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.

Author: rogercaiazza

I am a meteorologist (BS and MS degrees), was certified as a consulting meteorologist and have worked in the air quality industry for over 40 years. I author two blogs. Environmental staff in any industry have to be pragmatic balancing risks and benefits and (https://pragmaticenvironmentalistofnewyork.blog/) reflects that outlook. The second blog addresses the New York State Reforming the Energy Vision initiative (https://reformingtheenergyvisioninconvenienttruths.wordpress.com). Any of my comments on the web or posts on my blogs are my opinion only. In no way do they reflect the position of any of my past employers or any company I was associated with.

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