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.

 

How Much for Cuomo’s Executive Order 166 Part 2: REV

In response to President Trump’s decision to withdraw from the Paris Climate Agreement, Governor Cuomo recently 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.

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 each the first four components. This post speaks to the “unprecedented reforms” comment which refers to the Reforming the Energy Vision component. The final post will summarize the costs and estimate how much global warming would be prevented by the proposed reductions.

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.

Reforming the Energy Vision Costs

The Executive Order refers to “unprecedented reforms to make the electricity grid more resilient, reliable, and affordable” which is referencing the Governor’s Reforming the Energy Vision program. This comprehensive energy strategy for New York is supposed to help consumers make more informed energy choices, develop new energy products and services, and protect the environment. However, it does not have a comprehensive description of all the component programs, how they are supposed to work together, how much the programs will make the grid resilient and reliable or a description of the costs so it can be shown to be affordable.

There are seven general REV initiatives:

  1. Renewable Energy
  2. Buildings & Energy Efficiency
  3. Clean Energy Financing
  4. Sustainable and Resilient Communities
  5. Energy Infrastructure Modernization
  6. Innovation and R&D
  7. Transportation

There is a lot of overlap between the other commitments mentioned in the Executive Order and REV. In order to put a limit on the scope of this effort to estimate costs, I am going to only try to include those REV costs that directly affect electricity rates associated with energy infrastructure modernization. In part this is because I am also interested in how much of the current rate request for my electricity supplier is required by REV. According to the website:

60% of New York’s power generation infrastructure is over 35 years old. As we develop distributed energy resources statewide, it is critical for the safety and resiliency of our current energy system that we maintain—and in some instances enhance—the central grid. It is only by doing so that we can continue to meet the energy needs of New Yorkers and integrate clean and distributed power at scale into our energy system.

One of the sample initiatives listed under energy infrastructure modernization is the Energy Highway.

The 13 actions presented in the Energy Highway Blueprint (issued in October 2012) includes a wide range of measures to provide up to 3,200 megawatts (MW) of additional electric generation and transmission capacity and clean power generation—enough to serve about 3 million homes—through up to $5.7 billion in private- and public-sector investments.

For this analysis I am assuming that these costs are included in other initiatives and have already been counted elsewhere in this analysis. However I am pretty sure that there are projects that were it not for REV would be required so that means the total costs estimated are going to be low.

In addition to that initiative, the Load Serving Entities are required to do demonstration projects to implement the Governor’s vision. Those projects are buried in rate case requests so teasing out their costs is a monumental chore. What I have tried to do in the following is figure out what National Grid, my electric provider, is going to spend on REV demonstration and infrastructure projects.

In the National Grid rate case under Information Services capital projects and investments there are 22 projects listed under the NY REV/Grid Modernization program label for fiscal years 2018 to 2021. The total capital expenditures for those projects is listed as $161 million. It is not clear how exactly these modernization projects will actually affect REV goals. Consider that there are eight projects associated with Advance Metering Infrastructure (AMI) meters totaling $48.9 million. The idea for these AMI meters is that they incorporate two-way communication between the utility and the customer. The goal is to reduce peak generation charging for electricity by an hourly rate which will induce the customer to use less at those times. What is not clear is any quantitative estimate of the specific impacts of these projects nor how the results will be integrated into the plan. Specifically, will the results of the demonstration projects be evaluated relative to the goals to see if they provide the expected benefits and can be used as anticipated or is this simply a formality and implementation of the Governor’s executive order will proceed heedless of the results?

Back to the analysis of REV. In their Electric Customer Panel testimony, National Grid described six REV demonstration projects and listed a deferral balance of $3.283 million.

  • The Fruit Belt Neighborhood Solar demonstration project seeks to engage low to moderate income residential customers in the Fruit Belt neighborhood of Buffalo with solar photovoltaic (“PV”) installations and energy efficiency products and services. The project involves the installation of solar PV panels on the rooftops of 100 customers’ residences. The energy generated by the solar systems will be used to provide the Fruit Belt neighborhood with bill credits. Installation of the solar PV systems is scheduled to be completed in 2017.
  • The Potsdam Community Resilience project will examine the feasibility of building a community microgrid to add resiliency to the electric infrastructure in the area. The Company is partnering with Clarkson University to develop and test the microgrid through use of an underground distribution network, new and existing DER, and other utility services. The project commenced in early 2016 and design, outreach, and testing will continue in 2017. The Company anticipates final stakeholder decision whether to fully implement the community microgrid in late 2017.
  • The Distributed System Platform (“DSP”) project is aimed at testing how the Company can integrate customer-owned energy resources to manage system demands. As part of the project, the Company will partner with the Buffalo Niagara Medical Campus to incorporate customer-owned DER and other energy and ancillary services into the distribution system. The first phase of the project began in September 2016, with the technology development phase expected to continue in 2017 and field testing to begin in 2018.
  • The Clifton Park Demand Reduction project is aimed at reducing customers’ energy bills and peak demand through a combination of infrastructure upgrades and customer engagement. The project involves 2 the installation of Advance Metering Infrastructure (AMI) meters for residents of Clifton Park and other infrastructure upgrades to test whether price signals, tools, community outreach, and innovative rate design concepts, such as voluntary time-of use rates, will reduce electric demand. AMI meter deployment has begun and the Company anticipates that all offerings and services will be available by the end of 2017.
  • Linked to the already approved Clifton Park Demand Reduction project is the Smart Home Rate demonstration project. Under this project, customers in Clifton Park enrolled in the Company’s residential voluntary time-of-use rate will be provided with voice-recognition technology that will enable them to control home appliances via use of a phone application or other technology to reduce their electricity consumption when prices are high.
  • The DG Interconnection demonstration project seeks to test whether the Company’s upfront investment to make the system “DG-ready” combined with an alternative cost allocation methodology will enhance DG interconnections in Upstate New York.

National Grid was asked “Are the costs of the demonstration projects described above included in the revenue requirement?” The testimony response:

Yes, with the exception of the Smart Home Rate and DG Interconnection demonstration projects because they have not yet been approved by Staff. The Track One Order authorized utilities to defer the revenue requirement impacts of the incremental demonstration project costs until their next rate plan. The actual deferral balance at the end of the Historic Test Year (the 12 months ended December 31, 2016) for the four approved projects is $0.274 million and the forecast deferral balance through March 31, 2018 is $3.283 million, as shown in Exhibit ___ (RRP-7). Treatment of the deferral balance is discussed by the Revenue Requirements Panel. With respect to future costs, beginning in the Rate Year, capital and O&M expense for the four approved demonstration projects are included in the revenue requirements.

I assume a ratepayer cost of $3.283 million but trying to figure out the impacts of the demonstration projects is not nearly as simple. For example, the Fruit Belt Neighborhood Solar demonstration project is for 100 residential rooftop solar installations and the average reduction in CO2 tons per year is 0.5 so the total CO2 avoided is 50 tons. However, that is the only project that will have direct CO2 savings. The Potsdam Community Resilience project will determine if a microgrid is feasible, Distributed System Platform project will test ways to integrate distributed energy resources into the grid, the two projects in Clifton Park are associated with AMI meters as previously discussed and the final project will evaluate distributed generation interconnections.

The Transmission and Distribution Capital Investment Plan submitted to DPS on 1/31/2017 includes projects totaling $3,012 million. It is not clear how much of this plan is included solely to meet the Reforming the Energy Vision. As far as I can tell the REV costs are buried in three categories: the Customer Requests/Public Requirements spending rationale includes the Company’s Advanced Metering project, the Communications / Control Systems spending rationale includes costs associated with AMF communications and the DER – Electric System Access appears to be all REV. Table 1-2 in the Investment Plan notes that $147.2 million is needed for the AMF Investment Plan.

In conclusion I estimate that the REV costs buried in this rate case total $271.7 million dollars (Table 1 REV Costs in National Grid Rate Case). However, I suspect that I am double counting some costs and have neglected other costs.

Reflections

There are two inconvenient problems with the REV demonstration projects: ultimate feasibility and a funding death spiral. The requirement that each utility sponsor demonstration projects begs the ultimate question whether they would all ultimately provide cost effective savings. Working in isolation the utilities are not charged with overall feasibility and the State has been remiss in providing an overall summary of expectations and costs. Until the State provides a detailed plan how all the bits and pieces will work together an estimate of feasibility is not possible.  The reality of this problem is described very well in a post on An analysis of electricity system flexibility for Great Britain from November 2016 by Carbon Trust. The United Kingdom has legislation in place to make similar reductions as proposed by Cuomo. The post itself notes that “solving a problem requires understanding the scale of the problem and especially the hardest challenges – before you start on the main project.” I strongly recommend that you read this evisceration of the UK policy and think how similar the situation is to New York.

The death spiral is an overlooked component. The National Grid Fruit Belt demonstration project provides 100 low/moderate income residential customers with “the benefits of solar photovoltaic installations and energy efficiency products and services” paid for by the rest of the National Grid customer base. The problem is that to pay for all low/moderate income residential customers to get this benefit then costs necessarily increase such that more people become eligible for the benefit. In order to pay for those people fewer people are available to cover those costs so the increase necessary is larger and the death spiral kicks. Ultimately the question is whether this kind of program is feasible for everyone and if not who chooses who benefits.

 

 

How Much for Cuomo’s Executive Order 166 – Part 1

In response to President Trump’s decision to withdraw from the Paris Climate Agreement, Governor Cuomo recently 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. In order to make this post more manageable I am going to address only a portion of the plans proposed to implement these goals.

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.” This post addresses each the first four components. The “unprecedented reforms” comment refers to the Reforming the Energy Vision component. The final post will summarize the costs and estimate how much global warming would be prevented by the proposed reductions.

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.

Clean Energy Standard

The CES creates two mechanisms to implement the clean energy goal. The Renewable Energy Standard (RES) requires every load serving entity to procure renewable energy for their customers. It has three parts: Tier 1 obligation for utilities and other Load Serving Entities (LSEs); Tier 2 obligation for older generators in financial risk; and a third, new program focused on offshore wind resources.

In Tier 1, those companies are required to procure renewable energy credits (RECs) associated with new renewable energy resources for their retail customers. If LSEs cannot demonstrate they are meeting the Tier 1 obligation through the possession of RECs, they may make alternative compliance payments.

In order to estimate the ten year cost of the program I had to make some assumptions. The Tier 1 obligation renewable energy credit cost in 2017 ($1.3 million) equals the 2015 EIA residential load (51,013,000 MWhrs) times the LSE annual RES requirement of 0.60% times the difference between the EIA March 2017 residential cost ($17.02 per MWhr) and the 2017 Tier 1 RECs purchased from NYSERDA costs of $21.16 per megawatt-hour. The LSE annual RES requirement increases from 0.6% in 2017 to 4.8% in 2021. I assumed that the RSE requirement increased at half the 2020 to 2021 increase of 1.4% so that in 2026 the LSE annual RES requirement would be 8.3%. I used the 2015 EIA residential load and the 2017 differential price for all years to estimate the total cost of Tier 1 to 2026 to be 98 million dollars.

In order to determine the effectiveness of these programs relative to the goal of reducing global warming, I also estimated CO2 reductions resulting from this program. Over ten years. I estimate that the LSE Tier 1 requirement will subsidize 23,670,000 MWhr of renewable generation. Assuming that were it not for this program that this load would be replaced by natural gas generation[1] at 1200 lb of CO2 per MWhr (an older combustion turbine rate) this displaces 1,420,202 tons of CO2 per year at a cost of $6.90 per ton of CO2.

Tier 2 of the RES provides support for existing run-of-the-river hydroelectric facilities of 5 MW or less, wind facilities, and biomass direct combustion facilities through maintenance contracts approved by the PSC and administered by NYSERDA. Resources in this tier must demonstrate that but for the maintenance contracts, the facility would cease operation and no longer produce positive emissions attributes. I was not able to find any cost estimates so for the purposes of this evaluation assumed no significant costs or CO2 reductions over ten years.

The third and final component of the RES is offshore wind. The PSC did not set forth any specific plans for the development of offshore wind resources. Instead, the PSC requested that NYSERDA identify appropriate mechanisms the PSC and State should consider to develop offshore wind resources. NYSERDA recently issued its Blueprint for the New York State Offshore Wind Master Plan, outlining the process, steps and timeline for developing the Master Plan, which is ultimately expected to be released later in 2017. That press release notes that “In the 2017 State of the State, Governor Andrew M. Cuomo proposed an unprecedented commitment: to develop up to 2.4 gigawatts of offshore wind by 2030, enough to power 1.25 million homes.” In order to estimate the costs of Tier 3 I assumed that 2 gigawatts are developed. The current lower bound estimate of land-based wind development capital expenditure is $1300 (2014 $/KW). For off shore wind I assumed a capital expenditure cost of $2400 per KW installed and estimate a Tier 3 cost of $4,800 million.

For Tier 3, I assumed that the 2 gigawatts of off-shore wind capacity have a 40% capacity factor so in a year they would generate 7,008 gigawatt hours of energy. If that displaces natural gas generation then the annual CO2 reduction would be 4,204,800 tons per year and the cost per ton of reduction would be $114.

The second component of the Clean Energy Standard is the Zero Emissions Credit (ZEC). A ZEC is a credit for generating one megawatt-hour (MWh) of electricity with zero-emissions (no carbon) attributes that is consumed by a retail customer in New York State. The ZEC requirement mandates the LSEs procure ZECs from NYSERDA. The number of ZECs is based on each LSE’s proportionate amount of statewide load, or energy demanded, in a given compliance year. I estimate the zero emission credit cost in 2017 ($463 million) equals the five year average MWh output from Fitzpatrick, Ginna, Nine Mile 1, and Nine Mile 2 nuclear units (26,400,000) times the 2017 NYSERDA ZEC Price of $17.5394/MWh. Assuming those rates for the next ten years the cost is $4,630 million and $5,556 million over the complete 12 year life of the program. Note, however, that others estimate the 12-year term cost to be $7,800 to $10,000 million.

Clean Energy Fund

This program has a ten year $5 billion commitment from 2016 through 2025. The latest quarterly Clean Energy Fund Performance Report has summary data listing budgets and spending and a summary of committed benefits progress to date. For the quarter ending March 31, 2017 the Market Development and Innovation & Research Portfolio Level expended funds to date were $62,979,562. The Market Development and Innovation & Research Portfolio Committed Benefits Progress to Date lists the grand total completed and pipeline projects benefits and claims 482,451 tons of CO2 reductions will be saved as the result of these investments. Based on their numbers this program is spending $131 for every ton of CO2 saved.

NY-Sun

NY-Sun aims to invest $1 billion to add more than 3 gigawatts of installed solar capacity in the State by 2023. At a 15 % capacity factor the total generation of 3,942,000 MWhr. Assuming 1200 lbs of CO2 per MW that amount of generation would save 2,365,200 tons of CO2 at a cost of $1 billion for a rate of $423 dollars per ton.

New York Green Bank

According to the New York Green Bank 2016 Business Plan “The $1.0 billion NY Green Bank was established to attract private sector capital to accelerate clean energy deployment in New York State.” As a key component of New York’s Clean Energy Fund, NY Green Bank is structured to be self-sustaining in that it must ultimately cover its own costs of operation.

As of June 17, 2016, Green Bank investments supported clean energy projects with a total project cost of $518.3 million in aggregate, based on an overall portfolio size of $121.0 million. Current portfolio estimated gross lifetime GHG emissions reductions as of June 17, 2016 of up to 2.9 million metric tons. Assuming the GHG emissions are all CO2 the aggregate total project $ per ton of CO2 rate is $162 albeit for New York’s investment the rate is $38 per ton.

Summary of Costs of Cuomo Executive Order 166

The Summary of Costs of Cuomo Executive Order 166 (Table 1) consolidates all these estimates in one place. The Renewable Energy Standard will cost just under $4.9 billion if it includes the massive buildout of offshore wind proposed by Cuomo. The Zero Emissions Credit program to support Upstate nuclear units I estimate at $4.6 billion. The clean energy fund is supposed to be $5 billion and NY-Sun another billion. The grand total is $15.5 billion over ten years. Importantly, note that this does not include any costs for the REV demonstration projects which will be discussed in a future post.

There are several estimates on the impact of some of these programs on ratepayer costs. Public Utility Law Project (PULP) has estimated the bill impact on residential ratepayers of the Zero Emissions Credit component. The estimated average monthly cost over all tranches (04/17 ‐ 03/29) was $2.48 compared to the Governor’s cost estimate of a $2 monthly increase in average homeowner rates. The Megawatt Hour blog estimates eventual costs from $4.56 to $5.70. The Empire Center published an Issue Brief also prepared a cost estimate of $3.40 per month in 2021.   However the PULP cost was only for the Zero Emissions Credits and the Megawatt Hour blog and Empire Center Issue Brief costs only for the Clean Energy Standard. The costs for the Clean Energy Fund, NY-Sun and REV are not included and it is not clear that all of those programs will be sufficient to meet the Executive Order target so there are even more costs lurking in the background.

[1] Only two facilities still burn coal in NYS and the Governor has a program in place to eliminate them and oil-fired generation is as low as it is going to go without retirements.

Replacement Power for Indian Point – Energy Storage

In two earlier posts I addressed potential replacement of New York’s Indian Point nuclear station power using new projects that are licensed or under construction suggested by the Governor and the alternative use of renewables and energy efficiency as proposed by environmental organizations. The latest proposal, commissioned by the New York Battery and Energy Storage Technology Consortiums, claims that energy storage, along with a portfolio of other clean energy sources, can replace Indian Point. This post examines their proposal.

I have been following New York State (NYS) energy policy for a long time. Before retirement from a Non-Regulated Generating company, I was actively analyzing air quality regulations that could affect company operations and those regulations were often indirectly or directly tied to NYS 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. I am motivated to write these posts on energy policy because the majority of what you hear in public is, in my opinion, overly optimistic about the viability of new technologies and rarely portrays costs realistically.

In January 2017 New York’s Governor Andrew Cuomo announced the premature closure of the Indian Point Energy Center located 25 miles north of New York City. Cuomo claims that Indian Point produces 2,000 megawatts of electrical power and that “more than enough replacement power to replace this capacity will be available by 2021”. Previously I showed that while the capacity can be replaced by projects that are either under construction or licensed, that insinuations elsewhere that the replacement will be air pollution free are not correct. Shortly after his announcement environmental organizations proposed using renewables and energy efficiency exclusively but I showed that was technically possible but the realistic costs of replacing all the capabilities of Indian Point with those resources would be too expensive to be a realistic option.

Indian Point Energy Storage Replacement Option

The New York Battery and Energy Storage Technology Consortium hired Strategen Consulting to evaluate the use of energy storage as a potential replacement for Indian Point. The study presentation is a slide show that includes some excellent graphics that show the mix of generation capacity in Downstate New York. In addition to the retirement of Indian Point the study explains that there are a couple of other issues that could exacerbate the capacity problem. They point out that attaining the new ozone ambient air quality standard has triggered a NYS process to address old peaking turbines in New York City and that the City of New York is requiring that all use of #6 fuel oil be phased out. As a result, they claim there could be a capacity shortfall of greater than 1,000 MW by 2023.

The primary goal of this post is to discuss the energy storage proposal but let me quickly address the peakers and #6 fuel oil phase-out problems. The process for determining what to do with the peaking turbines has just begun and while the NYS Department of Environmental Conservation has shown that those peakers contributed to ozone in 2011, there are indications that the relationship is weakening to the point where additional modeling is necessary to determine what is happening today as opposed to five years ago. The phaseout of #6 fuel oil is not a major technological problem so the only reason that capacity would be affected is if the costs for switch over are too high. I have seen no indications that any of the affected facilities will shut down due to this requirement. Both issues are valid problems but the evolving regulatory framework is too early in the process to claim that the 1,000 MW shortfall claimed is anything more than a low probability.

Battery Storage Replacement

Until this issue came up I had not paid much attention to battery storage other than recognizing that in order to make intermittent renewable power dispatchable you have to have storage. In my mind, that simply equated to building enough batteries to store the renewable energy for when it is needed. Not surprisingly, it turns out that it is more complicated than that. Late last year PG&E reported on the results of a battery storage demonstration project that described how the batteries were used on the grid and how they were paid to operate. The project participated in the day ahead energy market which is used to procure the majority of supply to meet that day’s predicted electric load. The California ISO also has a real-time energy market and the battery system provided services for short-term fluctuations from the day ahead forecast. In addition to the energy market batteries can be used for the ancillary services of frequency regulation and spinning reserves and the demonstration project participated in those markets.  Note that the energy storage association has a longer list of battery technology applications.

The rosy projection for the use of energy storage depicted in the Strategen report is at odds with the results of the PG&E 18-month trial of electricity storage on the grid encompassing 6 MW of storage at two sites. For example, the report notes that it takes more energy to charge the batteries than battery discharges. Note that there is a significant discrepancy between the installed costs of the trial and the proposed Indian Point replacement. The trial report states that the “fully installed cost of the 2 MW / 14 MWh Vaca BESS was approximately $11,000,000, which equates to $783/kWh or $5,500/kW”. The assumed installed cost by Strategen is $1600/kW or nearly three times less than the actual trial cost presuming that these numbers are apples to apples.

Todd Kiefer described the results of the CAISO battery storage trial on the T&D World blog.  Mr. Keifer summarizes the report as a cautionary tale. The report shows that batteries are not cost-effective:

“The report included two external studies that found that cost of battery storage must come down to about $800/kW to achieve economic break-even.  However that number has two false assumptions baked in: a 20-year service life and only 15-minutes of storage capacity.  To aggressively dispatch the batteries as was done in the trial to maximize revenue requires at least 30 minutes of storage capacity and would consume the 4,500-cycle service life within 10 years.  With these adjustments, the real break-even cost is approximately $200/kW.  Indeed, $197/kW is the estimate PG&E itself empirically found to be the break-even cost for a typical month in 2015.  This is a factor of 27 cheaper than the Vaca system cost of $5,500/kw.”

Even assuming that the Strategen cost estimate of $1600/kW is possible the breakeven costs are much lower.

The Strategen report indicates that energy storage could be used to replace the peaking turbines at risk because of the ozone attainment requirements. Mr. Keifer explains that shaving peaks through energy arbitrage is an obvious use of batteries but notes:

“This time-shifting of generation to match consumption peaks involves techniques such as peak shaving and load leveling; these are easy to envision and model and optimize when looking at yesterday’s load and price curves, but very difficult to do in real-time when the load and price are varying stochastically and neither the height nor timing of the actual load peak can be known or recognized till well after the fact.  In practice, energy arbitrage only generated enough revenue to barely cover operating expenses.”

The basis of the Strategen report is that energy storage can be used to replace traditional generating units such as Indian Point or the peaking turbines. The emphasis on that claim is capacity but that neglects all the other services those generating units provide to the grid. Mr. Kiefer notes that the most lucrative use of batteries is frequency regulation or the response to fluctuations in the mismatches between load and generation. In the current CAISO market Frequency Regulation is the highest-value product but the project was not cost-effective for that application. Importantly, if the battery owner wants to maximize revenue by optimizing the system for frequency regulation, that precludes using the system to shave the peak because the batteries are maintained close to 50% charge levels and stand ready to charge or discharge rapidly to damp out momentary dips and spikes in grid frequency that mark mismatches between generation and load.

Mr. Kiefer describes a surprising finding that is directly applicable to the Indian Point replacement situation.

“The wholesale electricity price varied so much by geographic location on the California grid that often it was not economical for the two battery arrays to store surplus power being generated by wind or solar farms.  California now has enough “renewable” energy capacity that it can produce negative locational marginal price (LMP) in the vicinity of the wind and solar farms.  However, these low prices do not necessarily propagate as far as the electricity storage sites.  This is often blamed on “grid congestion” as if to say it is a shortcoming of the pre-existing grid, but in reality this bottlenecking is a predictable consequence of adding large capacities of remote, diffuse, and uncontrollably intermittent generators at the fringes of the grid far from the load centers that consume their power.  If batteries are to be used for energy arbitrage, they would be optimally co-located at the fringes with the wind or solar farms.  However, if they are to be used for frequency regulation, they are better located near the loads in cities and industrial centers.  Since the revenue stream of the latter is much more attractive than the former, it is likely that the utilities would prefer downtown rather than desert locations for assets they own.  That leaves solar and wind developers to install storage at their sites.”

In New York State the majority of the renewable sites are far from New York City so this suggests that the batteries for replacing the ancillary services will have to be near the City but in order to use the batteries for peak shaving they will have to be located near the renewable facilities.

The Strategen report claims low costs but only “through long-term contracting arrangements (e.g. 10-20 years)”.  In his cost analysis of the report, Mr. Keifer notes that “To aggressively dispatch the batteries as was done in the trial to maximize revenue requires at least 30 minutes of storage capacity and would consume the 4,500-cycle service life within 10 years.” Obviously a long-term contract greater than the expected service life is not a good deal.

Conclusion

The experience of the California demonstration project suggests that costs are a major concern with respect to this proposal.  Moreover, because wind and solar are diffuse collecting that energy and delivering it where it is needed requires the use of the transmission grid so the role that Indian Point provides for grid support services should not be ignored. Batteries can provide many of those support services and in some cases better than a generating unit but in order to provide all those services with batteries you will need more than the number needed to simply replace the capacity. How many more batteries is unknown, how the batteries will work within the system best needs to be determined, and how long the battery systems will survive providing different services is another key element in a cost comparison. Integrating small amounts is not an issue but there is a point when the incompatible nature of those resources compared to traditional generating plants like Indian Point has to be resolved and that also increases costs significantly.  The failure of the Cuomo Administration to admit much less address the grid issues is disappointing.

Unintended Consequences

I was working on this post at the same time that Planning Engineer posted on Renewable resources and the importance of generation diversity at Climate Etc. There were a couple of related and relevant comments made that brought up some unintended consequences for the widespread use of batteries that I reproduce below.  These comments show that the perception that batteries are unencumbered by additional environmental impacts are incorrect.

Albert Hopfer works in the battery design and manufacture field and notes:

We in this business (the biggest of that business) are struggling with cell suppliers to get the cells and cell types needed for our products. Lithium does not grow on trees they exist and produced as either rock-ore or brine. Brine has become the (only) profitable choice. Brine requires 9-12 months to “sun dry” producing the necessary oxides for Lithium battery grade product.

That being said, you can imagine the scarcity Lithium would become and the change in cost/selling price. Gas auto sales in the US 2016 was at the 14 million level. Electric cars next to zero in comparison. Yet, today, EV’s and other large format battery needs (new) are exhausting supplies of Lithium. Lithium is also use in glass and other product production.

If the US grid and transport systems became dependent on storage using wind and solar the US would immediately be dependent on foreign Lithium since the US reserves are minor compared to places like South America etc. We do not want to go there.

M Anderson has been been “mapping, analyzing, and helping change complex global infrastructure networks, on the ground, in more than 40 nations for decades. (Autos, energy, water, food, mobile communications, waste, etc).” He explained that rooftop solar and local battery storage have several hidden “landmines” that can only be seen by looking at their total life-cycle from mining to recycling and waste.

The first landmine is that the “Lithium batteries in Teslas – and in emerging home batteries – contain 1200-2,000 pounds of traditional, recyclable, materials AND lithium that cannot be easily recycled. At current useful lives, these batteries will be coming into the waste-recycling streams at volume in about 7-12 years.”

The second landmine is the “17-25 year recycling periodicity of the massive “e-waste” in modern solar panels.”

He goes on to explain that one of the unique, negative, environmental effects of the widespread use of lithium batteries is that each new product made requires new mining of lithium and other materials and emphasizes the point that in the case of electric vehicles the difference in recycling potential with respect to existing vehicles means that “EVERY new EV made requires more new mining and material production than any of the existing 1.2 billion petrol-fired vehicles on Earth.”

As a result the environmental effects of mining Lithium will be exacerbated because so much more will be required.