We Are Not Facing an Energy Crisis, Here Are Four Reasons Why
The Massachusetts Attorney General’s Office recently released a study showing that energy efficiency and demand response are more cost-effective than publicly-funded pipelines in meeting the region’s energy needs, and that renewable energy will help us achieve greenhouse gas reduction goals. Four key facts support the study’s findings:
- Electricity prices have declined without new pipelines: Massachusetts’ electricity prices are declining due to improved planning and market reforms. Specifically, Eversource’s winter rate is 27% lower than last year’s rate, and National Grid’s rate is almost 25% lower than last year. These lower prices are due in part to market reforms, implemented by the regional grid operator ISO-New England, that are improving utilization of existing gas delivery infrastructure and leading power generators to develop plans for ensuring adequate fuel supplies during winter peak.
- Energy efficiency is reducing electricity demand: Massachusetts’ and other New England states’ aggressive energy efficiency programs are causing winter energy demand to decline, reducing the need for additional pipeline capacity and other energy infrastructure. Despite using conservative assumptions that overstate the cost and understate the impact of efficiency programs, ISO-NE predicts that winter peak demand will decline by 0.1% annually through 2024, and the actual impact of energy efficiency is likely far greater. Acadia Center has demonstrated that ISO-NE consistently overestimates energy consumption and peak demand: winter peak energy demand was 24% lower in 2014 than the 2006 projection, and total 2014 energy consumption was 17% lower than the 2006 projection. These inaccurate projections overstate the need for expensive energy infrastructure, including oversized natural gas pipelines that could be used to support gas exports overseas the majority of the year.
- Clean energy procurement will displace gas generation: On November 12th Massachusetts, Connecticut and Rhode Island released a Request for Proposals (RFP) for significant quantities (up to 1,000MW plus) of hydroelectric and wind, and solar energy that will displace natural gas generation and reduce power sector natural gas demand. Legislative proposals in Massachusetts to procure additional hydroelectricity and wind could more than double the quantity of energy in the RFP, offsetting even more natural gas demand. It is worth noting that the costs for hydroelectricity, renewable energy, and transmission are conservatively overstated in the Attorney General’s report, and actual prices for blended wind and hydroelectricity would have to be lower to compete in the regional electricity market.
- Gas plants with limited backup generation: New power plants approved through the regional grid operator’s Forward Capacity Market Auction in early 2015 all include natural gas generation with oil backup. On the few coldest days when natural gas supplies are dedicated to meeting heating needs, these plants will run on oil. This modest, limited use of oil generation during winter peaks in the near term, before more renewable generation comes online, would have a far smaller impact on GHG emissions than new pipelines used year-round, and would be less expensive to consumers than pipeline expansion.
The Attorney General’s report shows that commonsense market reforms, improvements in energy efficiency, and new clean energy supplies offer the best pathway to addressing winter price volatility, and achieve necessary GHG reductions, and the findings are matched by facts on the ground.
Peter Shattuck is Director of Acadia Center’s Massachusetts office and Clean Energy Initiative. Peter’s work at Acadia Center focuses on cleaning up the energy supply across all sectors of the economy. Driving market-based emissions reductions is at the core of this work, using cap and trade policies such as the Regional Greenhouse Gas Initiative, which Acadia Center has tracked since the program’s early development in the 2000s.