Category: Climate Act Costs & Benefits

Climate Act and the Broken Window Fallacy

One recurring narrative by proponents of the Climate Leadership & Community Protection Act (Climate Act) is that it will create significant economic activity.  However, it has always seemed counter-intuitive to me that all this economic activity requires subsidies but I have not been able to make that point well enough for an article.  A recent post at Climate Discussion Nexus does an excellent job refuting that narrative and I reprint it in its entirety here.

Everyone wants to do right by the environment to the extent that they can afford to and not be unduly burdened by the effects of environmental policies.  I submitted comments on the Climate Act implementation plan and have written over 290 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.  Every indication is that the costs will be astronomical as well.  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

The Climate Act Growing Economic Opportunities webpage extolls the value of the Climate Act and jobs.

Our actions and investments are creating new economic activity right here in New York. The clean energy industry is growing before our eyes and the number of clean energy jobs in New York State reached a record level of 165,000 workers at the end of 2021. These jobs have helped lead New York’s COVID-19 economic recovery, the clean industry showing a faster recovery than other sectors. This recent growth is part of a larger trend in the State, with clean energy employment growing 17 percent since 2015 and continued growth on the horizon.

In partnership with businesses, schools, labor and trade organizations, we are supporting the creation of a clean energy workforce pipeline and providing new training opportunities for workers of all experience levels. These opportunities include programs designed to enhance skills in clean heating, energy efficiency, renewables, and other clean technology sectors. Our programs also assist businesses with recruiting, hiring, and onboarding costs for new employees. These efforts prioritize training programs for the state’s most underserved populations – low-income individuals, veterans, disabled workers, single parents, and the formerly incarcerated – and will also help integrate displaced workers into this new promising industry.

That means long-term economic opportunities for all New Yorkers.

I have looked at the New York Clean Energy Industry Report and found that the state’s clean job estimate claims are misleading and inaccurate.  However, I have not described the basic fallacy.  These jobs only occur because the entire existing energy system will be destroyed.  The Climate Discussion Nexus article explains this problem very well.  The following section presents the entire article.

 Stop them if you’ve heard it before

“Stop!” shouts Terry Corcoran in the Financial Post, saying all the “green economy” hype basically repeats the “Broken Window Fallacy” Frederic Bastiat smashed in his 1850 essay that inspired Henry Hazlitt’s 1944 Economics In One Lesson which is one more lesson than the “parade of corporate and political heavyweights, such as U.S. climate czar John Kerry” have had. As Corcoran writes, “In the parable, a boy smashes the window in a town shop, creating an expense and loss for the shopkeeper.

But a bystander observes that there is an economic benefit to smashing windows: Glassmakers get more business, a conclusion glibly summarized in one commentary: ‘It’s a good thing to break windows — money gets circulated and the industry thrives.’” And so, Corcoran laments, this nonsense is even more prevalent in 2023 than in 1850 because now there actually are formal programs to go about breaking glass on a massive scale to enhance prosperity: “as governments in the Western world attempt to smash the windows of the energy system and replace it with an all-new net-zero energy regime.” And chortle about the opportunities they’re creating for glass-makers, freight carriers, window-installers, painters, and who knows what all? For instance Canary Media burbling “Chart: US climate law to spur thousands of new jobs in every state”.

They don’t. As Corcoran growls, “The broken window fallacy in such thinking, if I can presume to condense Bastiat, is that the real cost of breaking windows is ignored.”

In some sense the Canary claim that “Each U.S. state could gain between 2,000 and 140,000 clean energy jobs by 2030 thanks to investments spurred by the Inflation Reduction Act, according to a new analysis by the think tank RMI” is a no-brainer. But we don’t mean it in a good way. They say that:

“RMI analyzed the amount of money that could be invested in the 48 contiguous U.S. states as consumers, manufacturers and other businesses take advantage of tax credits and rebates provided by the climate law.”

But quite apart from the fatuity of trying to figure out how much “could be invested” in the United States’ incredibly complex $23 trillion economy, if something is only profitable with subsidies it is another way of saying it is not profitable, which means it is worth less than it cost to make so this “investment” destroys wealth rather than creating it. Thus for David Wallace-Wells to snicker in the New York Times that “G.O.P. elites are simply lagging behind their states” because the Inflation Reduction Act offers subsidies so huge even Republicans will take the money is not proof that the climate zealots have won the debate or that they are boosting prosperity, just that far too few commentators understand the very basic economic point that you have to subtract the subsidy from the nominal profit to see if the thing actually benefited society.

Heck no, he says. Rather:

“The Inflation Reduction Act is a spigot of spending designed to produce a decarbonization boom — indeed, while it is often described as a $370 billion piece of legislation, that analysis seems likely to significantly underestimate the ultimate size of its tax incentives, which could stretch much closer to $1 trillion with rapid renewable development.”

To borrow from Adam Smith, since we’re taking a trip to the land of economic fundamentals, for a trillion dollars you could support a wine industry in Wales. But the net cost would be huge.

It may seem futile to seek to refine economic theory in the face of such persistent obtuseness. Including Clean Prosperity’s:

“The government could also look at strategic financial support for industries where Canada can compete globally and generate significant economic benefits, good jobs, and manufacturing value added. We point to direct air capture, sustainable aviation fuel, and the electric-vehicle value chain.”

Ooooh. Strategic. Sure beats the other kind of financial support where you hurl money out windows and hope it hits voters. But if “Canada” can compete globally, and we didn’t even know it was a company, then why in the name of all handouts does something that generates significant economic benefits and add value require a subsidy?

Having thus harrumphed we need to stress that Bastiat’s metaphor goes even deeper than Adam Smith’s pointed observation that those who clamour for government support in the national interest are by no means such fools as those who believe them. It actually is true that, once the window is broken, the process of making a new one in the marketplace is socially beneficial because it plugs the ugly gap in the store front, protecting the merchandise and sheltering customers and staff from inclement weather, something we already knew was worth the expense because the shop keeper previously incurred it to install the former window.

So yes, once the window has been broken, replacing it is economically rational including for the shopkeeper. But the cost incurred a second time, to replace the broken window, merely restores what was previously there, so the shopkeeper ends up poorer by the cost of replacing the window than they were before it was broken. So if something flattened all our power plants, we’d be better off after we replaced them (if we replaced them with something that worked) than if we didn’t. But we would be worse off than we were before they got flattened.

The whole Green New Deal, Just Transition, Energiewende and all its ignorant destructive cousins around the world miss this key insight. They are not proposals to make us better off, they are proposals to vandalise the economy then incur costs repairing it. They include the vandalism as a feature not a bug, and hope to get us back to where we were (though as we’ve made clear elsewhere we have grave doubts about the enormous engineering obstacles to generating enough power with wind and solar let alone distributing it) with the entire cost of the replacement a net loss.

If proponents of the “energy transition” understood this point, and insisted that it was actually beneficial to smash the old window anyway because it refracted light in such a way that it would necessarily set the shop on firea much better way we could engage them in rational discussion. But as long as they babble that it’s all gain, that “It’s a good thing to blow up power plants” it is not possible to talk sense with them, just at them.

They do babble it, in forum after forum. For instance The Economist with its headline “Saving the rainforests would be a bargain/ Far more money is needed to make conservation more profitable than slash and burn”. Um no. If it’s a “bargain”, it requires less money than other deals on the table.

The people at The Economist are not quite the economic illiterates their like-minded fellows at most other publications seem to be. They actually claim that:

“Profits from chopping down rainforests are surprisingly meagre. The land is not particularly fertile. A freshly cleared hectare of the Amazon fetches an average price of only around $1,200. By contrast, the social costs of clearing it are immense. Some 500 tonnes of carbon dioxide are pumped into the atmosphere. By a conservative estimate, that does $25,000 of harm by accelerating climate change.”

So they are making a version of the argument that the existing window, while seeming to provide shelter, entice customers and so on, actually is going to ignite the merchandise and the occupants. It’s just that their $25,000 number is highly suspicious despite bearing the PR-friendly label “conservative”. Others are not even that lucid.

In something called The Liberal Patriot, another in a long weary line of attempts to make modern progressive thought rational and palatable to normal people, Brian Katulis writes that what really concerns normal people is economic security. Thus, he notes:

“During his first two years in office, President Joe Biden introduced three pieces of legislation totaling at least $2 trillion of public investments in high-tech and clean energy aimed at re-making America’s economy…. it will require a strong focus on implementation and clear arguments for how these measures are making the lives of working-class Americans better. Advancing a clear argument on this front will be make-or-break for Biden’s re-election chances.”

He then takes a fairly level-headed look at the implementation challenges and the risks of the mercantilist “Buy American” provisions of the IRA. But when he gets off onto “a public communications strategy that convinces the American public about the value of these investments and how they are improving their lives in tangible ways” he misses the point. Scrapping America’s energy infrastructure then spending trillions to get back to the same level of production will leave the nation as a whole poorer.

Katulis says “The story is simple. No place in America will be left behind.” But the simple story is that Bastiat had it right. If you break every window in America then replace them all, the nation will be better off with fixed windows than with broken ones. But it cannot be better off than before the windows were broken because fixing them all only restores the benefits of having the original windows, but all the labour and raw material required to replace them is gone for good.

As for the guff about job creation, as Hazlitt said, if you want to make work ban trucks and require goods to be transported on people’s backs, and ban power tools and force them to dig with hand shovels. They will be poorer not despite there being more work, but because it now takes more work to get anything. It is incredible that such things must be explained again in 2023. But if we have forgotten Bastiat and Smith, there is nothing we have not forgotten.

Conclusion

I agree with everything in this article, but I do want to emphasize one point.  The Climate Act is an ignorant cousin in the Green New Deal, Just Transition, Energiewende family and they all not only want to destroy the existing energy system but they don’t have a replacement that has any chance of working.  The advocates who claim all these new jobs will occur should also, for example, include the costs to repair broken water pipes when the power goes out in the winter when there is no wind. 

Climate Act Hidden Costs for Upstate New York

I know that there are enormous hidden costs to the Climate Leadership and Community Protection Act  (Climate Act).  A friend sent information that lifts the veil of secrecy enough to get an idea how much money is involved and the impacts to Upstate New York

This is another article about the Climate Act implementation plan that I have written 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.  Moreover, the costs will be enormous and hurt those least able to afford increased costs the most.  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.

Transmission Upgrades

North American Wind Power gleefully reported that the “The New York State Public Service Commission has authorized a large number of upstate transmission system upgrades that are designed to alleviate bottlenecks in the grid and allow a higher penetration of renewable energy.”

The article noted:

In its decision, the commission approved requests from Central Hudson Gas & Electric, New York State Electric & Gas, National Grid and Rochester Gas and Electric to develop a total of 62 local transmission upgrades that will reduce congestion in the Capital Region, the southwest and northern region of the state.

“New York is making significant upgrades and additions to the state’s existing transmission and distribution systems to integrate new large-scale renewable energy projects into the state’s energy supply, and we must ensure that these investments are smart and cost-effective,” says commission Chair Rory M. Christian. “The commission recognizes the need to address congestion in certain parts of the state where renewable energy is already bottled and where additional generation projects are in development or likely to be developed in the future.”

In total, the projects will clear the way for 3.5 GW of capacity for clean energy – enough for more than 2.8 million average-sized homes.

“In order to keep moving towards our clean energy goals, New York needed grid investments in these three locations,” comments Anne Reynolds, executive director of the Alliance for Clean Energy New York. “This will allow electricity generating projects to deliver the clean power they make and will facilitate additional renewable energy projects coming online.”

The projects, which will cost an estimated $4.4 billion, include upgrades to existing transmission lines, upgrades to existing substations and the construction of three new substations. The utilities plan to complete the projects between 2024 and 2030.

Upstate Reality

It is not unexpected that the renewable energy crony capitalists are happy to have these projects funded,  For ratepayers it is just the tip of iceberg.   The transmission upgrade projects will cost $4.4 billion to support 3.5 GW of renewable energy or $1.26 billion per GW. An additional 2.8 GW is expected by 2025 and another 4.1 GW by 2030 according to Scenario 2 of the Scoping Plan.  The ratepayers will be on the hook for a total of $13.05 billion through 2030.

The New York Public Services Commission Case for this decision is 20-E-0197.  The order approving the transmission upgrades is available for download here.  According to the order there is a pressing need for transmission upgrades in three areas of Upstate New York:

The Commission found these areas to be characterized by “the presence of existing renewable generation that is already experiencing curtailments and a strong level of developer interest that exceeds the capability of the local transmission system. ”The Phase 2 Order identified these areas as Hornell and South Perry (NYSEG/RG&E), the Watertown/Oswego/Porter subzone (National Grid), and an area of southeastern New York consisting of facilities owned by NYSEG, National Grid, and Central Hudson. The same locations –referred to in the Phase 2 Order and here as the Areas of Concern (AOC)–are also identified by the New York Independent System Operator, Inc.

In other words, the renewable developers are unable to build as much wind and solar as they want because there are transmission constraints getting it out of those areas.  Because New York City cannot ever hope to install enough wind and solar generating capacity within the City the primary destination of this power is New York City.  However, the Public Service Commission is saying that it is the responsibility of the upstate utilities and their ratepayers to subsidize the renewable developers who want to build in those areas and sell downstate.

The specific impacts are described starting at page 39:

Table 6 below shows the estimated impacts, in dollars annually, of the AOC Projects for typical customers assuming the above noted energy price increase estimates. Table 7 below shows the estimated ratepayer impact, as a percentage, of the dollar increases depicted in Table 6 above for each of the major electric utilities. The percentage increases shown in Table 7 are based on 2021 typical total bills, with the exception of NYSEG and RG&E Industrial High Load Factor (HLF) customers, which is based on 2019 data – the most recent data available for these utilities.

Conclusion

The numbers are clear.  Upstate bills will rise much more than the bills for Con Ed ratepayers in New York City. The bill impacts are nearly double for most of the Upstate ratepayers.  It hardly seems equitable that rural New Yorkers have to bear the brunt of the impacts of the massive renewable development necessary for New York State’s Climate Act but also have to disproportionately pay for the privilege of having it in their backyards.

Empire Center Ten Reasons Climate Act May Cost More Than It Is Worth

James Hanley from the Empire Center published Ten Reasons the Climate Leadership and Community Protection Act May Cost More than It’s Worth (“Ten Reasons”) that explains why massive political promises like the Climate Leadership & Community Protection Act (Climate Act) often cost more than they’re worth, wasting taxpayers’ money.  While I agree with his ten reasons, this post explains why the costs are even worse than he describes.

I submitted comments on the Climate Act implementation plan and have written over 275 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

The Climate Act established a “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. The Climate Action Council is responsible for the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric gride with zero-emissions generating resources by 2040.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan that was revised in 2022 and the Final Scoping Plan  was approved on  December 19, 2022.  In 2023 the plan is to develop regulations and legislation to implement the Scoping Plan recommendations.

In the following section I reproduce Hanley’s post with my bold italicized comments.

Ten Reasons

Over budget, over time, over and over – that’s the iron law of megaprojects.  

Megaprojects are transformational, multi-billion-dollar, multi-year projects involving numerous public and private stakeholders. 90 percent come in over budget, often two, three or even more times over, and they often underdeliver on the promised benefits.  

In short, despite political promises to the contrary, they often cost more than they’re worth, wasting taxpayers’ money. 

Some notable examples of megaproject cost overruns include California’s high speed rail (years behind schedule and at least three times over budget), Boston’s Big Dig (completed five years late and more than five times over budget) and New York’s own Long Island Railroad East Side Access (12 years behind schedule and – with a budget that’s grown from $3.5 billion to between $11 and $15 billion – three to four times over budget). And that’s not New York’s only over-budget transit project. 

Those are all small potatoes compared to New York’s Climate Leadership and Community Protection Act (CLCPA). The overall benefit-cost analysis for the CLCPA predicts a cost of $280-$340 billion – around 20 times the cost of the East Side Access project – to radically transform New York to a net-zero greenhouse gas emissions economy. The benefit is supposed to be $420-$430 billion, for a net gain of $80-$150 billion.  

The Scoping Plan benefit-cost analysis is a shell game disguising misleading and inaccurate information.  In short, the $280-$340 billion costs only represent the costs of the Climate Act itself and not the total costs to meet the net-zero by 2050 target.  The Scoping Plan costs specifically exclude the costs of “Already Implemented” programs including the following:

  • Growth in housing units, population, commercial square footage, and GDP
  • Federal appliance standards
  • Economic fuel switching
  • New York State bioheat mandate
  • Estimate of New Efficiency, New York Energy Efficiency achieved by funded programs: HCR+NYPA, DPS (IOUs), LIPA, NYSERDA CEF (assumes market transformation maintains level of efficiency and electrification post-2025)
  • Funded building electrification (4% HP stock share by 2030)
  • Corporate Average Fuel Economy (CAFE) standards
  • Zero-emission vehicle mandate (8% LDV ZEV stock share by 2030)
  • Clean Energy Standard (70×30), including technology carveouts: (6 GW of behind-the-meter solar by 2025, 3 GW of battery storage by 2030, 9 GW of offshore wind by 2035, 1.25 GW of Tier 4 renewables by 2030)

The Scoping Plan documentation is not sufficiently detailed to determine the expected costs of these programs or to determine if the benefits calculations included the benefits of the emission reductions from these programs.  I have not doubt, however, that if these costs are included that the total would be greater than the benefits and I suspect very strongly that the benefits from these programs were included even if the costs were not. The shell game definition: “A fraud or deception perpetrated by shifting conspicuous things to hide something else”  is certainly an apt description of the Scoping Plan benefit-cost analysis.

That’s a good deal, if it really works out that way. Unfortunately, based on the history of megaprojects, it’s unlikely to provide so much benefit.  

Based on my evaluation it is not a good deal from the get go.  All of Hanley’s discussion of megaprojects below is in addition to the inaccurate starting point.

If we take the lower end cost estimate and assume the policy only costs half again as much – which would make it a rare megaproject success story – the cost would rise to $420 billion, exactly wiping out the lower end estimate of the gains.  

If it came in at twice the low-end cost estimate – which is common for such big and complex programs – it would cost $560 billion, resulting in a net loss of at least $220 billion. Three times over budget would mean a net loss of at least $410 billion – closing in on half a trillion dollars wasted. 

And if the benefits are less than predicted – which is also common – the outcome gets even worse. 

The issue is not that there aren’t any benefits. At least some of the claimed benefits are real. But just like buying a car or a meal, it’s possible to overpay for what we’re getting.  

Part of the general reason for the predictable cost overruns is that these projects tend to be exceptionally complex and innovative, novel ideas which nobody really knows how to execute well due to lack of experience. New York’s CLCPA-supporting politicians and advocates love to boast about the CLCPA being a nation-leading policy, which is to say it’s something nobody has experience doing. 

Another reason – known both from research and from the mouth of a famous politician – is that advocates sometimes intentionally mislead the public about the costs and benefits of megaprojects. Perhaps no CLCPA supporters are consciously lying about its costs, but it seems evident that it would be uncomfortable for them to dig deeply into the issue of megaproject cost, and whatever doubts they may have they are not voicing them.  

Ultimately the Climate Act is a political initiative designed to appeal to specific constituencies within the state.  In that context the Scoping Plan itself is just a tool to cater to those constituencies.  Authors of the Scoping Plan may not have lied but they did intentionally mislead the public as I have explained in posts and comments.  The response to comments submitted did not address any of the issues I raised.

But we shouldn’t look at the CLCPA as just a single megaproject. It’s actually a large group of them. Among the projects within the CLCPA that are, or may ultimately scale up to the size of, megaprojects are:  

  1. The build-out of electric vehicle charging infrastructure; 
  2. Transitioning the state’s school buses to all electric; 
  3. Transitioning the state’s public transit buses to all-electric; 
  4. Promotion of smart-growth for mobility-oriented (biking and walking) development. 
  5. Electrifying 85 percent of residential/commercial space by 2050; 
  6. Achieving 70 percent renewable electricity by 2030; 
  7. Developing 6 megawatts of battery storage; 
  8. Building 9,000–18,000 megawatts of offshore wind; 
  9. Building the grid for renewable energy transmission; 
  10. The overall agricultural and forestry portion of the CLCPA Scoping Plan; 
  11. Achieving dramatic reductions in the amount of solid waste being produced and disposed of; 
  12. Decarbonizing the statewide natural gas distribution system. 


That comes to at least 12 distinct policy areas within the CLCPA that are each likely to be multi-billion dollar projects on their own. Depending on how one analyzes the Act and its Scoping Plan, this may be an incomplete list. 

Keep in mind the “already implemented program” costs in the $280-$340 billion costs of the Scoping Plan.  Those programs at least include: The build-out of electric vehicle charging infrastructure; transitioning the state’s school buses to all electric; transitioning the state’s public transit buses to all-electric; developing 3 MW of the 6MW of battery storage; and building 9,000 MW of the 18,000 MW of offshore wind.

This means at least 12 opportunities for mega-failure in the CLCPA. And with 90 percent of megaprojects coming in over budget, we should expect at least 10 or 11 of these to experience substantial cost overruns. 

But saying that megaprojects tend to come in over budget and short on benefits is not enough. It’s fair to ask why this particular set of megaprojects that collectively make up the CLCPA are likely to do so. So, in addition to the sheer innovative complexity of the CLCPA’s bid to transition New York to a net zero economy, here are 10 reasons why the Climate Act’s costs may be understated, and its benefits overstated. 

  1. Inflation Bites   
    Projects that take multiple years to complete face the risk of inflation. When the CLCPA’s benefit-cost analysis was conducted, the analysts could not have anticipated that inflation would surge, pushing up the cost of materials and labor. Particularly hard hit so far have been offshore wind projects. 

    Inflation has moderated somewhat lately, but on-going large federal deficits could cause it to remain at higher levels than anticipated.
  1. Cap-and-Invest May Cause Business Flight
    Policies that cap emissions of particular chemicals, then reduce those caps over time and allow trading of emissions allowances, can be the most cost-effective way of reducing emissions when done at the national or multi-national level. Even if businesses move their operations to another country, a tariff on their emissions can be levied to either make businesses pay for those emissions or incentivize firms to reduce them.

    But cap-and-invest is ill-suited to the state level. First, it is easier for businesses to move out of state – or refuse to move into the state – than to move out of country. It is likely that other states competing for business investment will use the Empire State’s emissions cap as a way to leverage firms to look to their states for investment rather than to New York.

    This means a state-level cap-and-invest scheme is likely to diminish business investment, reducing the state’s economic growth and therefore tax revenues.

    Second, a state cannot enact an emissions tariff because it would violate the U.S. Constitution’s interstate commerce clause, so there is no cudgel to force emissions reductions on businesses that move operations out of state.  This means less overall reduction in greenhouse gas emissions because those emissions just occur elsewhere.

    This emissions “leakage,” and loss of tax revenue, can also occur if GHG-emitting in-state businesses become less competitive due to compliance costs and lose market share to out-of-state competitors.

    This kind of leakage has long plagued California’s cap-and-trade program. In New York’s case, because a majority of the CLCPA’s claimed benefits come from greenhouse gas reductions, it means a potentially very large reduction in the benefits of the policy.

    To minimize business flight and emissions leakage, the Climate Action Council proposes giving away emissions allowances to emissions-intensive and trade-exposed businesses – those that are most likely to find it more cost-effective to leave than to buy emissions allowances. But this may only be a temporary reprieve for these industries, as the number of emissions allowances is required to decline over time, and some businesses may never find it more cost-effective to reduce their emissions than to move operations out of state.

    Giving away emissions allowances also means the state will take in less revenue from auctions of emissions permits, having given away many for free, and so will have less money to invest in CLCPA policies, further reducing the law’s benefits.
  1. Union Job Requirements Drive Up Costs
    The Climate Action Council’s Scoping Plan – the roadmap for Climate Act implementation – calls for the use of union labor and project-labor agreements. But jobs go on the cost side of the ledger rather than the benefits side, so anything that increases the cost of labor increases the overall cost of the policy.

    How much this will drive up the total cost of the Climate Act has not been analyzed, but past reporting by the Empire Center shows that prevailing wage requirements can add 13 to 25 percent to project costs. And it’s not as though there aren’t New Yorkers willing to give the public a better deal – around two-thirds of workers in New York’s construction sector are non-unionized, but they will be locked out of CLCPA projects.
  2. Overbuilding of Renewable Energy and Building Energy Backup Is Costly
    The most undeniable truth about wind and solar power is that they are unreliable – the wind can fail, the sky can become clouded or night can fall, just when you need the electricity most. According to the New York Independent System Operator, New York must develop 15-45 GW of dispatchable zero-emission electricity generation resources. That’s in comparison to a total of roughly 40 gigawatts of total installed capacity today, and it must be in addition to any new wind and solar power developments.

    At a minimum, this means we have to overbuild solar and wind resources in the hopes that somewhere in the state the wind will be blowing and the sun shining. But because New York is too geographically small to ensure that the wind is always blowing, or the sun always shining, somewhere in the state, New York will also need to build backup energy sources.

    What these greenhouse gas emission-free resources will be – and how much they will cost – is currently unknown, because none are yet commercially available or competitively priced. Hydrogen is a possibility, but the cost will have to fall dramatically and quickly to keep backup power affordable.

    Batteries are also intended to be part of the backup system, although they are only good for meeting peak demand for a few hours. They are currently very expensive, even though – like all technologies – the learning curve continues to push down their price. However, materials costs for batteries may remain high for years, because demand is growing rapidly while supply chains are hindered both by political opposition to minerals mining and geopolitical constraints on mining and refining.
  3. The Cost of Redeveloping the Grid Is Unpredictable
    New York currently has, in effect, two largely – although not completely – separate power grids. One is upstate and draws heavily on hydroelectric and nuclear power. The other is mostly downstate and based on natural gas and dual-fuel power plants. Both are based on controllable and dispatchable forms of electricity production.

    To eliminate fossil fuel electricity generation and rely much more heavily on variable, uncontrollable, sources like wind and solar, New York must expand its transmission grid to move electricity from where it will be produced – primarily upstate and off-shore – to where it is needed. But this grid will have to be built so that energy can be delivered from whichever sources happen to be producing at a given time, which means more miles of high voltage transmission lines than ever before.

    Experts can make a first-pass estimate of the cost of building out all this new transmission, but the complexity of working through multiple political jurisdictions and satisfying numerous stakeholders is one of the leading causes of megaproject cost overruns. Few people want high-voltage transmission lines near their homes, and merely fighting the political battles to site these lines across numerous municipalities and counties could drive up the end cost significantly.

There is another aspect of the transmission system that the Scoping Plan glossed over.  Because wind and solar resources are inverter-based they do not provide ancillary services necessary to keep the transmission system stable.  As far as I can tell this issue was not addressed by the Scoping Plan and that means there are unaddressed technological and cost issues.

  1. The Jones Act Increases Offshore Windpower Costs
    The Jones Act is a law requiring ships moving cargo between U.S. ports to be U.S. built, owned, crewed, and flagged. There are no Jones Act compliant off-shore wind turbine building vessels in the U.S., although at least one is under construction (at an inflated cost because it has to be U.S. built). Because of the Jones Act, the available ships have to operate out of Canada or rely on the more expensive and dangerous process of having Jones Act compliant “feeder barges” bring materials out to the work site.
  2. The True Social Cost of Carbon Is Unknown
    Most of the benefit of the Climate Act doesn’t go to New Yorkers but is a world-wide benefit from the reduction of CO2 emissions. To estimate this benefit, a social cost per ton of CO2 has to be estimated. New York’s Department of Environmental Conservation (DEC) set the cost at $124 per ton for 2022, rising each year.

    But nobody truly knows the social cost of CO2. The number varies wildly between different models used to estimate it. The Biden administration has tentatively set the social cost of CO2 at $51 per ton, while it works to develop a new official estimate. Even if their estimate comes in higher than the tentative setting, it may be considerably lower than what the DEC estimates.

    Even the DEC’s own estimates diverge dependent on the discount rate used, and they chose to use only low discount rates that mathematically increase the social cost of CO2 emissions. There is no expert agreement on what discount rate should be used, and if a higher discount rate was used the social cost of CO2 would be much lower, and therefore the benefit from eliminating it would be much lower.

    While it’s not impossible that the DEC has underestimated the social cost of carbon – which would make the benefits of the CLCPA even larger than estimated – it’s at least as, if not more, likely that they’ve overestimated the social cost for political reasons, meaning the benefits could be far lower than predicted.

The primary driver of the benefits is the social cost of carbon and Hanley’s description of these issues is spot on.  There are other issues associated with social cost of carbon that I discussed in my Draft Scoping Plan comments.  The biggest inaccuracy is that it is inappropriate to claim social cost of carbon benefits of an annual reduction of a ton of greenhouse gas over any lifetime or to compare it with avoided emissions. The Value of Carbon guidance incorrectly calculates benefits by applying the value of an emission reduction multiple times.  Using that trick and the other manipulations results in New York societal benefits more than 21 times higher than benefits using everybody else’s methodology. When just the over-counting error is corrected, the total societal benefits range between negative $74.5 billion and negative $49.5 billion. 

  1. Some Alleged Benefits Are Dubious
    Not all of the claimed benefits in the benefit-cost analysis pass the sniff test. The most dubious of these is the assumption that indoor trip-and-fall hazards will be mitigated while weatherizing homes, producing almost $2 billion in health improvements. But there is no inherent connection between weatherization – replacing old windows adding insulation, sealing drafts – and removing interior trip hazards. It could happen, but to say it will is purely speculative.

    Another dubious assumption is that people will walk and bike significantly more, creating a claimed $40 billion health benefit – nearly 10 percent of all estimated benefits. But this requires major reconstruction of cities and reduced suburbanization, all in less than three decades. If that doesn’t happen and people fail to change their behavior, this benefit will be drastically reduced at best, and quite possibly come in at close to zero.

My comments on Scoping Plan benefit claims agreed with these dubious claims and also noted that the if the claims related to air quality improvements were accurate then we should be able to observe improvements due to the sixteen times greater observed air quality improvements than the projected improvements due to the Climate Act.  Until their projections are verified, I do not accept their projections.

  1. Subsidies Will Need to Increase, Creating Deadweight Economic Losses
    The Scoping Plan proposes transitioning most homes to heat pumps. Currently the only subsidies are $5,000 for geothermal systems, which is too small an amount to enable moderate- to low-income homeowners to afford them. To accomplish this goal, subsidies will have to increase substantially. Most likely this subsidy will be paid for by increases in utility rates, a de facto tax increase on ratepayers.

    But both taxes and subsidies create deadweight economic losses, increasing the cost of the policy in ways that were probably not accounted for in the benefit-cost model.

    The loss caused by the subsidy will be at least partially offset by the positive externality of reduced carbon emissions, but how much so is challenging to determine (in part because we don’t know the social cost of CO2). Ultimately, the size of these deadweight costs is unknown – and may remain so – but they are real and potentially significant.
  2. There Is No Focused Benefit-Cost Analysis of Individual Projects
    The benefit-cost analysis is a global analysis of the whole Climate Act, produced before the consultants even knew what specific policies would be proposed. None of the individual policies proposed have received a focused benefit-cost analysis.

    Even getting those right might be challenging, given that so many of these individual projects are megaprojects all on their own. But by focusing on specific policies, there is at least a better chance of achieving accuracy.

    An example of a missed opportunity is the requirement that all school districts shift to electric school buses. This will cost at least $8 – $15 billion – a broad estimate that needs to be narrowed down – but the value of the benefits is unknown. While benefits such as reductions in air pollution and improvements in student health are real, we have no dollar amount estimate of them.

    We do know that much of the benefit could be gained less expensively by shifting to clean fuel vehicles or buying newer – cleaner burning – diesel buses. Which of these approaches would provide the best benefit to cost ratio, making for the best use of taxpayer dollars? We don’t know because no analysis was conducted before creating the policy. 

Conclusion  

Perhaps not all these problems will come to pass. Inflation could moderate and remain low. Business flight and avoidance of New York due to cap-and-invest might be reduced if other states join a regional plan. Supply chain challenges for battery materials might be overcome. But others are sure to play a role, such as unionization of green jobs, the effect of the Jones Act, and the deadweight economic loss from subsidies and taxation. In addition, there could be other issues not addressed here that could cause CLCPA costs to increase. This is not intended to be a complete list.  

For these reasons, as well as the dismal history of such gigantic public ventures, it’s virtually certain that at least some, if not most, of the individual megaprojects within the CLCPA will be over budget. By how much is anyone’s guess, but it takes an unwarranted leap of faith to be confident that this time will be different. And as noted above, all it would take is for the cumulative effect of budget overruns to push the CLCPA’s cost up by half – a far better performance than most megaprojects – to completely wipe out any gains.

When the fact that the Scoping Plan costs do not include the “already implemented” programs are considered this analysis is overly optimistic.  Even without considering all the problems described in this analysis the total costs of all the programs necessart to meet the net-zero by 2050 target are greater than the alleged and impossibly optimistic benefits cited in the Scoping Plan.  Any claims that the costs of inaction are greater than the costs of inaction by proponents of the Climate Act are simply wrong.

New York Annual Climate Act Investment Requirements

I recently described my initial impression of the New York cap and invest program  and noted that it was not clear what the target revenue cap would be.  This post looks at some alternative revenue projections.

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.  I also follow and write about the Regional Greenhouse Gas Initiative (RGGI) market-based CO2 pollution control program for electric generating units in the NE United States.    I have extensive experience with air pollution control theory, implementation, and evaluation having worked on every cap-and-trade program affecting electric generating facilities in New York including the Acid Rain Program, RGGI, and several Nitrogen Oxide programs. 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.

Climate Act Background

The Climate Act established a “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. The Climate Action Council is responsible for the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric gride with zero-emissions generating resources by 2040.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan that was revised in 2022 and the Final Scoping Plan  was approved on  December 19, 2022.  Unfortunately, the revisions only addressed the language of the draft plan and not the substance of the numbers used from the Integration Analysis.

Investment Projection

My initial impression of the New York cap and invest program post calculated a revenue projection for the proposed cap and invest program.  From 2025 to 2030 I estimate that emissions will have to go down 14.76 million tons per year to meet the 2030 GHG emissions target.  New York’s investments in the Regional Greenhouse Gas Initiative yield an expected cost per ton reduced of $537 for a total of $7.9 billion.  Governor Hochul proposed “legislation to create a universal Climate Action Rebate that, subject to a stakeholder and rulemaking process, is expected to drive more than $1 billion in annual cap-and-invest proceeds to New Yorkers”.  If the $1 billion is added then the total revenues would be $9 billion per year.

Scoping Plan Cost Projection

The primary documentation for the numbers presented in the Scoping Plan is the Tech Supplement Annex 2. Key Drivers Outputs spreadsheet. The Scoping Plan has been described as a “true masterpiece in how to hide what is important under an avalanche of words designed to make people never want to read it.”  The spreadsheet is worse.  Not only is the information provided buried in a massive spreadsheet but the authors of the Integration Analysis presented misleading, inaccurate, and biased data to support the narrative that the costs of inaction are more than the costs of action. I have extracted the relevant tabs from the massive reference spreadsheet into my analysis spreadsheet to address the first concern.

The data in the Integration Analysis that is used in the Scoping Plan is misleading.  On one hand as many numbers are possible are only provided relative to a Reference Case instead of a status quo or business-as-usual case that represents the full costs of the control strategies necessary to meet the net-zero by 2050 Climate Act goal.  I maintain that the true cost of New York’s net-zero transition by 2050 should include all costs associated with all programs designed to reduce GHG emissions.  The authors of the Integration Analysis and Scoping Plan excluded decarbonization costs that I believe should be included and provided insufficient documentation to enable anyone to determine what is in or out of the Reference Case.  For example, consider the supporting data for Figure 48 (Fig 48 tab in my spreadsheet). 

Note the transportation investments in the Reference Case total $1.056 trillion but that the cost for the Low-Carbon Fuels scenario is only $3.4 billion more.  That means most of the costs associated with capital and operating expenses for light-duty vehicles, medium- and heavy-duty vehicles, and buses as well as charging infrastructure costs are buried in the Reference Case because these costs are a lot more than $3.4 billion.

The cost data in the Integration Analysis that is used in the Scoping Plan is inaccurate.  For example, in the calculations for the new wind, solar, and energy storage resources needed to replace existing fossil-fired resources it is assumed that none of the existing or newly developed resources reach their effective life expectancy.  Wind, solar, and energy storage resources all have expected lifetime less than 25 years and it is more than 25 years to 2050 so this inaccurately underestimates the cost of electric generation.

The data in the Integration Analysis that is used in the Scoping Plan is biased.  Wind and solar resources are intermittent so the assumption of the amount of energy produced affects the projected capacity of resources needed.  Without exception the future amount of energy from wind and solar resources is biased high relative to the New York Independent System Operator projections.  As a result, the costs projected are unreasonably low.  Based on my evaluation the Integration Analysis biased every choice to make the zero-emissions replacement resources cheaper.

I emphasize that the annual revenue numbers that I believe should be clearly listed in the Integration Analysis and Scoping Plan are not provided so I can only make an estimate.  Given all the limitations described above, the revenue values in the final row in the Figure 48 table shown above should be used cautiously.  The annual expenditure values listed are the difference between the mitigation scenarios and the Reference Case divided by the number of investment years (27) from 2024 to 2050.  The values range between $10 and $11 billion.

Other Cost Projections

I have heard other numbers tossed around so I did a bit of research to find other values.

In testimony regarding the environmental provisions of Governor Cuomo’s Executive Budget Proposal for SFY 2020-2021, Peter Iwanowicz, Executive Director, Environmental Advocates of NY, January 27, 2020 stated:

The costs of inaction are enormous. Based on the widely accepted social cost of carbon pollution of $50 per ton, New York has $10.2 billion dollars in costs per year attributed to the pollution we emit that is fueling climate change. This is a staggering blow to our health, our environment, our communities, and our economy.

Back calculating this projection assumes 204 million tons which is about the total CO2 emissions for 2017.  The problem is that social cost of carbon parameter can only be applied once because it represents all the impacts from the time of the reduction to 2300.  Counting them more than once is the same as claiming that because I lost ten pounds five years ago that I lost 50 pounds.

New York Lawyers for the Public Interest Nov. 8 Elections show that New Yorkers Overwhelming Support Climate Funding:

The Bond Act is a good start—but it’s not enough. It’s been three years since New York passed our landmark climate law, the Climate Leadership and Community Protection Act (CLCPA), and we’re far from achieving the law’s mandate of largely decarbonizing the state economy by 2040. The state’s own analysis shows that we’ll need to invest roughly $15 billion a year by 2030, and $45 billion a year by 2050.

The Integration Analysis does include annual projections for net direct costs of between $10.4 and $12.2 billion for 2030 and between $41.0 and $41.3 billion in 2050.

New York Renews: Climate Coalition launches campaign for state action

Among NY Renews’ key goals for the upcoming legislative session is the creation of a $10 billion Climate and Community Protection Fund, modeled after the state’s Environmental Protection Fund. It’s an amount in line with the Climate Action Council’s estimates of what meeting the goals in the climate plan will cost: $10 to 15 billion a year, whether the costs are paid by the state, the federal government, industry, ordinary New Yorkers, or a mix of all of the above.

There are enough options for guessing what the Council estimates as costs that these numbers are consistent.

I found a couple of independent estimates of the total costs to meet the net-zero target by 2050: An article by Ken Gregory critiques a report  by Thomas Tanton “Cost of Electrification: A State-by-State Analysis and Results”.  In Tanton’s analysis the estimated total installed cost (overnight) is approximately for New York is $1.465 trillion or $54.3 billion per year.  Gregory’s total national capital cost of electrification is $433 trillion and New York’s proportional share based on Tanton is $22.2 trillion.  Overbuilding solar and wind by 21% reduces New York overall costs to $18.2 trillion.  Allowing fossil fuels with carbon capture and storage to provide 50% of the electricity demand reduces New York’s estimated costs to $1.2 trillion or $44.4 billion per year.

Conclusion

The New York Senate held a public hearing to examine legislative and budgetary actions necessary to implement the Climate Act Scoping Plan on January 19, 2023.  One of the primary concerns of the legislative and budgetary actions has to be how much money is required.  I modified the draft of this post to submit as a comment.  The main point I wanted to make is that it is very important that the Legislature understand that the numbers presented in the Scoping Plan are inappropriate for any future legislative actions.  Those actions must be based on the total costs of implementation and not just the costs relative to a Reference Case.  Beyond that I offered no substantive recommendation for revenues needed because of the inadequate documentation in the Scoping Plan.

I determined the emissions reduction trajectory needed to meet the 2040 GHG emissions target, calculated the control cost per ton removed based on the RGGI auction proceed investments, and found that a total of $7.9 billion per year is needed.  That is the low-end cost of the projections.  At the upper end three projections exceed $45 billion a year.  All these estimates will impose extraordinary cost burdens on New Yorkers.  No one in the Hochul Administration has owned up to these costs.  When will this news become public knowledge?

Finally, all the cost per ton reduced estimates in these projections exceed the New York State Value of Carbon guidance.  The Frequently Asked Questions guidance states:

The term value of carbon is any representation of monetary cost applied to a unit of greenhouse gas emissions, expressed in terms of the net cost of societal damages (i.e., the “social cost of carbon”), marginal greenhouse gas abatement cost, or using another approach. DEC recommends that State agencies use a damages-based value of carbon for cost-benefit analysis, for describing societal benefits, and evaluating other types of decisions, such as state procurement, contracts, grants, or permitting.

This means that all these projected costs exceed the cost-benefit analysis for describing societal benefits.  New York’s greenhouse emissions are less than one half of one percent of global emissions and global emissions have been increasing by more than one half of one percent per year.  The facts that the expected investments exceed the societal benefits values and that all New York emission reductions will be replaced by emissions from elsewhere in a year does not mean that we should not do something, but it does mean we should take the time to do it right. 

New York Energy Storage Roadmap – Cost Projections

On December 28, 2022, the New York State Energy Research & Development Authority (NYSERDA) and the New York State Department of Public Service (DPS) filed New York’s 6 GW Energy Storage Roadmap to the Public Service Commission (PSC) for consideration.  This post gives an overview of the roadmap and an initial assessment of the cost assessment methodology.

Everyone wants to do right by the environment to the extent that they can afford to and not be unduly burdened by the effects of environmental policies.  I submitted comments on the Climate Act implementation plan and have written over 250 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.

New York Energy Storage Plan

The NYSERDA Energy Storage in New York web page gives an overview of New York’s plan:

In 2019, New York passed the nation-leading Climate Leadership and Community Protection Act (Climate Act), which codified some of the most aggressive energy and climate goals in the country.

  • 6,000 MW of Solar by 2025
  • 70% Renewable Energy by 2030
  • 9,000 MW of Offshore Wind by 2035
  • 100% Carbon-free Electricity by 2040
  • 85% Reduction in GHG Emissions from 1990 levels by 2050
  • 3,000 MW of Energy Storage by 2030, further increased to 6,000 MW of Energy Storage by 2030 by Governor Kathy Hochul

Energy storage will play a crucial role in meeting our State’s ambitious goals. Storage will help to integrate clean energy into the grid, reduce costs associated with meeting peak electric demands, and increase efficiency. Additionally, energy storage can stabilize supply during peak electric usage and help keep critical systems online during an outage.

The Roadmap proposes a comprehensive set of recommendations to expand New York’s energy storage programs to cost-effectively unlock the rapid growth of renewable energy across the State and bolster grid reliability and customer resilience. If approved, the Roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion, in addition to further benefits in the form of improved public health as a result of reduced exposure to harmful fossil fuel pollutants.

The Roadmap proposes the implementation of NYSERDA-led programs towards procuring an additional 4.7 GW of new storage projects across the bulk (large-scale), retail (community, commercial and industrial), and residential energy storage sectors in New York State. These future procurements, combined with the existing energy storage already under contract with the State and moving towards commercial operation, will allow the State to achieve the 6 GW goal by 2030.

Keep in mind that New York’s net-zero by 2050 plan is and always has been a political initiative developed by a small group and foisted upon the state by the emotion-driven innumerates of the New York Legislature.  Accordingly, the release of the Energy Storage roadmap warranted a press release from the Governor:

Governor Kathy Hochul today announced a new framework for the State to achieve a nation-leading six gigawatts of energy storage by 2030, which represents at least 20 percent of the peak electricity load of New York State. The roadmap, submitted by the New York State Energy Research and Development Authority and the New York State Department of Public Service to the Public Service Commission for consideration, proposes a comprehensive set of recommendations to expand New York’s energy storage programs to cost-effectively unlock the rapid growth of renewable energy across the state and bolster grid reliability and customer resilience. If approved, the roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion, in addition to further benefits in the form of improved public health because of reduced exposure to harmful fossil fuel pollutants. Today’s announcement supports the Climate Leadership and Community Protection Act goals to generate 70 percent of the state’s electricity from renewable sources by 2030 and 100 percent zero-emission electricity by 2040.

One phrase in this paragraph is the reason I wrote this post. It says “the roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion”.  I will show that what it really means is that we think we can claim that the costs will be nearly $2 billion dollars less than the astronomical total cost that we don’t admit to the public because it won’t reflect well on the narrative of the state’s Climate Act.

Chapter 3: Role of Storage Targets

New York’s 6 GW Energy Storage Roadmap (Roadmap) explains that “energy storage has the potential to play a critical role in supporting a deeply decarbonized New York electricity grid, through its ability to integrate large quantities of variable renewable energy and provide reliable capacity to meet growing peak demand”.  

The document describes the role of energy storage.  Note that the emphasis is on short-term storage for intra-day requirements for the 6 GW by 2030 target.

Figure 5 illustrates the role of energy storage in shifting generation to meet load, based on Roadmap analysis of the New York electricity system under portfolios consistent with the Climate Act. On days with excess solar, the modeled battery storage system charges from excess solar power concentrated in the middle of the day. Battery storage then helps the system to maintain reliability in events when load is high, and overnight when wind generation is low. Alternately, on low renewable output days, storage can charge from other resources, including imports, and reduce the need for more expensive firm resources.

Figure 5. Energy Value: Storage Dispatch in Modeled Analysis of the New York Electric System in 2040

The Roadmap document claims that it is appropriate to increase the energy storage deployment target of 3 GW by 2030 to 6 GW.  It states:

The analysis performed for this Roadmap (see Section A.1 in Appendix A) estimates that deployment of 6 GW of storage by 2030 will yield an estimated $1.94 billion (net present value) in net societal benefits to New York, due to increased delivery of renewable energy and reduced reliance on other more expensive firm capacity resources. These benefits reflect the value of avoided electricity system expenditures. Further societal benefits, not quantified here, would include improved air quality in communities impacted by fossil generation.

Furthermore, the analysis highlights the opportunity to leverage federal incentives to build out most of the expected 2040 storage deployments earlier, given that these credits could phase down as early as 2032. This Roadmap analysis finds that nearly all the 12 GW of storage chosen in the modeling is deployed by 2035, to meet system needs and maximize cost-effectiveness by capturing the federal Investment Tax Credit. Figure 6 illustrates these analytical findings, indicating that the projected 2040 quantity of 12 GW could be fully deployed as early as 2035 in order to maximize this opportunity. This context underscores the importance of an increased 2030 target of 6 GW in order to position New York to pursue such an accelerated opportunity.

Figure 6. Statewide Battery Storage Capacity Targets and Storage Deployment to Meet System Needs

Appendix A Storage Capacity Expansion Analysis

Appendix A documents the analysis conducted for the Roadmap.  It turns out that the analysis is basically the 2022 updated Integration Analysis for the revisions to the Scoping Plan.  The Appendix summarizes the approach but often refers to the Appendix G Scoping Plan documentation for specifics.  My experience with that reference information is that it is not nearly as comprehensive as implied by this document.

NYSERDA relies on Energy and Environmental Economics (E3) for the modeling analyses that provide the basis for the Roadmap.  E3 has a capacity expansion model, RESOLVE, and loss of load probability model, RECAP.  RESOLVE “optimizes long-term generation and transmission investments subject to reliability, technical, and policy constraints.”  RECAP performs “loss-of-load probability simulations to determine the reliability of resource portfolios and the contribution from each resource within it.”   The models “develop least-cost electricity generation portfolios that achieved New York’s Climate Act goals with the new 6 GW storage by 2030 target and meet New York’s long term energy needs.”  However, note that these models simplify the New York generating system so they do not do as good a job projecting the future system as the New York Independent System Operator (NYISO) models.

The E3 modeling for the Integration Analysis was used to estimate loads and costs starting in 2020.  That means that it is possible to check the model predictions against observations.  The Roadmap states: “Current costs are about 10% higher than those assumed in the 2018 Storage Roadmap and about 40% higher than that assumed in the 2021 Integration Analysis”.  In my opinion a 40% difference in cost over a few years does not lend any credibility to costs out to 2050.

The Roadmap notes reasons for the energy storage cost projection differences:

Over the past year, supply chain constraints, material price increases, and increased competition for battery cells have driven up the cost of energy storage technologies, particularly lithium-ion batteries. Many of the drivers of cost increases are expected to persist until at least 2025. These cost increases may impact the cost of any new programs designed to procure storage to be installed by 2030. In addition to cost increases, difficulties in the timely completion of interconnection processes, high interconnection costs, and downward pressure on capacity revenue create a challenging environment through the development and operational lifecycle of a storage project. Financial support will therefore be crucial for the state to achieve the 3 GW and 6 GW deployment goals.

One of my major concerns with the Scoping Plan projections was the overly optimistic projections of energy cost reductions which I believe were used to claim lower costs of the net-zero transition.  Despite the failure to project current costs in the 2021 Integration Analysis, the Roadmap doubles down saying that “Cost declines are assumed to begin in 2025 as manufacturing capacity expands, and benefits of scale and innovation are realized”.  The document does not explain why the concerns noted above are going to turn around so quickly or, for that matter, why given global competition for the same rare earth metals necessary for the energy storage won’t see those conditions persist for many years.

Appendix B: Storage Program Cost Analysis

This Appendix “summarizes the inputs, assumptions, and analysis methodology underpinning the estimates of incremental program costs associated with achieving the proposed 2030 target of 6 GW of short-duration storage”.   The Roadmap states:

The total cost of these proposed procurement programs is estimated at between $1.0 billion and $1.7 billion. This equates to an estimated increase in customer electric bills of 0.32% – 0.54% (or $0.34 – $0.58 per month for the average residential customer) on average across New York for the 22-year period during which these programs would make payments to awarded projects. The range of these projections reflects future uncertainties, most notably those associated with energy and capacity prices.

The way this is written it suggests that the energy storage costs will be manageable because it will only be at most $0.58 per month.  However, Appendix B states:

For the proposed bulk storage procurement program, program costs are calculated as the incremental revenue, on top of revenue that storage assets can realize through commercial operation in the existing energy markets, that would allow such assets to reach their cost of capital. This methodology is broadly consistent with that applied to cost studies under the Clean Energy Standard.66 Key assumptions and inputs include the costs of storage projects, the estimates of market revenue available to them, available federal incentives and the cost of capital.

This approach is disingenuous at best.  They are not providing all the program costs only the costs above what they think an energy storage owner will have above the expected “incremental” revenue.  That incremental revenue has to be paid by someone and that someone is the ratepayers of the state.  As I understand it the “incremental revenues” are composed of at least the subsidies that are being proposed for energy storage that are like renewable energy credits.  Those subsidies are not paid for in the NYISO’s wholesale energy market but are buried in utility rate cases.  Moreover, it is not clear if the Roadmap includes energy storage specific wholesale energy market payments as other “incremental” revenue.  In any event, the insinuation that the energy storage cost is only going to be “between $1.0 billion and $1.7 billion” is clearly misleading and inaccurate.

Conclusion

There is a lot to unpack in the Roadmap and I will follow up with future posts.  Even at first glance there are issues.  Not only does the study rely on the poorly documented Integration Analysis as its basis but it also replicates its shell game con for hiding the true costs.  In the Scoping Plan costs are compared to a Reference Case that includes already “incremented programs” and in this Roadmap costs are presented relative to “incremental revenues”.  In both instances the result is a deceptive cost estimate that does not include all the costs for the citizens of New York.

It gets worse.  The continued increase in subsidized resources in the NYISO’s wholesale energy market will on average suppress market prices which will result in the need for larger subsidies to make renewable developments viable.  Gresham’s Law of Green Energy is named after Sir Thomas Gresham, a 16th-century British financier who observed that “bad money drives out the good.”. In this context  subsidized renewable resources will drive out competitive generators, lead to higher electric prices, reduce economic growth, and likely lead to the need to subsidize competitive generators who provide critical resources but are no longer viable.  Finally, keep in mind that almost all project development costs are funded through NYSERDA non-recourse loans. In open capital markets that is the most expensive money there is to finance. 

The Roadmap claims “the roadmap will support a buildout of storage deployments estimated to reduce projected future statewide electric system costs by nearly $2 billion”.  The only reductions are relative to very high projected costs.  It appears that the Hochul Administration goal is hide the expenditure of hundreds of billions of dollars under hundreds of programs and subsidies making it intentionally impossible to capture the total costs to consumers.  The true “Total Cost” of the Climate Act will be hidden forever from the public by design. 

Climate Act Scoping Plan Costs Shell Game

In the past twelve months I have spent an inordinate amount of time evaluating the Climate Leadership and Community Protection Act (Climate Act) and the Scoping Plan implementation plan framework to meet the ambitious net-zero goal by 2050.  Climate Action Council Co-Chair Harris recently made the claim that delaying climate action will cost New Yorkers more than acting now.  However, that statement is misleading and inaccurate.  This post shows that the claim is no more than a shell game gimmick.

Everyone wants to do right by the environment to the extent that they can afford to and not be unduly burdened by the effects of environmental policies.  I submitted comments on the Climate Act implementation plan and have written over 250 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.

Climate Act Background

The Climate Act establishes a “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. The Climate Action Council is responsible for preparing the Scoping Plan that will outline how to “achieve the State’s bold clean energy and climate agenda.”  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the strategies.  That material was used to write a Draft Scoping Plan that was released for public comment at the end of 2021. The final Scoping Plan was approved by the Climate Action Council on December 19, 2022 and the Integration Analysis documentation was recently updated.

Documentation Shell Games

The Scoping Plan has been described as “a true masterpiece in how to hide what is important under an avalanche of words designed to make people never want to read it”. The Implementation Analysis quantitative assessment goes further.  It does not even pretend to clearly include what is important to evaluate the numbers that are used in the Scoping Plan.  There is no concise documentation that includes the costs, expected emission reductions and assumptions used for the control strategies included in the Integration Analysis documentation.  Instead, these is a massive spreadsheet with key drivers and input assumptions for all aspects of the transition.  The public is left to try to decipher what is included in each control strategy, figure out how the information was used, and then calculate what the results are for all control strategies.

The first shell game gimmick picks and chooses what control strategies are included in the costs of de-carbonization.  In order to evaluate the effects of different policy options, The Integration Analysis model projects future conditions for a baseline case.  The evaluation analysis makes projections for different policy options, and then the results are compared relative to the baseline.  Standard operating procedure for this kind of modeling is to use a business-as-usual or status quo case for the baseline.  Appendix G Section 3.4: Benefits and Costs argues that the costs of the control strategies should be considered relative to status quo or business as usual costs:

When viewed from a systems expenditure perspective (Figure 48), the NPV of net direct costs for Scenarios 2, 3, and 4 are moderate, roughly 11% as a share of the NPV of reference case system expenditures ($2.7 trillion). Because significant infrastructure investment will be needed to maintain business as usual infrastructure within the state irrespective of further climate policy, redirecting investment away from status quo energy expenditures and toward decarbonization is key to realizing the aims of the Climate Act.

Figure 51 from Appendix G is the documentation for the claim that the cost of inaction exceeds the cost of action by more than $115 billion.  In my Draft Scoping Plan comments I argued that the figure is mis-leading because it presents the numbers relative to a Reference Case rather than a business-as-usual or status quo case that represents a future without decarbonization programs.  I maintain that the true cost of New York’s net-zero transition by 2050 should include all costs associated with all programs designed to reduce GHG emissions.  The authors of the Integration Analysis and Scoping Plan excluded decarbonization costs that I believe should be included and provided insufficient documentation to enable anyone to determine what is in or out of the Reference Case. 

In the Scoping Plan shell game, the first thing to watch is the claim that “significant infrastructure investment will be needed to maintain business as usual infrastructure within the state irrespective of further climate policy, redirecting investment away from status quo energy expenditures and toward decarbonization is key to realizing the aims of the Climate Act” but at the same time including decarbonization costs for “already implemented” programs in the Reference Case.  If a reader loses track of this shell, it is easy to assume that the costs presented are relative to a business-as-usual or status quo modeling scenario per standard procedures.  Instead, the State compares mitigation scenario costs to a Reference Case that includes “already implemented” decarbonization costs.

There is another shell to watch.  In my review of the Draft Integration Analysis supplement, I ended up searching the document for the phrase “reference case” to try to determine what “already implemented” decarbonization programs were included in the Reference Case.  The following figure reproduces the page with the documentation on page 12 in Appendix G Integration Analysis Technical Supplement Section I. The documentation is buried in the footnote for the circled reference for the blank caption to Figure 4. 

Given its importance to the cost/benefit claim, my Draft Scoping Plan comment noted that this reference case caveat should be clearly described in the text rather than in a footnote.  What I missed in the draft was a reference to explanatory text in section 5.3 of the document.  However, that text was not included in the draft document! The appropriate text is in the recently released Appendix G section 5.3: Scenario Assumptions chapter and lists the “already implemented” programs.  It states:

The integration analysis evaluated a business-as-usual future (Reference Case) a representation of recommendations from CAC Advisory Panels (Scenario 1), and three scenarios designed to meet or exceed GHG limits and carbon neutrality (Scenarios 2 through 4). Scenarios 2, 3, and 4 all carry forward foundational themes based on findings from Advisory Panels and supporting analysis but represent distinct worldviews. A detailed compilation of scenario assumptions can be found in Annex 2.

For the record Annex 2 refers to a  massive spreadsheet that is certainly detailed but most certainly does not provide an easily accessible compilation of scenario assumptions.  In particular, the documentation does not provide explicit information to determine what costs are specifically included in the Reference Case relative to the other scenarios.

The Reference Case described as “Business as usual plus implemented policies” includes the following:

  • Growth in housing units, population, commercial square footage, and GDP
  • Federal appliance standards
  • Economic fuel switching
  • New York State bioheat mandate
  • Estimate of New Efficiency, New York Energy Efficiency achieved by funded programs: HCR+NYPA, DPS (IOUs), LIPA, NYSERDA CEF (assumes market transformation maintains level of efficiency and electrification post-2025)
  • Funded building electrification (4% HP stock share by 2030)
  • Corporate Average Fuel Economy (CAFE) standards
  • Zero-emission vehicle mandate (8% LDV ZEV stock share by 2030)
  • Clean Energy Standard (70×30), including technology carveouts: (6 GW of behind-the-meter solar by 2025, 3 GW of battery storage by 2030, 9 GW of offshore wind by 2035, 1.25 GW of Tier 4 renewables by 2030)

Figure 47 shows the total net present value (NPV) of direct costs relative to the Reference Case over the period 2020-2050.  However, these bar charts provide little information.

It is more useful to look at a table of the values to try to understand how the Reference Case costs differ from the mitigation scenarios.  That information is available in the IA-Tech-Supplement-Annex-2-Key-Drivers-Outputs-2022 spreadsheet.   One thing that jumps out is the $3.45 billion difference for the Transportation Investment between the Reference Cased and the Low-Carbon Fuels Scenario.  There are only two decarbonization programs included in the Reference Case: Corporate Average Fuel Economy (CAFE) standards and Zero-emission vehicle mandate (8% LDV ZEV stock share by 2030).   In my opinion that $3.45 billion difference either indicates that most of the EV electrification costs are improperly included in the Reference Case or that the cost estimates are suspect.

I found that both issues contribute to the small difference between the Reference Case and the Low-Carbon Fuels scenario.  According to the Scoping Plan the costs to replace light-duty vehicles, trucks, and buses with electric alternatives, provide the charging infrastructure to support those vehicles, and upgrade public transit services is only $3.45 billion over 30 years.  For the most part the only reason for those expenses is decarbonization and whether it is explicitly part of the Climate Act or not, those costs should be included in the costs of the Climate Act.  They have to be hundreds of billions of dollars. I have no doubts that proper accounting would reduce or reverse the alleged favorable benefit-cost ratio if just this is correctly attributed.

I believe that the cost estimates are also suspect.  My Draft Scoping Plan Comment on Electric Vehiclesanalyzed the Integration Analysis spreadsheet documentation.  The Integration Analysis presumes that the device costs for zero-emissions charging technology and the vehicles themselves decrease significantly over time.  Home EV chargers and battery electric vehicles both are claimed to go down 18% between 2020 and 2030 alone.  The following graph of electric vehicle costs shows that the costs for battery electric and hydrogen fuel cell vehicles that are the proposed solution go down over time.   The costs for gas, diesel, and Plug-in Hybrid Electric vehicles are all identical and stay pretty constant.  Given that PHEV also use batteries, why wouldn’t that technology cost decrease similar to the full battery EV.  The overall cost decreases in the preferred technologies are so large that the total costs for the zero-emissions vehicles adoption is cheaper than using existing technology.  My comments noted that I cannot accept this optimistic assessment of future cost reductions without documentation that addresses at least the potential for battery supply chain issues.  The Climate Action Council “acknowledged” my comment by providing a link but never addressed the issues that I raised.

Conclusion

A shell game is defined as “A fraud or deception perpetrated by shifting conspicuous things to hide something else.”  In the Scoping Plan shell game, the authors argue that energy costs in New York are needed to maintain business as usual infrastructure even without decarbonization policies but then include decarbonization costs for “already implemented” programs in the Reference Case baseline contrary to standard operating procedure to use a status quo baseline for this kind of modeling.  The documentation for Reference Case assumptions was missing in the draft documents. Shifting legitimate decarbonization costs to the Reference Case because they are already implemented and hiding the documentation fits the shifting condition of the shell game deception definition perfectly. 

The deceptions of the Scoping Plan are furthered by ignoring stakeholder input that ran contrary to their narrative.  Climate Action Council Co-Chair Harris recently claimed that the stakeholder “comments, letters, and engagement have absolutely impacted this process and the plan it has produced for the better.”  I see no evidence that the Climate Action Council addressed my Integration Analysis comments on the benefits and costs evaluation or any other stakeholder comments associated with quantitative Integration Analysis issues.   

Climate Act Emissions in Graphical Context

This post was updated on 10/24/22 to replace the second graph included and include data to 2019

The Climate Leadership and Community Protection Act (Climate Act) establishes a “Net Zero” target by 2050. The Draft Scoping Plan defines how to “achieve the State’s bold clean energy and climate agenda” and claims that there are significant direct and indirect benefits if New York’s greenhouse gas emissions (GHG) are reduced to net-zero but there is no mention of New York’s emissions relative to the rest of the world.  I explained that any claim of benefits is illusory because in the context of global impacts New York’s contribution is miniscule.  This short post puts the numbers into a couple of graphs.

Everyone wants to do right by the environment to the extent that they can afford to and not be unduly burdened by the effects of environmental policies.  I submitted comments on the Climate Act implementation plan and have written extensively on 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 this supposed cure will be worse than the disease.  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.

New York and Global GHG Emissions

The purpose of this post is to illustrate how New York GHG relate to global emission increases.  I found CO2 and GHG emissions data for the world’s countries and consolidated the data in a spreadsheet earlier this year.  I downloaded the data again for this post and found data out to 2019.  The following graph shows global and CO2 emissions for the world and New York plotted on the same graph.  New York emissions are essentially zero.

The trend results indicate that the year-to-year trend in GHG emissions was positive 21 of 26 years and for CO2 emissions was positive 24 of 30 years.  In order to show this information graphically I calculated the rolling 3-year average change in emissions by year.  The following graph shows that rate of change in emissions has been consistently higher than New York emissions since 1990.

Conclusion

By any measure New York’s complete elimination of GHG emissions is so small that there will not be any effect on the state’s climate and global climate change impacts to New York.  I previously showed that although New York’s economy would be ranked ninth relative to other countries, New York’s emissions are only 0.45% of global emissions which ranks 35th.  This post graphically shows New York emissions are negligible compared to global emissions.  The change to global warming from eliminating New York GHG emissions is only 0.01°C by the year 2100 which is too small to be measured much less have an effect on any of the purported damages of greenhouse gas emissions.  Finally, this post shows global emissions have increased more than New York’s total share of global emissions consistently since 1990.  In other words, whatever New York does to reduce emissions will be supplanted by global emissions increases in a year.

The only possible conclusion is that the Climate Act emissions reduction program is nothing more than virtue-signaling.  Given the likely significant costs, risks to reliability, and other impacts to New York society, I think that the schedule and ambition of the Climate Act targets needs to be re-assessed for such an empty gesture.

Climate Act Cost of Inaction Misinformation

I have argued repeatedly that claims that reliance on intermittent wind and solar resources to meet the net-zero Climate Leadership and Community Protection Act (Climate Act) mandated targets have no potential reliability issues is simply incorrect.  My other big concern is affordability and this article addresses the supposed cost benefits of the Climate Act.  In particular, a recent segment by Spectrum News report Nick Reisman addressed the costs of the Climate Act that included an argument that the cost of inaction is far greater than the cost of action.  I believe that is also simply incorrect.

Everyone wants to do right by the environment to the extent that they can afford to and not be unduly burdened by the effects of environmental policies.  I submitted comments on the Climate Act implementation plan and have written extensively on 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 this supposed cure will be worse than the disease.  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.

Climate Act Implementation Background

The Climate Act establishes a “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. The Climate Action Council is responsible for preparing the Scoping Plan that will “achieve the State’s bold clean energy and climate agenda”.  They were assisted by Advisory Panels who developed and presented strategies to the meet the goals to the Council.  Those strategies were used to develop the Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants that tried to quantify the impact of the strategies.  That material was used to write a Draft Scoping Plan that was released for public comment at the end of 2021. Following a six month public comment period, the Climate Action Council states that it will revise the Draft Scoping Plan based on comments and other expert input in 2022 with the goal to finalize the Scoping Plan by the end of the year.

I have written multiple articles (summarized here) documenting my belief that the Climate Action Council has not confronted reliability issues raised by New York agencies responsible for keeping the lights on.   Because those agencies have raised substantive issue based on the work of their subject matter experts I believe that the members of the Council that have downplayed reliability as a concern and have claimed that those concerns are misinformation  are the ones guilty of misinformation.  This post addresses the public’s perception of the claim that the costs of inaction are greater than the costs of action.

Can clean energy changes avoid dinging New Yorkers’ wallets?

The Nick Reisman story addressed the costs of the Climate Act and included a discussion of costs.  I think the genesis of the presentation was Children’s Environmental Health Day where advocates gathered at the State Capitol to urge the Climate Action Council to release a strong Climate Action Plan.  Reisman interviewed a local politician to explain the rationale for the request:

Elected officials and climate advocates are pushing for an aggressive plan to address global warming and reduce pollution. New Lebanon Supervisor Tistrya Houghtling says her community is especially vulnerable to extreme weather.   A school bus garage is vulnerable to flooding and farmers are hurt by fluctuations in weather and temperature.  “Between the drought and the flooding, and kind of what I call our bipolar weather where it goes back and forth so quickly, a lot of our farmers are struggling with their crops and other things,” she said.

For once there appears to be recognition that there is a difference between weather and climate because Houghtling correctly says that weather is causing the problems.  Nonetheless the implication is that a strong Climate Action Plan could affect these weather events.  No New York State regulatory policy related to climate change has ever quantified the potential effect of the regulation on global warming itself.  The reason is simple.  I have calculated the  expected impact on global warming as only 0.01°C by the year 2100 if New York’s greenhouse gas (GHG)  emissions are eliminated. That change is simply too small to be measured much less have a meaningful effect on any New York weather event. 

The interview goes on: “But at the same time, she does not want the changes to hit the wallets of her neighbors, especially lower income people who may struggle to pay to upgrade their homes with an electric car charging or a new heat pump.”  Reisman provides some background on the requirements:

In the coming years, New York plans to phase out gas-powered cars for electric vehicles. Buildings and homes will be electrified. The transition will mean a major change for how homes and businesses are powered, requiring major infrastructure upgrades along the way.

Of course, these actions will cost money and it is not clear just how much.  The news report notes:

Republicans, including Senate Minority Leader Robert Ortt, are skeptical utility ratepayers won’t take the brunt of the costs.  “What is the cost of these policies? Can we do these things?” Ortt said at a news conference recently.

New Yorkers have already been contending with high gas prices and an expected increase in home heating bills this winter.  “It’s not going to be at the pump so much that it’s going to be in their mailbox,” he said. “It’s going to be their utility bills. And it’s going to be the cost to heat their homes.”

The final interview is the reason I prepared this post.  In rebuttal to Ortt:

New Paltz Mayor Tim Rogers says the cost of inaction on climate is far greater.  “If we don’t make these investments,” he said, “if we don’t make these conversions, we will be paying many trillions more in costs for our communities.”

There are egregious mistakes in Rogers’ quote.  As noted previously, the presumption that implementation of the Climate Act reductions will actually have any effect on the observed weather and associated impacts is wrong simply because any New York emission reductions are simply too small to affect global warming.  In addition, New York GHG emissions have to be considered relative to global emissions.  I found that New York emissions are less than one half of one percent of global emissions.  On average, global emissions have been increasing by more than one half of one per cent per year for many years.  Therefore, any effect New York could possibly have on global warming will be offset by global emission increases in a year.

Draft Scoping Plan Cost and Benefits Claims

There is another egregious mistake in Rogers’ quote, namely the implication that reducing New York emissions prevent trillions in costs.  The Draft Scoping Plan estimates of potential benefits are much lower.  In order to bolster the claim that the costs of inaction are greater than the costs of action the Draft Scoping Plan conjures up as many speculative benefits as possible.   Figure 46 in the Draft Scoping Plan lists the net present value of benefits from 2020 to 2050 and the largest estimate is $420 billion or less than one half a trillion dollars. 

There is another problem.   I think the cost-benefit analysis is flawed and said so in my comments.  Because I have seen no indication in recent Climate Action Council meetings of any suggestion that stakeholder comments questioned the Draft Scoping Plan cost benefits claims I think it appropriate to summarize those comments.

The first problem is the lack of detailed cost documentation in the Draft Scoping Plan.  In my opinion the lack of detailed cost information in the Plan and the lack of response to questions about them is politically motivated because the costs will be eye watering.  Moreover, I maintain that the cost information provided is misleading.  In my comments on the Draft Scoping Plan I showed that in order to further the narrative that there is value to the Climate Act’s costs the reported numbers are carefully presented to give the impression that the cost of inaction is greater than the cost of action.  I documented a trick used to deceive the public that benefits out-weigh costs by excluding legitimate Climate Act costs.  For example, the analysis did not include the costs of the 2035 zero-emission vehicle mandate as part of the modeling comparison case because the “program was already implemented”.  That decreased the costs of compliance.  In addition, the Plan incorrectly interprets guidance to inflate the societal benefits of avoided emissions. That increases the alleged benefits.  When those errors are corrected the costs are greater than the benefits.

There is another issue with the benefit claims.  James Hanley from the Empire Center submitted written testimony to the Climate Action Council that addressed the cost and benefits of the Climate Act.  Although the messaging is that the benefits surpass the costs, Hanley commented that:

But what is obfuscated in this message is that all the costs fall on New Yorkers, while they receive only a portion of the benefits. Avoided economic costs due to reduced greenhouse gas emissions estimated at $260 billion are global benefits, although the plan fails to specify this important detail. This becomes clear only to those who are aware that the $260 billion estimate is based on the Department of Environmental Conservation’s social cost of carbon, which in accordance with the CLCPA is explicitly a global benefit. This is not clearly specified in the Scoping Plan, leaving the unwary reader with the mistaken impression that the benefit to New York outweighs the cost to New York.           

He goes on to explain that a careful analysis of the Draft Scoping Plan shows that the costs are greater than the benefits:

Nor does the Integration Analysis prepared by Energy+Environmental Economics make any attempt to disaggregate that $260 billion global benefit to discern what share accrues to the people who will be paying for it. But New York contributes approximately four-tenths of one percent of global greenhouse gas emissions. If we assume the state receives roughly the same share of the benefit, New York’s share of that benefit is only $1.4 billion. If we generously multiply that by 10 (assuming for the state what is likely a highly disproportionate share of the benefit), the benefit to New York would be $10.4 billion. If we subtract the $260 billion from the claimed $420 to $430 billion in benefits, then add back in that assumed benefit of $10.4 billion, we get a total net benefit to New York of $170.4-180.4 billion.  Against a cost of $280 – $340 billion, this means there is no net benefit to New Yorkers, but a net loss of $100-170 billion. Simply put, by the state’s own analysis the cost to New York outweighs the benefit to New York.

Conclusion

Despite the far-reaching impacts of the Climate Act, I remain convinced that most New Yorkers are unaware of what is coming.  In that context Spectrum News is to be congratulated for addressing this topic.  Unfortunately, like the majority of other news stories on this topic it accepts the basic talking points of both sides of the story without any investigation.  Advocates for action rely on talking points and typically respond to criticism by dismissing it as “misinformation”.

Investigation into the statements by both politicians would show their comments are real misinformation.  Houghtling implied that the Climate Act can reduce the potential risks to her jurisdiction but the State has never quantified those impacts or admitted that New York’s emissions relative to global emission increases negates anything we can do.  Rogers’ claim “if we don’t make these conversions, we will be paying many trillions more in costs for our communities” is not supported by the Draft Scoping Plan that projects benefits on the order of half a trillion over the period 2020-2050. Finally, careful review of the claimed benefits show that there are methodological issues and, importantly, that most of the benefits will accrue outside of New York. The costs will be real but the benefits are imaginary.

The news story interviewed politicians who supported a strong Climate Action Plan.  They don’t understand or don’t want to understand the enormous costs associated with the net-zero transition implementation.  To their defense the Hochul Administration has not provided sufficient information for anyone to find out what the state expects those costs to be.  Shouldn’t the fact that the Administration has refused to provide specific cost information for the proposed control strategies for a program that will radically transform the entire energy system of the state be the real story?

Follow Up to RFF Inflation Reduction Act Retail Electric Rate Cost Analysis

This is a follow up to my article published at Watts Up With That Resources for the Future: Retail Electricity Rates Under the Inflation Reduction Act of 2022  and re-published here.  The article addressed the  Resources for the Future (RFF) Issues Brief titled Retail Electricity Rates Under the Inflation Reduction Act of 2022 claim that the legislation, will “save typical American households up to $220 per year over the next decade and substantially reduce electricity price volatility.”  I got a comment here that raised two flaws in my arguments.  I used data from the United States Energy Information Administration (EIA) Electricity Data Browser for Texas to test the hypothesis that increased renewable energy resources would lower electricity costs.  This article addresses the flaws raised.

The comment that exposed my flawed argument was provided by Dr. Michael Giberson, associate professor of practice in the Area of Energy, Economics, and Law with the Rawls College of Business at Texas Tech University.  He commented that:

When I follow your directions for your chart using the EIA data you describe, I get a very different picture. Avg residential power prices in Texas peak in mid 2008, then fall for several years before coming up more recently. Your chart is showing something other than what you describe.

Further, inflation adjusted power prices have been falling over the 2001-2022 period. Using CPI data with January 2022 = 100, average real price in early 2001 was about 12.5 cents then jumped up to 18.5 cents in mid 2008 before falling back to about 12.5 cents in 2022.

I hypothesized that if I used the United States Energy Information Administration (EIA) Electricity Data Browser  tool I could find data that showed that prices would go up in states where renewable energy development has increased the fraction of renewable energy generated and I used Texas an example.   I downloaded the monthly total net generation (GWh) and the net generation from just renewable resources so I could calculate the percentage of renewable generation energy.  Then I downloaded the average monthly residential average price of electricity. 

I went back and reviewed my work and have to apologize to everyone because I mistakenly used the wrong monthly residential cost data.  Dr. Giberson used the correct data as shown below.  The Texas data do not illustrate any relationship between the percentage of monthly renewable energy generated per month (left axis) and the monthly residential electric price (right axis).  What it does show is that the observed variability of the monthly prices is large in Texas. 

Importantly, this result invalidates my hypothesis that these two parameters could be used to show that when the Texas electric system added more renewable energy the costs went up.  Obviously, these data do not confirm that hypothesis.  Upon further review in order to pick out a trend in the cost data I should have adjusted for inflation as Dr. Giberson suggested.  The variation in the data before the renewable energy production kicked in also suggests that picking out a trend is more complicated than I thought it would be. 

An alternative hypothesis is that this is an issue with just the Texas data so I did the same thing with California data.  The results shown below are significantly different than Texas.  There is less cost variability and the increase after 2005 is not as pronounced.   It does appear that costs go up and renewable penetration goes up but I did not adjust for inflation to test that theory.

The axes in the Texas and California charts are different so inter-comparison is difficult.  When combined the results are messy but there are a couple of interesting things.  Texas residential electric costs are significantly lower (89% in 2021) and the spread has increased over time.  However, during the years 2005 to 2009 the Texas energy costs were less than 20% lower apparently because something happened to the Texas market in that time.  Dr. Giberson notes that the inflation adjusted real price in early 2001 was about 12.5 cents then jumped up to 18.5 cents in mid-2008 before falling back to about 12.5 cents in 2022. The other interesting point is that as the percentage of renewable generation increases the spread between the monthly values increases which I think reflects seasonal variations in resource availability.

I also extracted data for the United States as a whole. Note that US residential electric costs increased at the same time Texas rates increased after 2005.  The same volatility increase as additional renewable power is added is apparent.  It is notable that historically there has been a clear annual cycle of costs peaking in the summer and troughing out in the winter.  With regards to the RFF cost projection, I don’t think there is much evidence that increasing renewable penetration has increased cost but the annual cycle appears to be becoming less pronounced.  Of course, trying to analyze a trend when there was a pandemic is likely to end up with massive uncertainty.

As noted, there is one aspect that is consistent for all the renewable penetration data.  As the percentage of renewable energy production increases the volatility of the monthly production increases.  Wind resources are generally higher when there is a greater contrast in air masses in the spring and fall.  Obviously solar resources are lower in the winter when days are shorter.  I believe that there is an important outcome of that finding.  The RFF brief claims that adding more renewable resources will “substantially reduce electricity price volatility”.  I believe that the argument is that the price of fossil fuels is subject to many extraneous factors that affect price but those factors are smaller for renewable resources.  I think these data suggest that the inherent variability in a weather-dependent source of power generation could increase electric price volatility as the system becomes more dependent upon those resources. 

The following figure lists cost data for Texas. California, and the country as a whole.  What interests me are the outliers.  For example, in March 2014 the monthly residential price of electricity in California was 15.86 cents.  It dropped to 10.12 cents in April then rebounded to 16.46 cents in May.  Subsequent outliers are all either in October or April for the next five years.  This might represent increased wind availability but it is not clear why it is not as pronounced before or after this period if that is the case.

More important are the high outliers.  In California, the monthly price was 15.17 cents in June 2005, jumped to 16.65 cents in July, and then dropped to 14.89 cents in August.  In Texas, the monthly price was 11.4 cents in January 2021, jumped to 12.74 cents in February, and then went down to 11.5 cents in March.  The Texas blackout was the cause for the energy price spike in February 2021 but I don’t know of any specific problem in California in July 2005.  I suspect that these events will become more common as renewable penetration increases but the data do not show that yet.

Conclusion

Obviously, I need to double check my data analyses before publishing.  I found that using the correct data leads to an analysis that is consistent with every other aspect of the net-zero transition that I have looked at.  Everything is more complicated than it appears at first glance and any conclusions drawn are more uncertain.  Any claims about conclusive evidence should be regarded cynically.

The RFF Retail Electricity Rates Under the Inflation Reduction Act of 2022 issues brief claims that the legislation, will “save typical American households up to $220 per year over the next decade and substantially reduce electricity price volatility.”  My original conclusion was that the Texas cost and renewable generation data showed that it was unlikely that there would be cost savings due to increased renewable energy but I used incorrect data.  Using the correct data, I could argue that the Texas results did not show a decrease which is contrary to the RFF projection, but it is also reasonable to argue that were it not for the renewable generation that costs would have increased more than they did.  At first glance and without adjusting for inflation, California data suggested that increased penetration of renewable resources increases costs but there are clear uncertainties that make this a tenuous conclusion.

Despite the problems with my analysis, I remain convinced that the RFF projection is unlikely. The models used for this kind of analysis do not do future changes to the electric system well. For example in the comments on my original post, Rud Istvan explained why wind renewables cannot reduce electricity prices.  He showed that EIA LCOE estimates do not accurately project future costs for renewable energy development because they don’t include the costs to make the energy generated available when and where it is needed.  Francis Menton recently made a persuasive argument that all projections for future electric systems overbuild the wind and solar resources resulting in higher costs.  Worse, you still need a backup dispatchable resource and someone also has to provide ancillary services to maintain the grid’s ability to move power around.  I believe that the modeling down by RFF and others does not adequately take those factors into account and if it did it would not show reduced costs.

One final point about the data.  There is a real trend in the renewable energy generation data that needs to be watched in the future.  All the data show that as the percentage of renewable energy production increases the volatility of the monthly production increases.  The RFF brief claims that adding more renewable resources will “substantially reduce electricity price volatility”.   While there is no apparent impact in retail costs due to this observed volatility in these data, I suspect that will change in the future. 

Resources for the Future: Retail Electricity Rates Under the Inflation Reduction Act of 2022

This post first appeared at Watts Up With That

Resources for the Future (RFF) has published an Issues Brief titled Retail Electricity Rates Under the Inflation Reduction Act of 2022.  According to the report the Inflation Reduction Act (IRA) legislation, will “save typical American households up to $220 per year over the next decade and substantially reduce electricity price volatility.”  This setoff my BS detector so I got some data from Texas to see if the state with the most total renewable energy production has seen reduced costs from their wind and solar development.

The Climate Act establishes a “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  I have written extensively on implementation of the Climate Act.  Everyone wants to do right by the environment to the extent that efforts will make a positive impact at an affordable level.  Based on my analysis of the Climate Act I don’t think that will be the case.  I believe that the ambitions for a zero-emissions economy outstrip available renewable technology such that the transition to an electric system relying on wind and solar 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.

I am not going to address the IRA provisions directly.  The Institute for Energy Research described the huge renewable tax incentives and subsidies earlier this week.  Anthony Watts applauded the Wall Street Journal and Bjorn Lomborg for showing how useless the IRA is at tackling climate.  H. Sterling Burnett explained that the claims made about its effects on greenhouse gas emissions are “pure fantasy”. The RFF report was one of the analyses that alleged that the IRA would benefit consumers and I will focus solely on that.  This analysis is of particular interest to New Yorkers because this type of study was used in the Integration Analysis and I expect the drawbacks described below are present in that work as well.

RFF analyzed the effects on the crucial electricity sector using their in-house Haiku Electricity Market Model to “project electricity retail rates for a range of potential scenarios that account for variability in future fuel prices, capital and technology costs, and uptake of specific provisions of the legislation.  The analysis found that if the legislation is passed:

  • Retail costs of electricity are expected to decline 5.2-6.7 percent over the next decade, saving electricity consumers $209-278 billion, given expected natural gas prices.
  • The average household will experience approximately $170-$220 in annual savings from smaller electricity bills and reductions in the costs of goods and services over the next decade.
  • Ratepayers are insulated from volatility in natural gas prices, with electricity rates projected to decrease even under a high natural gas price scenario.
  • 2030 electricity sector emissions are projected to drop to 69.8 percent to 74.9 percent below 2005 levels, compared to 48.5 percent below 2005 levels without the policy.

The RFF Haiku model analyzes regional electricity markets and interregional electricity trade in the continental United States.  It is all the rage for consulting companies to develop an in-house model suitable for projecting future electric system resources.  RFF claims that:

“The model accounts for capacity planning, investment, and retirement over a multi-year horizon in a perfect foresight framework, and for system operation over seasons of the year and times of day. Market structure is represented by cost-of-service (average cost) pricing and market-based (marginal cost) pricing in various regions. The model includes detailed representation of state-level policies including state and regional environmental markets for renewable energy and carbon emissions and frequently has been used to advise state and regional planning.”

I have had to deal with these electric production and costs models for over 40 years. I cannot over emphasize that even the most sophisticated of these models have difficulties dealing with the generation capacity needed for peak loads and the intricacies of the transmission grid.  The Haiku Electricity Market Model documentation shows that the model is so simplified that I don’t think it can get reasonable projections correct.    For example, the model simulates the contiguous United States with 21 regions and calculates the transmission between those regions in order to estimate capacity requirements.  New York alone has eleven control areas and the transmission constraints for those areas and adjoining regions are needed to accurately estimate generating resource needs.  All the little constraints that are averaged out in the RFF model mask a major portion of the capacity requirements and energy needs that under-estimate costs.  This is a particular problem as more and more wind and solar energy resources are added to systems.  The RFF model and others like it have consistently under-estimated the emission reductions from fuel switching from coal and oil to natural gas electricity production and I think they are under estimating the difficulty replacing natural gas generation with wind and solar.  Moreover, somebody, somewhere has to account for the intermittent nature and lack of ancillary services from wind and solar.  I don’t think a simple model can capture those costs.

On the other hand, if adding renewable resources in certain jurisdictions has led to lower costs then my reservations are wrong.  According to a recent US News and World Report article Texas produces produce the most total renewable energy (millions of megawatt-hours), according to the U.S. Energy Information Administration.  That article notes that: “In the first quarter of 2022, Texas led all states in overall renewable energy production, accounting for over 14% of the country’s totals, due in large part to the state’s prolific wind energy program”.

The United States Energy Information Administration (EIA) Electricity Data Browser  enables a user to access electricity generation and consumption data as well as electricity sales information.  The data can be filtered as needed.  I filtered the data to look only at Texas data.  I downloaded the monthly total net generation (GWh) and the net generation from just renewable resources so I could calculate the percentage of renewable generation energy.  Then I downloaded the average monthly residential average price of electricity.  The following graph shows the results.  The residential cost of electricity has been increasing steadily since 2001.  The percentage of renewable energy has increased from almost nothing in 2001 to recent months over 30%.  I am not seeing that the deployment of renewable resources produced a reduction in costs.

In conclusion, the Texas data do not show that renewable energy deployment reduces costs.  The RFF projections that the IRA will reduce costs due to renewable development are very unlikely because the overly simplified model cannot reproduce the features of the electric system that lead to higher prices from intermittent wind and solar resources. 

If anyone, anywhere can find any jurisdiction where the development of massive amounts of wind and solar reduced prices please let me know.  In the meantime, I call your attention to the comments of Rud Istvan at the Watts Up with That article who explains that:

Renewables (wind) CANNOT reduce electricity rates, period.

The EIA LCOE has since at least 2015 claimed on shore wind was at parity with CCGT. This is simply false, based on deliberately bad underlying assumptions. The worst is that EIA explicitly assumes both have useful capital lives of 30 years. That is at best gross negligence, at worst deliberate prevarication. The modern on shore big wind turbines (~2-3 MW each) have at best 20 year lives. The problem is inherent in the uneven axial bearing loading since wind at the top has a higher velocity than wind at the bottom. Axial bearing failure is sudden death, and for an older turbine not worth a very expensive repair. CCGT has at worst a 40 year life (GE warranty). And in practice 45-50.

Some years ago (2016 IIRC) over at Judith’s I posted ‘True cost of wind’ illustrating then fixing the basic obvious EIA errors. The result was CCGT LCOE about $58/MWh, while wind (based on the Texas ERCOT grid at then about 10% penetration) was $146/MWh.

No amount of IRA incentivizing or Biden pontificating can fix the basic problem that wind is MUCH more expensive. And this is also easily demonstrated for Europe without EIA LCOE annuity calculations by simply graphing wind penetration versus retail electrify rates by country. A very strong positive linear correlation. Higher penetration always means higher rates.