A Single Word Could Restore Maine Energy Efficiency Funding

Apr 8, 2015 by  | Bio |  Leave a Comment

A recent decision by the Maine Public Utilities Commission (PUC) severely limits energy efficiency funding in the state. If the decision stands, Efficiency Maine Trust – the public entity that runs energy efficiency programs – would see its near-term budget cut from about $60 million to $22 million. This drastic cut in energy efficiency funding would essentially eliminate the cornerstone of sound energy policy in Maine. Fixing this mistake is vital to the state’s energy future.

The fix is easy (the entire fiasco boils down to the single word “and”), but the backstory is more complicated.

The Backstory

Energy efficiency works 

shutterstock_129267746 lightbulbThe more energy consumers use, the more energy must be generated. Whether that energy comes from coal, natural gas, or renewable sources, the cost to generate that energy goes beyond the dollar figure on your utility bills. Part of that cost is sunk into the generation facilities themselves, and part is in the poles and wires needed to bring that energy into our homes and businesses.

Energy efficiency has the power to reduce the overall demand for electricity by encouraging technological advancements that produce the same service while using less energy. Less overall energy use means less transmission and distribution build out, less energy generation, and, ultimately, a lower energy bill for consumers.

Energy efficiency saves ratepayers money, improves the environment, stimulates commerce, and creates jobs. Since 2011, Efficiency Maine has saved ratepayers almost $1 billion in lifetime energy savings while creating thousands of jobs. Over their lifetime, the projects Efficiency Maine helped install in 2014 alone will save more than 1 billion kilowatt hours of energy consumption – the equivalent of more than 22 million gallons of oil. This translates to nearly $200 million in ratepayer savings. Every dollar Efficiency Maine invests provides at least three dollars in return.

All this raises a pressing question: Why would the PUC slash funding for energy efficiency?

How we got here

In 2013, the Maine Legislature passed the bipartisan Omnibus Energy Act. One piece of this legislation mandates that Maine, through Efficiency Maine, fund and pursue all maximum achievable cost-effective energy efficiency.

Let’s be clear – that is the law.

A single phrase of this voluminous statute determines how much annual funding Efficiency Maine receives to meet (or not) the law’s mandate. This funding, which is included in electricity rates, is capped at “4% of total retail electricity transmission and distribution sales in the State.”

The current fiasco all boils down to what “total retail electricity transmission and distribution sales” actually means. If you find that phrase confusing, you’re not alone. For those working in the electric industry, “retail electricity” sales mean sales of electricity generation. And “transmission and distribution” sales mean sales of the transmission and distribution of electricity. But mashing them together creates a phrase not used anywhere in Maine law, or in any other law in the country.

The problem stems from a missing “and.” The phrase as originally drafted by the legislature was: “total retail electricity and transmission and distribution sales.” That phrase means something. So what happened to the “and”? No one knows. But somewhere along the line, without any discussion, debate, or request, it disappeared from the final version of the bill – after a legislative committee approved a version containing this critical conjunction.

A matter of interpretation?

So, what does the PUC have to do with this? The 2013 Omnibus Energy Act directs the PUC to make a rule that interprets this phrase and thus the amount of energy efficiency funding. In making this rule, the PUC must follow what the legislature intended when it wrote the law. If what the law says is clear, the PUC need look no further than the text. But if the law is not clear, the PUC looks to the bill’s legislative history to determine what the legislature intended the law to mean.

As it turns out, the only people who have found that confusing phrase absolutely clear are two out of three PUC Commissioners. They read the language to include sales from only transmitting and distributing electricity, not sales from generating the electricity. That reading translates to a huge difference in how much money goes toward Maine’s energy efficiency initiatives – a $38 million difference.

Even as written – in other words without the “and” – the PUC got this wrong. The only thing that’s clear about the phrase is how unclear it is. That means the PUC must look to the legislative history to see what the legislature intended. And no one – not even the legislators who drafted the bill – disputes that the legislature intended much greater funding for energy efficiency by including sales from both electricity generation and electricity transmission and distribution.

The Future

Frustrated yet? There’s more.

The Maine Legislature now has the opportunity to fix the PUC’s decision. Doing so would save Maine ratepayer dollars. Unfortunately, as the Portland Press Herald reported recently, prospects for an easy legislative fix look dim.

Remember, the 2013 Omnibus Energy Act, which mandates energy efficiency measures, passed with bipartisan support. Legislators have introduced an amendment to the Energy Act that simply reinserts the word “and” – as the legislature originally intended.

But other lawmakers are trying to block this version. In an op-ed in the Portland Press Herald, House Minority Leader Kenneth Fredette (R-Newport) admitted that the Energy Act was intended to increase the funding cap to “roughly $60 million” instead of the roughly $22 million under the PUC’s interpretation. Nonetheless, he claims that the PUC correctly interpreted the law it was given, mistake and all.

What Representative Fredette and other lawmakers are now arguing is this:

  1. Yes, the Energy Act meant to increase energy efficiency funding.
  2. Yes, the PUC interpreted it to severely limit this funding.
  3. Yes, we the legislature should fix this.
  4. But NO, we are not going to simply insert a single word in order to do what a bipartisan legislature intended in the first place when it passed the law.

 

Why not? Governor Paul LePage. He is almost guaranteed to veto a fix of the bill because he does not want to invest more in energy efficiency. The legislature might not garner the two-thirds vote needed to override that veto, let alone pass the amended version in the first place.

What’s the alternative? A bill that compromises further on sound energy policy in Maine. To be clear, the original Omnibus Energy Act was itself the result of bipartisan compromise – which was meant to vastly increase energy efficiency funding. Now, because of one word, the governor and Republican legislators want another bite at the apple.

Tell your legislators to pass the clean fix of the bill and restore Maine energy efficiency funding! You can find your legislator’s contact information here. Help restore adequate funding for energy efficiency in Maine!

Quiet and Hardworking: Energy Efficiency

Apr 8, 2015 by  | Bio |  Leave a Comment

We all know them. Every family and office has at least one. That quiet and hardworking member of the team that day in and day out gets the job done.

No fanfare needed. Just consistently delivering results.

In the world of energy, that quiet and hardworking team member is energy efficiency. Every day, it cuts costs and cuts pollution, both for electricity and for heating. In doing so, it makes us better prepared for the future when climate change demands that we move away from fossil fuels and rely on cleaner and lower cost electricity.

At about half the cost of generating electricity, energy efficiency remains the lowest cost electric power resource. If we didn’t cut electric energy use with energy efficiency we would pay twice as much to buy that power from a power plant.

For more than a decade, Vermont has been a leader in relying on cleaner and low cost energy efficiency. In practical terms, our efficiency investments have avoided building new, expensive and polluting power plants, and has reduced the fossil fuels needed to heat our homes. Our reliance on efficiency also frees up energy for new uses such as heat pumps and transportation.

Energy efficiency is simply part of any sensible long-term energy strategy.

Here are some numbers:

In the past 13 years, electric efficiency in Vermont has produced savings of over 12.7 million megawatt hours. That is equal to the power needed to supply every home in Vermont for five years.

For 2014, energy efficiency met 13.3 percent of Vermont’s electric supply needs, an increase over 2013.

At the same time, electric energy efficiency in Vermont cut polluting greenhouse gas emissions by 8.7million metric tons since 2000. That is equivalent to reducing pollution by taking 1.8 million cars off the road each year.

But that is only part of the story. The regional New England grid operator recognizes the clear value of energy efficiency and holds it to high standards. Vermont is paid about $4 million dollars every year for its electric energy efficiency contribution to meeting the region’s power needs. Not only is that money reinvested in Vermont, and reduces fossil fuel use for heating, it lowers electric power costs for everyone in the region.

And in terms of electric transmission, Vermont’s investments in energy efficiency have deferred building over $279 million dollars of new electric transmission lines over the next decade.

From ski areas to grocery stores to homes and manufacturing, our energy efficiency efforts produce real results. Vermont’s employers are not only cleaner businesses, but also more competitive. For example, seventy five percent of Vermont ski areas have switched to more efficient snowmaking equipment, installing 2700 new snow guns that use up to 85% less energy to operate. That is a savings for all of us.

For such a quiet and hardworking resource, it is troubling that it has been caught in a political buzz saw this year. Energy efficiency was taken political hostage and cut as part of a new energy bill. We all know politics is not pretty. But it is sad when such shenanigans trump common sense, good policy and sound economics.

Rather than reward this quiet and hardworking team member, its ability to perform and deliver savings is being cut. Going forward, this means we will all pay more and pollute more.

It is time to make sure we rely on the cleanest and lowest cost resources. We should not leave real savings on the table and should not let politics elbow out the common sense solutions that benefit all Vermonters.

Time to Act: Guest Post by Olivia Gieger

Mar 6, 2015 by  | Bio |  Leave a Comment

Last fall, CLF, Mass Energy Consumers Alliance, and four youth plaintiffs filed suit against the Massachusetts Department of Environmental Protection for failing to fully comply with the Global Warming Solutions Act. In this guest post, one of the teen plaintiffs, Olivia Gieger, explains why she’s joined the court fight to defend her climate future.

As a sophomore in high school, I am all too familiar with procrastination. That group project assigned a month ago and now due tomorrow? We had a month; why start early? It’s a group project; won’t someone else do it? In my experience, I can tell you, those all-nighter–inducing group projects never turn out well.

Don’t be the sophomore in high school.

This 2015, we have the technology to know that atmospheric carbon dioxide levels are rising at an alarmingly fast rate. We’ve had this technology since 1960 when carbon dioxide levels were at 315 parts per million (ppm). Now they’re at 395 ppm(1). We know that this carbon dioxide is a greenhouse gas, which captures heat energy and slows its release from air. While greenhouse gases are necessary in our atmosphere and are needed to keep us warm, an unnatural amount is strikingly dangerous. More greenhouse gases mean more heat held in the atmosphere, which means a hotter Earth.

Side effects of global warming are countless, and they are happening today. Sea levels are rising. Ice caps are melting. Forest fires are raging. Downpours are constant in the Northeast, yet droughts are ever more present in the West(2).

But, really, why should I care? Melting ice caps and a couple less polar bears don’t really affect me, right? I don’t live in California, so those wildfires don’t affect me, either. But other people are being impacted by the wildfires, the melting ice caps, the rising temperatures. The scary reality is that we all are. I may not know anyone who lives in California, but that’s where my food is grown. If there are droughts and wildfires, how is my family supposed to get some of our favorite fruits and vegetables that don’t grow here in Boston during the winter? And those melting ice caps affect a whole lot more than polar bears. When they melt, sea levels rise – not just at the North Pole, but globally. This means my favorite beaches on Martha’s Vineyard will be washed away. It means my favorite restaurants and museums – even my neighborhood – here in Boston will be underwater in my lifetime.

In order to do something about these concerns, I have filed a lawsuit, along with three other youth plaintiffs, against the Massachusetts Department of Environmental Protection (DEP), because DEP has been procrastinating in fully complying with the Global Warming Solutions Act (GWSA). The GWSA requires DEP to pass regulations establishing declining greenhouse gas emissions limits for Massachusetts. But DEP has not done so. The purpose of the lawsuit is to force DEP to comply with the law, because it appears unwilling to do so on its own. Thanks to the support from my lawyers at Sugarman, Rogers, Barshak, & Cohen and Our Children’s Trust, we will ensure that DEP complies with the law.

So now my question is why? Why are we as a society being sophomores in high school about this? Why are we just waiting for someone else to solve this massive problem? We know the problems, and, better yet, we know the solutions. Using clean, renewable energy is one solution. Enough energy from the sun enters the Earth in one hour to power it for an entire year(3). This energy is unlimited, harmless to the environment, and virtually free. Sounds to me like it tops fossil fuels any day. It’s not just solar energy, however – wind power and hydropower are also unlimited and harmless to the environment. So why then are we oblivious to this? Why are we so incapable of making a change? We need to stop procrastinating. It is long past the time to include, encourage, and execute programs with wind and solar power as the energy of America. We cannot afford to be sophomores anymore; it’s time to graduate.

Works Cited:

  1. Pieter Tans, NOAA/ESRL (www.esrl.noaa.gov/gmd/ccgg/trends/) and Dr. Ralph Keeling, Scripps Institution of Oceanography (scrippsco2.ucsd.edu/).
  2. “The Current and Future Consequences of Global Change.”Global Climate Change: Vital Signs of the Planet. National Air and Space Association, n.d. Web. 14 Nov. 2014.
  3. “Solar Power Energy Information, Solar Power Energy Facts.”National Geographic. N.p., n.d. Web. 16 Nov. 2014.

CLEC Is Looking For (Not After) Your Wallet

Oct 28, 2014 by  | Bio |  1 Comment »

The recently announced formation of the Coalition to Lower Energy Costs (CLEC) represents the latest tactic employed by Kinder Morgan and its Tennessee Gas Pipeline (TGP) subsidiary in their effort to build a gas pipeline on the backs of electric customers. The acronym’s distinct resemblance to the Koch brothers’ ALEC front group is just a coincidence, but this move is straight out of the same playbook. The group’s press release suggests that it represents the interests of “citizens” and “consumers” to lower energy costs, but this thin veil cloaks a group of lawyers and gas executives set on doing quite the opposite.

The fact is, CLEC is led by a former natural gas company executive and an attorney with the law firm that represents TGP. The entirety of CLEC’s officers and directors are employees of that same TGP law firm and its political strategy subsidiary. Needless to say, the focus of this group will have a lot less to do with the interests of our electric consumers and more to do with the 2 bcf/day pipeline that TGP is struggling to fund and build in western Massachusetts.

A quick read of CLEC’s website exposes its self-serving intentions as it unabashedly proposes that the solution to anticipated high energy costs is the development of a new 2 bcf/day pipeline to be paid for by consumers – a pipeline that would just happen to follow the same route from New York to Dracut, MA, that TGP has proposed. CLEC cites two “studies” that support this approach, but neglects to mention that they were written by experts hired by TGP and that their “flood the market with gas” approach was widely discredited by a variety of experts as being bad for consumers and likely to undermine the energy markets in a recent proceeding before the Maine Public Utilities Commission.

The CLEC/TGP proposal is not a solution. First, it was already rejected by the first regulatory body to consider it, the Maine PUC staff, which has recommended to its Commissioners that the cost to consumers of investing their money in a gas pipeline outweighs any benefits. Second, CLEC fails to advise us that this “money saving pipeline” that we should pay for is highly controversial and unlikely to obtain the necessary permits, and that even if it does obtain permits, it would not be in-service for at least another 4–5 years. Finally, by that time, already planned incremental pipelines will be in-service and, in combination with ramped up energy efficiency, expanded management of gas and electric demand, and increased renewable energy resources, will have already helped provide relief to consumers without burdening them with the $3–6 billion cost of a new pipeline – and the climate implications that come with it.

What’s more, at least one of the companies proposing those incremental pipeline projects would undertake them with or without the public subsidy that TGP is asking for. So, thanks anyway TGP, we can’t afford your brand of consumer assistance.

3 Things No One is Telling You About Rising Energy Costs

Oct 3, 2014 by  | Bio |  5 Comment »

Rahm Emanuel, President Obama’s first White House chief of staff, was once quoted as saying “You never want to let a serious crisis go to waste,” referring to the opportunities to pass sweeping bills in the wake of the 2008 financial meltdown. Over the past weeks, we’ve seen that sentiment put into practice by some of New England’s major energy industry players. They’ve been fanning the flames of fear over expected winter price spikes to support their continued push for building massive new gas pipelines, even though new pipelines have no chance of helping to address the risk of price spikes for this winter.

Here are 3 things you’re not being told about what’s really responsible for the increased rates and how to deal with rising energy costs now:

  1. New pipelines can’t and won’t address the rising rates for this winter (or the next three winters).
    • Even under the most optimistic scenarios, new natural gas pipelines of the scale that were being considered as part of the now-stalled New England Governors’ initiative could not be permitted and built earlier than November 2018. Even if they lived up to the Governors’ promises after that, they would do nothing for consumers this winter and the next three winters.
    • New England isn’t the only region of the country that experienced price spikes this past winter. New York, an area that had just expanded its pipeline capacity still experienced higher prices last winter, and the regional electric grid known as PJM (because it covers, in part, Pennsylvania, New Jersey and Maryland) also experienced price spikes even though it is located in the epicenter of abundant Marcellus shale gas supplies.
  2. The real problem isn’t a major deficit of pipeline capacity, but a failure to deal adequately with the increased use of natural gas for power generation.
    • We now use a lot of natural gas for power generation in New England, which helped modernize the system by moving us away from old, polluting, and inefficient sources like coal and oil. Because of this, and the way the regional grid’s electric market works, natural gas prices now generally set the price for electricity in New England.
    • Unlike natural gas utilities that supply homes and businesses with gas for heating, which buy gas on long-term “firm” contracts that guarantee access to gas, the companies that own natural gas power plants typically buy cheaper “interruptible” contracts because there isn’t currently a mechanism that allows them to pass-through the additional costs of buying firm supply.
    • In the winter time, people are often turning on the heat at the same time that they are turning on the lights, so the system experiences high demands on gas for both uses in the mornings and afternoons. These “coincident” demands led to price spikes between 10-42 days in each of the last winters, and retail electric prices are now catching up as the market is expecting a repeat of last winter’s high prices.
    • Now that natural gas makes up so much of the electricity we use, the volatility of gas prices has a bigger impact on electric prices and leads to higher rates. We have been far too slow in deploying demand-reducing energy efficiency measures in homes and businesses and in increasing the amounts of local renewable energy on the system, both of which would help reduce market prices for electricity and protect us from volatile gas prices.
    • The increased use of liquefied natural gas (LNG) imports should help to moderate the price spikes to some extent this year, but more can be done through market reforms without risking overbuilding gas capacity.
  3. Energy efficiency is the best way to reduce your bills and stay warm this winter.
    • Even though rates are going up, you can still lower your total bill by lowering your demand. Massachusetts has some of the best energy efficiency programs in the country which means that you can apply for rebates, incentives, and assistance to help you install efficient measures. Other New England states have programs as well.
    • If you don’t own your home or apartment, there are still some inexpensive steps you can take to cut your bills. There are many ways to conserve energy for a very small investment of time or money. Check back in for a look at how Senior Attorney Shanna Cleveland is getting her apartment ready for the winter.

Working with the ISO to Integrate Renewable Energy in New England

Sep 15, 2014 by  | Bio |  3 Comment »

The ISO is the organization that operates the New England-wide electricity grid and runs New England’s wholesale electricity markets.

You can read more about what the ISO is, and why CLF works on ISO committees and working groups.

I have written before about CLF’s work with the ISO. You can read those prior blog posts here, here, and here.

As I have said before, CLF is one of the very few environmental organizations to work with the ISO, and no other environmental organization is as heavily engaged in the ISO as CLF is.

A few days ago, I wrote about one of the major criticisms of renewable energy – that it is too expensive – and how changes that CLF is seeing at the ISO are, even now, making that argument a thing of the past. Today I want to describe another frequently heard criticism of renewable energy, that it is not always available and so it cannot be relied upon like fossil-fuel generation can.

We renewable energy advocates hear that argument a lot. For example, the nationally prominent, anti-renewable-energy Heritage Foundation wrote on May 5, 2010:

Wind, like solar energy, is not a dispatchable power source; that is, it cannot be turned on at will. As a result, increasing dependence on wind adds variability and uncertainty to the power grid that must be offset by quick-ramping power sources like natural gas turbines to maintain a relatively constant flow of electricity.

When the Heritage Foundation discusses an electricity source being “dispatchable,” it means both being turned on and off at will, and being able to increase or decrease its electricity output at will. Here in New England, the ISO, which runs our electricity grid, “dispatches” every electricity generator in the region. The ISO tells those generators when to run and when not to run; and it tells them exactly how much electricity to churn out. This is essential to maintaining the reliability of the electricity grid, because the aggregate supply produced by all the generators in the region has to be exactly equal to the aggregate demand of tens of millions of customers every minute of every hour of every day of the year.

What the Heritage Foundation means to say here is that the wind does not always blow and the sun does not always shine. For these reasons, up until now, renewable energy has not been a dispatchable power source.

But here is the really cool news from the ISO: the ISO is now on an irreversible track to make intermittent renewable energy sources like wind fully dispatchable in the New England power grid. In fact, the ISO expects to have wind fully dispatchable in New England by late 2015 or early 2016!

According to the ISO, there are three requirements, or prerequisites, for making wind (and, eventually, other intermittent renewable energy sources) fully dispatchable.

The first requirement is that the wind farms, wherever they are located, be in constant electronic communication with the ISO’s control room in Holyoke, Massachusetts. The ISO refers to this requirement as “telemetry.” The telemetry between wind farms and the ISO control room is already in place; it exists today.

The second requirement for making renewable energy fully dispatchable is that the ISO needs to have reliable, accurate five-minute-ahead weather forecasts for things like wind speed and sunshine intensity. The ISO has been running trials for months now of five-minute-ahead forecasts; and at a meeting I attended this month, the ISO reported that the five-minute-ahead weather forecasts it has been receiving have been completely reliable and accurate and fully satisfy the requirements of the ISO control room.

The third, and final, requirement for making renewable energy fully dispatchable in New England is the creation of the actual computer algorithms that the ISO control room will use to dispatch renewable generators when the time comes. The ISO plans to issue a so-called “DNE Order” to every dispatchable renewable generator for every five-minute interval of every day. This DNE Order will set an upper limit (i.e., “Do Not Exceed,” hence, DNE) for that generator for that five-minute interval. As long as the generator does not go above its DNE limit, the generator will be considered (by the ISO) to be operating “within dispatch,” and will get paid for its electricity output.

It is this third, and final, part that is still needed to make renewable energy fully dispatchable. And at the ISO meeting I attended this month, the ISO decided to start the actual work on those computer algorithms. These algorithms will take some time to complete; but when they are done, the ISO will treat wind as fully dispatchable in New England.

Many owners of fossil-fuel-fired power plants are very unhappy that the ISO is moving so inexorably toward making renewable energy fully dispatchable. Those fossil generators know, correctly, that having renewable energy fully dispatchable by the ISO will tend to undermine the economic viability of their dirty, old power plants. This is especially true now because the ISO-New England, like other ISOs in other parts of the country, is also rolling out “negative price offers” that will make renewable energy resources even more economically competitive compared to fossil-fuel plants. (I discussed that development in my blog post a few days ago, which you can see, here.)

This is a very exciting time for CLF to be participating in ISO matters, because the ISO is moving on multiple fronts to integrate new renewable energy resources in to New England’s electricity grid.

For years, opponents of renewable energy have claimed that renewable energy, while clean and non-polluting, is too expensive for average ratepayers. But on December 3, 2014, ISO is introducing negative price offers, that will make renewable energy cheaper than ever before and drive down the cost of electricity for all New England ratepayers.

And for years, opponents (like the Heritage Foundation) have argued that renewable energy is not dispatchable. But even now the ISO is taking the final steps to make intermittent renewable energy resources fully dispatchable – and is writing the computer algorithms that the ISO control room will soon use to dispatch wind farms.

These are exciting times in the world of renewable energy development, and CLF is playing an active role in those developments.

The ISO – and How Renewable Energy Can Save Ratepayers Money

Sep 11, 2014 by  | Bio |  5 Comment »

Everyone’s heard someone claim that renewable energy is too expensive. This criticism often overlooks one of the most important benefits of renewable energy – not the environmental benefits (which are also very important!) but the price-suppression benefits. CLF is an active participant in the ISO-NE, and, as such, we get to see some of the ways that renewable energy saves ratepayers money – and we sometimes see this in ways that many members of the public do not.

ISO-NE stands for “Independent System Operator – New England.” The ISO is a nonprofit corporation, licensed by the federal government, that both operates the New England-wide electricity grid and runs New England’s wholesale electricity markets. In other words, the ISO tells every electricity generator in New England (whether powered by coal, gas, oil, nuclear, wind, or solar) when to be on (or off) and how much electricity to put into the grid – and the ISO runs the markets that determine how much you and I will pay for that electricity.

You can read more about what the ISO is, and why CLF works on ISO committees and working groups. And I have written before about CLF’s work with the ISO; you can read those prior blog posts here (discussing distributed generation), here (discussing reducing carbon emissions), and here (discussing energy efficiency). CLF is one of the very few environmental organizations to work with the ISO, and no other environmental organization is as heavily engaged in the ISO as CLF is.

First, let’s look at the price-suppression benefits that renewable energy (like wind and solar) have now in our electricity markets. Then, let’s take a look at how the ISO is planning to change the New England wholesale electricity market in a way that may increase those price-suppression benefits in the future.

How Renewable Energy Suppresses Prices Now

Electricity in New England is priced hourly, with the price each hour set by the most expensive marginal resource for that hour. That is, during every one of the 8,760 hours in a year, the ISO “turns on” the least expense generators first, and turns on the most expensive generators last. (That’s why electricity prices are highest on the hottest afternoons of the summer – because the ISO has turned on those last, most expensive generators when there is the most demand on the system, and those generators are setting the clearing price for the entire system.) The layering of generator bids, for every hour of the year – with the lowest bids on the bottom and the highest bids on the top – creates what the ISO calls the “bid stack.”

Thus, every generator on the system is paid the same clearing price for the same hour of the same day. And that clearing price is set by the last, “marginal” generator at the top of the bid stack, the most expensive generator operating during that hour. Of course, the overall clearing price paid by ratepayers is lowered when more low-cost power is bid in; and the overall clearing price is raised when more high-cost power is bid in.

Most renewable energy projects bid in to the New England electricity wholesale energy market at zero dollars for every day and every hour that it is available. This makes sense when you think about it. Most conventional generators (say, coal, oil, or natural gas) bid a price into the ISO-run energy market that reflects the price of the fuel that they burn. Wind and solar generators have free fuel.

The fact that renewable energy projects bid in to the ISO’s energy markets at zero means that the clearing price for all electricity for all ratepayers in New England gets lowered because of the presence of renewable energy at the bottom of the “bid stack” (in fact, at zero). This lowering of electricity prices paid by ratepayers due to the presence of renewable energy on the grid (and its presence in the ISO’s bid stack) is called the “price-suppression effect” of renewable energy.

And the amount of this benefit can be significant. In a recent report by a leading international consulting firm, Charles River Associates (CRA), on the price-suppression effect of the 468 megawatts of wind power expected from the Cape Wind project, CRA estimated the benefit to ratepayers to be about $185 million annually, or about $4.6 billion over the expected 25-year life of the project. These figures are controversial, and other experts put the dollar value of the price-suppression effect of Cape Wind significantly lower. Nevertheless, the price-suppression effect of renewable energy is real – and the CRA estimate was accepted into evidence in 2010 by the Massachusetts Department of Public Utilities in the D.P.U.’s Docket 10-54, which examined the proposed contract between Cape Wind and National Grid. The CRA report is entitled “Analysis of the Impact of Cape Wind on New England Energy Prices,” and is dated February 8, 2010. (You can see the full text of the CRA report on the organization’s website.)

What the ISO Is Going To Change

These price-suppression benefits exist in the New England energy markets now, with renewable energy resources bidding in to the market at zero dollars per hour.

But on December 3, 2014, the ISO is going to begin allowing renewable energy generators to bid into the energy market at minus-$150 per megawatt hour! (Actually, all generators – even coal, oil, and gas generators – will technically be allowed to bid into the energy market at negative amounts; but in the real world, it is likely that only renewable generators will actually do that.) When renewable generators bid into the energy market at less than zero, those bids will be called “negative price offers.”

Of course, negative price offers have the very real potential of driving the overall clearing price of electricity in New England – the price for electricity paid by every ratepayer – down even further.

What do “negative-price offers” really mean? When a conventional generator (say, a plant that is fired by natural gas) makes a positive price bid into the energy market (say, $100/MWh), that generator is, in effect, saying, “I’ll sell my electricity into the market if the market will pay me $100/MWh for all the electricity I sell.” When a renewable generator (say a wind farm) makes a negative price bid into the energy market (say negative $100/MWh) that generator is, in effect, saying, “I’ll sell my electricity into the market – and I’ll give the market $100/MWh for all of my electricity the market takes.”

Pretty good, huh?

So, how can renewable energy generators stay in business if they are willing to pay the market to take their electricity? It’s simple. Renewable energy projects sell not only electricity, but also the Renewable Energy Credits (RECs) from their projects. But the projects can sell those RECs if, and only if, their electricity is going into the grid. Sometimes, the value of the RECs to the renewable project owner will be worth enough money that the project will be willing to sell its electricity into the grid at a negative price!

The Energy-Pricing Paradigm Is Changing!

Renewable energy has been around for decades. Over the past decade, as the public’s awareness of the climate change emergency has increased, environmentalists have had some success in promoting renewable energy. But for as long as environmentalists have been promoting renewable energy, the overall structure of the argument has been the same: sure renewable energy is clean and reduces carbon emission; but renewable energy is far more expensive than conventional power, and we just can’t afford it.

That paradigm is now changing. It won’t change all at once. But as the ISO introduces the new negative-price offers into the New England wholesale electricity markets, the general public (including government officials and, indeed, all electricity ratepayers) will more and more see the cost-savings from the price-suppression benefits of renewable energy.

And, wholesale electricity markets will see another consequence of renewable energy being recognized as more cost-effective than fossil generation as a result of the new negative-price offers: old, dirty, fossil-fuel generators will start losing market share and then they will start losing money. That’s why at every ISO meeting I have attended over the last two years at which negative-price offers have been discussed, the owners of dirty, old fossil-fuel plants have been noticeably discomfited. Those owners of dirty, old fossil fuel plants know something (correctly) that the general public is about to learn: the old paradigm in which renewable energy could be plausibly criticized as being too expensive is changing.

In the new paradigm, renewable energy will be not only cleaner than conventional electricity, but it will be cheaper, too. In fact, the ISO that runs the California electricity grid already allows negative-price offers from generators down to negative-$150/KWh; and the ISO that runs the New York electricity grid allows negative-price offers from generators down to minus-$1000/MWh.

Although the general public does not know these facts, the owners of fossil-fuel generators sure do! That’s why they are so unhappy that the ISO is introducing negative-price offers into New England – even though we ratepayers will benefit significantly.

Fresh Air Ahead: Transition to Clean Energy Supplies

Sep 8, 2014 by  | Bio |  Leave a Comment

It is welcome news that the New England Governors are stepping away from a high-risk gamble with clean air and electric customers’ money. Shrouded in secrecy, the New England States Committee on Electricity (NESCOE) undertook efforts that were poised to tax electric customers – including customers in Vermont – to pay for bringing massive new gas pipelines into the region.

These pipelines would lock in polluting fossil fuel supplies for decades. The NESCOE efforts are now on indefinite hold. That’s good. The shoddy analysis supporting the plans collapsed after being exposed to the welcome sunlight of public scrutiny.

But as the region closes older and dirtier generating facilities – such as coal plants in southern New England, and Vermont Yankee here in Vermont – and as we move transportation and home heating away from gasoline and oil, we need to make sure we transition to cleaner supplies.

We still have homes to heat, lights to keep on and businesses to run. As a region, we have committed to reducing our greenhouse gases. Our efforts are a model for the rest of the country. Climate change demands that we reduce emissions at least 75% below 1990 levels by 2050. To meet this challenge, Vermont has set a goal of meeting 90% of all its power needs with renewable sources by 2050. If and how natural gas fits into this equation is one of the biggest energy challenges of the next decade.

Once touted as a panacea and a “bridge fuel,” the exuberance for natural gas is tarnishing. Pollution from gas leaks during transmission and extraction threaten to eliminate any of the possible climate benefits from natural gas burning cleaner than oil. But reliance on natural gas, at least in the short term, is not likely to go away. Most of southern New England relies on gas for heating. During the very cold days last winter, high demand for gas drove up short-term prices to record levels. These price spikes have fed a frenzy of cries for new pipelines.

The real challenge lies in reducing our overall reliance on gas. It is not an option to use as much gas decades from now as we use today.

The actions we take now in terms of gas pipelines or new gas supplies need to foster the transition to the next generation of cleaner supplies. Our clean energy transformation will not occur if all our energy dollars continue to prop up old technology and fossil fuels.

The model Vermont created with energy efficiency holds promise for our next clean energy transformation – transitioning away from fossil fuels. For pennies a day our investments in energy efficiency have saved money, reduced pollution and allowed us to avoid building expensive new electric power plants.

As we look at gas supply we can see that making wise use of our existing pipelines is a good place to start. We can make sure the pipeline capacity we already have is being well utilized before leaping to build expensive new pipelines as NESCOE contemplated. This starts with fixing leaks and creating opportunities for storage or contracts to address the few hours of a few days of high demand in the winter.

If new pipeline capacity is added, its lifespan should be limited. To move away from fossil fuels by 2050, any permit for a new or expanded pipeline should expire in 2050. We must recognize the useful life of a new pipeline and not allow it to saddle customers with costs and pollution for decades to come.

Any pipeline capacity increase should include a “system transformation charge.” Similar to the energy efficiency charge, this would recapture a portion of the expected economic savings and use those funds to enable more energy efficiency and renewable power supplies. These funds would allow customers to reduce their reliance on fossil fuels each year, making the possibility of using natural gas as a “bridge fuel” a reality.

A clean energy transformation is in reach. Vermont and New England can lead the way leaving cleaner air and a healthier planet for ourselves and for generations to come.

Breaking News: NESCOE Suspends Votes on Tariff Proposals

Aug 1, 2014 by  | Bio |  9 Comment »

The New England States Committee on Electricity (“NESCOE”), an entity created to carry out the policy directives of the New England governors, had been hurtling down the track towards forcing electric customers to pay for a massive, new natural gas pipeline as well as new transmission projects to import large-scale Canadian hydropower. This morning at the monthly meeting of the voting participants in the New England Power Pool (“NEPOOL”), NESCOE signaled that the train is going to slow down.

In a surprising and welcome move, NESCOE announced at the meeting that it is delaying action on both the gas and electric proposals that it has been pursuing–proposals that have the potential to put billions of customer dollars at risk. NESCOE formally requested that all of the votes that had been scheduled for the proposals be taken off the calendar to allow for a delay of  “at least a month.”

For months now, CLF has been calling upon NESCOE and the New England Governors to bring these flawed proposals and the reasoning behind them out into the open. Until now, the formulation of and negotiations around these proposals have been conducted almost completely behind closed doors.  With this delay, NESCOE and the officials who direct its actions have a real opportunity to address procedural and substantive concerns — raised by CLF and other stakeholders —  by embracing a transparent, open process that includes a meaningful assessment of alternatives, including: efficiency, better utilization of existing infrastructure, and more renewable distributed generation. After all, the initial studies for NESCOE indicated that under a “low demand” scenario there would be no need for additional infrastructure at all.

This time around, CLF urges the Governors to require NESCOE to include an evaluation of the cost-effectiveness of all alternatives, as well as an assessment of which solutions are actually consistent with achieving the long-range energy and climate objectives of the New England states.

The NESCOE announcement also followed a compelling argument by CLF at the last Transmission Committee meeting on July 22, regarding the need for these proposals to be properly vetted through ISO-NE’s “Major Initiatives” process. These proposals carry with them the power to shape New England’s energy system for the next 40-50 years, so an open, public process is imperative. CLF will continue to provide the public with up-to-date information as it becomes available.

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