Warning Signs from Germany for New York Reforming the Energy Vision

Germany’s Federal Audit Office has released a report that accuses the federal government of having largely failed to manage the German equivalent of New York’s Reforming the Energy Vision (REV). There are warning signs in the report because some of the issues raised are already prominent in the New York energy vision.

Germany’s program, Energiewende or energy transition, is the change from nuclear and fossil fuels to renewable sources of energy. Legislation for the Energiewende passed in 2010 and includes a Greenhouse Gas (GHG) reduction target of 80% by 2050 the similar to REV. The Federal Audit Office review of the program found that costs are high and the targets will likely be missed. “Over the past five years alone, at least 160 billion euros have been spent on the transformation of the energy system,” the report states: “If the costs of energy system transformation continue to rise and its targets continue to be missed, there is a risk of a loss of confidence in the ability of government action.”

In order to implement the transition Germany has had to develop a large bureaucracy to manage the programs and enact 26 laws and 33 regulations. The audit notes that there is “no place where everything comes together, no place that assumes overall responsibility”. This is what is happening in New York. There are over 40 REV initiatives but no single summary.

The audit states:

In short: “A lot of effort does not necessarily mean a lot”. For despite a great frenzy of data collection there is no overall view. “The Federal Ministry of Economics uses 48 different data sources to check the status of the Energiewende on the basis of 72 indicators, and yet “there is a lack of meaningful data that could be relevant for assessment and control”. Many data would have little control value or would be available too late, but often they would “simply draw the wrong conclusions”.

New York’s REV has no status indicators available.

My biggest concern with REV is cost. The German Federal Audit Office report notes: “there are no quantified targets, no measurable indicators” for the energy policy goals of affordability and security of supply. REV also fails to provide that critical evaluation information.

I believe that someday there will be a similar cost-benefit analysis audit of REV with the same results of extraordinary costs and failures to meet the ambitious targets. I predict that the response from New York State will be the same as from the German federal government:

The Federal Government explained its refusal to conduct a transparent cost-benefit analysis of the Energiewende by saying that these costs could only be compared with a “counterfactual scenario”. Because electricity grids and power plants would have had to be renewed even without the Energiewende, only a comparison of a world with and a world without the Energiewende would be meaningful. However, such a comparison could not be made because of the large number of uncertain basic assumptions.

Oneonta New York Decompressor Station and New York Energy Policy

Last month I stumbled upon references to a decompressor station in Oneonta, New York. Firstly, I had no clue what a decompressor station and secondly I was born and raised in Oneonta, New York so I followed up on the story. It is a perfect example of New York State’s emotional rather than rational energy policy.

I was astonished to learn that there is a natural gas load pocket in Oneonta. This small city is located in the western Catskills in Otsego County SW of Albany New York. The natural gas pipeline installed when I was living there in the 1950’s is no longer adequate for all users on the coldest days of the year. As a result the local utility has to curtail natural gas to larger users so that the residential users have adequate supplies to heat their homes. The solution is to compress natural gas elsewhere, truck it to the curtailed facilities, and then decompress it for use.

Mr. Zakrevsky described the decompressor station proposal at the Oneonta Town Board meeting on August 8. He explained that there isn’t enough natural gas for heating on the 30-odd coldest days of the year from the existing pipeline to Otsego County so bigger users have to curtail their use so that homeowners do not have to maintain a backup heating system. Two hospitals, several manufacturers, and a college in Oneonta need energy-dense, constantly available fuel to supplement their natural gas use when that fuel is curtailed. They have considered setting up their own decompressors to replace higher-polluting, less-efficient fuel oil so the Otsego Development Authority submitted a proposal for a grant to explore the possibility of a single centralized decompressor station to provide the necessary natural gas.

The link listed above documents a hearing at the Oneonta Town Board meeting including comments from a crowd of folks who do not want new fossil fuel infrastructure. I did not listen to all the speakers who attended the Town Board meeting to protest the decompressor station because the arguments I did hear all seemed confined to emotional pleas for “cleaner, greener” alternatives. My problem is that I do not believe numbers or history support such alternatives. There were opponents to this project that proudly claimed victory for the permit denial of the Constitution natural gas transmission project nearby that would have provided all the natural gas necessary for everyone in Oneonta. Apparently that natural gas was from Pennsylvania and is fracked so it is evil and must be stopped. I think that all those who opposed the decompressor proposal and opposed the Constitution pipeline should explain how they propose to solve the specific problem of heating the city’s hospital on the coldest days of the year.

I do not think that the decompressor station and compressed natural gas (CNG) trucks is a particularly “good” solution.   From a pollution standpoint using natural gas is better than fuel oil so I agree that using natural gas is preferable and my experience with fuel switching is that process also has implementation risks which could cause heating problems so sticking with natural gas rather than switching to fuel oil is better. Clearly moving CNG by truck during the winter is risky and I understand why speakers at the meeting described them as “bomb trucks”. However, the safer solution is to have enough natural gas pipeline infrastructure in place to prevent curtailments. Because that is not available, the proposal to have a central station just off the interstate rather than decompressor stations at each location that faces curtailment requirements reduces transport risk and makes sense. I must point out that the Constitution pipeline would have solved this problem so the folks that claim that preventing that as a “victory” have to accept culpability for what I believe is a worse alternative.

I expect that the opponents will claim renewables can provide the answer to providing heat for the hospital. I would love to see quantitative support for a solution to the need for constant, dense energy for heating the hospital on the days when not having heat would surely exacerbate illness and maybe even cause deaths. Renewables are intermittent and diffuse. What kind of storage solution do they propose for this winter problem when the available solar energy is low and, on the really cold days, when winds are light? Heating the hospital without the need for outside electricity is necessary in case of a power outage – think ice storm. The hospital uses a heating plant with a boiler that provides hot water for heating and hospital use. The problem with renewable electrical energy is that there is no way to provide in-kind replacement for the boiler fuel. In order to provide heat with renewables the whole heating system would have to be replaced, probably with heat pumps. Those systems have their own problems on these cold days. Proponents of renewable energy have to provide a solution and costs to make their case that there is a viable and affordable alternative to the proposal.

When I was growing up in Oneonta during the 1950’s I missed the Delaware & Hudson Railroad steam engine era when there were over a hundred coal-fired locomotives operating out of the city. However, I do remember the excitement when natural gas came to town so that my family no longer had to deal with maintaining our coal-fired furnace fire, dealing with the ashes and having a coal bin in the basement. I am not aware of any records of the air quality in Oneonta when coal was the preferred heating source and the roundhouse had coal-burning locomotives but I am sure that it was poor. Since 1980 statewide average SO2 levels have decreased by 95%. When homes and the railroad were burning coal in the “City of the Hills” the SO2 concentrations must have been a couple of orders of magnitude greater than today’s levels. That improvement was thanks to oil and natural gas replacement of coal.

I think this is a good example of New York’s dysfunctional energy policy. Ultimately the opponents of the decompressor station must rely on emotional arguments because a rational analysis supports the proposal as a reasonable, albeit not “good”, solution to a problem caused by the lack of sufficient pipeline infrastructure. The better solution would be new pipelines to provide the necessary natural gas. The irrational fear of fossil fuel infrastructure in New York is causing poor decisions.

Cuomo Pledges No New Natural-Gas Fired Power Plants

On May 10, 2018, a Food and Water Watch organizer cornered Governor Andrew Cuomo on the topic of natural-gas fired power plants. According to their press release, “Tonight in New York City, Governor Andrew Cuomo committed on camera that he would reject any new natural-gas fired power plants”.   It is not often that I have any sympathy for the Governor but in this case I do.

The press release headline is that Governor Cuomo pledged to not permit any new gas power plants. I leave it to the reader to review the video “proof” and decide if this was a substantive pledge.   My transcription of the conversation between Laura Shindell, the organizer with Food & Water Watch and Andrew Cuomo:

Shindell: “Will you protect our climate and communities by rejecting all fracking infrastructure?”

Cuomo: “I have.”

Shindell: “The Sheridan Hollow power plant in Albany and CPV power plants…”

Cuomo: “That is not fracked.”

Shindell: “The fracking infrastructure pipelines and power plants that transport …”

Cuomo: “Pipelines we have. “

Shindell: “Yes”

Cuomo: “Power plants that burn gas we have all over the state. We would have to close them and that is the long term plan.”

Shindell: “And will that conflict with your climate goals”

Cuomo: “Yes, they do”

Shindell: “to remove all fossil fuels? So building Cricket Valley and CPV make it harder for us to make your own climate goals”

Cuomo: “We are not building any new ones. But we have to find a replacement for the old ones.”

Shindell: “Cricket Valley is getting built now”

Cuomo: “It was approved like eight years ago. I have not approved any new ones and I won’t. Thank you”

According to the Food and Water Watch press release:

Asked about new natural-gas fired power plants, Cuomo said, “I have not approved any new ones, and I won’t.” The press release notes correctly that several power plants, including the CPV plant in Orange County and the Cricket Valley power plant in Dover, NY have in fact been approved on Cuomo’s watch. The governor was clear in saying that these plants conflict with the state’s climate goals, adding: “We’re not building any new ones.”

Unfortunately neither Cuomo nor Shindell are energy literate. Shindell does not want the proposed combined heat and power plant in the Sheridan Hollow neighborhood of Albany. On my companion blog I posted an analysis that showed there is no viable alternative to replace the existing system. The existing system needs steam and there is no renewable energy technology that provides steam.  Either you replace with a much cleaner natural gas system or use the existing old dirtier power plant.

Cuomo was correct to say that we have to find a replacement for old natural gas fired power plants when he said that he won’t approve any new natural gas-fired power plants. I hope that he knows, but did not want to extend the conversation to explain, that if we have to replace old natural gas-fired power plants some, if not all, will have to be with natural gas fired power plants.

For example, there are around 70 old, small (~15 to 25 MW), peaking combustion turbines in New York City that are inefficient and have high NOx emission rates. The NYS Department of Environmental Conservation has been threatening to promulgate new pollution limits that will either require new pollution control equipment or shutdown. Because they are so old it does not make much sense to invest in expensive control equipment so the more likely option is to shut them down and replace them with a new modern, efficient and very low emitting facility.

The fact of the matter is that there is no viable alternative for completely replacing 1000 MW of peaking turbines that need to be replaced. Some of the peak can be shaved and there are other options to make the system more efficient so you might not need all 1000 MW. Turbines can run for hours so even if you cut the peak hour load by half they can still provide 3000 MWh of generation if they run six hours. Because renewable energy is diffuse and intermittent New York City has to rely on transmission to get enough renewable power to cover normal load much less peak load. Importantly, there is a requirement to rely on in-city generation when storms threaten to sever transmission lines into the city based on lessons learned from the July 1977 New York City blackout. Absent any consideration of economics or tradeoffs the only solution is natural gas fired power plants or run the risk of another blackout.

According to the Food and Water Watch press release:

After the exchange, Food and Water Watch activists pledged to hold Governor Cuomo accountable to his new commitment to reject new fracked gas power plants. “The age of fossil fuels is over, and it’s exciting to hear Governor Cuomo commit to reject new fracked gas power plants. Since he acknowledged that fracked gas plants conflict with New York’s climate goals, Governor Cuomo should rescind existing permits for power plants like CPV and Cricket Valley as well.  The governor can rest assured the climate movement will hold him to his words,” said Laura Shindell.

I can only hope that at some point energy facts and tradeoffs between alternate sources of energy will be considered so that natural gas power plants can be developed where they are appropriate and necessary. Alas it is an election year and the energy illiterate climate movement appears to be calling the shots.

My Comments on New York Carbon Pricing 3

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 posted on previous submittals here and here.  The following is the comment that I submitted to the State on March 29 2018.

These 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 so that there is at least one voice of the unaffiliated public whose primary interest is low rates and an understanding of the basis of the rationale for a carbon price. New York State energy planning based on the Reforming the Energy Vision goal to change the energy system of New York to reduce greenhouse gas (GHG) emissions 80% from 1990 levels by 2050 is trying to choose between many expensive policy options like pricing carbon in the electric sector while at the same time attempting to understand which one (or what mix) will be the least expensive and have the fewest negative impacts on the existing system. If we make a good pick then we’ll spend the least amount of a lot of money, but if we get it wrong we will be left with lots of negative outcomes and even higher costs for a long time.

These comments are being submitted before the carbon charge setting and adjustment topic is discussed in April. The basic rationale of this policy to price carbon to offset the cost of its impacts hinges on the Social Cost of Carbon value used. I believe it is unfair and inappropriate to determine its viability based on the use of a single value so I recommend using a range and this comment provides further justification for alternative values.

I previously submitted two comments on this initiative. I have recommended 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. In my other submitted comments I noted that there are serious issues with only including the electric sector. I noted 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 tax is on only one sector of the economy, the overall goal of carbon reductions could fail simply because driving up the price of electricity makes the conversion to electric based residential heating and transportation more difficult.

Because of the importance of the SCC on the very basis of this initiative, this comment provides another reference documenting the weaknesses of its use. I endorse the findings of Climate Change, Catastrophe, Regulation and the Social Cost of Carbon by Julian Morris as representing my views on the use of the SCC in this matter.

Julian Morris on the Social Cost Carbon

In the following section I only edit the summary of the analysis as published at the Reason Foundation for use in this comment. I refer the reader to the reference for the supporting graphs and figures and recommend reading the full document.

Federal agencies are required to calculate the costs and benefits of new regulations that have significant economic effects, but initially, different agencies applied different SCCs. To address this problem, the Office of Management and Budget and Council of Economic Advisors organized an Interagency Working Group (IWG) to develop a range of estimates of the SCC for use by all agencies. However, the IWG’s estimates were deeply flawed. In April 2017, President Trump issued an executive order rescinding the IWG’s estimates and disbanded the IWG. The question now is what value regulatory agencies should use for the SCC—if any—when evaluating rules that affect greenhouse gas emissions.

Mr. Morris writes that:

Most analyses of the social cost of carbon, including the IWG’s, have utilized “integrated assessment models” (IAMs), the basic methodology of which involves the following six steps:

  • Develop (or choose from existing) scenarios of future emissions of GHGs;
  • Use those scenarios to estimate future atmospheric concentrations of GHGs;
  • Project changes in average global temperature and/or climate resulting from these future atmospheric GHG concentrations;
  • Estimate the economic consequences of the resultant changes in temperature/climate;
  • Estimate the costs of abating specific amounts of GHG emissions;
  • Combine the estimates from steps 4 and 5 to produce an assessment of the net economic effect of different scenarios and thereby identify the optimum path of emissions.

Each step in this process is fraught with difficulty:

  1. Future emissions of GHGs are unknown—and unknowable—but likely lower than assumed in most IAMs.

Future human-related emissions of GHGs will depend on many factors, especially: the human population, the extent and use of technologies that result in energy consumption, the types of technology used to produce energy, and the efficiency with which technologies use energy.

None of these factors can be forecast with any precision. Predicting future technologies is particularly challenging. However, greenhouse gas emissions from U.S. sources have declined from their peak, mainly as a result of using more energy-dense, lower carbon fuels (and by using energy more efficiently. Global emissions are rising but at a declining rate, in spite of robust economic growth. If these trends continue, future concentrations of greenhouse gases are likely to be at the low end of estimates used by the IWG when calculating the SCC.

  1. The relationship between emissions and concentrations of greenhouse gases is complicated.

Calculating future atmospheric concentrations of GHGs, based on estimates of future human emissions, requires knowledge of the length of time that these GHGs will remain in the atmosphere. That, in turn, requires knowledge about the rate at which they will break down and/or be absorbed. This is no simple task. The rate at which GHGs such as methane and dinitrogen monoxide break down depends on such things as temperature and the amount of water vapor and other chemicals in the atmosphere with which they might react. The rate at which CO2 is taken up by plants, soil and oceans varies considerably depending on factors such as temperature and the availability of nutrients. The dynamic and interactive nature of these effects complicates the picture further.

  1. The climate is likely much less sensitive to increased emissions of GHGs than has been presumed in most IAMs, including those used by the IWG.

Early estimates of the sensitivity of the climate to increased concentrations of greenhouse gases found that a doubling of atmospheric carbon dioxide would result in a warming of between 1.5°C and 4.5°C, with a “best guess” of 3°C. But those estimates were based on poorly specified models. Tests of models using those estimates of climate sensitivity predict about twice as much warming as actually occurred. Nonetheless, the IWG used those early, inaccurate estimates. More recent estimates of climate sensitivity suggest that future emissions are likely to result in much more modest warming of the atmosphere (with a doubling of carbon dioxide concentrations resulting in a warming of 1.5°C or less).

  1. The effects of climate change are unknown—but the benefits may well be greater than the costs for the foreseeable future.

If the recent lower estimates of climate sensitivity are correct and emissions follow a relatively low path, warming will likely be modest and its effects mild. Likely effects include:

  • Warming will be greater in cold places (i.e. farther from the equator), seasons (winter), and times (night) than in warm places (equatorial regions), seasons (summer) and times (day).
  • At higher latitudes, winters will be less extreme.
  • Precipitation will increase, but not everywhere, and some places will become drier.
  • Sea levels will continue to rise slowly, as the oceans expand and land-based glaciers melt. (If current trends continue, sea level will rise by about 11 inches by 2100.)
  • The incidence of extreme weather events will not change dramatically.

While increased temperatures in warm places and seasons may result in higher mortality among those who are less able to cope with higher temperatures, warmer winters will reduce the number of people who die from cold. Since 20 times as many people currently die from cold as die from heat, modest warming will reduce temperature-related deaths. These effects will be tempered by the use of heating and cooling technologies, but the costs of additional cooling will be more than offset by reduced expenditure on heating.While rising temperatures have the potential to increase the incidence of some diseases, such as diarrhea, these effects are likely to be moderated by the adoption of better technologies, including piped clean water and sewerage.

Increased concentrations of carbon dioxide and higher temperatures are likely to increase agricultural output in many places. While agricultural output may fall in other places, this effect is likely to be moderated by the adoption of new crop varieties and other technologies. On net, crop production is likely to rise in the U.S. and globally.

Many economic models of climate change, including two of the three IAMs used by the IWG assume very limited adaptation. Yet the history of human civilization is one of adaptation. Food availability per capita and access to clean water have risen dramatically over the past half-century, reducing malnutrition and water-borne diseases and increasing life expectancy. Rising wealth and the adoption of new technologies have reduced mortality from extreme weather events by 98% in the past century. It seems highly likely that continued innovation and more widespread adoption of adaptive technologies will continue to reduce mortality, mitigating most—if not all—the adverse consequences of rising temperatures.

  1. The costs of reducing future emissions of GHGs are unknown—and will depend very much on the extent and timeframe of any reduction.

Proponents of taking action now argue that any delay would increase the total cost of emissions reductions—because baseline emissions (i.e. the emissions that would occur without any mandated reductions) would be higher and the size of any such future reduction would have to be greater. But such arguments presume both significant increases in baseline emissions and a need dramatically to reduce such emissions. If the trends in technology identified earlier do continue, growth in baseline GHG emissions will continue to slow and in the longer term may even fall without any government mandates. Indeed, it is possible that baseline emissions in the future (i.e. after 2050) will be consistent with a pathway of emissions that results in atmospheric GHG concentrations that generate net benefits.

Even if baseline emissions rise to a level that justifies intervention in the future, that does not necessarily justify reducing emissions now. Humanity currently relies predominantly on carbon-based fuels for energy generation, and the costs of alternative sources of energy are in most cases relatively high. (If alternative sources of energy were less expensive, then it would make economic sense to adopt them.) Continued innovation will almost certainly result in lower emissions per unit of output in the future, so the costs of reducing a unit of GHG emissions in the future will be lower than they are today.

  1. When combining benefits and costs, the IWG used inappropriately low discount rates, giving the false impression that the benefits of reducing emissions are greater than the costs. At discount rates that reflect the opportunity cost of capital, the current costs of taking action to reduce GHG emissions now and in the near future are almost certainly greater than the benefits.

OMB guidelines state that, for the base case, “Constant-dollar benefit-cost analyses of proposed investments and regulations should report net present value and other outcomes determined using a real discount rate of 7%. This rate approximates the marginal pretax rate of return on an average investment in the private sector in recent years.”

Unfortunately, when discounting the benefits and costs associated with global warming, many analysts have used discount rates that do not reflect the opportunity cost of capital. For example, the IWG provided an estimate of the SCC at a 5% discount rate, but it is the highest rate given. In its guidance, the IWG emphasized the SCC calculated at a 3% discount rate. Its rationale for using the lower rate is that future benefits from avoiding climate change costs relate to future consumption, rather than investment. Policies to address climate change would affect both consumption and investment, but for the purposes of evaluation what matters is the effect on investment, since it is the effect of policies on investment decisions that will determine rates of innovation and hence economic growth, the ability to adapt to climate change, and future consumption. In other words, while future consumption is of primary concern, due to its relationship to human welfare, return on investment is the key factor determining future consumption. Thus, the appropriate discount rate is the rate of return on capital.

Changing the Assumptions

Changing the assumptions made in the IWG’s models can have a dramatic effect on estimates of the SCC. Anne Smith and Paul Bernstein of National Economic Research Associates ran the IAMs used by the IWG making four changes:

  1. They changed the emissions scenario to reflect more realistic assumptions regarding the relationship between emissions and economic growth;
  2. They changed the time horizon from 2300 to 2100;
  3. They changed the discount rate from 3% to 5%;
  4. They changed the scope from global to U.S. only.

When all these changes were combined, the effect was to reduce the SCC by 97%, from $43 to about $1.30. Smith and Bernstein’s analysis did not change any assumptions regarding climate sensitivity or other relevant climate parameters that might have been misspecified in the IAMs used by the IWG. Kevin Dayaratna, Ross McKitrick and David Kreutzer assessed the effects of using more-recent empirical estimates of climate sensitivity to calculate updated SCC estimates using two of the IWG models. They found that, for one model, the average SCC fell by 30%–50% and for the other it fell by over 80%. Moreover, at a 7% discount rate, one of the models generated a negative SCC.

If all of the adjustments made by Smith and Bernstein were combined with those made by Dayaratna et al. it seems likely that the SCC would fall to well below $1. Indeed, given uncertainties in the various parameters used, it seems difficult to avoid the conclusion that for practical purposes the SCC is effectively $0.

What About Catastrophic Climate Change?

Some economists have objected that conventional measures of the SCC fail adequately to account for the possibility of catastrophic climate change. However, such criticisms are based on assumptions concerning the probability of catastrophe that have no empirical basis. A recent attempt to estimate the SCC by surveying experts to find out what they would be willing to pay to avert catastrophe is so riddled with defects as to be of no utility.

Caiazza Conclusions

As Mr. Morris notes “The question now is what value regulatory agencies should use for the SCC—if any—when evaluating rules that affect greenhouse gas emissions.” I do not believe that this proceeding is an appropriate place to determine the most appropriate single value of the SCC to use. However, it would be clearly appropriate to consider a SCC range not only because there are technically justifiable differences in the key input assumptions but also because the SCC value originally proposed for this program was based on the flawed Obama Administration IWG assumptions that did not follow OMB guidance on the use of discount rates.

The analysis by Mr. Morris concludes that “it seems difficult to avoid the conclusion that for practical purposes the SCC is effectively $0.” Therefore, I recommend that this initiative determine what SCC value represents a breakeven point for implementing this program. It is only possible for policy makers to appropriately implement this initiative if they understand there is a reasonable and justifiable range of potential costs of carbon on society. The basic rationale of this policy hinges on the SCC value used and it is unfair to determine its viability based on the use of a single value.

Carbon Price SCC Value Recommendation

I recommend that the carbon pricing initiative consider a range of SCC values including the proposed value in the Brattle Report entitled Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals, the values included in the Regulatory Impact Analysis for the Review of the Clean Power Plan: Proposal, and because Climate Change, Catastrophe, Regulation and the Social Cost of Carbon concludes that “it seems difficult to avoid the conclusion that for practical purposes the SCC is effectively $0” that the breakeven point be calculated where the calculated value of the social cost of carbon benefit out-weighs the costs of a price on carbon.

Page 22 Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals Section V. Market Design Issues with a Carbon Charge, A. Establishing the Appropriate Carbon Price and Adjustments Over Time:

The first option is to set the carbon charge at the value New York ascribes to carbon abatement. The New York NYPSC has adopted using the SCC as estimated by the U.S. Interagency Working Group on the Social Cost of Carbon. The SCC serves an estimate of the damages associated with an incremental increase in carbon emissions. Specifically, the NYPSC has tied ZEC payments to the SCC, starting at $43/ton CO2 today and rising to $65/ton by 2029.

Page 44 Regulatory Impact Analysis for the Review of the Clean Power Plan: Proposal in section 3.4.1. Estimating Forgone Domestic Climate Benefits

Table 3-7 presents the average domestic SC-CO2 estimate across all the model runs for each discount rate for the years 2015 to 2050. As with the global SC-CO2 estimates, the domestic SC-CO2 increases over time because future emissions are expected to produce larger incremental damages as physical and economic systems become more stressed in response to greater climatic change, and because GDP is growing over time and many damage categories are modeled as proportional to gross GDP. For emissions occurring in the year 2030, the two domestic SC-CO2 estimates are $1 and $7 per metric ton of CO2 emissions (2011$), using a 7 and 3 percent discount rate, respectively.

For emissions occurring in the year 2015, the two domestic SC-CO2 estimates are $1 and $5 per metric ton of CO2 emissions (2011$), using a 7 and 3 percent discount rate, respectively.

Climate Ambition Must Confront Energy Realities

Sean Sweeney recently authored an intriguing article entitled “A Bridge to Somewhere? Progressive Democrats’ “Climate Ambition” Must Confront Energy Realities”.   This post addresses an unexpected agreement on some aspects for two individuals from opposite ends of the climate change debate.

Sean Sweeney is director of the International Program for Labor, Climate and Environment at the Murphy Institute at City University of New York, and coordinator of Trade Unions for Energy Democracy. His article published in the New Labor Forum mentions deniers in the first paragraph and states that the 2017 hurricane season was severe enough to “warrant climate change to be declared a national emergency?” At the other end of the spectrum when I look at a papers based on actual data I find that “since 1900 neither observed continental United States landfalling hurricane frequency nor intensity show significant trends, including the devastating 2017 season.” As a result I do not believe that climate change is a national emergency.

Nonetheless we find common ground. I agree with Sweeney that “the more ambitious the targets, the harder it is to answer questions about how they will be reached.”

Sweeney describes two bills introduced in Congress in 2017 that represent progressive Democrats’ climate ambition. A Senate bill introduced in April 2017 by Senators Jeff Merkley, Bernie Sanders, and Ed Markey. It calls on the United States to transition 100 percent off of fossil fuels by 2050. The “100 × 50” Act would impose new federal mandates requiring “zero carbon” vehicles, while barring federal approval of oil and gas pipelines. The House bill, submitted by Tulsi Gabbard on September 7, 2017, along with six other representatives seeks to end fossil-fuel use in the United States as early as 2035—a full fifteen years earlier than the 2050 target date proposed by Sanders and Merkley. Titled “Off Fossil Fuels for a Better Future Act” (OFF Act) would also mandate the United States to transition to 80 percent clean renewable energy by 2027 and 100 percent by 2035.

Both bills mandate moratoria on any new coal, oil, and gas projects (extraction and infrastructure, including power plants, pipelines, and export terminals). Sweeney and I agree that these are ambitious goals. I agree with him when he states “Ambition surely has its place, but committing to a crash diet on the morning of January 1 is one thing, being fifty pounds lighter in time for the July 4th weekend is something else altogether.” I also agree that with him when he notes that “the difference between aspirational targets and actual accomplishments is not always acknowledged by leading green nongovernmental organizations (NGOs).” I believe he is also correct when he notes that “Mandating electricity retailers to source 80 percent of their power from renewables does not answer the question how that power might be produced, integrated into the grid, or who will do the work.” As noted on my other blog, the aspirational plans to reduce New York State emissions certainly signal the virtue of the Governor of New York but it is not at all clear how those plans will be implemented, whether anyone is looking to see if there are unintended consequences between competing components of the plan, and, most importantly in my mind, how much will they cost.

Despite our agreement on this aspect I cannot overstate how much I disagree with his statement that those two climate bills are “informed by the core findings of the scientific community”. These targets are arbitrary, reflect a mis-reported 97% consensus and the idea that a portion of the scientific community funded to the tune of over $2.5 billion dollars in 2016 would come up with any conclusion other than “it is a problem and you need to fund us more” is naïve. I agree with Dr. Judith Curry “we do not know how much humans have contributed to the recent observed warming and there is disagreement among scientists as to whether human-caused emissions of greenhouse gases is the dominant cause of recent warming, relative to natural causes.” As a result I do not support mitigating greenhouse gas emissions.

Finally, Sweeney states that “If either bill became law, it would amount to a declaration of war on fossil-fuel interests, because much of the present-day stock market value of coal, oil, and gas companies is based on their below-the-ground reserves.” While I agree that this would be a declaration of war on fossil-fuel companies, I think it represents a much bigger target. I believe that fossil fuels have been one of the greatest things to happen to mankind. Until there are in-kind, same price replacements for the ubiquitous use of fossil fuel in society this targets the way of life of everyone. There is a massive lack of understanding relative to what keeps the lights on and enables our affluent and mobile lifestyles. Once you understand that cutting CO2 to the levels proposed will be extraordinarily difficult it is clear that it will be expensive and it is going to affect our lifestyle. For example, electrification of the transportation and residential heating sectors will be required. Sponsors of these bills owe it to their constituents to explain just how expensive it will be and what will have to change in our lifestyle.

Indian Point Replacement Power – NYISO Official Conclusion

I just became aware of a report by the New York Independent System Operator (NYISO) entitled Generator Deactivation Assessment, Indian Point Energy Center dated December 13, 2017 that is the official response to the question of replacement power for the retirement of Indian Point. This post compares their conclusions with my guesses in earlier posts.

In January 2017 New York’s Governor Andrew Cuomo announced the closure of Entergy’s Indian Point Energy Center (IPEC) located 25 miles north of New York City by April 2021. 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”. Since that announcement NYS agencies have been analyzing the potential impacts of the shutdown and the NYISO study summarizes their evaluation of the Entergy deactivation notice for IPEC. Entergy reported that it intends to deactivate the 1,299 MW unit 2 on April 30, 2020 and the 1,012 MW unit 3 on April 30, 2021.

NYISO Conclusions

As required by their rules, NYISO performed an analysis of resource adequacy and, in coordination with New York Transmission Owners, transmission security analyses of the New York Control Area to determine whether shutting down IPEC would cause problems with their standards for reliability and capacity. The conclusion was that subject to the assumptions of the study there would be no violations of their standards so “Entergy has satisfied the applicable requirements under the NYISO’s Generator Deactivation Process to retire the Generators on or after its requested deactivation date”.

NYISO assumed that three major generation facilities currently under construction would be available in the base case for this assessment that impact the findings: Bayonne Energy Center II Uprate (Zone J, 120 MW), CPV Valley Energy Center (Zone G, 678 MW), and Cricket Valley Energy Center (Zone G, 1,020 MW). All three are natural-gas fired combustion turbines. The assessment found that “reliability criteria would be met without Indian Point Energy Center throughout the Study Period under the assumed and forecasted base case system conditions.”

In addition, NYISO performed a scenario assessment to evaluate the reliability of the system without those three generation facilities. That scenario concluded “These scenario results demonstrate that, without the expected new generation facilities currently under construction, additional replacement sources of power would be necessary to maintain reliability following deactivation of IPEC.” They noted that “Resource needs could potentially be met by combinations of solutions including generation, transmission, energy efficiency, and demand response measures” and estimated that generic addition of at least 200 MW by 2023 anywhere in the Lower Hudson Valley would resolve the deficiency through a five-year horizon and that to address the deficiency through 2027, additional resources would range from 400 MW to 600 MW depending on type and location of the resources within the Lower Hudson Valley.

My Analyses

I prepared four previous posts on Indian Point replacement power. The first and a subsequent update considered New York State projects that had been permitted to see if there was replacement power in the pipeline that could replace its output. I also analyzed whether renewables and energy efficiency were a realistic alternative and concluded that approach was unlikely to succeed. Finally, I looked at a proposal from the New York Battery and Energy Storage Technology Consortiums to use energy storage as a potential replacement for Indian Point. I concluded that this would also not likely succeed.

Ultimately my conclusion that CPV Valley Energy Center, Cricket Valley Energy Center and the proposed Champlain Hudson Express transmission project could provide replacement power for IPEC is very similar to the NYISO conclusion that CPV Valley Energy Center, Cricket Valley Energy Center and the Bayonne Energy Center II Uprate project could provide the replacement power. The only difference is that my replacement scenario did not export jobs from New York to New Jersey and including the transmission project that uses hydro power from Quebec would have lower emissions. In either case, Cuomo’s claim that there would be no net increase of emissions due to the closure is flat out wrong.

The NY Riverkeeper blog claims that the three gas plants are not needed to replace IPEC. That post seizes on the alternative scenario that concludes that: “resource needs could potentially be met by combinations of solutions including generation, transmission, energy efficiency, and demand response measures.” In addition to my criticisms of their preferred alternatives in my previous posts, there is a timing issue. The plan is to deactivate one unit on April 30, 2020 and the other on April 30, 2021. No significant generation facilities can get through the NYS Article Ten permitting process in less than five years so alternative resources would not be available for the proposed shutdown schedule.

New York State Comments on the Clean Power Plan – February 2018

Officials from twelve states including New York submitted a comment labelled as State Environmental and Energy Regulators’ Comment on Advance Notice of Proposed Rulemaking, Docket ID No. EPA-HQ-OAR-2017-0545 on February 26, 2018. The comments, facilitated by the Georgetown Climate Center, were from: California, Connecticut, Massachusetts, Minnesota, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington. The letter discusses the need to reduce emissions of the greenhouse gases that cause climate change and this post reviews their rationale for that need.

EPA requested comments on a proposed rulemaking to revise the Obama-era Clean Power Plan which was a regulation to limit CO2 emissions from power plants. From my pragmatic standpoint the ultimate issue is whether the regulation can actually impact the purported effects better than an alternate response.

The comment starts as follows:

We are environmental and energy regulators from a group of 12 states, and we are providing comment on the Environmental Protection Agency’s (EPA) Advance Notice of Proposed Rulemaking on State Guidelines for Greenhouse Gas Emissions from Existing Sources (ANPRM)[1].

We represent states that are already suffering the economic and human consequences of climate change, and that are leaders in working to reduce the emissions that cause it. Extreme weather events in recent years have continued to cause record damages that disrupt state economies and require years for recovery. For example, in 2017 California experienced almost twice as many wildfires burning six times as many acres as the average over the last five years[2], and these fires were among the deadliest in the state’s history, killing a total of 47 people[3]. The National Oceanic and Atmospheric Administration (NOAA) estimates that Hurricane Sandy caused damages of over $70 billion, and projected damages from Hurricane Harvey total $125 billion[4]. With over $300 billion in estimated losses from disaster events in 2017, last year was by far the costliest year for climate and weather related events, and it also tied the record for the number of billion-dollar disaster events in a single year[5]. Our states are working to reduce harmful climate pollution individually and jointly. Minnesota’s GDP grew by 23.1 percent between 2000 and 2014, while its emissions decreased by 3.6 percent[6]. North Carolina’s Renewable Energy and Energy Efficiency Portfolio Standard has resulted in investments of over $10 billion in clean energy technologies[7], created 34,000 clean energy jobs,[8] and reduced CO2 emissions by 14.6 percent between 2004 and 2014[9]. Since the launch of the multi-state Regional Greenhouse Gas Initiative, carbon emissions from power plants in the region have decreased by 40 percent[10]. EPA should act urgently to reduce the risk to American citizens from further climate impacts, and should take into account the methods our states have already proven as effective and affordable in reducing carbon pollution.

My problem with this rationale is that it only lists a series of weather events but does not explain how much of the observed events are the result of climate change and, therefore, could be affected by the control program they support. Ultimately, the alleged effects of human impacts on climate are not creating new weather-related hazards. Climate change could make weather hazards more frequent and more intense but will not prevent them from occurring in the future.

Consider, for example, the statement “projected damages from Hurricane Harvey total $125 billion”. Hurricane Harvey was “A category 4 hurricane (on the Saffir-Simpson Hurricane Wind Scale) before making landfall along the middle Texas coast. The storm then stalled, with its center over or near the Texas coast for four days, dropping historic amounts of rainfall of more than 60 inches over southeastern Texas.” “Harvey was the most significant tropical cyclone rainfall event in United States history, both in scope and peak rainfall amounts, since reliable rainfall records began around the 1880s”. Not surprisingly with this much rain there was catastrophic flooding and the fact that it happened over the major metropolitan area of Houston made it very costly.

The comment letter states “Extreme weather events in recent years have continued to cause record damages that disrupt state economies and require years for recovery” and uses the very large damage estimate as an example. Not addressed was whether climate change affected the rainfall and thus the damage.

In the first place, using damage estimates is a weak argument for climate change affecting Harvey. If the storm had not stalled over Houston there would have been much less to damage and the costs would have been lower. A recent paper makes the point that “Growth in coastal population and regional wealth are the overwhelming drivers of observed increases in hurricane-related damage”. The paper also shows that there has been no significant change since 1900 in hurricanes that land in the United States for frequency or intensity. So the real argument that the state comments should have made is that Hurricane Harvey itself was affected by climate change.

There are a couple of analyses that do claim that Harvey rainfall was affected by climate change. A team of scientists from World Weather Attribution claimed that human-caused climate change made the record rainfall that fell over Houston during Hurricane Harvey roughly “three times more likely and 15 percent more intense”. Another paper suggests that the annual chance of at least 500 mm (20”) of rain over Texas like that seen from Hurricane Harvey would increase from about 1% between 1981-2000 to 18% by the end of the 21st Century and concludes that the risk from a Harvey event has already increase six-fold in 2017 (a 6% chance of occurrence yearly) versus that from just a couple decades ago.

Both of these analyses use output from dynamical weather forecast models to project the effect of climate change. The theory is that a warmer atmosphere can hold more moisture so rainfall rates would be more intense. Landsea references a study that explains “Theory suggests that the amount of rainfall in the tropical latitudes would go up about 4% per deg F sea surface temperature (7% per deg C). Climate models forced by assuming continued emissions of greenhouse gases suggest around 2-2.5 deg F (1-1.5 deg C) warming by the year 2100, or about 10% more tropical rainfall. Landsea then notes:

Scaling the results from both theory as well as climate model projections suggest, then, that roughly 3% of hurricane rainfall today can be reasonably attributed to manmade global warming. This value is a rather tiny contribution. Thus only about 2” (50 mm) of Hurricane Harvey’s peak amount of 60” (1525 mm) can be linked to manmade global warming.

Landsea goes on to explain why he does not consider the other results reliable. I prefer to use all the results to provide a range of potential outcomes

So even if the State comments had properly considered the real effect of climate change on extreme weather events instead of the inappropriate total cost of a storm, there are a legitimate range of potential outcomes – (15% more intense to 3% more intense). These comments do not provide an appropriate rationale why they believe controls are necessary because they did not provide a science-based argument. Instead they have relied on emotion-based claims of damages without attributing them to climate change impacts.

The Landsea paper lists lessons to be learned from Harvey’s catastrophic flooding that summarize the important points that should be recognized that is written so well I want to include it here:

  1. Hurricanes (and Tropical Storms) have been associated for millenniums with extreme rainfall and freshwater flooding. There is nothing that one can do to prevent these storms from occurring, hitting land, and impacting people;
  2. Massive flooding and catastrophic impact from tropical storms and hurricanes occurs when the system moves slowly over a major city. This is precisely what happened because of Harvey as a tropical storm over Texas;
  3. Flooding is made worse when extreme rainfall occurs over impervious land (such as roads and buildings) and the rain cannot soak in. Land use decisions should better consider allowing building (or rebuilding) in flood prone areas;
  4. Studies should be made to see if evacuating people in advance of extreme flooding rain is feasible. (Currently, only evacuations from hurricanes are primarily issued from possible storm surge – salt-water – flooding. However, because the skill of in day-to-day rainfall amounts and locations continues to improve, it might be feasible to call for limited evacuations in the most vulnerable locations.);
  5. Linking hurricane rainfall to global warming today (and even decades from now) based upon such a tiny contribution is misleading. Moreover, such a fixation can delay steps that can be taken now to better mitigate the effects of extreme flooding from hurricanes. See the following sites for more action today that can be taken: the Federal Emergency Management Agency (FEMA), the Insurance Institute for Business and Home Safety (IIBHS), the Environmental Protection Agency (EPA), and academia (University of Colorado, University of Pennsylvania, and University of Iowa).

Paraphrasing Dr. Landsea, the fixation on reducing greenhouse gas emissions in the Obama-era Clean Power Plan is delaying actions that could and should be done today to mitigate the inevitable catastrophic hurricane damages. The comment letter by these states continues this inappropriate fixation. Moreover, the comments do not provide any indication how much their preferred control options would impact global warming in general or the alleged impacts listed in particular.

[1] 82 Fed. Reg. 61,507 (Dec. 28, 2017).

[2] “Incident Information,” California Department of Forestry and Fire Protection, http://cdfdata.fire.ca.gov/incidents/incidents_stats?year=2017.

[3] California Department of Forestry and Fire Protection, Large Fires 2017: 300 Acres and Greater, http://cdfdata.fire.ca.gov/pub/cdf/images/incidentstatsevents_273.pdf.

[4] Billion-Dollar Weather and Climate Disasters,” NOAA, https://www.ncdc.noaa.gov/billions/events/NY/1980-2017.

[5] Id., https://www.ncdc.noaa.gov/billions/overview.

[6] Devashree Saha & Mark Muro, The Brookings Institution, Growth, Carbon, and Trump: State progress and drift on economic growth and emissions ‘decoupling’ (December 8, 2016), Fig. 3.

[7] RTI International, Economic Impact Analysis of Clean Energy Development in North Carolina – 2017 Update (Oct. 2017), https://energync.org/wp-content/uploads/2017/10/Summary-Findings_Economic-and-Rate-Impact-Analysis-of-Clean-Energy-Development-in-North-Carolina%E2%80%942017-Update-October-Version.pdf

[8] U.S. Climate Alliance, 2017 Annual Report, https://static1.squarespace.com/static/5936b0bde4fcb5371d7ebe4c/t/59bc4959bebafb2c44067922/1505511771 219/USCA_Climate_Report-V2A-Online-RGB.PDF.

[9] North Carolina Utilities Commission, Annual Report Regarding Renewable Energy and Energy Efficiency Portfolio Standard in North Carolina Required Pursuant to G.S. 62-133.8(J) (October 1, 2017), http://www.ncuc.commerce.state.nc.us/reports/repsreport2017.pdf.

[10] “RGGI Emissions Fell Again in 2016,” Acadia Center (March 10, 2017), http://acadiacenter.org/rggi-emissionsfell-again-in-2016/.