How Can We Replace Traditional Infrastructure with Clean Energy?

In March, Acadia Center released an analysis demonstrating that outdated financial incentives are driving expenditures on expensive and unnecessary utility infrastructure and inhibiting clean energy in the Northeast. The report, Incentives for Change: Why Utilities Continue to Build and How Regulators Can Motivate Them to Modernize, shows that under current rules, utilities can earn more money on infrastructure expenditures like natural gas pipelines and electric transmission lines than on cleaner, local energy resources like energy efficiency, rooftop solar, and highly efficient electric heat pumps. The key takeaway from the analysis is that without changes to the way they are regulated and rewarded, utilities will continue to advocate for infrastructure over local energy resources because their fiduciary duty to shareholders requires it.

Meanwhile, experience throughout the Northeast shows that clean, local energy resources can replace expensive grid infrastructure proposed by utlilities. These local alternatives include energy efficiency and demand response technologies that reduce demand for electricity at specific times, as well as roof-top solar, battery storage, and efficient combined heat and power.

Energy efficiency investments alone have avoided over $400 million in major transmission upgrades in Vermont and New Hampshire.1 Similarly, the Tiverton/Little Compton pilot project in Rhode Island,2 the Brooklyn/Queens Demand Management Project in New York,3 and the Boothbay Smart Grid Reliability Project in Maine4 are real world examples of local clean energy resources deferring or avoiding upgrades to the distribution grid. Earlier this year, expert witnesses for the New Jersey Division of Rate Counsel argued that a $75 million, 10-mile transmission line is no longer needed due to increasing adoption of distributed generation.5 There are additional examples from California also, where the state’s grid operator (California Independent System Operator, or CAISO) announced in December 2016 that it is putting the Gates-Gregg 230 kV transmission line project on hold, and may cancel the project entirely, due to forecasted increases in the development of solar energy.6

These clean energy projects are possible when consumers are given the ability to shape a cleaner, lower cost energy system through their investment decisions and behaviors. To motivate utilities to give consumers these options, utility regulators need to adopt alternative economic structures that balance the need to bring clean energy resources on-line with the need to keep utilities financially healthy.

Acadia Center’s UtilityVision outlines an alternative economic structure to resolve this conflict. UtilityVision recommends that states adopt performance incentives to motivate utilities to advance priorities such as system efficiency, grid enhancements, distributed generation, energy efficiency, and other energy system goals. Regulators can then increase the portion of revenue recovered through those performance incentives while reducing the portion of revenue that is linked to infrastructure projects, helping to shift utility priorities further towards achieving the performance outcomes.

A handful of states are beginning to adopt reforms to focus the utility’s financial incentives on advancing public policy goals for clean energy development. On January 25, 2017, the New York Public Service Commission issued an Order approving a shareholder incentive to reward Con Edison for deploying distributed energy resources (DER) to defer or avoid traditional transmission and distribution projects and deliver net benefits to ratepayers. The PSC approved a shared-savings model that uses a benefit-cost framework to determine the difference between the net present value of DER and the traditional infrastructure solution. The PSC found that this reward structure effectively signals the utility to find the most cost-effective grid solutions for ratepayers and advances additional energy and environmental goals.7

The California Public Utilities Commission is taking similar steps to resolve the conflict between bringing more DER online and ensuring they do not harm utilities’ profits. In December 2016, Commissioner Florio issued an Order creating a model to financially incentivize utilities to adopt DER. The Order will incentivize the deployment of cost-effective DER that displaces or defers utility spending on infrastructure by offering the utility a reward equal to 4% of the payment made to the DER customer or vendor.8

Whether the New York and California model is the best of many ways to revamp the utility business model to incorporate DER is an open question. One limitation of this model is that it is based on a comparison between DER and the traditional infrastructure projects that would otherwise be built in their place. This model makes it relatively straightforward to compensate the utility based on the cost savings and greater net benefits from the DER solution, but it is not easy to apply to more general deployment of DER. For instance, in Rhode Island,9 stakeholders led by the Office of Energy Resources are considering how to reward the utility for proactively and strategically using DER to improve grid conditions and prevent problems before the grid gets to the point of needing infrastructure upgrades. In this case, the NY/CA model can’t be used because there isn’t a traditional infrastructure project to compare to the proposed DER.

States must continue to seek reforms to utility regulations so that clean energy can flourish and both consumers and utilities are treated fairly. Replacing poles, wires, transformers, and substation upgrades with rooftop solar, battery storage, demand response, and energy efficiency can reduce costs and make the grid cleaner—but utilities make a guaranteed rate of return on their million (and billion) dollar grid investments, and any lower cost DER alternatives threaten to undercut those revenues. Until a new system of incentives is created, it will be an uphill battle to achieve states’ goals for a lower cost, cleaner energy grid.

1Schelgel, Hurley, and Zuckerman, 2014, “Accounting for Big Energy Efficiency in RTO Plans and Forecasts: Keeping the Lights on While Avoiding Major Supply Investment.” http://aceee.org/files/proceedings/2014/data/papers/8-1215.pdf

2 Rhode Island Public Utilities Commission Docket No. 4581, “2016 System Reliability Procurement Report”. October 2015. http://www.ripuc.org/eventsactions/docket/4581-NGrid-2016-SRP(10-14-15).pdf

3 New York Public Service Commission Case 14-E-0302, “Petition of Consolidated Edison Company of New York, Inc. for Approval of Brooklyn Queens Demand Management Program.” June 15, 2014.

4 Maine Public Utilities Commission Docket No. 2011-238, “Final Report for the Boothbay Sub-Region Smart Grid Reliability Project.” January 19, 2016.

5 “Rate Counsel Sees No Need For High Voltage Transmission Line,” NJ Spotlight (Jan 19, 2017) available at: http://www.njspotlight.com/stories/17/01/08/rate-counsel-sees-no-need-for-high-voltage-transmission-line/

6 ”Solar Growth Puts Fresno High-Voltage Line on Hold,” Fresno Bee (Dec 20, 2016). Available at: http://www.fresnobee.com/news/local/article122063189.html

7 New York Public Service Commission, Case 15-E-0229, Petition of Consolidated Edison Company of New York, Inc. for Implementation of Projects and Programs that Support Reforming the Energy Vision, Order Approving Shareholder Incentives. January 25, 2017. http://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?MatterSeq=47911

8 California Public Utilities Commission, Decision 16-12-036, Rulemaking 14-10-003, Order Instituting Rulemaking to Create a Consistent Regulatory Framework for the Guidance, Planning, and Evaluation of Integrated Distributed Energy Resources. December 22, 2016.  http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M171/K555/171555623.PDF

9 More about Rhode Island’s Power Sector Transformation initiative can be found at: http://www.ripuc.org/utilityinfo/electric/PST_home.html

New Era of Natural Gas Exports Raises Concerns for Northeast

President Trump’s “Energy Week” address today is expected to express strong support for U.S. exports of natural gas, currently on the rise. For the Northeast, these exports exacerbate the risks of the region’s already-dangerous overreliance on a fossil fuel that has a history of volatile prices and will not allow the region to reach its commitments to reduce greenhouse gases.

With the arrival two weeks ago in Taiwan of a liquified natural gas (LNG) tanker ship loaded with American natural gas, June has been a month marked with milestones for the nascent export industry in the United States. Preceding this delivery by a few days were the first ever U.S. LNG shipments to Poland and the Netherlands. U.S. Energy Secretary Rick Perry deemed those events significant enough to warrant a statement from his office. These deliveries from a new LNG export facility in Louisiana signify a new era for the natural gas industry in this country, and residents of Northeastern states should be paying attention to these events.

This export plant, the Sabine Pass LNG Terminal, is the first of several such facilities planned to be constructed or converted from import use. When it is fully online, it will be able to liquify nearly 1,300 billion cubic feet (bcf) per year of natural gas. Five other facilities under construction in Hackberry, Louisiana, Freeport, Texas, Corpus Christie, Texas, Elba Island, Georgia, and Lusby, Maryland, will be able to liquify twice that volume. In total, these facilities will be able to liquify and export the equivalent of 15% of current U.S. natural gas consumption. Several additional projects have been approved but are not yet under construction.

Having this large a portion of U.S. natural gas consumption subject to world market prices will likely have an impact on markets at home. Such a rapid surge in demand will likely increase domestic natural gas prices. What does this mean for Northeastern states? They need to carefully scrutinize analyses of any projected benefits from natural gas conversions or new natural gas infrastructure projects in the region. The levels of promised savings may never materialize if rapidly increasing LNG exports drive up natural gas prices. The risk of these projects as proposed is almost always borne by ratepayers—the utilities or other project developers will earn their guaranteed return on investment, paid for eventually by electric or gas ratepayers, but the savings are not guaranteed.

Natural gas already stands as one of the main obstacles to reducing greenhouse gas emissions in the region, and concerns have been raised that subsidized pipelines could facilitate exports from facilities in Eastern Canada that—like Sabine Pass—were first built for imports. Tying domestic prices to volatile international markets layers on more risk.

The region’s policymakers should continue to proceed cautiously before committing their ratepayers to years of payments for large fossil fuel infrastructure projects whose tenuous savings can easily be wiped out by changing market conditions. All proposed projects should be evaluated against the possibility that other available resources can meet the Northeast’s energy needs without growing the region’s overreliance on natural gas. Northeast states need to consider energy efficiency, solar and wind generation, and conversion of fossil fuel heating and transportation systems to electric-powered alternatives. Acadia Center’s EnergyVision 2030 project shows the benefits of embracing energy sources that are indigenous to the Northeast region. With the expansion of U.S. natural gas in world markets, the economic benefits of local clean energy will likely only grow.

One Month In – Advocating for Clean Energy Policies in Connecticut

In this blog post, Acadia Center’s new Policy Advocate in Connecticut, Kerry Schlichting, shares her experience one month into her tenure at the organization.

Kerry Schlichting

I recently joined the Hartford team in late May, after eight years in Washington, D.C., working on energy policy issues with a national perspective, and was eager to apply my experience to challenges at both the federal and state level. As a new staff member, my experience over the past month in Connecticut’s exciting and fast-paced environment has shown me the depth and breadth of Acadia Center’s work and how much is possible in the state and regionally. With just over two weeks left in Connecticut’s legislative session, Acadia Center’s Hartford-based team made a final push for policies protecting and promoting the state’s clean energy goals while also fighting a proposal to divert funds from the state’s crucial energy efficiency programs. Meanwhile on the national stage, the decision to leave the Paris Climate Accord was announced, with lasting implications for climate and economy locally, regionally, and globally.

On just my second day, we organized a sign-on letter opposing proposed budget raids of ratepayer funds for energy efficiency and clean energy programs to send to CT officials. Over 70 signees—representing business, community, consumer, low-income, public health, environmental, and clean energy interests—came together against the harmful impacts that would flow from proposed raids on ratepayer-funded energy efficiency programs. The letter opposes two budget proposals, one made by Senate Republicans that would raid ratepayer-funded energy efficiency programs and another made by the Senate and House Democrats that would sweep ratepayer-derived revenues from the Regional Greenhouse Gas Initiative. These programs generate immense economic value for the state, from billions of dollars in electricity and natural gas bill savings to helping low-income families reduce the difficult burden of high energy costs, while also protecting the health and prosperity of our local communities. Budget negotiations are ongoing through the end of this month, and we continue to respond to changing proposals that threaten these important programs.

My second week saw the next major challenge as we learned of the threatened withdrawal of the Trump Administration from the Paris Climate Agreement. By pulling out of the Paris Agreement, the Trump Administration weakens our country’s position as an energy leader. This action also undermines progress being made globally, as well as at the national and state level, to address the growing harms of carbon pollution. The announcement by the White House underscores how much more important state leadership will be in advancing a clean energy future. The day of the White House’s announcement, representing Acadia Center, I spoke at U.S. Senator Richard Blumenthal’s press conference to decry this shortsighted decision that risks our country’s global climate leadership and hurts our economic interests around clean energy.

Yet, this moment also offers states and regions an opportunity to aim high and lead the transition to a clean energy future. During my third week, Acadia Center joined other advocates to thank Governor Malloy for committing Connecticut to the Paris Agreement’s climate pollution goals and to pursue policies that will help achieve those goals, as well as for being a leader in the new U.S Climate Alliance, a bipartisan commitment by governors throughout the country to commit to reducing climate pollution. A recent analysis by Acadia Center, EnergyVision 2030, shows that Northeast states can be on the path to a low-carbon future by the year 2030 if they commit to and embrace clean energy technologies. With further strategic action and expanding adoption of modern, market-ready technologies, Northeast states can reduce climate pollution emissions 45% by 2030: a target needed to put the region on the path to meet scientifically directed emission reductions of 80% by 2050.

With a special legislative session called to address the state budget, Acadia Center’s Connecticut team continues to advance policies that benefit consumers and the environment. To reduce the state’s greenhouse gas emissions as well as to accelerate the growth of our clean energy economy, creating new jobs and state revenue, the state needs policies that support our award-winning energy efficiency programs. Additionally, we need policies that make us competitive with our neighboring states in pursing clean energy resources. This includes strengthening the state’s commitment to renewable energy procurement and encouraging electrification of the transportation sector and increased deployment of electric vehicles.

Both federal and state policies can affect the state’s clean energy economy, and it is from that perspective that I look forward to the many opportunities and challenges that lie ahead. My experiences this past month have made me look forward even more to being part of a team advancing the clean energy future through fact-based, solutions-oriented advocacy and collaboration.

Out with the Old, In with the New: The New York DSIPs and What They Mean for the Modernized Energy Grid

The traditional system we currently use for serving the needs of energy users is quickly going out of style. The energy grid is still relying on a system that was invented almost 100 years ago (hello, the 1930s called and they want their transmission and distribution lines back!). The old classic version of the grid has served an important purpose for getting energy to consumers reliably and safely, but today’s energy fashion is more demanding. While the old grid excelled at sending energy one-way from generators to consumers, the new energy grid needs to be able to accessorize by incorporating distributed energy resources (“DER”) such as solar and wind energy, active load management, and energy efficiency programs. DER will enable the development of a grid that is increasingly resilient, flexible, and adaptable to the needs of all energy consumers. In New York, a process is under way to try to bring these innovative new options online.

A modernized energy grid doesn’t happen overnight. States across the Northeastern U.S. are trying to figure out how to facilitate the transition from a traditional energy grid system to a more modernized grid. The Distributed System Implementation Plan (“DSIP”) process initiated by the New York Public Service Commission (“PSC” or “Commission”) may be one model for helping utilities make a smooth and efficient transition.

The Commission has required all electric service utilities to create and maintain comprehensive Plans detailing the processes by which they will transform the traditional one-way electric grid into a more dynamic and integrated grid that can manage two-way flows, is more resilient, and produces fewer carbon emissions. The DSIPs are a comprehensive source of information for the public and serve to consolidate several important pieces of New York’s Reforming the Energy Vision (“REV”) strategy.  They are also intended to be a source of data and information to assist third-party DER providers with planning and investment. The new energy grid will require joint decision-making and planning between utilities, third-party providers, consumers, regulatory bodies, and other interested parties. This means that transparency and visibility are paramount to achieving a modernized grid.

The DSIP process is novel in that it has required utilities to make their internal decision-making more transparent and begin making joint planning decisions. This type of practice has potential for creating a collaborative environment that produces a constructive transition. The DSIP process has done well in New York to:

  • Provide insight into key decision-making processes of utilities, especially regarding the use of DER in addressing system needs
  • Provide a baseline for current data-gathering capabilities as well as capabilities regarding load forecasting and accommodating DER
  • Create a space for joint decision-making and planning between utilities
  • Involve stakeholders on various key issues

While the DSIPs that the utilities produced are important and useful, in many ways they fall short of what was expected of them. Some improvements that should be made to the DSIPs include:

  • Valuable data – for example regarding hosting capacity, DER forecasting, and DER impacts on the grid – has not yet been included in the DSIPs and the utilities have not in many cases provided sufficient plans for providing the data
  • Many of the plans that have been provided are a good start, but are still not sufficiently detailed or specific enough to be useful for the public and third-parties, for example, almost no timelines for implementation are provided
  • There is a general lack of description regarding how various processes, such as forecasting and making decisions about using DER for system needs, will be re-assessed and evolved as technologies and data-gathering capabilities improve
  • Stakeholder process has been utility-centric and lacked necessary oversight by the state energy regulatory body to ensure fair and meaningful engagement by all interested parties, including at the scoping stage of the process.

In sum, the DSIP process provides one model for states to facilitate the transition to the modernized energy grid, but they should look for opportunities to build on New York’s model. These first DSIPs were filed in 2016. Updated DSIPs will be filed in June 2018, giving utilities another opportunity to seek and receive the level of detailed data and planning that is needed to inform decision-making by other stakeholders and in other states.

Summaries of Important DSIP Focus Areas

Some of the most relevant aspects of the DSIPs are briefly described and assessed below. For more information about the New York DSIPs, read Acadia Center’s full Summary Analysis or the DSIP documents available in the proceedings.

Forecasting is the process by which utilities make predictions about energy load on the grid. Utilities also use forecasting to predict penetration of different DER technologies on the grid. These predictions have varied implications for what the grid needs to ensure reliable and safe power to all customers. The DSIPs provide a first glimpse into the calculations that utilities use and the impacts that DER are expected to have on forecasting. However, the DSIPs also reveal that utilities need to improve their forecasting processes and especially that they need to continue refining their methods for predicting DER penetration as well as DER impacts on the grid.

Utilities’ plans for accommodating and enabling DER on the energy grid are addressed in the DSIPs. As DER increase, their impacts on the grid increase. Distributed generation (such as wind and solar) for example, will increasingly be able to inject energy into the grid from various locations. The current energy grid can only manage a limited amount of distributed generation since it is currently only configured to manage energy flowing from a select few large generators into the homes and businesses of energy users. To optimize development of DER, third-party developers need to have detailed information about where DER can be accommodated and where DER might be most beneficial. The DSIPs provide important information about when and how this information will be available. They also describe their plans for streamlining the interconnection processes for distributed generators. These efforts will go a long way to reduce barriers for integrating DER with the grid, but the DSIPs also show a lack of preparation and planning for actively encouraging more DER. Increasing DER will be invaluable for enhancing resiliency and flexibility as well as decreasing carbon emissions.

Non-wires alternatives are DER that are procured by utilities to address the needs of the energy grid. Traditionally, utilities simply invest in more traditional infrastructure when the need arises. These types of upgrades are costly for the utility and thus for ratepayers. Alternatively, DER can be more cost-effective and can be used to avoid or postpone traditional infrastructure investments. The DSIPs provide clear analysis of the types of projects that they consider suitable for using non-wires alternatives. The utilities have defined a narrow range of projects that are suitable for these alternatives, and limiting the range of possible projects in this way means that there will be missed opportunities to address a wider range of system needs.

Advanced Metering Infrastructure (“AMI”) is important for advancing grid modernization efforts. It will enable utilities to vastly improve data-gathering capabilities and increase their ability to control energy load on the system. In the past, meters were only needed to measure energy used within a time frame, usually one month. With AMI, meters will be able to report hourly or even near to real-time data about energy use. This information will be invaluable for load forecasting and for better understanding DER impacts on the grid. Utilities will also be able to share data with customers – empowering them to better manage their own energy use. AMI also enables strategies to optimize the grid, like demand response, time-varying rates, and active load management. These strategies are based on increasing energy consumption during off-peak periods and decreasing it during peak hours. The DSIPs show that all utilities are planning to implement AMI over the next several years. However, the utilities are not consistent in how they present their plans for AMI roll-out. Some utilities provide excellent summaries or even include their full plans in the appendix of their DSIP. Other utilities provide almost no summary and simply refer to other proceedings.

Electric Vehicles will be key for achieving New York’s carbon emissions reduction goals. New York has made clear goals for increasing the number of electric vehicles on the road. This will require increased infrastructure, such as charging stations. Utilities are expected to be proactive about planning for and enabling the electric vehicle market. The DSIPs show that utilities are implementing pilot projects, mostly aimed at better understanding how these vehicles are used and charged, which will in turn help utilities better understand their impact on the grid. The utilities have also jointly produced a plan for creating an “EV Readiness Framework” which will guide their actions for preparing for electric vehicles. The DSIPs lack any concrete plans for going beyond pilot projects to implementing any wide-scale infrastructure investments for electric vehicles.

The DSIPs include investment plans that indicate how and where the utilities will spend money in the next several years to begin the transition to a modernized energy grid. Generally, utilities are investing in new systems and capabilities that will enhance data-gathering, load management, and DER integration, which will in turn increase grid reliability and efficiency. Utilities also need to invest in improving customer engagement by providing understandable billing and secure data exchange platforms.

EnergyVision 2030: What the numbers tell us about how to achieve a clean energy system

What impact will current efforts to expand clean energy markets in the Northeast have over time? Where can we do more to advance these markets? What specific increases in clean energy are needed to adequately reduce carbon pollution and meet targets for deep reductions in climate pollution? What does the data show about claims that more natural gas pipeline capacity is needed?

A few years ago, Acadia Center released a framework entitled EnergyVision, which shows that a clean energy future can be achieved in the Northeast by drawing on the benefits of using clean energy to heat our homes, transport us, and generate clean power. Many studies have shown that a clean energy future will improve public health, increase consumer choice, and spur economic growth by keeping consumer energy dollars in the region. States have started to move towards the future put forward in our EnergyVision framework supporting key clean energy technologies like rooftop solar, electric vehicles, and wind, and increasing investments in energy efficiency and upgrades to the grid.

But other voices have tried to slow or even block progress toward a clean energy future. Claims that the region needs more natural gas capacity continue to be made, most recently by the U.S. Chamber of Commerce, and states are not uniformly moving forward in all areas of clean energy development. Efforts to reform the power grid vary from state to state, and the data needed to identify what our energy system could look like in a few years and what contribution clean energy can make has not been gathered.

To fill these important information gaps and help answer these questions, Acadia Center undertook a comprehensive analysis of the Northeast’s energy system. Using a data based approach, we looked at where current state and regional efforts to expand clean energy stand and what emissions reductions and growth in markets for clean energy technologies those efforts will produce. We then examined what expansions in clean energy are needed to attain state goals to reduce climate pollution. The result is EnergyVision 2030, an analysis of the energy system that provides a clear pathway towards a clean energy future that empowers consumers in the Northeast.

EnergyVision 2030 demonstrates that the Northeast region can be on track to a clean energy system using technologies that are available now. In the last several years, clean technologies have advanced rapidly, and they offer states an unprecedented opportunity to transform the way energy is produced and used. For example:

  • The nation’s first offshore wind project has recently come online in Rhode Island
  • Electric heat pumps that work in the cold climates of the Northeast are now readily available
  • There has been a dramatic increase in the number of electric vehicle options on the market
  • Efforts to modernize our electric grid are underway in several states
  • Onshore wind is now the lowest-cost electric resource in some reports
  • Massachusetts and Rhode Island have redefined the levels of energy efficiency that can be consistently achieved.

 

And the list goes on.

To determine what growth in key clean energy technologies is needed, Acadia Center used a well-respected model1 to analyze the energy system as it might look in the year 2030 under different conditions. First, EnergyVision 2030 shows what the energy system would look like under current trends, and then if policies were put in place to expand markets for newer technologies more quickly—at rates leading states are already achieving.

With this approach, EnergyVision 2030 finds that the first generation of climate and energy policies has successfully built a foundation for progress. Energy efficiency, renewable portfolio standards, and the Regional Greenhouse Gas Initiative (RGGI) have all contributed to declining emissions since the early 2000s.

To be on track to meet state targets for emissions reductions the region needs to achieve a 45% emissions reduction by 2030.2 We used this 45% reduction as a target to develop our “Primary Scenario,” which features individual targets for clean energy technologies that together would reduce emissions 45%. We also modeled what it would take to get to a 50% reduction, in our “Accelerated Scenario.”

Policy changes drive both of these scenarios, which would see lagging states catch up to leaders like Massachusetts in energy efficiency and other areas, expand and extend renewable portfolio standards as New York has recently done, and grow markets for newer clean energy technologies like electric vehicles and cold climate heat pumps. In other words, if all states did what leading states are doing in each area—if they expanded building heat pumps like Maine, electric vehicles and solar like Vermont, energy efficiency like Massachusetts and Rhode Island, and utility reform like New York—the Northeast would achieve its emissions goals.

The table below shows how much selected clean energy technologies will expand by 2030 under current trends and in the Primary and Accelerated Scenarios.

To foster these clean energy markets, states can redouble their efforts and create a second generation of clean energy policies building on their initial success. The following policy recommendations will help make this possible. A more complete list is available at 2030.acadiacenter.org.

Clean Energy:

  • Extend and increase rooftop and community solar
  • Expand Renewable Portfolio Standards

 

Electric Vehicles:

  • Strengthen market for electric vehicles through consumer incentives and better electric rate design

 

Lower-Cost Heating:

  • Increase the market for heat pumps through incentives and education
  • End policies that promote natural gas pipeline expansion

 

Electric Grid:

  • Modernize and optimize the energy grid
  • Reform utility incentives and regulation to better align them with state policy goals

 

EnergyVision 2030 combines detailed data analysis and policy recommendations to provide a tool for policymakers, advocates, and other stakeholders to demonstrate both why state-level policy changes are needed and what we can do to make those changes happen, putting us on the path to a clean energy system. As with the first generation of clean energy policies, results can take significant time to accumulate, so action is needed now to ensure the region is ready to meet 2030 goals. EnergyVision 2030 gives us the targets and tools we need to begin working toward those policy changes today.

EnergyVision 2030 is available as an interactive website and in printable formats at 2030.acadiacenter.org.

 

1 Long-range Energy Alternatives Planning (LEAP) system from Stockholm Environment Institute
2 45% emissions reduction from 1990 levels

EnergyVision 2030 FAQ

Frequently Asked Questions about EnergyVision 2030

What is EnergyVision 2030?

EnergyVision 2030 is a data-based analysis of options to expand clean energy resources in New York and the six New England states. It examines where current efforts can lead, how consumer adoption and market penetration rates can grow, and what increases in clean energy efforts are needed to attain emissions goals.

EnergyVision 2030 shows that advances in technologies that are now readily available, from heat pumps to electric cars to solar panels, create the means for states to advance a consumer-friendly energy system by increasing adoption in four key areas—grid modernization, electric generation, buildings, and transportation.

Why did Acadia Center prepare it?

Acadia Center prepared EnergyVision 2030 to provide a pathway for policymakers and others in the Northeast to show how market-ready clean energy technologies can modernize the energy systems, give consumers better options to control energy costs, and advance economic growth, while dramatically reducing climate pollution.

What are the key takeaways from the study?

States can achieve a modern clean energy system using available technologies, achieving a 45% emissions reduction by 2030, if policies are enacted now to foster and expand adoption of clean energy resources.

How does EnergyVision 2030 present the data?

EnergyVision 2030 uses the results from Acadia Center’s modeling to describe how much states should increase each clean energy technologies to shift the energy system. EnergyVision 2030 then offers detailed policy recommendations with policy options that states can use to achieve these results.

How can the information be used?

Information presented in EnergyVision 2030 shows the incremental gains needed in key clean energy areas for the region to achieve reductions in climate pollution and build robust clean energy economies. Advocates, stakeholders, and policymakers can use the information presented in EnergyVision 2030 to focus on where to expand current policies that will have the most impact or oppose policies that will move the region off this path. In many cases, states already have the policy tools they need to increase adoption of these technologies; they must simply improve and accelerate existing mechanisms to achieve the goals set in EnergyVision 2030.

What was the methodology?

EnergyVision 2030 uses the Long-range Energy Alternatives Planning System (LEAP) model from Stockholm Environment Institute to project a detailed forecast of energy consumption in all sectors and an emissions trajectory. Acadia Center incorporated the U.S. Energy Information Administration (EIA) Annual Energy Outlook (AEO) forecast, the ISO New England and New York ISO electric ’s Capacity, Energy, Loads, and Transmission (CELT) forecasts, and other data sources as appropriate. The LEAP model contains an electric dispatch model to simulate the electric system, determine the generation mix and ensure that there are sufficient resources to satisfy peak demand for power in summer and winter.

Why a 45% emissions reduction?

The scientific consensus is that to avoid the worst impacts of global warming, the U.S. needs to reduce emissions by 80% from 1990 levels by 2050. States must reduce emissions 45% by 2030 to be on a trajectory to meet that goal, i.e. if a straight line were drawn from the present emission levels to the required 2050 levels, the region would hit a 45% reduction in 2030.

Why 2030?

Most states in the region have committed to reduce emissions 80% by the year 2050 in some form, and several have goals for emissions reductions in the interim period. Building markets takes time and has cumulative impacts, so acting now is critical. 2030 is closer than it seems but offers states sufficient time to reach the clean energy levels outlined in EnergyVision 2030 if they take action in the next two to three years.

What does EnergyVision 2030 tell us about the economy?

In developing EnergyVision 2030, Acadia Center did not model how increases in clean energy technologies and processes will impact local economies. Numerous studies, including some by Acadia Center, show the economic benefits of shifting from paying for imported fossil fuels to investing in local clean energy improvements like those presented in EnergyVision 2030. These benefits include stronger local economies, local job growth, and significant consumer savings.

Does EnergyVision 2030 address calls for more natural gas as a “bridge fuel”?

EnergyVision 2030 analysis shows that the current and planned pipeline capacity in New England will be sufficient to meet the region’s needs as expanding clean generation and energy efficiency reduce demand. Adding new pipeline capacity to the region would cost ratepayers billions of dollars and would lock the region into higher-emission gas generation for decades.

RGGI Emissions Fell Again in 2016

Declining Emissions Signal Need for Reform
In advance of expected actions by the Trump administration to remove or weaken federal climate protections, the Northeast’s pioneering climate program continues to see reductions in carbon pollution, reflected by today’s three-year low auction clearing price. Member states must now strengthen the Regional Greenhouse Gas Initiative to preserve the program’s effectiveness and signal commitment to continuing bi-partisan climate leadership.

Introduction
CO2 emissions from power plants have been steadily declining across the nine states of the Regional Greenhouse Gas Initiative (RGGI) for the last decade, and in 2016 fell 8.4 percent below the emissions cap. Since the program began in 2009, the decarbonization of the electric sector has been a major victory for the environment, health and economy of the region. Continued investments in clean energy and complementary climate policies in the participating states will help to achieve greater emissions reductions, but the RGGI states must do more to build on their first-in-the-nation program. Through the current Program Review,1 the participating states should strengthen RGGI to align the program with the current emissions trends and future climate goals.

Emissions
RGGI CO2 emissions fell to 79.2 million tons in 2016, a 4.7 percent decrease from 2015, marking the sixth consecutive year of power-sector emissions declines. Since 2008, the year before RGGI began, emissions are down 40.4 percent.

While several factors including growth in renewable energy, efficiency improvements, and fuel-switching have contributed to regional emissions reductions, a large share of these reductions has been attributed to the RGGI program.2 By establishing a price on carbon emissions and generating revenue for clean energy investments, RGGI has accelerated the transition to a cleaner electric sector. Increases in energy efficiency and growth in renewable energy output will enable the RGGI states to continue to achieve ambitious emissions reductions.

Figure 1: RGGI Emissions Continue to Fall

RGGI 3-10-2017

Market Dynamics

Auction Results

RGGI’s success has resulted in lower-than-expected emissions, which, in turn, have resulted in lower-than-projected compliance costs. With annual emissions falling below the RGGI cap in each of the program’s first eight years, there is an excess of allowances in circulation, leading to low allowance prices. Following ten consecutive auctions in which the auction clearing price was determined by the price floor—the lowest price at which allowances will be sold at a given auction—the RGGI states decided to reduce the cap by 45 percent. That decision had immediate impacts on the RGGI market, driving increased demand for allowances. Increased RGGI allowance prices proved to be temporary, however, as continued emissions reductions have outpaced the decline of the recently adjusted cap, creating an allowance oversupply. These conditions have resulted in falling allowance prices, with Auction 35 clearing at a three-year low of $3.00, 15 percent below the previous auction and 43 percent below the clearing price from one year ago.

Figure 2: Allowance Oversupply Leads to Low Auction Prices
3-10-2017 RGGI auction

Allowance Oversupply
RGGI, like nearly all emissions trading programs, has struggled with an oversupplied market. Emissions reductions have been achieved more quickly and cost effectively than projected, creating a large gulf between cap levels and actual emissions, as shown in Figure 1. This has led to a market flooded with low-priced allowances, diminishing the program’s impact and undermining the environmental integrity of the cap. Recognizing these problems, the RGGI states agreed during the previous Program Review to gradually eliminate allowances banked prior to 2014 by adjusting 2014-2020 cap levels downward.3

This innovative strategy has proved effective, but a new surplus of allowances has been accumulated since 2014, and we expect it to increase through 2020 as trends that have contributed to the decline in emissions (growth in renewable energy, efficiency improvements, and fuel-switching) continue to bring emissions down.

In the first three years under the new cap, emissions have fallen below cap levels by 4.7 million tons (2014), 5.6 million tons (2015) and 7.3 million tons (2016).  Over these three years all available allowances have been purchased, creating a surplus of 17.6 million tons. Additional allowances purchased from the Cost Containment Reserve (CCR) have added to the surplus, introducing 15 million additional allowances without corresponding emissions to balance the market. This brings the new surplus to 32.6 million tons, as shown in Figure 3. If emissions follow projections under recent ICF modeling of a post-2020 2.5% cap decline,4 the surplus will grow to 52.8 million tons through 2020. If CCR allowances are purchased, that figure could grow by up to 40 million tons.

Figure 3: Allowance Surplus, 2014-2020
RGGI3 3-10-2017

Need for Market Reform
The emissions reductions achieved by the RGGI states have been a tremendous success, but program reforms will be necessary to ensure that this success continues. As detailed in Part II of our RGGI Status Report: Achieving Climate Commitments,5 the RGGI states should make the following changes to strengthen the program:

  • Establish a 2021-2030 cap that declines annually by 5% of the 2020 baseline;
  • Commit to an adjustment for banked allowances accumulated from 2014-2020;
  • Eliminate the CCR or increase CCR price triggers to ensure that CCR allowances are only purchased during periods of exceptionally high demand;
  • Establish an Emissions Containment Reserve6 to capitalize on emissions reductions and to protect against future allowance oversupply; and
  • Increase the auction reserve price to at least $4/ton to maintain a meaningful price on carbon emissions.

 

1For more information on the current RGGI Program Review, see: http://rggi.org/design/2016-program-review

2Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market, and Policy Factors, Brian Murray and Peter Maniloff, Duke Nicholas Institute, August 2015. Available at: https://nicholasinstitute.duke.edu/environment/publications/why-have-greenhouse-emissions-rggi-states-declined-econometric-attribution-economic

3This adjustment was conducted in two steps; one adjustment to account for allowances banked during the first control period (2009-2011) and a second adjustment for the second control period (2012-2014). For more information, see: https://www.rggi.org/docs/SCPIABA.pdf

4IPM modeling conducted by ICF for RGGI, Inc. available here: http://rggi.org/design/2016-program-review/rggi-meetings

5RGGI Status Report Part II: Achieving Climate Commitments, Acadia Center, August 2016. Available at: http://acadiacenter.org/wp-content/uploads/2016/08/Acadia-Center_RGGI-Report-2016_Part-II.pdf

6The Emissions Containment Reserve (ECR) was first proposed by the RGGI states during the November 21st, 2016 Stakeholder Webinar: http://rggi.org/docs/ProgramReview/2016/11-21-16/2016_Nov_21_ECR_Presentation.pdf. For more information on how the ECR might function, see: http://www.rff.org/events/event/2017-02/emissions-containment-reserve-rggi-how-might-it-work

An Ode to Docket 4600

As told through a series of haiku:

AWA blue leaf

I drove to Warwick

In a blue electric car

The chargers were full

 

Those in the know, know

Rhode Island utilities

Governed in Warwick

 

Fifty-four miles left

Should be plenty to get home

I am risk averse

 

Endure long meeting

With many energy geeks

Time-based rates for cars

 

Leafs swap spots at lunch

Brain can’t take much more rate talk

Level 2 charging

 

Start up in silence

I pause a moment, and breathe

Rate case up ahead

 

Can New England Steal California’s Storage Thunder?

Clean energy rivals New England and California are racing toward a new prize: leadership on energy storage. Both coasts have been leaders on energy efficiency, renewables deployment, and electric vehicles (EVs), and storage is the logical next step to improve system efficiency and back up intermittent wind and solar as they are increasingly adopted.

The benefits of storage are clear and increasingly well-recognized. Storage deployed at scale will serve the same purpose as warehouses and refrigerators in our food system by rationalizing an energy grid that is massively overbuilt to match supply and demand every second of every day. This logic is backed up by analysis from the Massachusetts’ Department of Energy Resources (DOER) showing that the top 10% of peak demand hours drive 40% of energy costs, and storing energy to meet these peaks would provide $3 billion in energy system benefits each year. According to a recent study from UC Berkeley, storage can also produce significant public health benefits by avoiding reliance on dirty ‘peaking’ power plants that are often located in marginalized urban areas.

Massachusetts Leadership
In the race for energy storage in the Northeast, Massachusetts is taking an early lead. Under energy diversity legislation passed this summer, DOER can act to meet the storage target it recommended—600MW by 2025—which proportionately would be far larger than California’s mandate. The legislation also cleared an important practical hurdle by authorizing utilities to own storage, and, so long as third-party owners are protected to ensure competition, political support for energy storage should remain strong.

An overall mandate would build on efforts already underway in the Commonwealth. DOER is offering $10 million for demonstration projects through the Energy Storage Initiative. The Massachusetts Clean Energy Center has invested $9 million in storage-related initiatives and is serving as a match-maker for storage developers and potential customers. Under the new solar incentive mechanism being developed, bonus incentives for storage are being considered in the range of two to seven ¢/kWh, based on storage duration (kWh) and power (kW) relative to solar capacity. Within energy efficiency plans that invest $700 million per year, utilities are piloting demand management programs integrating thermal and battery storage, and attention to demand resources is likely to increase as peak demand flatlines, overall consumption declines, and the focus on improving system efficiency at all levels grows.

New Tool in the Energy Toolbox
Across the Northeast energy storage is gaining favor as an alternative to more expensive and often difficult-to-site transmission and distribution (T&D) system upgrades. In Boothbay Harbor, Maine, cheap energy available at night is stored in ice that is then used to cool buildings on hot summer afternoons. In conjunction with targeted efficiency, solar, and demand response, storage is being deployed instead of an $18 million transmission upgrade.  At a larger scale, in New York ConEd is investing $200 million in storage, targeted energy efficiency, distributed generation and demand-response in lieu of a $1.2 billion substation upgrade. The potential for eye-popping T&D savings (in addition to other energy system benefits) contributed to a proposed rule from the Federal Energy Regulatory Commission that would require all Regional Transmission Operators to remove barriers impeding storage from providing energy, capacity, and ancillary services.  This clear directive will help drive the grid operator ISO-NE to take necessary steps to enable storage, including compensating storage for rapid response capabilities, opening markets to smaller storage facilities, and allowing storage to provide multiple services simultaneously. Large scale energy storage could additionally help replace retiring nuclear and coal capacity in Southeast Massachusetts/Rhode Island (potentially pairing directly with offshore wind in a coal-to-clean energy conversion at the soon-closing Brayton Point plant) and address expected load growth in the greater Boston area.

Complementing top-down reform, several states are pursuing grid modernization processes in order to capitalize on declining costs and technology advances for energy storage and other distributed energy resources.  New York’s Reforming the Energy Vision has received the most attention, but REV does not stand alone.  Massachusetts utilities filed Grid Modernization plans including energy storage projects and pilots in August of 2015, and while the plans need improvement to ensure unified progress toward truly modern grids, the process has begun.  Meanwhile, Rhode Island is pursuing a truly bottom-up approach by using distributed resources to meet energy system needs, and grid modernization proceedings were recently initiated in New Hampshire.

Resiliency and Preparedness
Because of its resiliency and preparedness, storage is increasingly recognized for its security advantages. The vulnerability of the grid to cyber-attacks was made clear in Ukraine, and physical attacks on critical grid infrastructure have recently increased.  Weather-related outages will also increase with climate change-fueled extreme weather. As we grow ever more dependent on electrical devices, the importance of grid security expands accordingly.

Storage alone can provide backup power, and pairing storage distributed generation offers steady supply when the grid is down.  In recognition of these benefits, Massachusetts put $40 million into the Community Energy Resiliency Program to support solar plus storage projects at schools that double as emergency shelters, hospitals, and other critical facilities.  Following storms that caused major power outages, Connecticut established a microgrid grant and loan program that is currently deploying $30 million in funding.

And the Winner Is…
California receives the most attention for energy storage, and with real progress toward a bold procurement mandate the attention is deserved.  However, unique conditions in the Northeast—aggressive renewable energy targets, relatively high energy prices, and difficulty siting traditional infrastructure—make the region ripe for storage.

At this stage the race for energy storage leadership is just getting started, and the ultimate winners will be customers and the climate, as storage deployment ramps up, costs decline, and our entire energy system becomes more efficient and cleaner.

 

This blog post also appeared as a guest post on UtilityDive.com. See it here.

New York Proposes New Rates for Distributed Energy

This blog was co-authored with Miles Farmer, Clean Energy Attorney at Natural Resources Defense Council.

The New York Department of Public Service has proposed to change the way distributed energy resources (like community solar and small wind projects) are rewarded for the benefits that they provide to the electricity system. The Department released a landmark report in its “Value of Distributed Energy Resources” proceeding, recommending a methodology by which these resources can receive credits that align more closely with their true value to the electricity system. Acadia Center and NRDC have been involved in the collaborative process around the report’s creation, and here we examine what these proposed reforms hope to accomplish, give initial feedback, and look toward next steps.

This report marks the latest step in the state’s ambitious Reforming the Energy Vision (“REV”) initiative. REV aims to create a more consumer-centric, efficient, resilient, and cleaner energy system. The Department’s report focuses on reforming an electricity rate structure known as “net energy metering,” where credit for clean energy generation is set equal to the retail rate. Reforms to net energy metering have been a controversial topic across the country for the last several years. Some states have proposed successful new approaches. California, for example, is phasing in time-of-use rates for most customers that recognize when electricity generation is most valuable.

From the outset, New York’s Value of Distributed Energy Resources proceeding has sought to better align credits for community solar and other distributed generation resources with their value to the system. New York’s current net energy metering policies are simple, easy for customers to understand, and have proved to be effective incentives for investments in clean energy, so revising methods for net metering presents risks. A new ‘value-based’ crediting system is more complex by its very nature. But if done correctly, aligning credits more closely with benefits created by distributed generation has the potential to incent more efficient investments in the electric system. Acadia Center discusses value-based crediting here.

The staff report is a good start to a long-term iterative process. Throughout this process, Acadia Center and NRDC will be closely analyzing the report and offering recommendations for improvement. On first review, Acadia Center and NRDC find that the report recommends many approaches to important issues that are worthy of support:

  • It protects existing projects from unexpected changes and allows mass market development of small rooftop projects to continue under traditional net energy metering, providing continuity.
  • It provides credit to projects for their environmental value, with a floor at the social cost of carbon, pursuant to the New York Public Service Commission’s previous Benefit-Cost Framework Order.
  • It provides for a ‘market transition credit’ that incorporates some values that cannot be accurately calculated at this time, recognizing limits in current techniques to estimate the value of benefits provided by distributed energy resources.
  • It adopts monetary crediting, where each kilowatt hour generated is translated into a monetary amount based on the value it provides. This approach is more flexible and allows for smarter pricing than traditional volumetric crediting (which tracks only the amount of electricity generated and cannot accommodate details like the time at which the electricity was generated).

When creating a “value-based” crediting system like the Department’s proposal, the most difficult task is to develop a method for calculating the value of each of the benefits that distributed energy resources can provide. These benefits include energy, capacity (the availability of the system to provide electricity at times of peak demand), transmission and distribution value (because distributed energy resources like rooftop solar reduce the need for infrastructure to send electricity to customers), environmental and public health value, and other values that are more difficult to quantify. In practice, there are many ways to define and calculate the value of each of these components. However, the precise methods chosen have significant consequences for what investments will be made and how resources will be operated. Certain methods offer different tradeoffs. For example, using dynamic credit values may allow a resource to respond in real time to system needs, but they set less predictable values that might prevent investors from putting capital into beneficial resources.

The staff report effectively balances these goals in a manner that should facilitate continued growth of the solar industry in New York. It provides a good framework for further refinement, and we look forward to working with the Department and other parties to evaluate it further and carry out additional improvements.

The report also reflects the inclusive approach taken by the New York Department of Public Service. The Department facilitated a collaborative process to allow utilities, solar developers, customer representatives, environmental groups, and others to work together and provide input on a variety of issues including how the values of these different components should be calculated. Department staff has listened carefully to the concerns of all parties, including a range of detailed suggestions by Acadia Center and NRDC.

New York’s approach to valuing distributed energy resources is new and innovative, and regulators in states across the country will be examining it closely. We look forward to continuing to work collaboratively on these important issues as New York refines its proposal and builds upon it in future years.