Cuomo State of the State 2018 Climate Agenda “Really?”

Governor Cuomo unveiled a comprehensive agenda to combat climate change by reducing greenhouse gas emissions and growing the clean energy economy in the 2018 State of the State on January 3, 2018. My reaction to one aspect of this reminded me of the VW Sign then Drive Event – “Really?” commercials. In the commercial a kid rows a gutter ball and says “Really?”, a lady gets no responses to a party and says “Really?”, and so on. The 20th proposal of the 2018 State of the State: a comprehensive agenda to combat climate change by reducing greenhouse gas emissions and growing the clean energy economy made me think the same thing. In particular is this little gem to undertake “revisions to strengthen RGGI by grouping together and thereby covering peaking units that collectively exceed RGGI’s capacity threshold of 25 megawatts”.

The rationale in the agenda is that:

RGGI only covers power plants with a capacity of 25 megawatts or greater, leaving out many smaller but highly-polluting, high demand “peaking” units, which operate intermittently during periods of high electricity demand. These polluting units are often located close to population centers that come online to meet peak electricity demand on excessively hot or cold days, and disproportionately impact low-income and minority communities that already face a multitude of environmental burdens.

I never really thought too much about the CO2 emissions from the peakers because after all they don’t run much and they are small although admittedly relatively inefficient. So I looked into it. Table 1 New York State CO2 Emissions by Control Program lists operating data and CO2 emissions. Of course you run into a problem immediately inasmuch as about two thirds of the peakers don’t even report CO2. Nevertheless I managed to come up with an estimate. I downloaded all the Environmental Protection Agency Air Markets Program New York unit annual emissions for all reporting programs from 2009 to 2016. I categorized the units by RGGI program; Other Program, 5-month reporting; and Other Program 12-month reporting. In 2016 the RGGI unit CO2 total was 31,194,515 tons and the peaker units already included in RGGI CO2 total was 245,987 tons.

In order to estimate CO2 emissions from the units that don’t report I assumed that the CO2 rate per operating time would be the same for peakers that report and those that don’t to calculate a conversion for the 5 month units. I multiplied that conversion factor by the reported operating times and assumed that it should be pro-rated across the entire year by multiplying by 12/5. Using those assumptions the total CO2 peaker emissions increase 215,000 tons to 460,987 tons or about 1.4% of the total emissions.

One of my biggest problems with the New York State clean energy programs is the apparent lack of an end game. I think the primary rationale for this is the environmental justice angle that the peaking units “disproportionately” impact low-income and minority communities. So it looks like the goal is to shut these units down.

Peak load days correspond to highest emissions days but the problem is that the peaking turbines needed to provide the peak load are old, inefficient and relatively high emitting. Consequently there is an extra kick of NOx pollution which as a precursor to ozone creates problems meeting the ozone ambient air quality standard. That is a real problem but conflating that with CO2 “pollution” is silly at best.

The State has never explicitly produced a game plan to replace the turbines in question. For example, consider July 20, 2015 which is the highest emissions day that year. The total gross load from all electric generating units in New York on that date was 303,967 MWh. Units covered by the RGGI program generated 297,350 MWh or 97.8% of the load. There already are combustion turbines covered by RGGI and they accounted for 19,960 MWH or 6.6% of the load. The non-RGGI combustion turbines targeted by the agenda only accounted for 2.1% of the load but that was still 6,369 MWh. The problem is that all of the combustion turbine generation was dispatched when it was needed, where it was needed in the New York City transmission system, and was not subject to weather. It is a non-trivial exercise for the Governor’s renewable energy program to replace that generation with those constraints.

I suppose proponents for including these units in RGGI could think that the revenues resulting from the sale of the RGGI allowances necessary to run could be invested to replace the peaking turbines. But 215,000 allowances at even $5 per ton is only $1,075,000. If those funds were allocated to the Clean Energy Fund then you could expect 3,575 MWh reduction based on calculations derived from my estimate of the NY RGGI operating plan. On the face of it that is pretty close to the 6,369 MWh number above but the gob smacking issue is that the 6,369 MWh is for one day and the 3,575 MWh is for a year!

My Comments on New York Proposal to Incorporate Carbon Pricing in Wholesale Markets 2

New York’s energy planning process continues its efforts to meet the aggressive goals of a remodeled energy system that relies on renewable energy. The latest boondoggle in that effort is a plan to price carbon in the wholesale electric market. I have not been able to let that go by without throwing in my two cents so this post describes my second submittal in the formal proceeding. I have been submitting my comments because I am convinced that all these efforts will cost extraordinary amounts of money but will have no discernable impact on global warming or any of the purported effects.

As part of the release of Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals (hereinafter the “Brattle Report”) there was an introduction authored by Brad Jones, President & CEO of the New York Independent System Operator (NYISO) and John Rhodes, Chief Executive Officer of the New York State Department of Public Service (DPS). The introduction described the rationale for the report:

In this regard, the NYISO began a project through its stakeholder process in the fall of 2016 to examine the potential for using carbon pricing within wholesale markets to further New York’s energy goals. Initially, The Brattle Group was retained by the NYISO to evaluate conceptual market design options for integrating the social cost of carbon, a widely recognized regulatory standard, into competitive wholesale energy markets administered by the NYISO. That analysis explored how carbon pricing can align wholesale markets with state energy policies and looked at several factors, including the effect on customer costs and emissions reductions.

The Executive Summary of the Brattle Report notes that “Harmonizing state goals and the operation of wholesale electricity markets could leverage market forces to more efficiently meet both state goals and traditional electric system goals of providing affordable, reliable supply.” This statement makes for a nice slogan, but the reality is different. In this post I show that there are barely enough electric sector emissions available to meet the 2030 goal and nowhere near enough for the 2050 goal. Because the proposed carbon price is on only one sector of the economy, the theory that increasing the price of carbon will drive the market to less carbon intensive alternatives fails. Instead, driving up the price of electricity makes the conversion to electric based residential heating and transportation more difficult. I consider these fatal flaws to the proposed initiative.

The Reforming the Energy Vision (REV) state energy goals in 2030 are a 40% reduction in Greenhouse Gas (GHG) emissions from 1990 levels and a 50% renewable generation. In 2050 the goal is an 80% Reduction in GHG emissions from 1990 levels. The NYSERDA Patterns and Trends document notes that the 1990 Carbon Dioxide equivalent (CO2e, standing in for GHG) emissions were 235.8 million metric tons so the 2030 goal is 141.5 million metric tons or a 94.3 million ton reduction. In 2050 the goal is 47.2 million metric tons which is a 188.7 million metric ton reduction.

Figure 1 shows the trends in New York State CO2e emissions, energy (TBtu) and CO2e intensity which is the emissions divided by the energy. Note that the energy used in New York rose until 2005 and has since started to drop while the pattern of CO2e has ebbed and flowed more but has also dropped since 2005. The question is whether pricing carbon in the electric sector can affect these trends to meet the state goals. In order to do that we have to look at what drove the trends.Figure 1 NYS CO2e, Energy and CO2e Intensity

In order to reduce GHG emissions there are three direct approaches:

  1. Replace energy sources that generate GHGs with ones that don’t
  2. Energy efficiency – use energy more effectively
  3. Energy conservation – use less energy

In addition there are a couple of indirect ways: reduce the population and reduce the gross state product or economic growth. I mention those two methods to point out that neither approach is politically palatable as an approach to reduce GHG emissions and that historically the gross state product has increased and population has stayed relatively constant.

The NYSERDA Patterns and Trends document contains the energy and emissions data by sector needed to evaluate the causes of the observed reductions. Figures 2 and 3 show the trend of primary energy consumption by the residential, commercial, industrial, transportation and electric energy production sectors by total energy use (TBtu) and % of total. Residential has bounced around but is effectively the same since 1080 and the commercial sector trended up but has trended down to roughly the same levels as 1990. Given the growth in the economy it appears it appears to me that investments in conservation and efficiency have produced some results. The most notable decrease has been the industrial sector, down over 200 TBtu since 1980. While efficiency and conservation have helped with that it is more likely a result of the decline of the industrial sector in New York. Transportation energy use has grown consistently since the mid-80’s. The electricity sector grew until approximately 2005 and has since dropped. It does not appear on the basis of historic trends that energy conservation and energy efficiency will be major factors for compliance with the emissions goals.

Fig. 2 Trend NYS Primarary Consumption of Energy (TBtu) by SectorFig 3 Trend NYS Primarary Consumption of Energy (%) by Sector

That leaves carbon emission reductions to make the majority of the reductions necessary. Figures 4 and 5 show the trend of GHG emissions by the residential, commercial, industrial, transportation and electric energy production sectors and % of total. Note that these are emissions from fuel combustion only so the totals are not the same as shown before. The emissions trends for residential, commercial, industrial and transportation sectors are similar to the energy trends. Residential and commercial are roughly the same, industrial is down, and transportation is up. Electricity sector emissions are down more than the total energy. This is the only sector the proposed price on carbon will affect.

Fig 4 NYS CO2e Emissions (million metric ton) by Sector TrendFig 5 NYS CO2e Emissions by % Sector Trend

Because the electric generation sector is the only sector that will be affected by the proposed carbon price we need to evaluate the sources of electricity generated in New York. Figure 6 shows the percentage of electricity provided by different sources: coal, natural gas, petroleum (residual oil and distillate), hydro, nuclear, imports, other (landfill gas & biomass), wind and solar. Coal and petroleum have gone down significantly since 1990. Natural gas has increased significantly as has imports. After Nine Mile Point unit 2 came on-line nuclear has stayed about the same as has hydro. In the past few years enough solar and wind have come on line to appear on the chart. Figure 7 shows the total energy provided by the same categories. Clearly the biggest changes have been the reduction of coal and petroleum fuel use and increase of natural gas and imports.

Fig 6 NYS Electric Generation by % Fuel TypeFig 7 NYS Electric Generation by Fuel Type (GWh)

In order to determine how much the carbon pricing program can directly affect CO2e emissions we need to look at the electric sector emissions relative to emissions from the rest of New York State. Figure 8 shows the trends and Table 1 NYS Trend of CO2 by electric sector and rest of state shows the data. Statewide coal and electric sector oil have gone down 55 million metric tons but since 1990 natural gas has gone up. It can be argued that for the most part the major decreases in coal and oil were the result of changes in the relative cost of fuel and had nothing to do with New York State policy. Moreover, the State has drafted regulations to eliminate the use of coal so carbon pricing will have no effect on those emission and there are only 3.9 million metric tons of reduction available anyway. With respect to electric sector emissions, no further oil use reductions are expected because the current levels represent the minimum emissions necessary to maintain oil as a backup and emergency use fuel. That leaves natural gas emissions.

Fig 8 NYS Trend of CO2 by electric sector and rest of state

Overall, the total emissions in 2015 are only down 18% to 169.5 million metric tons and the 2030 target is 141.5 million metric tons so further reductions of 28 million metric tons are necessary. Putting a price on electric sector carbon could, in theory, reduce the total sector emissions of 29.2 million metric tons. However, the primary way to reduce emissions from the other sectors is to replace fuel combustion with electricity. The unintended consequence of the carbon price then will be to increase the price of electricity making those conversions less attractive.

On one hand carbon pricing is touted as a market-based solution to carbon reductions. However, that only works when the tax is applied to the entire economy. The proposed New York carbon pricing approach is only for the electric generation sector, so market intervention will be required to subsidize the electrification conversions necessary to meet the targets if only because the proposal increases the cost of electricity making conversions less attractive. As soon as that happens the elegant market-based solution devolves into special interest lobbying at the expense of the general public.

Already labor unions, community groups, environmental organizations, faith communities, and environmental justice advocates are supporting just such a carbon tax scheme. While the New York State Climate and Community Protection Act (CCPA) (S.8005 / A.10342) covers all sectors it specifically proposes to not only return the revenues to ratepayers but also includes subsidies to renewable energy sources in general and targeted subsidies as well and worker and community support.

While the intent of carbon pricing to harmonize state goals and the operation of wholesale electricity markets to leverage market forces to more efficiently meet both state goals and traditional electric system goals of providing affordable, reliable supply makes for a nice slogan the reality is different. There are barely enough electric sector emissions available to meet the 2030 goal and nowhere near enough for the 2050 goal. Because the proposed carbon price is on only one sector of the economy, the theory that increasing the price of carbon will drive the market to less carbon intensive alternatives fails. Instead, it drives up the price of electricity which makes the conversion to electric-based residential heating and transportation more difficult.

My Comments on the New York Proposal to Incorporate Carbon Pricing in Wholesale Markets 1

New York’s energy planning process continues its efforts to meet the aggressive goals of a remodeled energy system that relies on renewable energy. The latest boondoggle in that effort is a plan to price carbon in the wholesale electric market. I have not been able to let that go by without throwing in my two cents so this post describes my first submittal in the formal proceeding. I have been submitting my comments because I am convinced that all these efforts will cost extraordinary amounts of money but will have no discernable impact on global warming or any of the purported effects. My comments are submitted as a private retired citizen. They 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 motivated to submit these comments to make the point that the majority of New York State ratepayers are unaware of the ramifications of this proceeding and have never heard of the Social Cost of Carbon (SCC). I doubt that if they understood the SCC as the basis for this initiative that they would favor its implementation as proposed. Therefore, I recommend that the carbon pricing initiative consider a range of SCC values including the proposed value and the values included in the Regulatory Impact Analysis for the Review of the Clean Power Plan: Proposal.

The SCC is the present day value of projected future net damages from emitting a ton of CO2 today. In order to estimate the impact of today’s emissions it is necessary to estimate total CO2 emissions, model the purported impacts of those emissions and then assess the global economic damage from those impacts. The projected global economic damage is then discounted to present value. Finally, the future damage is allocated to present day emissions on a per ton basis to get the SCC value.

Because of the huge uncertainties of the SCC providing a range of values is appropriate. The SCC future net damages includes impacts out 300 years. It is an act of extreme hubris to claim that any projection of how the world will operate in 100 years, much less 300 years, should be used to guide current actions simply because no one could have imagined the technology available in today’s society in 1917. In addition, the SCC relies on a complex causal chain from carbon dioxide emissions to social impacts that are alleged to result from those emissions. Richard Tol testified that these connections are “long, complex and contingent on human decisions that are at least partly unrelated to climate policy. The social cost of carbon is, at least in part, also the social cost of underinvestment in infectious disease, the social cost of institutional failure in coastal countries, and so on.”

The current value of the SCC proposed for use in this initiative was developed by the US Interagency Working Group (IWG). There are three technical reasons that the single value the IWG developed and proposed for use in this initiative should not be used exclusively: global benefits, discount rates and equilibrium climate sensitivity.

The IWG SCC value considers global benefits and impacts not just New York State benefits impacts. In other words New Yorkers are being asked to pay today for some estimated far future impact elsewhere. Given that the State has limited resources to provide benefits to New Yorkers today is reason enough to consider a range of the SCC for a program that could increase costs to ratepayers. The EPA RIA for the revised Clean Power Plan includes a domestic rather than international social cost of carbon value. Putting aside for the moment the question whether a New York only policy should only consider benefits to New Yorkers, it nonetheless seems obvious that the policy should at least limit benefits to the United States in any calculation on the value of the program to New Yorkers.

The IWG SCC value did not follow Office of Management Budget Circular A-4 guidance that states that regulatory analyses “should provide estimates of net benefits using both 3 percent and 7 percent.” The 7 percent rate is intended to represent the average before-tax rate of return to private capital in the U.S. economy. The 3 percent rate is intended to reflect the rate at which society discounts future consumption, which is particularly relevant if a regulation is expected to affect private consumption directly. The EPA RIA for the revised Clean Power Plan follows this guidance by presenting estimates based on both 3 and 7 percent discount rates in the main analysis.

Equilibrium climate sensitivity (ECS) is the expected change in temperature when the atmospheric CO2 concentration doubles. The costs of this warming are dominated by the higher possible values of the ECS. The ultimate problem is that the IWG did not use the most recent values of the ECS for the value that the price of carbon initiative proposes to use. On July 23, 2015, Patrick Michaels presented relevant testimony to the House Committee on Natural Resources.  Excerpts:

“In May 2013, the Interagency Working Group produced an updated SCC value by incorporating revisions to the underlying three Integrated Assessment Models (IAMs) used by the IWG in its initial 2010 SCC determination. But, at that time, the IWG did not update the equilibrium climate sensitivity (ECS) employed in the IAMs. This was not done, despite there having been, since January 1, 2011, at least 14 new studies and 20 experiments (involving more than 45 researchers) examining the ECS, each lowering the best estimate and tightening the error distribution about that estimate. Instead, the IWG wrote in its 2013 report: “It does not revisit other interagency modeling decisions (e.g., with regard to the discount rate, reference case socioeconomic and emission scenarios, or equilibrium climate sensitivity).”

“Clearly, the IWG’s assessment of the low end of the probability density function that best describes the current level of scientific understanding of the climate sensitivity is incorrect and indefensible. But even more influential in the SCC determination is the upper bound (i.e., 95th percentile) of the ECS probability distribution. Apart from not even being consistent with the AR4, now, more than five years hence, the scientific literature tells a completely different story. And this is very significant and important difference because the high end of the ECS distribution has a large impact on the SCC determination—a fact frequently commented on by the IWG2010.”

Dr. Judith Curry has prepared a table of different values of the ECS that illustrates the relative impacts of the indefensible cherry picking of a value that suited the agenda of the IWG rather than a more recent value.

Curry Equilibrium Climate Sensitivity

Because the extreme values are a key driver of the ECS, the 95th percentile values are of most interest. Refer back to the Michaels testimony above to see that the IWG had lower values available to it for years but chose not to use them. There is another nuance to this table that is important to me personally as a meteorologist with over 40 years of experience with modeling and monitoring. The last two rows in this table are estimates based on monitoring and not modeling so, in my opinion, are more likely to be correct.

The SCC is the fundamental rationale of the NY carbon pricing program. When the time comes to decide whether to implement the carbon pricing initiative it is important for decision makers to be aware of the changes in the value of the program possible by tweaking two parameters in the calculation of the SCC. The uncertainties with the methodology and the three technical reasons support my recommendation to include the SCC values from the EPA RIA for the revised Clean Power Plan so a range of potential benefits is provided.

Millennium Proposed Valley Lateral Pipeline Project

There is no better example of New York State’s utter disregard of pragmatic environmental policy than the Department of Environmental Conservation’s (DEC) denial of water quality permits for the construction of a 7.8 mile natural gas pipeline to the CPV Valley Energy Center which is under construction and expected to be completed in early 2018. On October 16, 2017 the DEC filed a formal challenge to the Federal Energy Regulatory Commission’s (FERC) decision that DEC waived its jurisdiction under the federal Clean Water Act for the Millennium Pipeline Company’s proposed Valley Lateral project.

Before proceeding a disclaimer. Before retirement from the electric generating industry, I was actively analyzing air quality regulations that could affect company operations. I am convinced that evidence-based environmental decision making is necessary to maintain New York’s electrical system infrastructure and that is the reason I maintain this blog. Sadly, motivated reasoning where the conclusions are based on emotions or preconceptions and the evidence used only reflects that belief while anything else is ignored appears to be the rationale for much of current New York environmental and energy policy. 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.

According to the DEC website for the project the Department of Environmental Conservation (DEC) has conditionally denied water quality permits for Millennium’s proposed Valley Lateral pipeline project. The conditional denial is based in part on the inadequacy of the environmental review conducted by the Federal Energy Regulatory Commission (FERC), which failed to account for downstream greenhouse gas emissions.” DEC goes on to say: “DEC subjects all applications for environmental permits to an extensive and transparent review process that encourages public input at every step‎, and DEC’s determination included consideration of nearly 6,000 public comments. DEC will continue to thoroughly evaluate all applications to ensure they do not adversely impact the environment.”

The DEC description of the project notes:

Construction of a new 7.8 mile, 16-inch diameter natural gas pipeline lateral extending from Millennium’s existing main line pipeline north to the new 650 megawatt natural gas powered Competitive Power Ventures (CPV) Valley Energy Center. The proposed pipeline lateral is located in the Towns of Wawayanda and Minisink in Orange County, New York. The project would provide approximately 130 million cubic feet per day of natural gas to the CPV Valley Energy Center.

The pipeline lateral would be installed via horizontal directional drill (HDD) below two Class C(t) streams (Rutgers Creek) and seven federally regulated streams (no impacts). Additionally, the pipeline lateral would be installed via open trench within three federally regulated streams resulting in a temporary disturbance to the bed and banks of the streams for a total of approximately 16 linear feet.

Three state regulated Freshwater Wetlands (MD-23, MD-26 and MD-29) would be crossed via trenchless methods (no impacts). A total of 1.35 acres of federally regulated wetlands would be temporarily impacted by the construction of the pipeline lateral and 0.34 acres of federally regulated wetlands would be permanently impacted by the operation of the pipeline lateral.

From the water quality standpoint the permanent wetland impact of the pipeline is equivalent to a plot of land 120 feet by 120 feet. That is not the reason used to deny the water permit.  Instead they claim the downstream impact of the natural gas emissions have to be considered. So what are those impacts?

DEC notes that the pipeline would provide approximately 130 million cubic feet per day of natural gas to the CPV Valley Energy Center where it will be burned to produce power. To be conservative assume that the pipeline provides 260 million cubic feet per day or 94,965 million cubic feet per year. Using EPA emission factors that would result in annual emissions of 5,169,853 metric tons of CO2 per year.

I assume that the downstream impact of interest is the predicted temperature impact on global warming. For the CPV Valley Energy Center that can be estimated by adapting estimates in Analysis of US and State-By-State Carbon Dioxide Emissions (For 2010) and Potential “Savings” in Future Global Temperature and Global Sea Level Rise from a Complete Cessation of All CO2 Emissions by Paul Knappenberger. These climate change calculations are based on Intergovermental Panel on Climate Change reports using the MAGICC climate model simulator (MAGICC: Model for the Assessment of Greenhouse-gas Induced Climate Change). MAGICC was developed by scientists at the National Center for Atmospheric Research under funding by the U.S. Environmental Protection Agency and other organizations. MAGICC is itself a collection of simple gas-cycle, climate, and ice-melt models that is designed to emulate the output of complex climate models. MAGICC produces projections of the global average temperature and sea level change under user configurable emissions scenarios and model parameters. There are many parameters that can be altered when running MAGICC, including the climate sensitivity (how much warming the model produces from a doubling of CO2 concentration) and the size of the effect produced by aerosols. In all cases, the MAGICC default settings were used (for example, a climate sensitivity of 3.0°C), which represent the middle-of-the-road estimates for these parameter values.

In order to calculate the temperature impact of the 5,169,853 metric tons emissions from CPV Valley Energy Center the parameters estimated when the US observed 2010 CO2 emissions were simply scaled by 167.1 million metric tons divided by 5,631.3 million metric tons as shown in Table 1 CPV Valley Energy Center Impact on Global Warming. The results indicate that the project will increase global warming 0.00008 Deg. C by 2050.

DEC claims to “thoroughly evaluate all applications to ensure they do not adversely impact the environment”. In order to determine the impact on the environment we should consider the predicted temperature impact relative to the environment.

The National Oceanic & Atmospheric Administration’s Requirements and Standards for NWS Climate Observations states that: “The observer will round the entered data to whole units Fahrenheit”. The nearest whole degree Fahrenheit (0.55°C) is over 7,000 times greater than the projected change in temperature so the impact will not be observed by the NOAA monitoring system.

Another way to relate to the savings is to compare those temperatures differences to climatological variation. Table 2 CPV Valley Energy Center Temperature Impact Relative to Middletown NY Climate compares the projected temperature impacts to the average temperature climatology of Middletown, NY near where the project is located. The annual temperature range for the maximum daily average high and the minimum daily low in Middletown is 65.8 F degrees which is 863,000 times greater than the temperature difference that would result from the potential emissions. The annual temperature range for the average daily high and the average daily low in Middletown is 19.7 F degrees which is 258,000 times greater than the temperature difference that would result from the potential emissions. There is a range in temperature every day and the maximum, minimum, and average hourly maximum and minimum difference ranges are listed. The lowest ratio is for the minimum difference between the observed maximum and minimum temperatures and that is over 178,000 times greater than the temperature difference that would result from the potential emissions.

Unfortunately those numbers still don’t completely reflect the absurdity of claiming that this facility will have an adverse impact on the environment due to downstream impacts of its emissions. A more relatable context would be to consider them in relation to typical changes in temperature with elevation and latitude. Generally, temperature decreases three degrees Fahrenheit for every 1,000 foot increase in elevation above sea level. The temperature increase projected for the potential emissions is equivalent to a 3/8” drop in elevation. The general rule is that temperature changes three degrees Fahrenheit for every 300 mile change in latitude at an elevation of sea level. The temperature increase projected for the potential emissions is equivalent to going south 40 feet.

Clearly the technical evidence is that these changes are insignificant so no environmental impacts associated with global warming could possibly be affected with these emissions. Any rational pragmatic environmental policy would weigh the benefits of this project against these insignificant impacts and approve the permits without delay.

New York State Carbon Pricing

The report “Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals” was prepared by the Brattle Group for the New York Independent System Operator (NYISO) and the New York State Department of Public Service (DPS). According to the Brattle Group the report finds “that adding a carbon charge into the wholesale energy market could improve the state’s ability to meet its decarbonization goals cost-effectively. The study reveals that refunding collected carbon revenues back to customers results in minimal impact on customer electricity costs compared to current policies.” This is a post on the basis of the study only because much of the analysis is beyond my capability to review.

Disclaimer: I am writing posts on New York State (NYS) energy policy because I am concerned that this whole thing is going to end as an expensive boondoggle and drive electricity prices in 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.

Overview

This report is a useful example of New York State energy policy in general. It universally refers to New York State policy when in reality it is implementation policy for Executive Orders from multiple Governors. The fact is that the legislature has never voted on any aspect of the policy, the DPS has been loaded with Cuomo appointees so it is not clear whether it will rate the interests of NYS ratepayers over the Governor’s agenda, and NYISO has also been cowed into sponsoring a report that is no more than a politically correct roadmap for an untried policy option. Needless to say I am disappointed with the response to date within New York.

The biggest problem in New York is that no one has provided an analysis of the total costs to meet the electric sector’s part of New York’s State Energy Plan (SEP) that calls for reducing state economy-wide greenhouse gas emissions 40% by 2030 and 80% by 2050, relative to 1990 levels and the call for generating 50% of electricity from renewable sources by 2030 to help meet that goal. This report illustrates the need for an overall summary. In particular it notes that “although average wholesale energy prices would increase, about 50% of the cost could be offset by returning carbon revenues to customers; another 18% would be offset by reduced prices for RECs and ZECs in the presence of higher wholesale energy prices, and increased TCC revenues; finally, another 23% would be offset by dynamic effects on investment signals.” This clearly shows that the component costs cannot be estimated individually and then combined for a total. Instead someone has to consider the interactions between the components to get a total price.

Ultimately, however, the biggest issue in the study is its use of the Social Cost of Carbon (SCC) as the basis for the report.   The report notes that “The Brattle Group was retained by the NYISO to evaluate conceptual market design options for integrating the social cost of carbon, a widely recognized regulatory standard, into competitive wholesale energy markets administered by the NYISO.” I am absolutely sure that the vast majority of New Yorkers have no clue what the SCC is, much less the shortcomings of its use in general, and the political manipulation of its numbers by the Obama administration in particular.

The SCC is the present day value of projected future net damages from emitting a ton of CO2 today. In order to estimate the impact of today’s emissions it is necessary to estimate total CO2 emissions, model the purported impacts of those emissions and then assess the global economic damage from those impacts. The projected global economic damage is then discounted to present value. Finally, part of the future damage is allocated to present day emissions on a per ton basis.

The ultimate question is whether using the SCC for NYS CO2 emissions reductions benefits is reasonable. Jonathan Lesser has evaluated Cuomo’s Clean Energy Standard and concludes that “the appropriate value for these CO2 emissions reductions is effectively zero. The reason for this is not that climate change is a hoax or that CO2 emissions do not affect the climate. The reason is simple economics: the marginal benefit of reduced CO2 emissions caused by the CES cannot be valued at the SCC because the latter reflects an average value of reducing many billions of tons of CO2. Moreover, because climate change is, by definition, a global phenomenon, the benefits to New Yorkers themselves from reduced CO2 emissions will necessarily approach zero, as virtually all the putative benefits will be captured outside New York.”

Someday I will prepare a more detailed post on the SCC but I also want to highlight some of the short-comings of the current value of the SCC used in this report. Consider that the future net damages includes impacts out 300 years. It is an act of extreme hubris to claim that any projection of how the world will operate in 100 years much less 300 years should be used to guide current actions simply because no one could have imagined the technology available in today’s society in 1917. Another key component of the SCC is that it considers global impacts not just NYS impacts. In other words we are being asked to pay today for some estimated future impact elsewhere. Were it not for the fact that there are plenty of global problems that could be funded today with demonstrable effects at a fraction of these proposed costs then I could accept the premise of this noble gesture. Ultimately when the State claims benefits exceed costs buried in there somewhere are SCC benefits that are not in anyone’s wildest imagination a direct connection to today’s NY costs.

I earlier noted political manipulation by the Obama Administration. Two examples prove my point. One of the key assumptions in the estimate of future net damages is just how much the effect CO2 emissions have on future temperature. The Obama SCC did not use the latest (and lower) value available at the time of this factor in their calculations so their values are biased high. Since the publication of the latest IPCC report other estimates of the sensitivity of temperature to CO2 based on observations and not modeling have reported even lower values.

An even more egregious example of manipulation is documented by the Institute of Energy Research. In order to estimate future economic impacts the discount rate is used to estimate how much money invested today would be worth in the future so that we can link today’s costs to the future. As shown in the IER post “the Office of Management and Budget (OMB) guidelines that all cost/benefit analyses are to be scored using both a 3% and a 7% discount rate. Despite this clear directive, the Obama Administration’s task force on the Social Cost of Carbon did not bother running the computer simulations with this setting.” Why not you may ask? Cynics like me suspect it is because that there are net benefits of CO2 emissions through the year 2030 using that discount rate.

Conclusion

This report exemplifies problems with current New York State energy policy. The legislature and public have not had a chance to comment on the goals espoused by the Executive Orders that are driving this policy. Even if agree that those goals should be pursued, do we really want to go there without knowing the price? The report shows that a comprehensive analysis of costs is necessary in order to determine the total costs. What is the benefit to New York? The use of the SCC as a primary driver of the benefits is not well understood by the public and upon closer examination its use in this context is inappropriate. Ultimately, it is fair to ask why the State is pushing ahead with these programs without answering these fundamental questions.

The High Cost of New York’s Symbolic Environmentalism

In response to President Trump’s decision to withdraw from the Paris Climate Agreement, Governor Cuomo issued an Executive Order reaffirming the state policy to reduce greenhouse gas emissions by forty percent by 2030, and eighty percent by 2050 from 1990 levels, across all emitting activities of the New York economy. The Manhattan Institute recently published “New York’s Clean Energy Programs, The High Cost of Symbolic Environmentalism” by economist Jonathan Lesser that provides cost estimates for some of the programs referenced in the Executive Order which are clearly symbolic only. In this post I will summarize his findings but I recommend that you read his entire paper.

The Executive Order states that “New York has already committed to aggressive investments and initiatives to turn the State Energy Plan goals into action through its Clean Energy Standard (CES) program, the $5 Billion Clean Energy Fund (CEF), the $1 Billion NY-Sun solar program, the nation’s largest Green Bank, and unprecedented reforms to make the electricity grid more resilient, reliable, and affordable.” Dr. Lasser shows that meeting the Clean Energy Standard mandate could easily cost New York consumers and businesses more than $1 trillion by 2050. Amazingly he does not include all the costs so it is an underestimate. He does not include costs of Reforming the Energy Vision mandates that are buried in the rate case requirements, the recent changes to the Regional Greenhouse Gas Initiative or the cost to incorporate a carbon fee on generators. I will address those programs at some point on this blog.

Disclaimer: I am writing this series of posts on New York State (NYS)energy policy because I am concerned that this whole thing is going to end as an expensive boondoggle and drive electricity prices in particular and energy prices in general significantly higher without any appreciable improvement to global warming in general and certainly will have no effect on the purported impacts in NYS. It is a very sad commentary on this process that the State has not provided either an analysis of total costs or disclosed the actual impacts of these reductions. Before retirement from the electric generating industry, I was actively analyzing energy and air quality regulations that could affect company operations. 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.

Evaluation Summary

There are three sections in the analysis: The New York Clean Energy Standard, An Introduction to Cost-Benefit Analysis Concepts, and Evaluating the Benefits and Costs of New York’s Clean Energy Programs. The description of the Clean Energy Standard (CES) describes the focus of the report. The introduction to cost-benefit analyses review of key concepts that “provide the framework for evaluating the costs and benefits of the CES, identifying specific categories of costs and benefits relevant to the evaluation”. The last section assesses the costs and benefits of the CES, and two related components: the solar PV Programs, Cuomo’s January 2017 mandate to install 2,400 megawatts (MW) of offshore wind generation off Long Island by 2030, and Cuomo’s March 2017 “Drive Green” program that will subsidize purchase of electric vehicles.

The summary of the Clean Energy Standard includes an analysis of the required Greenhouse Gas (GHG) emission reductions which is a good overview of the planned reductions and the scale of the mandate. Notably he shows that the Clean Energy Fund mandates are not clearly defined and as far as can be determined are ambitious. For example, to meet the 600-TBTU savings mandate, the cumulative savings will have to increase by an average of 30% each year. He concludes: “The gulf between the 600-TBTU energy-efficiency goal and the optimistic projections by NYSERDA, to say nothing of the still-lower forecast of electric savings recently projected by NYISO, calls into question the ability of New York to realize anything close to that goal, apart from the costs of doing so.”

His analysis also looks at the feasibility of the 80 by 50 mandate. His first conclusion is important: even if NY electric generation was 100% fossil free, the resulting decrease in emissions will not even come close to meeting the interim 40% goal much less the 80% goal. Therefore, emissions will have to decrease from all end-use fossil fuel energy consumption: residential, commercial, industrial and transportation. The problem is that in order to reduce emissions in those sectors increased electrification is necessary. He concludes that “the generating mix would have to be about 63% renewables and 37% natural gas, assuming that no other higher CO2-emitting fossil generation, e.g., coal, was used. That means that by 2050, there would need to be sufficient renewable generation to provide 1,420 TBTUs of end-use energy, equivalent to about 400 TWh of electricity.” He then goes on to equate the amount of renewable energy needed, the land needed and the supporting requirements. Ultimately concluding that, given today’s technology, meeting the 80 by 50 mandate appears to be technologically impossible, regardless of cost.

One would think that his analysis could be compared to the state’s implementation plan for all these programs. However, this is NYS and the answer is no implementation plan has been provided. While I could find a couple of points that I think were stretches in his evaluation I also think that he missed some implementation issues vis-à-vis storage and transmission support requirements for the 63% renewable target. I agree that the plan is technologically impossible to implement with today’s technology.

I found his introduction to cost-benefit analysis fascinating. I have never taken a course on economics so this helped me better understand concepts I have “learned” from my work over the years. It confirmed my suspicions on several issues. After describing the alleged benefits for four analyses of green energy programs he explains “Claims of economic benefits arising from new investment and job creation are erroneous. Using subsidies to increase investment in low carbon energy sources and to create jobs is simply a transfer of wealth from electricity consumers and unsubsidized electricity generators to renewable energy and energy-efficiency providers.”

He goes on to say:

“When businesses and consumers pay more for electricity, they have less money to spend on everything else. Consumers have less money to spend on other goods and services; businesses have less money for investments that increase economic output. Goods and services whose production requires electricity also increase in cost, leaving less money to spend on goods and services, which cost more to produce. Thus, subsidizing electric generation—of any kind— effectively imposes two separate taxes on businesses and consumers: the first is a direct tax associated with higher electric bills; the second is an indirect tax in the form of higher costs for purchased goods and services that require electricity as an input.”

In the final section of the report, the benefits and costs of the New York programs are evaluated. He points out that to do a proper cost benefit evaluation you need to compare the proposed plans with how the future would evolve without them. For example, the pollution reduction estimates in all the State analyses include emissions from coal-fired power plants but the reality is that the cost difference between natural gas and coal drove NY coal plant retirements so including coal emissions in the benefits is improper.

He also discusses nonmarket cost in his evaluation. While the New York evaluations of the programs provide all the benefits they have not, to date, included the costs. For example, in order to install the large amounts of solar power proposed the land necessary cannot be used for agricultural crops. Displacing those crops takes money out of the economy that is not reflected in the State analyses.

Moreover, I believe that he has not included the nonmarket cost of fuel diversity. Proponents of renewable energy claim that it provides fuel diversity but that is only true if it includes the full cost of dispatchable electricity. Moreover, one of the strong points of the NY electrical system was that there was a wide range of truly diverse power: hydro, nuclear, coal, oil and natural gas. Even the diversity within the fossil fuels had value because if there was an interruption in supply to any fuel there were alternatives. NY is going to be dependent upon natural gas but what happens if the gas transmission lines get disrupted due to an earthquake?  Renewables will not provide any value in this regard.

The final, and most important aspect of his evaluation, is his discussion of the State’s use of the Social Cost of Carbon (SCC). The SCC is the present day value of projected future net damages from emitting a ton of CO2 today. In order to estimate the impact of today’s emissions it is necessary to estimate total CO2 emissions, model the purported impacts of those emissions and then assess the global economic damage from those impacts. The projected global economic damage is then discounted to present value. Finally, part of the future damage is allocated to present day emissions on a per ton basis.

The vast majority of benefits in both recent NY agency cost-benefit analyses are associated with the value of reduced CO2 emissions, which are, in turn, based on the SCC. The SCC values estimated by Obama Administration are not based on marginal CO2 emissions changes. Instead, the SCC estimates are average values, equal to the estimated impact of a large change in CO2 emissions in a given year, divided by the present value of lost economic output, as measured by a decrease in world GDP.

 However, when the increase in CO2 emissions is small, the marginal damage is not even measurable. Equivalently, the marginal benefit of a small reduction in worldwide CO2 emissions is also small. This will be the case with NY policies to reduce CO2 emissions. He notes that “Temperature changes that are too small to physically measure and impossible to separate from natural climate variability cannot be associated with changes in climate and economic output.” Thus, the benefits of equivalent CO2 reductions are effectively zero. Also note that even if there were a measurable impact, virtually all the benefits would, by definition, accrue outside the state. Nor does the NYS approach account for increases in emissions in the rest of the world.

 Key Findings

In conclusion, I recommend readers go directly to the source.  The report lists four key findings:

“Given existing technology, the CES’s 80 by 50 mandate is unrealistic, unobtainable, and unaffordable. Attempting to meet the mandate could easily cost New York consumers and businesses more than $1 trillion by 2050.”

“The CES mandate will require electrifying most of New York’s transportation, commercial, and industrial sectors. (In 2014, for example, fossil-fuel energy used for transportation was twice as large as all end-use electricity consumption combined.) Even with enormous gains in energy efficiency, the mandate would require installing at least 100,000 megawatts (MW) of offshore wind generation, or 150,000 MW of onshore wind generation, or 300,000 MW of solar photovoltaic (PV) capacity by 2050. By comparison, in 2015, about 11,300 MW of new solar PV capacity was installed in the entire U.S. Moreover, meeting the CES mandate likely would require installing at least 200,000 MW of battery storage to compensate for wind and solar’s inherent intermittency.”

“Meeting the CES interim goals—building 2,400 MW of offshore wind capacity and 7,300 MW of solar PV capacity by 2030—could result in New Yorkers paying more than $18 billion in above-market costs for their electricity between now and then. By 2050, the above-market costs associated with meeting those interim goals could increase to $93 billion. It will also require building at least 1,000 miles of new high-voltage transmission facilities to move electricity from upstate wind and solar projects to downstate consumers. No state agency has estimated the environmental and economic costs of this new infrastructure.”

“The New York Department of Public Service and the New York State Energy Research and Development Authority claim that renewable energy and the CES will provide billions of dollars of benefits associated with CO2 reductions. Not so. Regardless of one’s views on the accuracy of climate models and social-cost-of-carbon estimates, the CES will have no measurable impact on world climate. Therefore, the value of the proposed CO2 reductions will be effectively zero.”

Cuomo’s Executive Order 166: Part 3 Global Warming Effects

In response to President Trump’s decision to withdraw from the Paris Climate Agreement, Governor Cuomo issued an Executive Order reaffirming the state policy to reduce greenhouse gas emissions by forty percent by 2030, and eighty percent by 2050 from 1990 levels, across all emitting activities of the New York economy. I believe it is appropriate to ask how much is this plan to mitigate climate change going to cost and how much will the plan actually reduce global warming. This post sum estimates how much global warming would be prevented by the proposed reductions.

The Executive Order states that “New York has already committed to aggressive investments and initiatives to turn the State Energy Plan goals into action through its Clean Energy Standard (CES) program, the $5 Billion Clean Energy Fund (CEF), the $1 Billion NY-Sun solar program, the nation’s largest Green Bank, and unprecedented reforms to make the electricity grid more resilient, reliable, and affordable.” In order to make my analysis manageable I am breaking it up into three posts. The first post addressed costs of each the first four components. The second post estimated costs of for the “unprecedented reforms” comment which refers to the Reforming the Energy Vision component.

Disclaimer: I am writing this series of posts on New York State energy policy because I am concerned that this whole thing is going to end as an expensive boondoggle and drive electricity prices in particular and energy prices in general significantly higher. Before retirement from the electric generating industry, I was actively analyzing energy and air quality regulations that could affect company operations. 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.

How Much Will REV Affect Global Warming

In the absence of any official quantitative estimate of the impact on global warming from REV or any other New York State initiative related to climate change I did my own calculation. I simply adapted data for this emission reduction from the calculations in Analysis of US and State-By-State Carbon Dioxide Emissions and Potential “Savings” In Future Global Temperature and Global Sea Level Rise. This analysis of U.S. and state by state carbon dioxide 2010 emissions relative to global emissions quantifies the relative numbers and the potential “savings” in future global temperature and global sea level rise. All I did in my calculation was to pro-rate the United States impacts by the ratio of New York emissions divided by United States emissions to determine the effects of a complete cessation of all CO2 emissions in New York State as well as the REV plan for the 167.1 million metric ton reduction.

The first step is to quantify NY emissions. In 2010 the NY total was 172.8 million metric tons.  According to the Energy Information Administration total New York carbon dioxide emissions in 1990 were 208.9 million metric tons so the reduction to the REV goal of 80% is 167.1 million metric tons. The New York impacts were calculated by the ratio of the NY emissions reductions to the US reductions in the report. For example, the NY % of global total emissions equals the % of US global total (17.88%) times the 2010 NY emissions (172.8) divided by the US emissions (5631.3)

These calculations show current growth rate in CO2 emissions from other countries of the world will quickly subsume New York total emissions much less any reductions in New York CO2 emissions. According to data from the U.S. Energy Information Administration (EIA) and based on trends in CO2 emissions growth over the past decade, global growth will completely replace an elimination of all 2010 CO2 emissions from New York in 79 days. For the emissions reductions proposed in REV, global growth will completely replace the expected reductions in 76 days. Furthermore, using assumptions based on the Intergovernmental Panel on Climate Change (IPCC) Assessment Reports we can estimate the actual impact to global warming for REV. The ultimate impact of the REV 80% reduction of 167.1 million metric tons on projected global temperature rise would be a reduction, or a “savings,” of approximately 0.0025°C by the year 2050 and 0.0051°C by the year 2100.

These small numbers have to be put in context. First consider temperature measuring guidance. The National Oceanic & Atmospheric Administration’s Requirements and Standards for NWS Climate Observations states that: “The observer will round the entered data to whole units Fahrenheit”. The nearest whole degree Fahrenheit (0.55°C) is one hundred times greater than the projected change in temperature.

Although this change is too small to measure I am sure some will argue that there will nonetheless be some effect on the purported impacts. However, if these numbers are put into perspective of temperatures we routinely feel then that argument seems hollow. For example, in Syracuse NY the record high temperature is 102°F and the record low temperature is -26°F so the difference is 128 °F or 71.1°C which is nearly 14,000 times greater than the predicted change in temperature in 2100. The annual seasonal difference ranges from the highest daily average of 71.6°F to the lowest daily average of 23.2°F, or a difference of 48.4°F or 26.9°C which is over 5,000 times greater than the predicted change in temperature in 2100. The average difference between the average daily high and average daily low temperature is 10.4°C or 2,000 times greater than the predicted change in temperature in 2100. In order to give you an idea of how small this temperature change is consider that temperature normally drops as you go higher in the atmosphere. The dry adiabatic lapse rate is the change in temperature with height when no energy is added or subtracted and equals 1°C per 100 meters. For a six foot man this temperature change is 0.018°C between his head and feet which is four times greater than the predicted change in temperature in 2100. Clearly claiming impacts for that small a change in temperature is a stretch at best.