CPV Valley Energy Center Operating Status August 1, 2018

On August 1, 2018 New York State’s Department of Environmental Conservation (DEC) CPV Valley Permit denied (DEC letter to CPV August 2018) the renewal of the Air State Facility Permit for the Competitive Power Ventures (CPV) Valley Energy Center natural gas power plant located in Orange County, New York. In this post I will describe the decision, what I think is going to happen, potential ramifications, and rationale for the decision. Initially, I thought it might have been an oversight on the part of CPV Valley but the more I poked around the more evidence surfaced that this was a politically motivated decision that will likely end up in court.

Background and Decision

On July 8, 2018, the Middletown Times-Herald Record reported that the “$900 million, 680-megawatt plant built between Interstate 84 and Route 6 will be connected to a natural-gas pipeline in a matter of days, and should begin full-time operation in a matter of weeks.” At the time the last apparent hold up was connecting the plant to the natural gas transmission system after New York Governor Cuomo’s administration tried to block the construction of the connecting pipeline after the plant was nearing completion. However, CPV Valley did not apply for their Title V operating permit and DEC said in their letter that “CPV may not lawfully operate the facility”.

On August 3, 2018, the Middletown Times-Herald Record reported:

The state Department of Environmental Conservation announced its decision in a letter to CPV officials on Wednesday, one day after the air permit DEC granted in 2013 expired. A department official explained that a change in federal regulations required CPV to get a so-called Title V permit from the Environmental Protection Agency before starting up the plant, something the company had not done.

It was not immediately clear if CPV, which had planned to begin operating the $900 million power plant in Wawayanda this month, will contest the decision, or comply with it by applying for a Title V permit. It also was unclear how long it would take to obtain such a permit and what obstacles the company could face. The DEC letter said the permit application requires a public comment period and a 45-day review period for the EPA.

What is going to happen?

I believe that this article is correct that this represents a delay rather than a sign that the facility will not operate someday. The Albany Times Union headline that says State pulls plug on controversial Orange County power plant is incorrect and a Riverkeeper article that suggests that this permit denial indefinitely shuts down the power plant are wrong.

This is a controversial power plant for two reasons. Firstly, there is strong environmentalist opposition to any fossil fuel infrastructure and second there is an associated political scandal. This is election season in New York and the Governor is trying to keep his environmental credentials as clean as possible. This facility’s opponents consistently link this plant to fracked natural gas and point out that it will delay the transition to renewables and call for its permanent closure. Nothing about this administration shocks me anymore so even shutting down a plant needed to replace power from the closure of Indian Point so I would not be that surprised to see them propose that but I can guarantee that there is no way that the permitting process for the missing permit will be completed until well after the election.

The political scandal occurred when a top Cuomo aide was found guilty of getting an executive from CPV to get his wife a high paying “low-show” job for his wife. The payments were in exchange for helping to win state power contracts. Apparently CPV took the lobbying approach to get their power plant commissioned because there is a money trail to politicians associated with the plant. As a result of this there have been calls to prevent the power plant from opening.

Ramifications

I have written about the role of CPV Valley as replacement power for Indian Pont (a nuclear station that Cuomo has forced into accepting a shutdown in April 2021. The New York Independent System Operator concluded that there would be no issues with replacement power if three major generation facilities were completed including CPV Valley. As noted above, because I believe this represents a delay rather than a cancellation I do not expect that to be an issue. However, if Cuomo’s political team decides to go all in for the environmentalist vote and he refuses to give them an operating permit reliability issues will arise.

I have always been on the technical side of things in the power industry. My dealings with the business side of the house were uniformly stressful because their idea of long lead time was tomorrow and environmental permitting takes time so I was always pushed to produce faster. Nonetheless I question whether permanently shutting down a completed power plant makes NY “Open for Business” generally. If I were on the business side of a power generating company I certainly would not be comfortable proposing to build a new power plant to replace the old power plants that the NYS Department of Environmental Conservation (DEC) wants shut down. It will be interesting to see how this turns out not only in the short term but also the long haul.

Rationale

I did not understand how CPV Valley got into a position where they did not even have an application listed on the NYS DEC draft Title V permit website. Title V permits are described as the “operating permit”. How in the world did CPV Valley think that they would not need that?

The Middletown Times Herald-Record article says “A department official explained that a change in federal regulations required CPV to get a so-called Title V permit from the Environmental Protection Agency before starting up the plant, something the company had not done.” Trying to determine what that statement meant was a challenge.

According to the CPV Valley website description of the permitting approval process the first permitting submittal was completed in March 2008. The Town of Wawayanda Planning Board SEQRA Findings Statement was published on May 23, 2012.

In 2013 there was a revision to 6 CRR-NY 201-6.2 Permit Applications to clarify the acceptable time frame for the submittal of Title V permit applications: Renumbered Paragraphs 201- 6.2(a)(1) through 201-6.2(a)(4) were revised to clarify the acceptable time frame for the submittal of Title V permit applications. According to this rule they should have had a complete application prior to construction:

The owner or operator of a facility subject to this Subpart shall submit a complete application, as defined in Part 621 of this Title and this Subpart, for initial issuance of a title V permit, or renewal, in accordance with the timeframes established under paragraphs (1) through (6) of this subdivision:

(1) Prior to the commencement of construction of a new facility subject to permitting under this Subpart

The SEQRA Findings Statement mentions that they submitted an “application for regulatory agency review in conjunction with Federal and State PSD and non-attainment new source review requirements and process” before March 2012.  There is no mention of a Title V permit in the document.

It looks like there was a rule change after the project was permitted and the revision clearly says that a new facility has to have a complete Title V permit before they can begin construction. I can only guess that CPV Valley thought that because they had a State facility permit that it would roll over as if it were an existing facility modification per sub-sections (2) and (3):

(2) Prior to the commencement of operation of new emission unit(s) or modified emission units at an existing facility that make the facility subject to title V permitting. The owner or operator of a facility subject to this provision may choose to apply for a State facility permit pursuant to section 201-5.2 of this Part. Upon issuance, that permit shall authorize both construction and operation of the new or modified emission units until a title V permit is issued in accordance with this Subpart.

(3) Prior to the commencement of construction of a new emission unit at an existing title V facility. The owner or operator of an existing title V facility, which is being modified by the addition of a new emission unit comprised solely of new emission sources, may apply for a State facility permit pursuant to section 201-5.2 of this Part that will authorize construction and operation of the new emission unit upon issuance. A title V permit modification is required within one year of the commencement of operation of the new emission unit.

I did a Google Search for CPV Air State Facility Permits and found the pre-construction permit  (CPV Valley Permit). It turns out the CPV Valley thought that were all right because their permit said “A Title V permit application must be submitted to the Department within one year of commencement of operation of this facility.” The rationale was that the application would include “start-up, shutdown, and fuel switching data to establish enforceable combustion turbine start-up, shutdown, and fuel switching emission rates for NOx, CO, and NH3, and confirm that such established rates would not result in a violation of applicable NAAQS.”

Back to the statement from the Middletown Times Herald-Record that “A department official explained that a change in federal regulations required CPV to get a so-called Title V permit from the Environmental Protection Agency before starting up the plant, something the company had not done.” I am no lawyer but as far as I can tell the change in the DEC regulations in response to the federal regulations came in 2013  before the CPV Air State Facility permit was issued that explicitly said the Title V application had to be submitted within one year of the commencement of operations and if it was after CPV Valley has a permit that shields them from this change. I don’t think that there is any chance that this won’t be headed to court.

New York State Air Pollution Emissions Status

I do not think that the general public understands how much improvement there has been to New York State’s air quality and how big the emissions reductions have been.   This is a summary of the trend of SO2, NOx and CO2 since 1999 in New York State and it shows extraordinary improvements. Later, I will prepare a summary of the changes to the air quality measurements which also show big improvements.

I have to apologize for my inability to incorporate tables and graphs in the body of a WordPress blog post. If I had that ability then this post would be a heck of a lot easier to read. Instead I offer three alternatives. Each of the figures and tables is available by links in the following post. I also have prepared a version of this post and you can view NYS Air Pollution Emission Status Summary  as a pdf document.  Finally that document, three spreadsheets with the data, tables and graphs, and a detailed documentation summary of the data processing analysis are available at the NY Pragmatic Environmentalist dropbox.

The emissions and operating data used for this summary were downloaded from the EPA Clean Air Markets Division Air Markets Program Data website. The website includes a query tool that I have used for years to extract specific data from national emission monitoring programs. For this analysis I downloaded SO2, NOx and CO2 emissions data, operating time, heat input and load data as well as unit-specific information on fuel use and unit type so that I could show what changes caused the emissions reductions. Because this is a New York-centric blog I primarily focused on New York emissions.

Figure 1 NYS SO2 Emissions by Fuel Type documents the annual SO2 emissions from 1998 to 2017 by the primary fuel type reported to EPA. In 1998 SO2 emissions totaled 309,775 tons and in 2017 were only 2,561, a 99% reduction. Table 1 EPA CAMD Data New York State Air Pollution Emissions from All Program Units presents the emissions totals and includes the coal-firing totals. It turns out that reductions in coal-firing and residual-oil firing account for the reduction in SO2 mass. New York is unique in that there are five relatively new large residual oil-fired boiler units in the state. Although there were changes in the limit of sulfur in fuel the primary driver for the reductions was the cost of oil relative to natural gas coupled with the fact that there is essentially no SO2 emitted by natural gas firing. At this time these units survive because they can provide 1000s of MW when necessary and their operational costs are low enough that the payments to be able to provide that capacity are sufficient to be viable. Note, however, that they cannot reduce emissions much more because they still have to run a couple of times a year to prove that they can provide capacity. Coal-firing units in New York were older and were required to install extensive controls over this period to continue to operate. The cost differential between natural gas and coal was the final blow to viability and for all intents and purposes only one facility remains operating today. Governor Cuomo has proposed regulations to eliminate coal burning at even that unit by 2020. These data suggest the de minimus level of future SO2 emissions will be around 1,000 tons per year.

Figure 2 NYS NOx Emissions by Fuel Type documents the annual NOx emissions from 1998 to 2017 by the primary fuel type reported to EPA. In the peak year of 2000 NOx emissions totaled 101,635 tons and in 2017 were only 11,253, an 89% reduction. The coal and residual oil units were also the largest sources for NOx so they account for most of the reduction. On the other hand there still are significant NOx emissions from natural gas firing so the reductions are not as large. Eliminating coal firing will drop emissions another 2,770 tons from 2017 levels. Further reductions will come from replacing older, higher emitting units with new cleaner ones. If I had to guess on a future de minimus level it would be around 7,000 tons per year.

Figure 3 NYS Statewide SO2 and NOx Rates documents the changes in annual emission rates (lbs/mmBtu) over the same period. The reason for these changes is the same as the mass changes. Keep in mind that mass emissions are a function of these rates and the operating levels. If there is more demand on fossil-fired units then they will emit more. Of course, if renewable energy reduces the need for fossil-fired units or if demand for electrical energy goes down due to energy efficiency efforts then mass emissions will go down.

CO2 emissions are a bit complicated. There are two CO2 data sets included: one from the Regional Greenhouse Gas Initiative (RGGI) program units and the other from all programs. In New York there are some small peaking turbines that are not presently included in RGGI. Unfortunately the annual emissions are not directly comparable because units that are not affected by RGGI do not have to report annual emissions only the ozone season (May through September). Also note that the RGGI CO2 Allowance Tracking System (COATS) data system also provides annual numbers for the RGGI only units and those numbers are the same as the RGGI only units from CAMD. Figure 4 NYS CO2 Emissions by Fuel Type lists the annual CO2 emissions from 1998 to 2017 by the primary fuel type reported to EPA. Table 2 EPA CAMD Data NYS Air Pollution Annual Emissions from RGGI Program Units lists the annual emissions from these units. These data show that CO2 emissions reductions to date have been caused by fuel switching but importantly there isn’t much left to switch. As a result, future CO2 emission reductions will be more difficult.

In addition to annual market trading programs there are trading programs that run from May 1 to September 30 for NOx emissions to reduce ozone.   Figure 5 NYS Ozone Season NOx Emissions shows the Ozone Season NOx emissions from 1999 to 2017 by the primary fuel type reported to EPA. In 1999 NOx emissions totaled 47,314 tons and in 2017 were only 5,533 tons, an 88% reduction. Figure 6 NYS Ozone Season NOx Rate documents the changes in ozone season emission rates (lbs/mmBtu) over the same period. The state-wide NOx rate during the Ozone Season in 1999 was 0.202 lbs per mmBtu and was 0.053 in 2017, a 74% reduction. Similar to the annual numbers these reductions are primarily the result of fuel switching. Finally Table 3 New York State Ozone Season NOx Mass by Unit Type lists the Ozone Season NOx mass, heat input and NOx rate values sorted by major unit types: boilers, combined-cycle turbines and simple cycle turbines.

These trends show that New York State has done a superlative job reducing emissions.  There also are implications for future air pollution control programs in these data.  Any future reductions simply cannot be as effective because the current emissions are so low.  In addition, any program that claims air pollution emission benefits for reducing CO2 must recognize the current low rates and mass emissions or those benefit estimates are higher than appropriate.

 

Unintended Ramification of the Finger Lakes LPG Storage Community Character Decision

On July 12, 2018, the New York State Department of Environmental Conservation (NYSDEC) Commissioner Basil Seggos issued a decision for a proposal to construct and operate a new underground liquefied petroleum gas (LPG) storage facility for the storage and distribution of propane in the town of Reading in the Finger Lakes region of New York. The decision denied the permit applications for the proposed project on the grounds the facility would have a significant adverse impact on community character in the local area and the Finger Lakes region. This post compares the changes made to the proposed project by the Finger Lakes LPG project with an industrial wind complex, the Ball Hill Wind Energy Project between the initial environmental impact statement and the final environmental impact statement. It is not clear to me how any wind energy project can pass the bar set by this community character decision.

DEC Decision

I discussed the NYSDEC decision in an earlier post where I concluded that it values qualitative value judgements over any quantitative assessment and will establish “not in my backyard” arguments as an acceptable rationale for denying just about any project.  I determined that based on the conclusion of the opening section of the decision by Basil Seggos that states:

Notwithstanding that certain issues can be identified as adjudicable, the record is more than sufficient at this stage for me to make a final determination based on the requirements of the State Environmental Quality Review Act (SEQRA). The record demonstrates that the impacts of this project on the character of the local and regional community, including but not limited to the environmental setting and sensitivity of the Finger Lakes area and the local and regional economic engines (e.g., wine, agricultural and tourism industries), are significant and adverse and the project does not avoid or minimize those impacts to the maximum extent practicable. Furthermore, the significant adverse impacts on community character are not outweighed or balanced by social, economic or other considerations, and cannot be avoided or minimized to the maximum extent practicable by the proposed mitigation measures.

My decision, together with the draft supplemental environmental impact statement (DSEIS) and the comprehensive record, hereby serves to finalize the DSEIS for this action. Based upon my review, I am not able to issue a findings statement in support of this project and, accordingly, the permit applications for this proposed project are to be denied.

Frankly, I was not familiar with community character impacts so I relied on the description in the decision. Community character is described in the decision as follows:

Community character is specifically referenced by the State Environmental Quality Review Act (SEQRA). SEQRA defines “environment” to include “the physical conditions which will be affected by a proposed action, including . . . existing patterns of population concentration, distribution, or growth, and existing community or neighborhood character” (ECL 8-0105[6]; see also 6 NYCRR 617.2[l]). Unique to each case is the “community” to be evaluated – it will relate to the type of action that is being proposed, the factual circumstances and the nature of the impacts. For some projects, the “community” may be only the municipality in which the proposed action would occur. Here, the interests of a range of communities within the vicinity of Seneca Lake, as in part reflected by the submissions of the Seneca Lake Communities in this proceeding, are clearly relevant to the analysis. The evaluation of community character in this specific matter is not solely limited to the communities (Town of Reading and County of Schuyler) in which the proposed facility would be sited but entails an evaluation of communities in and around Seneca Lake and the Finger Lakes region whose economies and environmental interests are directly intertwined.

One community character rationale is particularly apt for this comparison. The decision noted that “impacts to noise and aesthetic resources as revealed on the current record are essential components in the evaluation of impacts on community character in the context of this proposed project”.

The Finger Lakes LPG Storage Project as Described in the Decision

Finger Lakes LPG Storage, LLC originally proposed to build a facility that would store propane and butane in existing solution-mined underground caverns in the Syracuse salt formation. As originally proposed, a maximum of 2.10 million barrels (88.20 million gallons) of LPG in the form of liquid propane and butane was to be stored in the caverns seasonally, displacing some of the brine currently filling them. The stored LPG was to be withdrawn by displacement of propane with brine when demand occurred during the heating season, and displacement of butane with brine during the gasoline blending season.

During storage operations, the brine displaced by LPG or butane was proposed to be stored and contained in two double-lined brine ponds. One 2.25 acre pond would have had a capacity of approximately 0.17 million barrels (7.14 million gallons). The second pond was 6.35 acres, and would have a capacity of approximately 0.80 to 0.81 million barrels (33.6 to 33.9 million gallons)

The facility would connect to an existing interstate pipeline for shipment of LPG into and out of the facility. As originally proposed, LPG was also to be shipped out by truck, and by rail. The original project included the construction of a new rail and truck LPG transfer facility, consisting of a six-rail siding capable of allowing loading and unloading of 24 rail cars within 12 hours, and a truck loading station capable of loading four trucks per hour.

During the application process modifications were proposed to reduce the scale and environmental impacts of the project in response to local stakeholder concerns. The modifications eliminated the proposal to store liquid butane at the facility and reduced propane storage capacity from 2.1 million barrels to 1.5 million barrels; eliminated the project’s rail and truck loading facilities so all deliveries of liquefied petroleum gas would be by pipeline; eliminated one of the brine ponds; and, for lack of a better term offered bribes as they proposed to “provide resources ranging from financial resources to technical resources (mining data) to support community initiatives for the preservation and improvement of water quality in the area, including Seneca Lake”.

Ball Hill Windpark as Described on the Project Website

Noble Ball Hill Windpark, LLC originally proposed to construct and operate an approximately 94.5 megawatt (MW) wind energy facility in Chautauqua County, New York in 2008 and submitted an Environmental Assessment Form. According to Appendix F – 2008 Environmental Assessment Form and 2015 Board Resolution the project consisted of the following:

  • 60 wind turbines;
  • 16 miles of access roads;
  • An electrical collection system along the same right-of-way corridor as the access roads with 23.8 miles buried and 6 miles of overhead.
  • A new substation with a footprint of approximately 200 by 300 feet;
  • A new switchyard with a footprint of approximately 300 by 500 feet; and
  • An operations and maintenance building site of 5 acres

In November 2016, Ball Hill Wind Energy, LLC submitted a Final Environmental Impact Statement with changes to the project:

  • 29 instead of 60 wind turbines;
  • 13 instead of 16 miles of access roads;
  • An electrical collection system along the same right-of-way corridor as the access roads with 19.8 miles instead of 23.8 miles buried and 5.7 miles instead of 6 miles of overhead.
  • A new substation with a footprint of approximately 175 by 190 instead of 200 by 300 feet;
  • A new switchyard with a footprint of approximately 225 by 611 instead of 300 by 500 feet; and
  • An operations and maintenance building site of 2.8 acres

I was unable to find a description of the turbines originally proposed but in 2008 the local township wind law limited the maximum height to 420’. In 2011 the developer submitted an amended application using a new turbine design. In September 2016 the developer requested that be changed to 495’ to allow for the use of “newer, more efficient turbine technology. The 2016 Supplemental Draft Environmental Impact Statement states that there will be 34 3.45MW Vestas wind turbines with a hub height of 72.5m and a 51.2 blades. I understand that the current developer recently requested another change to the maximum height restriction to 600’ but do not know if that is for these Vestas turbines or another, and presumably, higher design.

Noise Comparison of Projects

I am guessing at the noise impacts of the final Finger Lakes LPG Storage proposal. It proposed to use two electric 75 horse power pumps to pump product from the tanks into the pipeline to the electronically driven injection pumps where those pumps will then be used to inject the product into the caverns. I expect that insulated walls and advanced fan technology would have been used to dampen sound. Moreover, because the proposed plant area is adjacent to a NYSE&G building complex and NYS Route 14 there was a certain amount of ambient noise in the area anyways.

According to the Ball Hill Windpark 2018 Proposed Modifications Summary of Environmental Impacts:

The new proposed turbine is quieter or the same at 750 out of 769 receptor points studied. At the remaining 19 points, the sound level would increase imperceptibly by 1-2 dBA. The Project remains fully compliant with Town and NYSDEC noise standards.

In summary, I conclude that the noise impacts from the two projects are essentially the same. Without more research I am not sure why the opponents of Finger Lakes LPG Storage were so upset about noise because the revised plan eliminated truck and rail transport which would have affected noise levels.

Aesthetic considerations Compared

The primary aesthetic issue is visibility and Ball Hill Windpark will have 29 highly visible wind turbines. The project will use a VI26 class turbine which is a three-bladed horizontal-axis wind turbine with a rotor diameter of approximately 413 feet. The turbine rotor and the nacelle are mounted on top of a tubular tower giving a rotor hub height of approximately 285 feet. The maximum height for the turbine is below 500 feet when a rotor blade is at the top of its rotation. Once installed, the wind turbine would occupy a round base approximately 60 feet in diameter.

According to the 2018 Proposed Modifications Summary of Environmental Impacts wind turbines will be visible in 33.9% of the area within the 5-mile viewshed. According to the 2008 Environmental Assessment Form the smaller turbines originally proposed would be visible from greater than 5 miles from a parcel of land which is “dedicated to and available to the public for the use, enjoyment and appreciation of natural or man-made scenic qualities” and “an overlook or parcel of land dedicated to public observation, enjoyment and appreciation of natural or man-made scenic qualities”, and a “site or structure listed on the National or State Registers of Historic Places” and between ½ and 3 miles to a State Wildlife Management Area.

In addition, there are the access roads, overhead electric lines, switchyard, substation and operations and maintenance building site that all have an aesthetic effect.

The final proposal for the Finger Lake LPG Storage facility was a brine pond, a compressor station, and a support building. The more visible (and eventually eliminated) brine pond was proposed to be a maximum height of 50 feet above its down slope toe on a site with variable slopes in the 8 to 12 percent range. The slope tends to steepen downhill in the area under the proposed impoundment structure. When full, the pond surface will be approximately 400 feet above Seneca Lake elevation, at a horizontal distance from the lake of approximately 2400 feet.

The Draft Environmental Impact Statement noted:

The brine pond embankment and portions of site clearing will be visible or partially visible from NYS Route 414 and Seneca Lake. Once the brine pond is constructed and the side slopes of the embankment are vegetated, the view from Seneca Lake and NYS Route 414 is anticipated to be similar to the current view. The proposed brine pond site will be visible from NYS Route 14 and NYS Route 14A. The truck transfer facility will also be visible from NYS Route 14A. Potential visual impacts along NYS Route 14 and NYS Route 14A will be mitigated during site development activities through strategic native plantings and seeding at both the brine pond site and the truck transfer facility site. It is not anticipated that the proposed project will result in any significant adverse visual impacts.

Because this describes the more visible brine pond and even this pond’s visibility could be mitigated by planting native trees I conclude that the pond has a negligible impact on visibility.

In summary, the Ball Hill Windpark will be visible from 1/3 of the area within 5 miles whereas the most visible component for Finger Lake LPG Storage can be screened such that there is no longer visible. The compressor station and support building aesthetics impacts cannot be considered to have a greater effect than the access roads, overhead electric lines, switchyard, substation and operations and maintenance building site for Ball Hill Windpark. Nonetheless Commissioner Seggos claims that the gas storage facility has significant adverse impacts on community character.

But it is worse. According to the Ball Hill Windpark 2018 Proposed Modifications Summary of Environmental Impacts:

The new turbine increases by 3 the number of homes that would experience 10-20 hours per year of shadow flicker, and by 23 the number of homes that would experience 40+ hours per year. Of these homes, 11 are project participants. The remaining 215 homes would experience the same or fewer hours of shadow flicker annually as in the 2016 Permit.

There is no equivalent impact for Finger Lakes LPG Storage.

Conclusion

I can only conclude that if the Finger Lakes LPG Storage project has sufficient adverse impacts on community character associated with noise and aesthetics then every wind development project must have a similar adverse impact. The precedent set by this case would seem to preclude wind energy.

Setting a Price for Carbon in the NY Wholesale Electric Market for the Layman

This post discusses the New York effort to put a price of carbon on the wholesale electric market. I think New Yorkers deserve answers to the following questions:

  • What is this proposal going to do?
  • How is it supposed to work?
  • How much will it cost?
  • What impact will it have?

This post will attempt to provide my answers to these questions to summarize my concerns with the proposal.

I have been submitting comments throughout the process (here and here) and I have posted on this here.   My comments have been submitted as a private retired citizen. They 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. The majority of New York State (NYS) ratepayers are unaware of the ramifications of this proceeding and have never heard of the Social Cost of Carbon (SCC). I was motivated to submit comments and prepare these posts so that there is at least one voice of the unaffiliated public whose primary interest is an evidence-based balance between environmental goals and costs to ratepayers. There are significant hurdles to implementing carbon pricing in general and as proposed in the straw proposal that should be considered. There are unintended consequences to the proposal that will result in enormous costs for a plan that will have Inconsequential tangible benefits to the environment.

Carbon Pricing

The fundamental idea behind carbon pricing is that when carbon dioxide emissions cost money society will produce less of them. Economists support the idea that with a carbon price the market efficiently cuts emissions. Note, however, in order to operate efficiently the carbon price has to be applied to the whole economy.

Not surprisingly, the devil is in the implementation details. A price has to be set for each ton of carbon dioxide emitted but what should the price be and how should the emissions be measured. The disposition of the money earned by the tax is another major issue. In order to minimize regressive effects and let the market efficiently decide how best to make reductions many economists favor a revenue-neutral approach where the carbon tax revenues replace other tax revenue streams and no investments are determined by the regulators.

New York Carbon Pricing Proposal

On August 11, 2017, the New York Independent System Operator (NYISO) and the New York State Department of Public Service (DPS) jointly initiated a process to engage with stakeholders to examine the potential for carbon pricing in the wholesale energy market to further New York State’s energy policy goals. This initiative began in the fall of 2016 as a project commenced by the NYISO through its stakeholder process. The NYISO retained The Brattle Group to evaluate conceptual market design options for pricing carbon emissions in the competitive wholesale energy markets administered by the NYISO. That report, Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals, (Brattle Report) forms the basis of the proposal.

The Integrating Public Policy Task Force (IPPTF) was created to solicit stakeholder feedback for the carbon pricing proposal. The IPPTF meeting materials page lists all the documents produced by NYISO and stakeholder comments. Frankly, this is a frustrating process. This is illustrated by the fact that there are meeting agendas but no meeting minutes. For example, at the May 21, 2018 meeting emissions monitoring experts from the generating industry had a panel discussion on emissions reporting to explain how CO2 is measured and reported. One of the major points was that there is a significant timing issue between the needs of the carbon pricing initiative and regulatory requirements which mandate post-monitoring quality assurance adjustments. On July 16, 2018 NYISO presented its general recommendation for emissions reporting and the ensuing stakeholder discussion ignored the expert presentation discussion of the timing issue. If minutes were available then the timing issue would have been documented. More importantly, It is not clear if the NYISO final recommendation will incorporate the concerns of the experts.

In April 2018, NYISO posted a straw proposal that outlined a potential design for incorporating the cost of carbon emissions into the wholesale electricity market of New York State. The straw proposal recommends that the DPS set the carbon price value and has suggested using the Social Cost of Carbon (SCC) as estimated by the U.S. Interagency Working Group (IWG) on the Social Cost of Carbon, starting at $43/ton CO2 today and rising to $65/ton by 2029[1]. The straw proposal recommends that all internal suppliers participating in wholesale electric energy markets pay the carbon charge. Most of the affected sources already report hourly CO2 emissions but there remain difficulties integrating their existing reporting requirements and this new requirement (primarily timing issues) and there are some affected sources that do not report CO2 that will have to develop the necessary infrastructure to report hourly data. Further complicating the problem is the issue of how to deal with imported and exported power. Finally, there has been limited discussion of the disposition of the carbon price funds but it is noticeable by its absence that the concept of returning all the money to rate payers has not been suggested. Instead, it appears that portions of this will be an additional funding mechanism for the Governor’s Reforming the Energy Vision initiative.

Carbon Price

My first concern with this proposal is the choice of the carbon price (for example my comments on the April 23, 2018 addressed this). The SCC value proposed was developed by a working group established by an Obama Executive Order to estimate the economic harm of CO2 emissions. My fundamental problem is that the IWG SCC value does not accurately reflect the current state of the science relative to the probability of temperature being highly sensitive to CO2. As a result that value over-estimates the potential benefit of New York emission reductions. Ultimately the SCC relies on a complex causal chain from carbon dioxide emissions to social impacts that are alleged to result from those emissions. Richard Tol testified that these connections are “long, complex and contingent on human decisions that are at least partly unrelated to climate policy. The social cost of carbon is, at least in part, also the social cost of underinvestment in infectious disease, the social cost of institutional failure in coastal countries, and so on.”

Potential Costs to Consumers

Table 1 Potential Costs of the Carbon Pricing Initiative is my best estimate of potential costs. The SCC column lists the annual values from 2015 to 2029. In order to know the costs we have to know the CO2 emissions. I used NYS Regional Greenhouse Gas Initiative (RGGI) historical emissions for 2015 to 2017 and then assumed that emissions would drop 1.5% per year from the 2017 values. At a minimum, ratepayers in New York will have pay the SCC value times the CO2 emissions from the affected New York generators (SCC Charge column in Table 1).

The Brattle Report proposes breaking the SCC charge into two components: the existing RGGI costs and the carbon price to the wholesale market. The RGGI allowance prices in Table 1 are the observed values from 2015 to 2018 and the value assumed by Brattle for 2025. The RGGI costs will equal the RGGI allowance price times the CO2 emissions (RGGI Charge column in Table 1). These are costs already committed to NY ratepayers albeit they are supposed to be invested for the benefit of consumers.

The IPPTF refers to the difference between the SCC Charge and the RGGI Charge as the Residual (Residual column in Table 1). The disposition of this money has not been finalized, but we know that a portion will be returned to the Load Serving Entities to offset ratepayer costs and the rest will be invested in carbon-reducing programs.

The Brattle Report analysis of the impact on customer costs uses average annual values and concludes that the carbon charge would have “approximately zero net impact on customer costs”. However, the point of my hourly analyses in my comments submitted on July 5, 2018 is that I think that the carbon charge will raise net energy costs. When I calculated the hourly impact I estimate that the total cost would have been $3,027,266,788 (Energy Increase column in Table 1). Importantly, none of the difference ($1,728,574,766) between this value and the SCC Charge (Energy Impact column in Table 1) will be returned to customers.

Impact

New York State has never provided an estimate of the effect of its clean energy programs on global warming. Governor Cuomo’s plan to “rebuild, strengthen and modernize New York’s energy system is called Reforming the Energy Vision (REV). The ultimate goal of REV is to change the energy system of New York to reduce greenhouse gas (GHG) emissions 80% from 1990 levels by 2050 (“80 by 50”).  In the absence of any official quantitative estimate of the impact on global warming from REV or any other New York State initiative related to climate change I did my own calculation.

The ultimate impact of the REV 80% reduction of 188.7 million metric tons on projected global temperature rise would be a reduction, or a “savings,” of approximately 0.0028°C by the year 2050 and 0.0058°C by the year 2100. In order to give you an idea of how small this temperature change consider changes with elevation and latitude. Generally, temperature decreases three (3) degrees Fahrenheit for every 1,000 foot increase in elevation above sea level. The projected temperature difference is the same as going down 18 inches. The general rule is that temperature changes three (3) degrees Fahrenheit for every 300 mile change in latitude at an elevation of sea level. The projected temperature change is the same as going south 0.4 miles.

My calculated values for temperature change are based on the “consensus” estimates of the Intergovernmental Panel on Climate Change which I personally believe over-estimate the impact of temperature changes caused by greenhouse gas emissions. My calculations show that REV and the carbon pricing initiative cannot claim that any observable impacts for the projected small change in temperature due to these emissions reductions.

Conclusion

This post did not delve into the many technical issues associated with implementing carbon pricing in general and as proposed in the straw proposal. Nonetheless, it raises basic questions. The increase in energy prices beyond the carbon price itself is an unintended consequence that will basically double the costs of the program. At the end of the day those enormous costs will have inconsequential tangible benefits to the environment. Even if you believe that we need to do something about climate change these numbers do not support this proposal.

[1] See New York Public Service Commission Order Adopting a Clean Energy Standard (2016) pp. 49, 51, and 131 http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7B1A8C4DCAE2CC-

449C-AA0D-7F9C3125F8A5%7D, and U.S. Government (2015) Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. May 2013, revised July 2015.

New York Codifying NIMBYism

On July 12, 2018, the New York State Department of Environmental Conservation (NYSDEC) Commissioner issued a decision for a proposal to construct and operate a new underground liquefied petroleum gas (LPG) storage facility for the storage and distribution of propane in the town of Reading in the Finger Lakes region of New York. The decision denied the permit applications for the proposed project on the grounds the facility would have a significant adverse impact on community character in the local area and the Finger Lakes region.

This blog supports evidence-based environmental decision making. When infrastructure is proposed it always affects someone who lives nearby. Not in My Back Yard (NIMBY) environmental issues are the reaction of those who don’t want to have any impacts on their personal lives. Because there are no quantitative measures for community character this is an emotion-based decision that sets the precedent that if enough people complain about something in their backyards then the NYSDEC will rule in their favor.

The Project as Described in the Decision

Finger Lakes LPG Storage, LLC originally proposed to build a facility that would store propane and butane in existing solution-mined underground caverns in the Syracuse salt formation. As originally proposed, a maximum of 2.10 million barrels (88.20 million gallons) of LPG in the form of liquid propane and butane was to be stored in the caverns seasonally, displacing some of the brine currently filling them. The stored LPG was to be withdrawn by displacement of propane with brine when demand occurred during the heating season, and displacement of butane with brine during the gasoline blending season.

During storage operations, the brine displaced by LPG or butane was proposed to be stored and contained in two double-lined brine ponds. One 2.25 acre pond would have had a capacity of approximately 0.17 million barrels (7.14 million gallons). The second pond was 6.35 acres, and would have a capacity of approximately 0.80 to 0.81 million barrels (33.6 to 33.9 million gallons)

The facility would connect to an existing interstate pipeline for shipment of LPG into and out of the facility. As originally proposed, LPG was also to be shipped out by truck, and by rail. The original project included the construction of a new rail and truck LPG transfer facility, consisting of a six-rail siding capable of allowing loading and unloading of 24 rail cars within 12 hours, and a truck loading station capable of loading four trucks per hour.

In response to local stakeholders, modifications were proposed to reduce the scale and environmental impacts of the project. The modifications eliminated the proposal to store liquid butane at the facility and reduced propane storage capacity from 2.1 million barrels to 1.5 million barrels; eliminated the project’s rail and truck loading facilities so all deliveries of liquefied petroleum gas would be by pipeline; eliminated one of the brine ponds; and, for lack of a better term offered bribes as they proposed to “provide resources ranging from financial resources to technical resources (mining data) to support community initiatives for the preservation and improvement of water quality in the area, including Seneca Lake”.

Community Character Impacts

The decision discusses community character as follows:

Community character is specifically referenced by the State Environmental Quality Review Act (SEQRA). SEQRA defines “environment” to include “the physical conditions which will be affected by a proposed action, including . . . existing patterns of population concentration, distribution, or growth, and existing community or neighborhood character” (ECL 8-0105[6]; see also 6 NYCRR 617.2[l]). Unique to each case is the “community” to be evaluated – it will relate to the type of action that is being proposed, the factual circumstances and the nature of the impacts. For some projects, the “community” may be only the municipality in which the proposed action would occur. Here, the interests of a range of communities within the vicinity of Seneca Lake, as in part reflected by the submissions of the Seneca Lake Communities in this proceeding, are clearly relevant to the analysis. The evaluation of community character in this specific matter is not solely limited to the communities (Town of Reading and County of Schuyler) in which the proposed facility would be sited but entails an evaluation of communities in and around Seneca Lake and the Finger Lakes region whose economies and environmental interests are directly intertwined.

So how did the project affect “existing patterns of population concentration, distribution, or growth, and existing community or neighborhood character”? There would have been visible infrastructure. In the original proposal a compressor building, two ponds, a rail and truck loading facility, and I assume some sort of office building with process control equipment but in the revised proposal one pond and the rail and truck loading facility were eliminated. In the original proposal 24 rail cars could have been loaded and moved out within 12 hours and four trucks per hour could have entered and left the facility but the impact of that traffic was eliminated by the applicant’s modifications.

The Community Character section of the decision has to be read to be believed. Excerpts include “impacts to noise and aesthetic resources as revealed on the current record are essential components in the evaluation of impacts on community character in the context of this proposed project.” “The proposed facility with its “industrial” image is seen to be in conflict with the local and regional setting.” Summed up by this: contrary to future progress as planned by local, regional and state officials the project would “overlay an indelible industrial impact on the cultural landscape of Seneca Lake”. The section supports its descriptions of these impacts by referencing a couple of analyses and statements in opposition from local municipalities.

The final plan would have a couple of buildings and a pond, no truck or rail loadings, but would have added a few commuters to the cultural landscape. It is amazing to me how the final decision could conclude that “continuing this proceeding by directing adjudication of issues discussed below would not and cannot overcome the project’s significant adverse environmental impacts on community character.”

Conclusion

Ultimately by this criterion, what could have been built in New York State in the past? Surely the Erie Canal had a significant environmental impact on community character so by this reasoning it would not have been built. The same could be said for any factory, railroad or highway. Apparently the future for New York development is primarily dependent upon social considerations of the local communities and the economic infrastructure in the tourism sector. If the local communities don’t want it in their back yards then it is not going to happen.

Stop This Nonsense

I am tired of the constant drumbeat from those who are convinced that greenhouse gas emissions are going to cause an inevitable horror show of environmental impacts and that we need to stop emitting those emissions else we are doomed. In science you should look at the range of possibilities and probabilities. The fact is that though those horrific forecasts are possible, they are pretty unlikely. It is much more likely that any impacts will tweak weather to be a little more severe and a little more frequent if there is any effect at all.

The problem is that these prophesies of doom are driving all kinds of New York State policies that allegedly will prevent catastrophe. If New York implements all the programs the Cuomo administration wants to do so that we reduce our emissions 80% from 1990 levels by 2050 the global temperature increase prevented will be the same as going south a half a mile.

Jo Nova said it well: I say, just stop. Stop installing infrastructure we don’t need, stop subsidizing it, stop pretending we need green electrons. Stop pretending we need “storage” to solve a problem we never had. Stop buying electricity at inflated prices from generators which don’t make it when we need it. People wanting to make money selling solar power can pay for the batteries themselves. Start spreading the costs of this pointless experiment as fairly as we can instead of dumping it on electricity consumers who don’t have solar and on taxpayers who have never had the opportunity to vote whether they support these massive investments.

Here is the bottom line. There will be no measurable effect so all this is virtue signaling and the cost for New York is billions. No one is saying that if we control greenhouse gases that historical severe weather won’t happen. A much better investment of our tax and energy dollars would be to make society more resilient to the observed weather impacts of the past.

NYS Carbon Pricing: Implications of Observed CO2 on Peak Hour of 2017

New York’s energy planning process continues its efforts to meet the aggressive goals of a reformed energy system that relies on renewable energy. The latest boondoggle in that effort is a plan to price carbon in the wholesale electric market. I have been following the process and submitting comments as an unaffiliated public party to the process. This post describes a vivid example of the difficulties of implementing economic theory related to carbon dioxide reduction programs.

 Introduction

I am motivated to submit comments in this process so that there is at least one voice of the unaffiliated public whose primary interest is an evidence-based balance between environmental goals and costs to ratepayers. There are significant hurdles to implementing carbon pricing in general and as proposed in the straw proposal that should be considered by the Integrating Public Policy Task Force (IPPTF). The questions in these comments are related to the total costs of the program.

This post is based on comments submitted as a private retired citizen. They 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. The majority of New York State (NYS) ratepayers are unaware of the ramifications of this proceeding or have any idea of the ramifications of incorporating the cost of carbon emissions into New York State (NYS) wholesale electricity markets. The basis of this initiative is a Brattle Group analysis that outlined a scheme to incorporate a state policy defined cost of carbon in the wholesale market to improve the overall efficiency of the New York Independent System Operator (NYISO) energy and capacity markets.

As of the date of this post one thing that has been conspicuously absent from the discussions has been the total expected cost. In my latest submitted comments I argued that it would be beneficial for all stakeholders to have the NYISO provide an analysis of historical data that shows what would have happened to the markets if the carbon price were in effect. I illustrated the problem estimating this cost by considering one historical hour. It appears that there is a significant overlooked component to this initiative. One feature of a carbon price scheme is usually revenue neutrality where the carbon costs are returned to the consumers to make it less regressive. However, in the New York State wholesale electric market case it looks like in addition to the carbon price itself there will be a general increase in market clearing prices. There is no mechanism to make that component revenue neutral.

Input Data

In order to evaluate the emissions data I obtained data from the United States Environmental Protection Agency Clean Air Markets Division (CAMD) website for July 19, 2017 at hour 17. The CAMD website has hourly data for all emissions sources affected by national emissions trading programs. There are significant limitations to the data for this application but they should be indicative of the situation. I manually added the NYISO electric load control zones, made some guesses about whether some small units should be included or not, estimated CO2 emissions at some sources that are not required to provide that data, and revised some inconsistent numbers. There also is an inherent flaw in this approach because the EPA data set includes gross load whereas the NYISO loads are net loads. Also note that I excluded combined heat and power units and steam units from these calculations. My data are available upon request and the submitted comments describe the methodology in more detail.

Energy Markets

The NYISO manages the state’s power grid and de-regulated energy market. In order to understand the implications of carbon pricing on New York electricity market costs some background information is necessary. There is an overview of the price setting approach used in the NYISO document NYISO Markets:

The energy market provides a mechanism for Market Participants to buy and sell energy at prices established through a competitive auction process designed to meet energy demands, or “loads,” with the least-cost resources available; or, through contractual, bilateral transactions where quantities and prices are arranged directly between wholesale suppliers and “load-serving entities” (LSEs) such as utilities. For energy purchases arranged through the NYISO’s auctions, the NYISO administers day-ahead and real-time auctions, resulting in a two-settlement process that sets the price of energy based on market and grid conditions at specific times. Further, the NYISO’s auctions reflect geographic conditions , establishing “Locational Based Marginal Prices” (LBMP) for energy that reflect local demand and supply conditions as well as any constraints that may exist when moving energy across the grid to meet demand. The first settlement is based upon the day-ahead bids and the corresponding schedule and prices, or day-ahead commitment. The second settlement is based upon the real-time bids and the corresponding real-time commitment (RTC) and real-time dispatch (RTD). Market Participants may participate in the DAM and/or the real-time market. Roughly 94% of energy is scheduled in the day-ahead market, while the remaining 6% is accounted for in the real-time market. About 40% of the energy settled in the day-ahead market is scheduled through bilateral contracts.

CO2 Summary

The NYISO Zone CO2 Cost July 19 2017 at hour 17 table lists the gross load, heat input, CO2 mass, and CO2 rate in lbs per mmBtu and tons per MWhr for the entire state, by LBMP zone and aggregating Downstate and Upstate zones. The source data show that the hourly CO2 emissions range from 681 tons per hour at the remaining coal plant to 1.2 tons for a partial operating hour at a natural-fired turbine. More importantly the CO2 emission rate (lbs/mmBtu) data only lists three general emission rates corresponding to natural gas, oil, and coal fuels. If the results for this hour are generally consistent throughout the year then the efficacy of this program to lower CO2 emissions is questionable. There are slight differences within these rate categories but there are relatively minor. The New York Department of Environmental Conservation recently announced a new regulation that will for all intents and purposes ban the future use of coal so this program cannot be expected to shut down the use of coal. The oil generating units do not burn oil for economic reasons so this program cannot be expected to change the use of those units relative to natural gas units. The difference in CO2 emission rate for the natural gas units is so small that this program cannot be expected to lead to the use of lower emitting units. Therefore, this program will not likely cause fuel switching due to the price of carbon.

Carbon Prices

According to the NYSERDA Patterns and Trends report, in 2014 the electric sector CO2 emission rate was 39,406,671 tons per year. If the carbon price is $50 per ton then we can expect this program to generate a minimum of over $1.5 billion dollars per year. The hourly carbon price based only on emissions ($50 per ton times the total tons in the previous table) gives a state-wide cost of $440,373 with $173,995allocated Upstate and $266,978 allocated Downstate.

The Brattle report proposed that the only impact to consumers would be directly related to the carbon price. However, the NYISO has not done an analysis of the potential impact of the carbon price on the wholesale electric market to determine if there could be a general increase in market clearing prices. If that is the case then the consumers will be paying a whole lot more than just the carbon price and there will be no way to even to try to make any extra costs revenue neutral.

 I used the hourly data to estimate LBMP zone costs in theNYISO Zone CO2 Cost July 19 2017 at hour 17 table. I assumed that the zone cost equals the total load times the maximum CO2 rate (tons per MWhr) times the Social Cost of Carbon (Tab “LBMP”). Because of the magnitude of the carbon price I also assumed that the price of carbon sets the price of the most expensive unit in the zone. If that presumption is correct then the results are far different than the example estimate simply multiplying emissions by the cost of carbon. The total statewide cost is $773,644 and the Upstate portion is $209,394 and Downstate is $564,251. Note that most of the additional cost is due to a $306,048 increase Downstate because the Upstate cost only increases $35,999.

Conclusion

Based on this example I believe it is necessary and appropriate for the NYISO to provide estimates of the expected historic market response to the carbon price for an entire year based on hourly LBMP values. The NYISO knows the marginal economic unit and can use the USEPA data to show the marginal and maximum emission rates, CO2 mass/MWH and CO2 mass/mmBtu. At the proposed price of carbon that analysis could determine what would happen to the LBMP prices.

In addition to the financial impacts we can estimate what kind of impacts the carbon price will have on generation patterns. Based on the CO2 rates in the example hour it appears that we will find very small shifts in the marginal economic unit. Only when we have annual results can we verify whether this proposed program will have any effect on carbon emissions.

Finally, the analysis I recommend will not only estimate how the carbon price will affect LBMP prices but also provide information about where those revenues end up.  If my assumption that the LBMP prices are based on the maximum emission rate but the residual that goes back to the consumers is based on the actual rates for each generator then the only facility that fully pays its residual is the maximum emission rate unit. All the other units contribute less to the consumer. The NYISO should provide the analysis so that we can determine what portions of the LBMP price increases remain with which generator sectors and what residuals could be returned to the LSEs. Finally, we can estimate the portion of LBMPs that could be credited to new renewables.