New York RGGI Operating Plan Amendment 2023

I recently published a summary of the Regional Greenhouse Gas Initiative (RGGI) Investments of Proceeds annual report and followed that up with a post on the New York-only report.  This post describes my comments on the New York State Energy Research & Development Authority (NYSERDA) Regional Greenhouse Gas Initiative (RGGI) Operating Plan Amendment (“Amendment”) for 2023.  This document describes the plans to use the RGGI proceeds in the next several years.  There are implications not only to the RGGI program but also for the Climate Leadership and Community Protection Act (Climate Act).  Although supporters of RGGI claim that it is a successful model to emulate my analyses show that it is not nearly as successful as claimed.

I have been involved in the RGGI program process since its inception.  I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program.   I submitted comments on the Climate Act implementation plan and have written over 270 articles about New York’s net-zero transition because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  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.

Background

RGGI is a market-based program to reduce greenhouse gas emissions (Factsheet). It has been a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector since 2008.  New Jersey was in at the beginning, dropped out for years, and re-joined in 2020. Virginia joined in 2021 and Pennsylvania has joined but is not actively participating in auctions due to on-going litigation. According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.” 

NYSERDA Operating Plan Amendment

NYSERDA designed and implemented a process to develop and annually update an Operating Plan which summarizes and describes the initiatives to be supported by RGGI auction proceeds.  On an annual basis, the Authority “engages stakeholders representing the environmental community, the electric generation community, consumer benefit organizations and interested members of the general public to assist with the development of an annual amendment to the Operating Plan.”

The draft Amendment explains that New York State invests RGGI proceeds to support comprehensive strategies that best achieve the RGGI greenhouse gas emissions reduction goals pursuant to 21 NYCRR Part 507.  The programs in the portfolio of initiatives are designed to support the pursuit of the State’s greenhouse gas emissions reduction goals by:

• Deploying commercially available energy efficiency and renewable energy technologies;
• Building the State’s capacity for long-term carbon reduction;
• Empowering New York communities to reduce carbon pollution, and transition to cleaner energy;
• Stimulating entrepreneurship and growth of clean energy and carbon abatement companies in New York; and
• Creating innovative financing to increase adoption of clean energy and carbon abatement in the State.

The draft Amendment notes that the initiatives described represent program activity proposed for the 2023 Operating Plan. The funding levels for each program include previously approved and the amounts proposed for FY23-24 through FY25-26.  The annual RGGI Operating Plan Stakeholder Meeting was held on December 12, 2022 to review the proposed Operating Plan Amendment.

This post summarizes the comments I submitted on the proposed Operating Plan Amendment.  My comments were separated into two main parts.  The first described the observed New York State (NYS) emission reductions from the electric sector since 2000 and the lessons that should be learned.  Those results and implications were discussed in my previous post.  The second section offered my comments on the specific programs in the Amendment.

NYSERDA Operating Plan Amendment Comments – Emission Trend Implications

The first section showed that between 2000 and 2021 New York EGU emissions have dropped from 57,114,438 tons to 28,546,529 tons, a decrease of 50%.  NYS EGU CO₂ emissions were 39% lower in 2021 than the three-year baseline emissions before RGGI started.  However, I showed that emissions have dropped primarily because coal and oil fueled generation has essentially gone to zero.  Natural gas has increased to cover the generation from those fuels but because it has lower CO₂ emission rates New York emissions have gone down.

My evaluation discovered issues associated with the NYSERDA RGGI Funding Status reports related to the observed CO₂ reductions compared to estimates of direct CO₂ savings and projections using heat input (mmBtu) and generation (MWhr) projected savings.  Consequently, the best estimate of observed emission reductions that can be attributed to RGGI are from the only two programs that claim direct CO₂ reduction savings: NY-Sun Initiative and NYSERDA Solar Electric.  Over the years 2013 to 2021, the total investment for those programs is $565 million and the claimed savings are 1,684,616 MWh and 861,442 tons of CO₂e with a calculated cost benefit of 565 $/ton.  The observed emissions decrease between 2013 and 2021 is 5,397,135 tons so the only CO₂ reductions that can conclusively be claimed from RGGI investments account for 16% of the observed emission reduction.  Because observed coal CO₂ emissions went from 5,463,637 tons in 2013 to zero in 2021 and oil CO₂ emissions went from 3,871,162 tons to 313,115 tons, I conclude that the primary reason for the observed electric sector emission reductions in New York was due to fuel switching.

These observations are relevant for the future of EGU emission reductions required for RGGI and the Climate Act. Coal and oil emissions from the RGGI affected sources are as low as they are going to get without retirement of oil-fired sources.  The average CO2 emissions reduction per year from RGGI investments has been 95,716 tons since 2013.  New York Part 242 CO2 Budget Trading Program specifies an annual reduction of RGGI allowances of 880,493 per year starting in 2022 and continuing to 2030.  That reduction is nearly ten times more than the reductions from RGGI auction proceed investments.  The Climate Act is going to require even more emission reductions.  Electric generating unit owners and operators have no options available for additional emission reductions other than reducing their operating times.  It is incumbent upon the state to incentivize and subsidize carbon-free generation so that the RGGI sources can reduce operations and not jeopardize system reliability.  It is not clear where those reductions will come from given the poor record of RGGI-funded program investments and the lack of RGGI focus on direct emissions reduction programs.

NYSERDA Operating Plan Amendment Comments – Operating Plan Amendments

In the second section of my comments, I evaluated the programs in the Operating Amendment relative to their value for future EGU emission reductions.  The comments included descriptions of all the programs in the FY23-26 Amendment.  I commented briefly on each proposed program and classified each program relative to six categories of potential RGGI source emission reductions.  The first three categories cover programs that directly, indirectly or could potentially decrease RGGI-affected source emissions.  Those programs total 45% of the investments.  I also included a category for programs that will add load that could potentially increase RGGI source emissions which totals 27% of the investments.  Programs that do not affect emissions are funded with 21% of the proceeds and administrative costs total another 7%. 

I evaluated potential emissions for five Integration Analysis and New York Independent System Operator (NYISO) scenario projections of load through 2030.  They all agree that fossil generating resource loads will increase or remain nearly constant until 2026 when large amounts of renewable resources are expected to come on line.  On the other hand, RGGI allowance allocations decrease so that NY emissions are projected to exceed the annual RGGI allocations.  This problem peaks in 2025 but in that year NYISO Resource Outlook scenario 1 projects EGU emissions are 10% higher than the RGGI allocation. 

In order to address the need for strategies that can displace RGGI-affected source generation the RGGI Operating Plan amendment needs to reevaluate priorities.  I argued that NYSERDA must verify that other investments will provide the necessary reduction in RGGI-affected source emissions in order to justify spending more than half the RGGI proceeds on programs unrelated to RGGI emissions.  My comments on specific amendments recommended that most of the unrelated programs not be funded.

I only had specific comments on one proposed program. The Climate Act is pushing the envelope of zero-emissions technology so the Scoping Plan Implementation Research program is certainly appropriate.  I recommended that this program fund projects for dispatchable emissions-free resource DEFR) requirements and the question of wind and solar resource availability during winter doldrums.

Conclusion

The draft Amendment explains that the programs in the portfolio of initiatives are designed to “support the pursuit of the State’s greenhouse gas emissions reduction goals”.  Of the five goals only one addresses emission reductions.  The others are vague cover language to justify the use of RGGI auction proceeds as a slush fund for hiding administrative expenses and costs related to Climate Act implementation at the expense of programs that affect CO₂ emissions from RGGI affected sources.  To date this has not been an issue because fuel switching has provided the necessary emission reductions.  However, there could be a problem in the next several years because no more fuel switching reductions are available at the same time that RGGI allowance allocations continue to decrease.  In the worst case, affected units may not be able to come on line because they don’t have sufficient allowances to cover operations.