, the price will increase markedly to the consumer’s disadvantage.

Finally, a constraining CO2 allowance program will cause the price of allowances and the ultimate cost of energy to consumers to go up in the best case, but in a worse case, allowances are unavailable and affected sources will simply not run.  However, in the worst case the reliability of the electric grid could be endangered if enough affected sources are unable to run.

[1] In the interest of full disclosure, I should note that I own RGGI allowances that I purchased in an auction.

Not a Lot of People Know That on Carbon Taxes

I recently published a post on my concerns with carbon pricing schemes.  Subsequently Paul Homewood at the Not a Lot of People Know That blog described the flaws in an article supporting yet another carbon tax plan. This post describes Mr. Homewood’s description of the flaws because he brings up additional issues that I did not consider.  I have also included my comment on the original post and a reply to my comment.

AEP’s Carbon Tax Fantasy

Mr. Homewood commented on an opinion piece in the British Telegraph newspaper by Ambrose Evans-Pritchard supporting HR 763, the Energy Innovation and Carbon Dividend Act.  According to the article “this initiative by the Citizens Climate Lobby has the support of Democrats and Republicans in Congress. It has been endorsed by Alan Greenspan, the late Paul Volcker, and Nobel laureate Myron Scholes in the free market camp, and Janet Yellen, Amartya Sen, and Larry Summers on the interventionist side.”

Mr. Homewood described seven flaws in the proposal.  My comments in italics.

    1. The only logical reason for a carbon tax is to reduce emissions. Such a tax might help to reduce energy consumption, but only at punitive levels, because energy demand is so inelastic. Therefore, the real intention is to make fossil fuels so expensive that renewables can eventually become competitive, along with CCS, hydrogen heating etc. But when that happens, there are less emissions, and consequently less carbon tax revenue to redistribute. Meanwhile energy consumers will still have to face the extra cost of expensive renewables.
      • The point that energy demand is inelastic is important. Supporters of carbon taxes either underestimate energy demand change assuming, that people will use less or count on magical solutions that will cost less.  If they are wrong then society gets stuck with the higher costs.  I noted the problem with decreasing revenues over time in my post but did not pick up on the fact that consumers will be stuck with higher costs.
    1. It is well established that once governments get their hands on a new source of tax revenue, they don’t give it back. And that’s even before counting the cost of collecting and administering it.
      • I agree completely and should note that New York’s record with the Regional Greenhouse Gas Initiative revenues confirms this problem. Twice since the inception of that program New York has raided the revenues for the general fund.  Governor Cuomo has been circumspect – he simply diverts funds from RGGI to existing programs.
    1. AEP claims in this same article that the cost of renewables is already plunging. In that case why do wind and solar power still need subsidies, guarantees, and now apparently punitive carbon taxes to be able to compete?
      • Clearly this the case everywhere.
    1. His case for carbon taxes assumes that the world can run on predominantly unreliable renewable energy. So far, coal power has been squeezed out in Europe and the US through a combination of carbon pricing, air quality rules etc. But it has been largely replaced by extra gas fired generation. There is no evidence that gas and oil can in turn be replaced by wind and solar, and certainly not in the short time scales he has in mind.
        • The primary reason that coal is no longer used in New York is that natural gas is cheaper. My biggest concern with the Climate Leadership and Community Protection Act mandate to eliminate fossil-fired generation from the electric sector by 2040 is the lack of a plan to do it.
    1. In the UK at least, the power sector only accounts for about a tenth of emissions. Most arise from heating, transport and industry. A carbon tax would have little effect on, for instance, domestic gas usage or car travel. (We do after all already have a punitive carbon tax on cars, called fuel duty – it has not encouraged us to buy EVs). AEP’s colleague Jeremy Warner wrote about carbon taxes a few weeks ago. He reckoned that a $75 carbon tax would raise natural gas prices by 70%. Does he really believe this is acceptable to millions of people up and down the country who are already struggling to make ends meet?  As the Committee on Climate Change accept, to switch domestic heating from gas to heat pumps or hydrogen will cost hundreds of billions, money which neither householders or government has.
      • These concerns should be red flags for the New York Independent System Operator’s proposal to have a carbon price just on the New York electricity market.
    1. If a punitive level of carbon tax really was introduced in Europe, the consequences would be earth shattering. The Gilets Jaune would look like a tea party in comparison with the riots such a policy would cause. As the squeeze took effect, people’s cost of living would be badly affected. At the same time, the economy would quickly tank, with companies contracting, shutting down or simply offshoring.

AEP talks about a “border carbon tax”, but this would make matters even worse. For a start it would put up prices for consumers even more. Secondly it would set off a highly damaging trade war, as China and the rest of Asia would not sit back and take it. There would be only one loser in such a war, and it would not be Asia.

In any event, an EU carbon tax and border tax would never get off the ground, as the East bloc would reject it out of hand. Why, after all, should their economies, which rely heavily on coal, be hamstrung to suit German and French Greens?

      • These are the leakage issues that I described in my original post. I agree that implementation of a carbon tax that actually drove behavior changes and investment decisions would be so expensive that protests and political changes would be inevitable.
    1. Of course, the bottom line with all of this is that a carbon tax would need to be truly global to have any real effect. Would anybody trust China, for instance, to institute a proper system, rather than some fake one which merely shuffled bits of paper around. Many other developing countries would be in the same position.  They won’t stop using fossil fuels, because they know that they work and renewables don’t. No amount of creative accounting will change that.  Maybe he thinks the UN could ultimately administer a carbon tax, collecting and redistributing the revenue itself. If so, heaven help us all!
      • I agree completely with this bottom line.

 My Comment

I commented (December 27, 2019 9:31 pm) with the following:

I agree that all carbon pricing schemes are flawed. I think that there are a number of practical reasons that carbon pricing will not work as theorized. Because a global program is impractical, leakage is always going to be a problem. The carbon price has to be set such that revenues over time increase significantly and either the funding to make reductions dries up or as you point out the rebates dry up. The economists who support this theory seem to be blissfully unaware of the reality of the energy market or how inelastic demand is. Based on observed emission reduction programs in New York I think that indirect market signals are going to lead to less cost-effective reductions in the time frame necessary for the aggressive reduction rules. Finally, no supporters seem to understand the very real problems of implementation logistics. More here https://wp.me/p8hgeb-gw.

Phoenix44 replied to my comment (December 28, 2019 9:20 am):

None of that is true. The simple point about a carbon tax is that it encourages markets to come up with solutions. Unless you believe there are no solutions, it is the best way of solving the problem. We can continue to argue on here that there is no problem, but nobody who matters is listening.

Refusing to then support the least damaging solution is I am sorry to say, stupid.

My reply comment to Phoenix44 (December 28, 2019 1:57 pm):

With all due respect I think you miss the point of our critiques.  Even if you believe that a carbon tax is the best solution, that does not mean that our criticisms are incorrect.  It just means that this theoretical solution is not perfect.  I believe that it can be claimed to be the best solution only if you can implement this across the globe and across all the energy sectors.  If that cannot be done, then to claim that it is the least damaging solution because it is the best theory is flawed.  At the link above I posted on this problem in New York.  Advocates claim this is the best theory so it should be least damaging when we apply it to just the electric sector, in just New York State.  I don’t think it is going to work.

So, what would I do to address your problem?  I believe that the only way to successfully de-carbonize is to make the alternatives cheaper with no subsidies or externalities considered.  One way to try to do that would be to have a small carbon tax on those that feel we have to do something and invest all that money in research and development for cheaper and safer alternatives – how about small modular thorium reactors or fusion?   If you want to electrify transportation then you need a cheap, environmentally benign battery too.  Unfortunately, there are those opposed to nuclear in any form and even oppose getting cheap, abundant electric power to those who don’t have it.  Ultimately that is the stupid position.

Conclusion

Despite all the theoretical advantages  of carbon pricing I believe that any carbon pricing scheme that gets implemented will suffer from the practical constraints that Mr. Homewood and I have described.  In New York, I believe direct funding of emission reduction efforts will be more cost-effective.  As noted in my reply comment I think that the only way to successfully de-carbonize is to make the alternatives cheaper with no subsidies or externalities considered.  If the real goal is to de-carbonize the world, then it would be far better for New York to mobilize its intellectual capital for research and development for cheaper alternatives than to try to use intermittent and diffuse renewable energy to make emissions reductions now.  Carbon pricing will not provide incentives for the breakthrough technology needed to solve the global problem.