This is a post on the New York State Operating Plan which is supposed to determine the best use the Regional Greenhouse Gas Initiative (RGGI) auction proceeds that accrue to New York State (NYS). It is another in a series of posts on RGGI that discusses how RGGI has fared so far (see my RGGI posts page). This post shows how far the public face of RGGI is from reality relative to NYS emission reduction goals.
I have been involved in the RGGI program process since its inception. Before retirement from a non-regulated generating company, I was actively analyzing air quality regulations that could affect company operations and was responsible for the emissions data used for compliance. As a result, I have a niche understanding of the information necessary to critique the operating plan. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.
The responsibility for RGGI implementation is shared by the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA). DEC set up the regulatory requirements for the affected sources and NYSERDA handles the money from the allowance auctions. The operating plan outlines how the money will be invested in programs to reduce emissions. The problem is that the budgeted program investments coupled with historic CO2e emission reduction benefits from those programs calculated by the agencies are woefully short of what is needed to meet the NYS emission reduction goals.
On December 20, 2017 the annual operating plan stakeholder meeting was held. You can see the operating plan documents, slides presented and access a recording of the meeting at the NYSERDA Use of Auction Proceeds website. In the opening remarks at the meeting the story from the agencies was that RGGI has been a rousing success and the investments have been a significant factor in that success. Alicia Barton, NYSERDA President, said that RGGI was “extraordinarily successful in driving positive environmental outcomes and fostering clean energy” and would be useful implementing a “cleaner, more reliable and more affordable future in the electric system”. Julie Tighe, DEC Chief of Staff, said that “emissions from the power sector in New York have fallen more than 50% since the states agreed to set the cap in 2005.” This post addresses the claim that RGGI investments have been an effective tool driving positive environmental outcomes. Tighe’s statement conflating the emissions reductions with setting the RGGI cap clearly implies that the reason the emissions went down was because of RGGI. I have already evaluated the actual impact of RGGI on emissions here that shows that her statement is wrong.
Two documents released as part of the Operating Plan stakeholder process provide the information necessary to determine the potential effectiveness of the operating plan programs on reducing CO2e emissions. The calculated expected (CO2e) tonnage benefits to date are in RGGI Operating Plan (“2017 Operating Plan”) Table 1: Cumulative RGGI Benefits by Program. In DRAFT – 2018 RGGI Operating Plan Amendment (“Draft 2018 Operating Plan Amendment”) Table 1: Revenues and Program Funding Allocations, the proposed RGGI allowance revenue program investments for the next three years are listed. Multiplying the total budget amounts by the observed emission reductions dollars per ton benefits is all that is necessary to estimate how much CO2e is expected to be reduced.
Table 1 Comparison of RGGI Program Investments in this post combines information from both of those tables and a slide (Program Investments of $245M for FY 18-21 below) in the stakeholder presentation that describes the proposed program investments for the next three years. It was an interesting exercise to figure out how the categories meshed between the Draft 2018 Operating Plan Amendment and the Program Investments slide but I think the listings in my table are close. The total program investments budgeted in Fiscal Years 2018-2019 are $244.5 million. At the stakeholder meeting five investment strategies were described:
- Building capacity for long-term carbon reduction
- Energy Efficiency and Renewable Energy technologies
- Empowering New York communities and transition to cleaner energy
- Innovative financing
- Stimulating entrepreneurship and growth of clean energy
Those categories are listed under Stakeholder Presentation in Table 1 Comparison of RGGI Program Investments. The specific programs from the Draft 2018 Operating Plan Amendment are listed opposite those strategies.
For each of the specific programs the $ per ton annual benefit calculated values presented in the 2017 Operating Plan was included in the table. Note that the category “Directed to the State – Environmental Tax Credits category did not have a $ per ton benefit calculated. I used the lowest of the three EE/RE cost benefit numbers to give the most CO2e reduction bang for the buck. Neither of the Empowering New York communities and transition to cleaner energy categories in the 2017 Operating Plan had emission reduction benefits calculated. The Directed Electric Generation Facility Cessation Mitigation Program provides payments to municipalities that depended on large fossil-fired generating plant property taxes when those facilities are closed down which certainly does not translate into reductions. Community Clean Energy programs “support the transition to sustainable and resilient communities” which apparently does not translate into direct CO2e reductions
Finally, the program 3-year investments are divided by the $ cost per ton benefit to determine how much CO2e reduction can be expected. For the $244.5 million investments the projected annual (how much is expected each year from the investment) emission reductions total is 268,595 tons of CO2e. The annual investment emissions reductions expected is one third of that or 89,531.
Let’s put those numbers into context. The RGGI model rule states:
The regional emissions cap in 2021 will be equal to 75,147,784 tons and will decline by 2.275 million tons of CO2 per year thereafter, resulting in a total 30% reduction in the regional cap from 2020 to 2030.
The New York share of the total allocations is 38.9% so New York’s share of the emission reductions necessary is 885,721 tons per year. The New York investments from the RGGI allowance auction revenues are expected to only reduce emissions 89,531 tons at an average investment rate of $81.5 million. In other words the RGGI investments are only expected to provide about 10% of the needed emissions reductions. If we back calculate to determine how much would have to be invested in these programs to get all 885,721 tons needed each year, it would take $731 million per year. That translates into a weighted average allowance price of $48 per ton, nearly nine times the assumed price.
Even more gob smacking is the NYS Reforming the Energy Vision (REV) goal of a 40% reduction of 1990 emissions by 2030. NYS 1990 emissions were 205.8 million tons so the 2030 goal is 123.5 million tons. In 2015 NYS emissions were 178.9 million tons so for the next 15 years annual emission reductions have to be just under 3.7 million tons per year to get to the target goal. It would take over $3 billion per year to be invested in these programs to get the 3.7 million tons needed each year to meet the 2030 REV goal.
Actually looking at the performance of the RGGI investments and determining the cause of electric sector emission reductions tells a completely different story than that presented by NYSERDA and DEC at the NYS RGGI operating plan stakeholder meeting. RGGI investments are not providing anywhere near the emission decreases necessary to meet the additional 30% RGGI cap reduction that New York championed. As shown elsewhere, fuel switching was the primary reason emissions dropped since 2005 and the problem is that there are limited opportunities for further reductions. Given that simply using their own numbers to determine the effectiveness of their investments tells a different story than the public overview does not portend well for the ambitious goals of Governor Cuomo.