RGGI 63rd Auction: An Additional $388 Million Raised for Clean Energy

FOR IMMEDIATE RELEASE
RGGI 63rd Auction: An Additional $388 Million Raised for Clean Energy
For Release: March 20, 2024

BOSTON, MA – On Wednesday, March 6, 2023, the ten states participating in the Regional Greenhouse Gas Initiative (RGGI) released the results of the 63nd auction for 2024. Emissions allowances were sold for $16.00 each, generating $388 million for clean energy investments in participating states.  

“The strong success of this auction speaks volumes—$388 million raised brings RGGI’s cumulative total to a staggering $7.5 billion,” stated Paola Tamayo, Policy Analyst at Acadia Center and co-author of the organization’s RGGI Third Program Review Report.  

The allowance price of $16.00 is the highest level observed historically since the RGGI program’s inception. RGGI auctions stand as a crucial mechanism for curbing carbon emissions and charging power plants for their climate pollution. Among the various instruments within RGGI auctions, the Cost Containment Reserve (“CCR”) – a market mechanism that releases extra allowances beyond the cap which are sold if prices exceed predetermined levels – was triggered again in this auction. The Trigger Price of $15.92 per ton of CO2 was met, and 8,416,278 CCR allowances were sold in the auction. The CCR was initially conceived to be a safeguard, only to be triggered in times of extraordinary circumstances. However, recent trends have shown a worrisome pattern: in the latest auction, the CCR was triggered for the second consecutive time. This auction highlights the importance of reassessing the CRR trigger price in this Program Review. By raising the CCR cost, more breathing room is created for auction prices to rise, ensuring the effectiveness of the RGGI cap in reducing emissions.  

Furthermore, the Emissions Containment Reserve (ECR) retains allowances for additional emissions reductions if prices fall below the trigger price of $7.35 in 2024. Notably, the ECR remains well below the auction price and has historically not been triggered. That means that the auction price was over two times higher than the trigger price, signaling a significant deviation from the original intent of this program mechanism. For the ECR to maintain its effectiveness as a market stabilizer, it should show a more dynamic response to fluctuations in auction prices. While the ECR serves as a vital safety net, its rigid structure makes the effect of this mechanism negligible in the face of rising auction prices. As stakeholders engage in discussions surrounding the third program review, there’s a pressing need to reevaluate the mechanisms governing the ECR. By introducing greater flexibility and adaptability into its design, the ECR can better fulfill its role in ensuring the stability and integrity of the RGGI market, ultimately driving progress towards a more sustainable future. 

Higher RGGI allowance price is good for climate, clean energy investment  

The clearing price of $16 for the first auction of 2024 marks a continuation of the upward trend observed in recent years. This clearing price represents a 28% increase from the clearing price in March 2022 and an 8% increase from the last auction. The positive trajectory witnessed in the 2023 auctions and this first auction of 2024 holds promising implications for the RGGI program. Higher observed allowance prices in 2022, 2023 and now 2024 means that the RGGI program is sending a stronger incentive to reduce fossil fuel emissions and produce electricity from carbon-free sources, like wind and solar.   

Since the program launched, the vast majority of RGGI proceeds have been invested in energy efficiency and clean energy projects, as detailed in the most recent report on RGGI investments in 2021, released in June of  last year. We are also hoping for a more timely and transparent reporting system on proceeds investments. As the auctions generate significant revenue, it’s crucial to ensure that these funds are allocated efficiently and effectively towards clean energy and energy efficiency initiatives. 

The $388 million in proceeds generated in this auction brings the cumulative to-date total to $7.5 billion. The 2023 and 2024 auction results underscore RGGI’s significance as more than a regulatory framework, emphasizing its influence on the shift towards sustainable energy. RGGI states show the practicality of a collaborative, market-driven strategy for reducing greenhouse gas emissions.   

RGGI Third Program Review Offers an Opportunity to Direct Proceeds Towards Clean Energy Investments that Directly Benefit Environmental Justice Communities  

Since its establishment, RGGI’s priorities have centered around reducing pollution from fossil fuel power plants and achieving climate solutions for RGGI states. Every five years or so, RGGI undergoes a program review, giving the participating states the opportunity to consider the program’s performance and make various changes, including the equitable disbursement of the program’s proceeds. RGGI’s Third Program Review is happening now and is expected to conclude relatively soon this year. In 2023, RGGI held two public meetings and two public comment periods to discuss and seek feedback on various aspects of the program. Acadia Center, other stakeholders, and the public at large await any responses from the states to public input on setting the cap and improving overall program design and operation. 

As discussed in more detail in Acadia Center’s most recent RGGI Report, there are many different ways in which RGGI can ensure that environmental justice communities are heard and are actively involved in the development of strategies for an equitable transition to a carbon-free economy. Regardless of how strongly the Third Program Review does or does not prioritize environmental justice, it should remain a priority for individual states to consider the recent auctions, the history of investments across the states, the need to benefit environmental justice communities directly, and other mechanisms associated with the cap-and-invest program.  

Acadia Center remains closely involved in RGGI policy conversations across the RGGI states and will continue to advocate for program reforms that drive equitable investment and climate action.    

Media Contacts: 

Ben Butterworth, Director: Climate, Energy, and Equity Analysis
bbutterworth@acadiacenter.org, 617-742-0054 x111 

Paola Moncada Tamayo, Policy Analyst
ptamayo@acadiacenter.org, 860-246-7121 x204 

Massachusetts Clean Heat Standard Reignites Debate over Biogas

The role of renewable natural gas (RNG) and hydrogen in decarbonizing Massachusetts’ heating sector has been a major topic of debate for several years, with major implications for the state’s gas network and electrical grid. 

“The ineligibility of gaseous biofuels and hydrogen under the CHS is absolutely essential for keeping the commonwealth on the most cost-effective trajectory towards building decarbonization,” wrote Acadia Center.  

Environmental organizations in the state have long expressed concerns that electrification is the most efficient pathway to decarbonizing the building sector and that blending alternative fuels into the gas network would deliver minimal climate and public health benefits at a high cost to gas ratepayers. 

Acadia Center made the case that making hydrogen and RNG blending eligible to generate credits would be in “direct conflict” with the DPU’s 20-80 Order on gas system decarbonization.  

To read the full article from RTO Insider, click here.

Unaddressed Energy Burdens Are Threatening the Clean Energy Transition

In addition to being an incredible burden upon residents, heavy energy burdens, defined as the percentage of a household’s income spent on home energy bills, also threaten the clean energy transition. Generally speaking, the operational costs of an air-source heat pump end up being less than many existing alternatives, such as fuel oil, propane, or electric resistance heating. However, in cases where electricity prices are high and fossil gas prices are low, and without supplemental relief, it can be difficult to ask an already energy burdened household to switch to a heat pump, even if the swap were to happen at no cost. Therefore, in order to meet our climate goals, it is absolutely crucial to equitably address energy burden as well.

Thankfully, we are starting to see a number of jurisdictions take steps to combat this issue. For example, several states, such as New York, California, and Ohio, have implemented forms of Percentage of Income Payment Plans (PIPP) for certain residents or established policy goals around what constitutes an acceptable/unacceptable energy burden. A PIPP can directly alleviate energy burden by limiting a monthly payment to a certain percentage of income, often between 4-6%. Other states, such as Massachusetts, are looking at things even more comprehensively.

On January 4, 2024, the Massachusetts Department of Public Utilities (DPU) opened an inquiry into energy burden with a focus on energy affordability for residential ratepayers, DPU 24-15. In this docket, the DPU is soliciting input from stakeholders, including members of the public, advocates, and DPU-regulated entities to allow the DPU to “consider improvements to the programs currently offered to address energy affordability, to ensure maximum participation in each of these programs, and to determine whether additional programs may further benefit residential ratepayers of the Commonwealth’s electric and gas distribution companies.”¹ As part of this effort, the DPU released a broad list of questions and sought comment by March 1, 2024.

Acadia Center’s comments focused primarily on utilizing a PIPP approach versus potentially using a tiered discount approach. As outlined above, utilizing a PIPP focuses directly on limiting utility bill payments to a specific percentage of household income (with additional provisions). A tiered approach, which some jurisdictions utilize, essentially creates income brackets for which a ratepayer can qualify. At each different bracket, there are different levels of benefits/rate relief. Unfortunately, this approach to benefits has a potential drawback known as the “cliff effect.” Put simply, if a household in a particular bracket but close to the limit rises even a single dollar over the limit, they potentially could lose out on significant benefits. As such, Acadia Center also advised the DPU to avoid the “cliff effect” in any of its policies. Additionally, as part of its recommendations regarding PIPP, Acadia Center also specifically recommended utilizing a 6% income cap, a benchmark that is emerging as a commonly accepted standard for energy burden. In addition, we underscored PIPP program design elements – such as caps in consumption – that can preserve the incentive to conserve energy and the benefits of energy efficiency. Beyond PIPP, Acadia Center also advocated for auto-enrollment in the discount rate, energy affordability programs reflecting seasonal fluctuations in energy use, and placing the costs of the discounted rates upon high energy-use and higher-income households.

Acadia Center also worked with a broad array of stakeholders, including housing advocates, environmental organizations, and environmental justice advocates, to produce a set of coalition comments as well. These comments did not specifically address the questions raised by the DPU and instead focused on broad issues surrounding energy affordability. For example, it notes that existing structural inequities aggravate energy burden amongst certain customers. It also highlights that race is a major factor in determining the likelihood that a household will experience energy insecurity. The coalition letter further emphasizes that this cannot be the end of this process, and additional in-depth analysis will be required.

The steps after this point in DPU 24-15 are not currently clear. However, Acadia Center is confident that the DPU will ensure a robust and transparent process that incorporates a broad swath of stakeholder input and prioritizes environmental justice and equity. We look forward to bringing further analytical review to this important proceeding as it progresses.

1 DPU 24-15, at 1.

For more information:

Contact: Kyle Murray, Director, State Program Implementation, kmurray@acadiacenter.org

National Grid Backs out of Twin States Clean Energy Link Project

Despite support from the U.S. Department of Energy, National Grid has backed out of a major project to significantly increase the two-way transmission capacity between New England and Quebec.  

The news is a setback for efforts to increase bidirectional transmission connections between the regions, which could become increasingly important in coming decades as electricity demand increases and intermittent renewables proliferate. 

“It’s discouraging that a project that had such significant Department of Energy support could not make it across the finish line,” said Joe LaRusso of the Acadia Center. “Broader U.S.-Canadian cooperation and coordination is still needed, because in the future we are going to have to have a grid that spans the entire Northeast Power Coordinating Council reliability zone.”

To read the full article from RTO Insider, click here.

Kallman, Kislak introduce bill to begin reducing carbon emissions from buildings

STATE HOUSE – When Rhode Island enacted the Act on Climate in 2021, the state committed to reducing its carbon emissions to net-zero by 2050. About 30% of those carbon emissions come from buildings, and Sen. Meghan E. Kallman and Rep. Rebecca Kislak have introduced legislation to transition the building sector toward meeting that commitment.

Emily Koo, senior policy advocate and Rhode Island program director of Acadia Center said, “The Building Decarbonization Act is an essential first step to transitioning our buildings away from fossil fuels in order to meet our state’s climate mandates. We cannot allow new buildings to lock in fossil fuel systems for decades to come. And by tracking energy usage and building performance, large public and private building owners can lower energy costs and chart a path toward investing in energy efficiency and electrification.”

To read the full press release from the State of Rhode Island General Assembly, click here.

RIDOT Establishes New Freeway Connection from I-95 to Quonset Business Park

Last month, the Rhode Island Department of Transportation received $81 million in federal funding to establish a new freeway connection between I-95 highway and Quonset Business Park, which will allow RIDOT to “complete the ‘missing move’ at the interchange of I-95 and Route 4,” according to the organization’s website.

Emily Koo ’13, the senior policy advocate and R.I. program director at the Acadia Center, believes that increasing public transportation within R.I. is one solution to carbon emissions and expressed disappointment that Route Qx is going to be eliminated.

She added, “fully connecting the entire state to the employment center of the Quonset Business Park must be tackled not only through a more direct connection to I-95, but also through frequent, reliable public transportation.”

“Rhode Island’s transportation sector is not on track to meeting its proportionate Act on Climate mandates to reduce emissions 45% by 2030 and to reach net zero emissions by 2050,” Koo said.

To read the full article from the Brown Daily Herald, click here.

Mass. drivers will save money charging EVs at night — but when and how much?

Charging electric vehicles in Massachusetts could get less expensive under a pair of utility proposals now under consideration, but advocates are arguing for tweaks they say would make the transition faster and more fair.

A 2022 state climate law requires the state’s two major electric companies, Eversource and National Grid, to submit proposals for so-called time-of-use rates offering lower prices to electric vehicle owners who charge their cars during times of lower demand hours. The utilities did so in August 2023, proposing off-peak rates they say could save users hundreds of dollars a year compared to basic service rates.

“We are very supportive of time-of-use rates, broadly speaking,” said Oliver Tully, director of utility innovation and reform at climate nonprofit the Acadia Center. “We want to make sure these initial plans are as strong as possible.”

Swing-state fights escalate over regional carbon trading program

To read the full article from Politico, click here.

Getting Off Fossil Fuels Requires Transportation Makeover

Drastically and rapidly reducing the amount of fossil fuels we burn requires an all-out effort, from individuals and households to businesses and governments. For example, the state of Rhode Island is largely focused on implementable small projects that nibble around the emergency’s edges when what is needed is building big-impact efforts.

Those efforts need to start with the transportation sector, which accounts for nearly 40% of Rhode Island’s greenhouse gas emissions — the state’s largest percentage of climate-changing pollution. Until we get serious about building an efficient and reliable public transit system and significantly reducing vehicle miles traveled, any progress we make with smaller but important efforts will be negated.

Jamie Dickerson, senior director of clean energy and climate programs for the Acadia Center, noted the complexity of my question.

“There are a number of instructive ways to break this question down. One could approach it by economic sector, from a societal or governmental perspective, or from an individual’s or household’s viewpoint,” he wrote. “In our answer, we’ve opted to interpret ‘we’ broadly, meaning we’ve highlighted universal pillars of action that all actors in our society — from policymakers to corporations and households — will need to pursue swiftly to transition us off our reliance on fossil fuels and drive down our emissions, both here in Rhode Island and across the region, nation, and globe.”

Dickerson noted that all five of the Acadia Center’s steps are “underway in some sense, but they all must be accelerated and expanded to avert the worst impacts of climate change.”

Maximize efficiency. Reduce energy consumption and vehicle miles traveled through vital investments in an energy-efficient building stock and a robust public transit system.

Deploy renewables. Build wind, solar, other renewables, and energy storage rapidly to green our electricity supply, aided by significant new transmission line capacity and grid-enhancing technologies to help even more green electrons flow through our power lines, existing and new.

Electrify our end uses. Decarbonize our buildings and vehicles, primarily by converting from combustion technologies — e.g., boilers and furnaces, internal combustion engine vehicles — to efficient, electric technologies such as air- and ground-source heat pumps, heat pump water heaters, thermal energy networks, electric vehicles, and zero-emission buses and trucks.

Build a flexible, dynamic grid. Revamp our utility regulatory system and our grid to be more intelligent and dynamic and to better harness the abundant new flexibility provided by distributed energy resources, from EV charging and heat pump hot water heaters to smart thermostats, solar+storage systems, and other grid-interactive technologies.

Invest and innovate. Invest in deploying cleaner energy in every sector of the economy via both the public and private sectors, and for the most challenging remaining sectors to decarbonize — heavy industry, shipping, aviation — we must support research and development for breakthrough technologies, pursue first-of-their-kind green procurements, and be a laboratory for piloting and demonstrating new solutions.

To read the full article from ecoRI, click here.

Where do all those Amazon EV delivery vans recharge?

Tucked away in the woods off I-495 at a warehouse in Bellingham, dozens of gray Amazon delivery vans spend the night side by side, plugged in to recharge.

The e-commerce giant is far in the lead in electrifying its commercial delivery fleet, and 67 of the new vans stationed in Bellingham make their rounds daily within a 30-mile radius. The electric vans, quieter than their gas-powered counterparts, arrived starting at the end of 2022. They were made by EV upstart Rivian and feature that California company’s recognizably cartoonish headlight design.

Electrifying delivery fleets, and commercial vehicles in general, should bring several benefits, including lowering greenhouse gas emissions, Kyle Murray, Massachusetts Program Director at the nonprofit Acadia Center in Boston. The state’s climate plans call for 25,000 electric trucks and buses on the roads by 2030.

“The commercial transportation sector is a significant contributor to greenhouse gas emissions,” Murray said. “It is critical that they transition to electric fleets as quickly as possible.”

To read the full article from the Boston Globe, click here.