Category: Climate Act Costs & Benefits

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.

Climate Act Benefits Greater than Costs Claim Numbers Update

One of the key claims in the Draft Scoping Plan documentation is that “The cost of inaction exceeds the cost of action by more than $90 billion”.  Last month I consolidated documentation that had been presented in multiple earlier posts that supports my statement that the costs far exceed the benefits.  The single most glaring omission of the Draft Scoping Plan is the near complete lack of cost documentation but with two weeks left in the comment period some of the numbers that were used in the Benefits and Costs chapter of Appendix G were made available.  This post uses the new information provided to evaluate the benefits claim.

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 have written extensively on implementation of New York’s response to climate change because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that it will adversely affect reliability, impact affordability, risk safety, affect lifestyles, and will have worse impacts on the environment than the purported effects of climate change in New York.  New York’s Greenhouse Gas (GHG) emissions are less than one half one percent of global emissions and since 1990 global GHG emissions have increased by more than one half a percent per year.  Moreover, the reductions cannot measurably affect global warming when implemented.   Bottom line for me is that in its present form the Climate Act 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 Leadership and Community Protection Act (Climate Act) establishes a “Net Zero” target by 2050.  The Climate Action Council is responsible for preparing the Draft Scoping Plan that defines how to “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 quantified the impact of the strategies.  That analysis was used to develop the Draft Scoping Plan that was released for public comment on December 30, 2021.

At a recent meeting there was an opportunity for the public to ask questions about the New York State Energy Research & Development Authority (NYSERDA) work supporting the Draft Scoping Plan.  I asked about the missing cost information and John Williams, Vice President, Policy and Regulatory Affairs, responded:  “In response to your inquiry for additional cost information, we have added clarifying information to the existing Excel document, ‘Appendix G Annex 2: Key Drivers and Outputs,’ which can be found on the Climate Action Council Draft Scoping Plan website.”  I extracted all the new tables to a separate spreadsheet.  The spreadsheet table summarizing the cost methods is difficult to read so I have also extracted that information in a document. Also note that more detailed documentation for my cost-benefit analysis is available here and here.

Benefits Exceed the Costs Claim The Draft Scoping Plan claim that “The cost of inaction exceeds the cost of action by more than $90 billion” is presented in Figure 51 in Appendix G Integration Analysis Technical Supplement. The Climate Act overview presentation for the public hearings included a similar figure and made the claim.  However, there is a caveat or in this case, a trick.  In the following figure I have highlighted the description that notes that the benefits are “relative to Reference Case”.  By the way, that caveat is usually not noted when these results are presented.  The clarifying data in the updated spreadsheet lists all the values in the table.  Because the values are exactly the same, I believe the updated spreadsheet numbers were simply pulled from the figure and not from the analyses themselves.

Reference Case Costs

The next figure I evaluated in my analysis of the benefits claim was the total system expenditures shown in Figure 48.  My biggest gripe was that the values in the Figure were not quantified.  Thankfully the clarifying data in the updated spreadsheet provides numbers.  The Reference Case total in the following table lists the net present value of system expenditures as $2,665 billion.  Scenario 2, low-carbon fuels expenditures are $2,974 billion; Scenario 3, accelerated transition expenditures are $2,953 billion; and Scenario 4, beyond 85% reductions expenditures are $2,972 billion.  More importantly the category costs are now available.  Note that these numbers are not rounded in any way so I believe that they were copied from a different spreadsheet or model.

I have frequently heard Climate Action Council member refer to the net cost totals in Figure 47 as the costs of Climate Act implementation.  However, these costs are relative to Reference Case for the three mitigation scenarios.  In other words, the numbers presented subtract out the Reference Case costs. As explained in the previous post, the rationale for this approach is those estimates include not only the business-as-usual programs but also programs that are already implemented.  This new cost information can be used to see if these already implemented programs are really business-as-usual strategies.

Category Cost Implications

The clarifying information update provides numbers associated with each category in Figures 47 and 48.   In this section I will address three of the more impactful categories. 

The “Buildings Investment” category “Includes capital and operating expenses for building equipment and appliances (e.g., space heaters, air conditioners, water heaters) and investments for building shell upgrades”.  The net present value of system expenditures from 2020 – 2050 is $565 billion for the Reference Case.  The building sector costs for the mitigation scenarios only range from $235 billion to $240 billion (42% increase) but the emission decreases relative to the Reference Case are 95% greater.  In my opinion, that seems inconsistent with the Reference Case costs.  It appears that Reference Case cost reductions per ton are double the mitigation scenarios.  This anomaly could be caused by excluding the costs but including the emission reductions from the presented numbers.

The ”Transportation Investment” category “Includes capital and operating expenses for light-duty vehicles, medium- and heavy-duty vehicles, and buses, in addition to charging infrastructure costs”.  The net present value of system expenditures from 2020 – 2050 is $1,056 billion for the Reference Case.  Previously it appeared that the bar chart components difference to add charging infrastructure and the additional costs of electric vehicles relative to current alternatives seemed unacceptably low.  According to the Integration Analysis, Scenario 2 transportation initiatives will reduce emissions 79% relative to the Reference Case at a cost of only $2.97 billion.  Obviously, this does not pass the smell test.  Something is overlooked or deliberately manipulated to make this claim.

The Figure 47 category label is Electricity but the description in the cost methods overview table is Electricity Incremental.  I assume they are the same.  The description of this category states that it “Includes capital and operating costs for electricity generation, transmission, costs to upgrade existing distribution system, and in-state hydrogen production costs.”  The net present value of system expenditures from 2020 – 2050 is $424 billion for the Reference Case.  The Integration Analysis described in the Draft Scoping Plan projects that the additional costs necessary to transition the electric grid to zero-emissions ranges between $89 and $111 billion.  According to the Integration Analysis that covers the cost of between 5,659 and 7,265 MW on additional land-based wind, 7,393 and 9,310 MW of additional off-shore wind, 40,648 and 45,254 MW of additional solar, and 10,987 and 14,731 MW of additional energy storage beyond the capacity expected in the Reference Case.  The additional costs necessary to the transition the electric grid to zero-emissions range between $89 and $111 for incremental electricity.  Many things are overlooked or deliberately manipulated to make this claim.  A US Energy Information Agency (EIA) report “Capital Cost and Performance Characteristic Estimates for Utility Scale Electric Power Generating Technologies” published in 2020 estimates that a 200 MWh battery energy storage system has a capital cost of US $65.9 million.  Assuming that the average of the additional energy storage capacity provides four hours of energy for every MW and using the EIA cost number, energy storage costs alone are $213 billion. 

Discussion

In my previous post  I argued that the authors of the Draft Scoping Plan apparently included the already implemented transportation investment statewide zero-emission vehicle mandate in the Reference Case.  I pointed out that suggesting that the zero-emissions vehicle “implemented policy” should not be included in the Climate Act implementation costs is disingenuous at best. The press release announcing that the Governor signed the legislation states: “The actions announced today in advance of Climate Week 2021 support New York’s ambitious goal of reducing greenhouse gas emissions by 85 percent by 2050, as outlined in the Climate Leadership and Community Protection Act.”  It goes on to quote Governor Hochul: “New York is implementing the nation’s most aggressive plan to reduce the greenhouse gas emissions affecting our climate and to reach our ambitious goals, we must reduce emissions from the transportation sector, currently the largest source of the state’s climate pollution”.  I think that these statements pretty well represent any dispassionate observer’s belief that the only reason for this mandate is to support the Climate Act.  As such those costs are not legitimate Reference Case business-as-usual costs.

I also pointed out the claim that “The cost of inaction exceeds the cost of action by more than $90 billion” includes a caveat that the comparison is relative to the Reference Case.  I showed how the semantic justification that the transportation investments were already implemented excluded the costs of the zero-emissions vehicle mandate from the costs side of the comparison.  In order to further tilt the results, the emission reduction benefits attributed to the transportation investments were not excluded in the comparison.   In other words, the comparison takes out the costs that would hurt their case but leaves in emission reduction benefits that help make the case that the benefits are greater than the costs.

The newly released categorial cost data provide evidence of similar manipulation of the data for other categories to provide the desired result.  The building sector costs for the mitigation scenarios only range from $235 billion to $240 billion (42% increase) but the emission decreases relative to the Reference Case are 95% greater.  The numbers also confirm my initial transportation initiative concerns.  According to the Integration Analysis, Scenario 2 transportation initiatives will reduce emissions 79% relative to the Reference Case at a cost of $2.97 billion.  The Integration Analysis projects that just the cost of battery electric vehicle chargers will be over $15 billion for Scenario 2 relative to the Reference Case.  Finally, the claim that the additional costs necessary to transition the electric grid to zero-emissions range between $89 and $111 for incremental electricity are ludicrous.  I estimate that the additional energy storage costs alone are $213 billion more than the Reference Case costs.

Conclusion

In my opinion the Climate Act claim that the benefits out-weigh costs is obviously incorrect.  I have shown the recently released numbers confirm my earlier analyses.  The Climate Act requires the Climate Action Council to “[e]valuate, using the best available economic models, emission estimation techniques and other scientific methods, the total potential costs and potential economic and non-economic benefits of the plan for reducing greenhouse gases, and make such evaluation publicly available” in the Scoping Plan.   In order to fulfill this obligation, the Draft Scoping Plan must describe all control measures, assumptions used, the expected costs for those measures and the expected emission reductions for the Reference Case, the Advisory Panel scenario and the three mitigation scenarios.  Given the overt manipulation of the data used to erroneously claim that “The cost of inaction exceeds the cost of action by more than $90 billion”, I have no faith in any cost numbers presented without that documentation.

Draft Scoping Plan Cost Documentation Announcement

Note: This post was updated to add a revised link to the spreadsheet that lists all the clarifying information update on May 29, 2022.

The Climate Leadership and Community Protection Act (Climate Act) has a legal mandate for New York State greenhouse gas emissions to meet the ambitious net-zero goal by 2050. The Draft Scoping Plan that describes how to meet those goals was released to the public at the end of 2021 and the comment period is open until June 10, 2022.  This post announces the fact that the with two weeks left in the comment period the numbers that were used in the Benefits and Costs chapter of Appendix G of the documentation are now available.

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 have written extensively on implementation of New York’s response to that risk because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that it will adversely affect reliability, impact affordability, risk safety, affect lifestyles, and will have worse impacts on the environment than the purported effects of climate change in New York.  New York’s Greenhouse Gas (GHG) emissions are less than one half one percent of global emissions and since 1990 global GHG emissions have increased by more than one half a percent per year.  Moreover, the reductions cannot measurably affect global warming when implemented.   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 “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 quantified the impact of the strategies. 

Draft Scoping Plan Cost Documentation

The Draft Scoping Plan claims that “The cost of inaction exceeds the cost of action by more than $90 billion”.   In my recent verbal comments at the Syracuse Climate Act public hearing I said that statement is inaccurate and misleading.  I recently published an article that consolidates documentation that supports my contention that the costs far exceed the benefits.  A main finding in my cost-benefit analysis is that most of the values in the supporting documentation (Section 3.4 Benefits and Costs, Appendix G Integration Analysis Technical Supplement Section I) are only presented in bar charts.  In other words, the values of the numbers are not included.

At a recent meeting there was an opportunity for the public to ask questions about the New York State Energy Research & Development Authority (NYSERDA) work supporting the Draft Scoping Plan.  I asked about the cost information and John Williams, Vice President, Policy and Regulatory Affairs, responded.  He indicated that detailed information was available and suggested that I follow up for more information.  I sent him an email asking for specific information.  I explained that, for example, in Appendix G, Section I, Figure 48 lists the net present value of system expenditures in Reference Case and Scenarios 2-4.  The only associated number given in the text is a mention that the Reference Case totals $2.7 trillion.  I said that I believe that at a minimum the values of the cost categories listed on the right-hand side of the bar charts should be available in a table somewhere for each of the scenarios.  I also said that detailed control measure costs should also be available so that the public can check the category costs and critique specifics.

On May 27 Mr. Williams responded:

In response to your inquiry for additional cost information, we have added clarifying information to the existing Excel document, “Appendix G Annex 2: Key Drivers and Outputs,” which can be found on the Climate Action Council Draft Scoping Plan website.  At the end of the workbook, you will see a series of green tabs. The “Cost Methods Overview” tab describes how costs were calculated throughout the analysis. Accompanying tabs provide the data associated with the cost figures published in the Draft Scoping Plan.

We hope this will help you and all stakeholders better understand how our cost analyses were performed.  Please reach out if there are any questions.

My hats off to Mr. Williams for responding to my request.  He is the only one in the Administration that has responded to any of my comments.

Conclusion

While I really appreciate the response it is a problem that this obvious need was not included until there are only two weeks left in the comment period.  Unfortunately, only two things were provided: the numbers associated with the cost figures in Section 3.4 Benefits and Costs of Appendix G and a table summarizing the cost methods.  I also believe that it is problematic that a casual reader would have no idea that this new information has been included in an update because the appendices listing on the Climate Act Draft Scoping Plan page does not mention that an update is available.  Finally, tacking 15 tables at the end of an already huge spreadsheet does not foster easy use.  I have extracted all the new tables in a separate spreadsheet.  The spreadsheet table summarizing the cost methods is difficult to read so I have also extracted that information in a document.

I will follow up with another post later regarding the information provided.