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.

Investment of RGGI Proceeds in 2015

This is a post on the latest Regional Greenhouse Gas Initiative (RGGI) report: Investment of RGGI Proceeds in 2015. It is another in a series of posts on RGGI that discusses how RGGI has fared so far (see posts labelled RGGI in the menu). Although the press release, RGGI Report: Investments Generating Consumer Benefits, describes the benefits of the program in glowing terms there are some unsettling numbers buried in the report.

I have been involved in the RGGI program process since its inception. Before retirement from a non-regulated generating company, I was actively analyzing air quality regulations that could affect company operations and was responsible for the emissions data used for compliance. After years dealing with RGGI I worry that whether due to boredom or frustration, that there is very little dissent to the program. It may be because, contrary to EPA and State agency rulemakings, RGGI does not respond to critical comments and rebut concerns raised by stakeholders. After years of making comments that disappear into a void, industry does not seem to think there is value to making comments. 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.

Summary of the Report Results

According to the Executive Summary in this report:

Proceeds from the Regional Greenhouse Gas Initiative (RGGI) have powered a major investment in the energy future of the New England and Mid-Atlantic states. This report reviews the benefits of programs funded in 2015 by RGGI investments, which have reduced harmful carbon dioxide (CO2) pollution while spurring local economic growth and job creation. The lifetime effects of these RGGI investments are projected to save 28 million MMBtu of fossil fuel energy and 9 million MWh of electricity, avoiding the release of 5.3 million short tons of carbon pollution.

As a whole, the RGGI states have reduced power sector CO2 pollution over 45 percent since 2005, while the region’s per-capita GDP has continued to grow. RGGI-funded programs also save consumers money and help support businesses. RGGI investments in 2015 are estimated to return $2.31 billion in lifetime energy bill savings to more than 161,000 households and 6,000 businesses which participated in programs funded by RGGI investments, and to 1.5 million households and over 37,000 businesses which received direct bill assistance.

The report describes how the RGGI investments were used 2015, a brief summary of cumulative investments, and then provides specific information for each state including an example of the programs.

Critique

The first step evaluating the claims of the RGGI states is to convert the pretty graphics to numbers. Chart 4 Cumulative RGGI Investments by Category is an example of the graphical data provided. In the table, All-Time RGGI Investments by Category %, I extracted the numbers shown for each analogous State graphic. In the State information sections the amount of money invested, received and diverted to the general fund for each state is listed. In the table, All-Time RGGI Investments by Category $Millions, I listed those numbers then multiplied them by the State category percentages to get total category amounts.

When you extract the numbers a less complimentary picture of the RGGI proceeds investments emerges. For starters, Chart 4 RGGI Investments by Category does not include the embarrassing raids of RGGI funds by New York and New Hampshire. In reality, the correct percentages are shown as the last row in the All-Time RGGI Investments by Category $Millions table. Similarly, the individual state category investments do not include the General Fund raids which would have shown that 10% of the New York “investments” went to political expediency.

There are some financial issues raised when the amounts are available for each state. Note the difference between the RGGI monies received and investments made and the column labelled “investments received %” which is simply investments divided by received. There is a huge range between the states. Vermont is the most efficient turning the money received into investments but six of the nine states all managed to invest at least 80% by the end of 2015. Delaware, Rhode Island and New York did much worse. It is probably no coincidence that the Administrative cost percentages for Delaware, Rhode Island and New York were among the highest four state percentages.

Administrative costs in general and the tithe to RGGI total over $100 million.   Coupled with the general fund raids there is clearly a cautionary tale for carbon tax advocates who suggest that returning those taxes revenues to the public will minimize impacts. In my opinion, whenever there is a large pot of money available there will be politicians abusing their power to the disadvantage of the public.

The cost effectiveness of these investments is not presented in the report. The report notes that the lifetime effects of the 2015 RGGI investments are projected to save 28 million MMBtu of fossil fuel energy and 9 million MWh of electricity, avoiding the release of 5.3 million short tons of carbon pollution. In Chart 2 there is a note that states that the RGGI states invested $410,158,329 in 2015. The lifetime effects cost $15 per MMBtu, $46 per MWh of electricity and $77 per ton of carbon. I am unfamiliar with the benchmark costs per MMBtu and MWh for comparison with the RGGI effectiveness. However, the common justification for carbon reduction costs is the social cost of carbon. At a 3% discount rate, EPA says that the 2015 social cost of carbon was $36. RGGI investments are reducing carbon at twice the rate claimed to value the climate impact of rulemakings so their investments are not cost effective in this regard.

There is one other aspect of this report that needs to be addressed. The Executive Summary notes that “the RGGI states have reduced power sector CO2 pollution over 45 percent since 2005”. There is no better example of mis-direction in the reporting on the impact of RGGI in this document than this statement. The casual reader would certainly conclude that the RGGI program itself was responsible if not for the entire reduction at least a sizeable portion of the reduction. However, looking at CO2 reductions in the RGGI states that is not the case. In the first place, the program started in 2009. As shown in the EPA CAMD Annual CO2 Trend Data table the reduction from the last year before RGGI was instituted to 2015 was 31%, much less than the 45% claimed. (Note that my numbers don’t match the RGGI report which I believe is because I relied on the EPA Clean Air Markets Division database with the assumption that summing all the annual CO2 from the all programs that report CO2 was a good enough approximation. If RGGI only summed data from RGGI-affected units it could certainly account for the difference between numbers.)

However, it is even worse. The 20.5 million decrease is only a 16.1% reduction from the 2006-2008 baseline. This is consistent with my previous post on CO2 reductions due to RGGI which showed that RGGI is only responsible for between 24% and 5% of the observed reduction.

There is one final implication to the RGGI investments “success” with carbon reductions. The proposed program revisions released last month for RGGI call for an annual post-2021 cap reduction of 2,275,000 tons per year. In the Proceeds Investment Report Table 1: Benefits of 2015 RGGI Investments Program the annual benefits of 2015 investments lists an annual reduction of 298,410 tons. As shown in a white paper submitted to RGGI by the Environmental Energy Alliance of New York the affected electrical generation units have made most if not all of the cost effective reductions possible from their operations. As a result, future reductions will have to come from other investments but RGGI has no track record providing any assurance that RGGI investments will be sufficient to meet the targets proposed. For the record if a compliance entity has no allowances available to cover emissions their only compliance alternative is not run. If that happens then RGGI states will have a whole lot of explaining to do.

 

 

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.

Pragmatic Environmentalist of New York Principle 7: Golden Rule of Climate Extremes

This is a background post for my pragmatic environmentalist principles listed on the principles page of this blog.

Dr. Cliff Mass defines the Golden Rule of Climate Extremes as: The more extreme a climate or weather record is, the greater the contribution of natural variability.

I am posting this soon after Harvey made landfall, dumped extraordinary amounts of rain, and the impact of global warming on it made the news. The question that came up was the effect of climate change on the storm. The Capitol Weather Gang claims the truth is in the middle. Note that Dr. Mass concluded that global warming effects on Harvey were immaterial.

The golden rule of climate extremes is important to keep in mind because I believe it is important to point out that most climate scientists do not have extensive weather forecasting experience. It is that experience that enables meteorologists to properly determine the role of natural variability to a particular event. When an operational meteorologist looks at this kind of weather event, for example Joe Bastardi, natural variation invariably provides most of the impact.

Pragmatic Environmentalist of New York Principle 8: Gresham’s Law of Green Energy

This is a background post for my pragmatic environmentalists principles listed in the about section of this blog. Jonathan Lesser has coined “Gresham’s Law of Green Energy” that I believe is another principle of a pragmatic environmentalist.

Gresham’s Law is named after Sir Thomas Gresham, a 16th-century British financier who observed that “bad money drives out the good.” Lesser shows that green energy subsidies transfers wealth and does not create wealth. The subsidies or “bad” money take money out of the system that was “good” inasmuch as it was being used productively. In particular he notes that “subsidized renewable resources will drive out competitive generators, lead to higher electric prices, and reduce economic growth”.

He explains his rationale as follows:

“The subsidies paid by ratepayers transfer wealth from existing generators to a chosen few renewable resource owners. One may like to rail against the existing generators — as many politicians have — but the long-run implications of such subsidies will be to destroy competitive wholesale electric markets and drive out existing competitors. This course of action will cost jobs because businesses, forced to pay higher electricity prices, will either relocate, contract, or disappear altogether. It will reduce the disposable income of consumers, who will forever be forced to subsidize renewable resources (just as they must now subsidize corn ethanol producers) — all in the name of ’green energy’.”

This is a particularly important principle for renewable energy benefit analyses, in particular “price suppression” such as that used in NY’s Clean Energy Standard. The idea is that increasing the supply of “cheap” electricity causes market prices to decrease so that consumers benefit. However, Lesser shows that these benefits are temporary and costly in the long run. Subsidizing the construction of renewable generation in a de-regulated state results in resources that manipulates the market to make it less efficient. Moreover, it eventually drives out existing generators and reduces the likelihood that new unsubsidized generating facilities will enter the market. Lesser notes that rather than building a better mousetrap, these policies are using subsidies to artificially and temporarily reduce the price of mousetraps.

Real Climate and Cost Effectiveness

Update 9/1/2017: My responses showed up on Real Climate.  Not sure why I could not see them but the timing on the posts indicates they were there but I could not see them?!?

On August 28 I read a post called Sensible Questions on Climate Sensitivity on the Real Climate blog. In the comment section there was a comment that, in my opinion, mis-characterized the position of the luke-warmers I know so I responded. I have heard that comments are censored sat this site o that those who do not comply with the positions of the web masters are not shown but have never had personal experience with it. Although my first comment was posted my responses to the follow up comments were not. Because my original post included the link to this blog I am posting the comments and my responses. If you wanted a response to your comments and checked my blog here you go. If the comments show up then I will delete this post.

The relevant comments are shown below. The particular comment (#25) that engendered my response claimed that luke-warmers insist “that published ECS confidence limits can only mean the most cost-effective public policy is to do nothing.” First an explanation then the comments and finally a conclusion.

I consider myself a luke-warmer. Luke-warmers are not a well-defined party in the global warming debate. My definition is that we simply believe that the ECS or equilibrium climate sensitivity (the amount of warming caused by greenhouse gases) is at the lower end of the Intergovernmental Panel on Climate Change range. As soon as you get to policy responses luke-warmers diverge but those who also claim to be luke warmers (e.g., Tom Fuller, Blair King and Judith Curry) all don’t think public policy should be to do nothing.

I don’t want to speak for their particular public policy opinions so I will give my preference for public policy. I don’t think the climate is so sensitive to GHG that we have to use current renewable technology in order to stave off catastrophe. I don’t think we can ever be so sure of future climate to say it is not a problem or it will be a catastrophe. Therefore I am convinced that we have to develop cheaper low carbon technology because as long as fossil fuels are cheaper they will be used. Fossil fuels are the best thing that ever happened to mankind because without them our lives would be brutal and short. Until we have a replacement that can provide the benefits of abundant and affordable power then it is immoral to not use fossil fuel. In the meantime because society is not resilient to current extreme weather I think that in addition to funding research for cheaper fossil fuel alternatives we should be spending money on adapting to extreme weather rather than subsidizing any current technology renewable energy.

Comments

Here are the blog comments. I responded to comment 25 in comment 29. Comments 30, 31, 32, and 33 were posted in response to my comment. I submitted two responses that went to moderation. I copied the text and pasted it into a document for archival. Several hours later they disappeared and were not posted.

25   Mal Adapted says:

22 Aug 2017 at 9:35 AM

DDS:

Interpretation: There is enough uncertainty that a little humility need apply.

Scientists, like all genuine skeptics, are required to be humble before Nature. It’s necessary, though not sufficient, to not fooling themselves. Pseudo-skeptical AGW deniers, OTOH, who keep saying “it’s not happening”, “it’s not our fault”, “it won’t be bad” or “We’ll be lucky” are letting hubris fool them.

That last AGW-denier meme has been labeled ‘luck-warmerism’. Luckwarmers selectively mask the upper half of the ECS PDF, while falsely accusing climate realists of masking the lower half. The luckwarmer insists that published ECS confidence limits can only mean the most cost-effective public policy is to do nothing.

How about you, Dan? Are there limits to your confidence?

29   Roger Caiazza says:

28 Aug 2017 at 11:20 PM

Mal Adapted, Two questions relative to “The luckwarmer insists that published ECS confidence limits can only mean the most cost-effective public policy is to do nothing.”

This Luke warmer thinks that the trend in ECS confidence limits is shrinking the fat tail. Is that what you mean by masking the upper half?

However the science ends up, this Luke warmer thinks that adaptation is a more cost-effective public policy than mitigation. Do you think that today’s technology is capable of mitigating our way out of GHG forcing climate change?

30   zebra says:

29 Aug 2017 at 9:36 AM

Roger Caiazza #29,

What exactly does “cost effective” mean in this context?

I’m always hearing this sky-is-falling claim about the “economic disaster” that is supposed to result from doing things like installing solar panels or building wind farms or driving EV or reducing energy consumption, and so on.

But, I never see any numbers! And, I never see any cause and effect!

If you want to deal with fat tails, let’s do it on both sides of the discussion. Why should anyone give any credibility to your alarmist position, given that you don’t have any basis for it other than your opinion?

31   MartinJB says:

29 Aug 2017 at 12:59 PM

Roger (@19): SO, “however the science ends up” you think that adaptation is cost effective. Interesting… that suggests that you have a preconceived notion of what you’re willing to do that is not dependent on the reality of the situation. I will freely admit that at a low enough level of ECS, adaptation is more cost effective. But surely, the higher the ECS the more relatively cost-effective mitigation becomes. What’s more, mitigation is more likely to cut off some of the tail risk than adaptation.

One other thing to consider: In general, efforts at mitigation do a better job of assigning more of the costs of dealing with global warming to the the people who have contributed more to in-the-pipeline global warming. Admittedly, that is not a strictly economic metric and likely puts more cost on me and mine, but I am happy to give up a little for the purpose of justice and equity…

32   Mal Adapted says:

29 Aug 2017 at 6:16 PM

Roger Caiazza:

However the science ends up, this Luke warmer thinks that adaptation is a more cost-effective public policy than mitigation.

Uh…if you don’t care about the science, what makes you think adaptation is a more cost-effective public policy than mitigation? Stipulating, of course, that adaptation might be a more cost-effective private policy for you, even if climate sensitivity ends up to be above the modal estimate. If you’re lucky, that is.

33   Phil Scadden says:

29 Aug 2017 at 7:50 PM

Roger – your opinion based on hope, preference – or some actual peer-reviewed analysis of numbers that you would like to share with us? Link please.

Roger Caiazza says:

Your comment is awaiting moderation.

29 Aug 2017 at 8:43 PM

Zebra, Here is a cost estimate for New York State to meet part of Governor Cuomo’s 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” (https://www.manhattan-institute.org/html/new-yorks-clean-energy-programs-high-cost-symbolic-environmentalism-10565.html) by economist Jonathan Lesser that provides cost estimates for some of the programs referenced in the Executive Order.

Here are the 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.

For what it is worth I think his estimates don’t include all the costs.

Roger Caiazza says:

Your comment is awaiting moderation.

29 Aug 2017 at 9:03 PM

For the cost effective commenters,

Using your science for the ECS and the New York State Energy Research and Development Authority numbers referenced in the Manhattan Institute report referenced above what do you think the change in global warming temperature would be? For New York the reduction would be 76.2 MMtCO2e from 2014 levels for the 2030 goal and 170.6 MMtCO2e from 2014 for the 2050 goal. For costs use just the $18 billion in above market electricity costs. My question to you is the money spent on the mitigation reduction that you predict going to have tangible results? However I do that calculation I don’t see a measurable impact on temperature. If you have a different approach suitably referenced in the peer reviewed literature please show me.

On the other hand spending that money on adapting New York would provide tangible benefits by making the state more resilient to extreme weather. Remember global warming is going to increase the probability of extreme weather and make it more severe. It is not going to prevent the extreme weather we have observed in the past and, in my opinion at least, we are not nearly as resilient to historical weather as we need to be. So my cost effective argument against mitigation is a lot of money spent for little effect might better be spent adapting to the past.

Conclusion

I really am not sure why my comments were censored other than they reveal some inconvenient points. If the moderators do not think that adaptation is a better alternative or can show that the costs for the 80% goal are reasonable then why not let the commenters provide those numbers or better yet disprove them with their own post. New York State has never shown their numbers so surely someone somewhere can prove their case for them.

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.”