On July 18, 2019, Governor Cuomo signed into law the Climate Leadership and Community Protection Act (CLCPA). It is among the most ambitious climate laws in the world and requires New York to reduce economy-wide greenhouse gas emissions 40 percent by 2030 and no less than 85 percent by 2050 from 1990 levels. This post looks at claims that using the green energy projects needed to meet the CLCPA goals will get the economy moving after the COVID pandemic.
I am following the implementation of the Climate Act closely because its implementation affects my future as a New Yorker. Given the cost impacts for other jurisdictions that have implemented renewable energy resources to meet targets at much less stringent levels, I am convinced that the costs in New York will be enormous and my analyses have supported that concern. 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.
Problems with a Green Energy Kick-Start
Advocates for the CLCPA claim that we should use clean energy projects to get the economy moving again. For example, at the August 24, 2020 Climate Action Council meeting Co-Chair Doreen Harris said this summer’s large-scale renewable project solicitations will kick-start the economy. In this post I evaluate Gail Tverberg’s post “Why a Great Reset Based on Green Energy Isn’t Possible” at her blog Our Finite World with respect to those claims.
Ms. Tverberg gives ten reasons why re-starting the economy after the Covid pandemic is not simply like resetting your computer. She explains some of the misunderstandings that “lead people to believe that the world economy can move to a Green Energy future”. I encourage readers to read her post. Despite her emphasis on the world’s economy there are important lessons for New York.
Her first point is that the “The economy isn’t really like a computer that can be switched on and off; it is more comparable to a human body that is dead, once it is switched off.” Ms. Tverberg argues that the economy and energy system are inextricably interconnected. She explains that the economy is only able to “grow” because of energy consumption. As resources change businesses change. A key point is that as energy sources are taken away systems like the economy fail quickly. While in this instance the economic collapse was not because of energy input it still cannot simply be turned back on.
Tverberg’s blog originally explored how oil limits affect the economy but, in my opinion, oil is only a surrogate for energy. In the “Getting Started” section on her blog she explains how limits to minerals and energy sources should be incorporated into economic modeling. This is related to her second point “Economic growth has a definite pattern to it, rather than simply increasing without limit”. Of particular interest to New York is that one of the economic limits ignored by economic modelers is “an energy supply that becomes excessively expensive to produce”. We are still waiting for an estimate for the cost of the CLCPA but experience elsewhere does not bode well.
Her post addresses the world’s economy but her third issue “Commodity prices behave differently at different stages of the economic cycle. During the second half of the economic cycle, it becomes difficult to keep commodity prices high enough for producers”, should be a direct warning for New York. In particular, we are waiting for the Climate Action Council to develop their scoping plan that will include an energy plan for New York. We can only guess at how many wind turbines, solar panels, and energy storage systems will be needed when heating and transportation are electrified. Given that energy storage is expensive, one cost minimization approach is to over-build wind and solar to minimize the periods when a lot of energy storage is needed. The peak demand periods occur rarely but they are also the most impactful – think the coldest and hottest periods. However, if you over-build, the electricity commodity price will be very low most of the time when solar and wind output is greater than the load needed. Tverberg explains that too low oil prices make it more difficult for oil producers to survive and this will also be a likely problem for New York’s energy producers.
Her next point specifically addresses coal and oil prices. She is concerned that the low prices since mid-2008 seem to be leading to both peak crude oil and peak coal. In both cases she claims that investments in new oil wells and unprofitable coal mines are not occurring. Consequently, there will be less energy available for the economy.
Tverberg believes that economic “modelers missed the fact that fossil fuel extraction would disappear because of low prices, leaving nearly all reserves and other resources in the ground”. Importantly she points out that these “modelers instead assumed that renewables would always be an extension of a fossil fuel-powered system”. The following quote is directly applicable to New York’s CLCPA:
“Thus, modelers looking at Energy Return on Energy Invested (EROI) for wind and for solar assumed that they would always be used inside of a fossil fuel powered system that could provide heavily subsidized balancing for their intermittent output. They made calculations as if intermittent electricity is equivalent to electricity that can be controlled to provide electricity when it is needed. Their calculations seemed to suggest that making wind and solar would be useful. The thing that was overlooked was that this was only possible within a system where other fuels would provide balancing at a very low cost.”
The CLCPA assumes that political will is sufficient to over-come this problem but no one has shown how they plan to do it.
Tverberg makes the same point that I have been making that her concerns apply to other aspects of the economy: “The same issue of low demand leading to low prices affects commodities of all kinds. As a result, many of the future resources that modelers count on, and that companies depend upon as the basis for borrowing, are unlikely to really be available.” If New York continues down this path, then our only hope is that jurisdictions outside of New York won’t, so that future resources will be available elsewhere.
The following two issues addressed by Tverberg reveal fundamental flaws in the CLCPA. First, she notes that “On a stand-alone basis, intermittent renewables have very limited usefulness. Their true value is close to zero.” Recall that the CLCPA plans to replace almost all fossil fuels with intermittent renewables. I am sure she would agree with me that the CLCPA will likely end badly.
I could not agree more with the second applicable issue: “The true cost of wind and solar has been hidden from everyone, using subsidies whose total cost is hard to determine.” A common trope is that wind and solar are cheaper but those comparisons always include the cost of construction and exclude the costs to make the intermittent and diffuse renewable power available when and where it is needed. When those costs are included wind and solar are far more expensive. If subsidies are needed to make intermittent renewable viable then how can New York afford to maintain the subsidies indefinitely? She notes that the “ability to subsidize a high cost, unreliable electricity system is disappearing.”
Tverberg points out that “Wind, solar, and hydroelectric today only comprise a little under 10% of the world’s energy supply” so we have a long way to go to reach a “green” energy system. According to the New York Independent System Operator wind, solar and hydroelectric in New York totaled 25.8% of New York’s energy supply mostly because New York is in the unique geographical position to get 22.4% from hydro primarily at Niagara Falls and the St. Lawrence River. In my opinion the hydro capability for New York is tapped out so future renewables will have to come from wind and solar. Additionally, she makes the point that “None of these three energy types is suited to producing food. Oil is currently used for tilling fields, making herbicides and pesticides, and transporting refrigerated crops to market.”
I also agree strongly with Tverberg’s final consideration: “Few people understand how important energy supply is for giving humans control over other species and pathogens.” She ends that section with “We are dealing with COVID-19 now. Today’s hospitals are only possible thanks to a modern mix of energy supply. Drugs are very often made using oil. Personal protective equipment is made in factories around the world and shipped to where it is used, generally using oil for transport.”
“We do indeed appear to be headed for a Great Reset. There is little chance that Green Energy can play more than a small role, however. Leaders are often confused because of the erroneous modeling that has been done. Given that the world’s oil and coal supply seem to be declining in the near term, the chance that fossil fuel production will ever rise as high as assumptions made in the IPCC reports seems very slim.”
I conclude that two of the concerns raised in her article are fundamental flaws in the CLCPA. She explains that intermittent renewables have a true value close to zero and that the total cost of the subsidies needed to support wind and solar are hidden and hard to determine. The CLCPA mandates reliance on intermittent renewables which will inevitably eventually cause problems. I also believe that those flaws undermine the concept that the technologies will kickstart the economy. That can only appear to work until the subsidy money runs out. At a time when there isn’t enough money for basic services throwing money away on intermittent renewables is sheer folly.