Governor Baker’s Solar Bill Misses the Mark

Aug 25, 2015 by  | Bio |  Leave a Comment

Anticipating the release of his promised solar power legislation, we encouraged Governor Baker to be bold in strengthening and continuing the solar-friendly policies, including net metering, that have made Massachusetts a national leader in solar energy. Unfortunately, his proposed bill falls well short of that goal. At a time when our changing climate demands urgent action on clean energy, the people of Massachusetts deserve better.

Net Metering: The What and the Why
So what is net metering and why is it important? Economics.

Strategic investments in renewable energy sources will reduce our reliance on climate-changing fossil fuels. Photo credit: CLF

Strategic investments in renewable energy sources will reduce our reliance on climate-changing fossil fuels. Photo credit: CLF

Net metering is the billing arrangement with Eversource and other utility companies that encourages the use of solar power by making it a good investment for businesses and families. When the sun is shining, your panels either power your home directly, or run your meter backwards – selling your excess solar power back to the utility. At the end of the month, you pay the difference between the electricity you consumed and what you sold back to your electric company – the “net” amount of electricity you purchased. The savings – over buying all your electricity from the utilities – can allow an average Massachusetts home installation to pay for itself (with other federal and state credits) in as little as five to six years. It’s a win-win: You get cheaper electricity; we all get cleaner air, a more resilient grid, and fewer climate warming emissions.

Caps Are Bad for Business (and Our Climate)
For historical reasons we’ll discuss in just a moment, the number of solar installations that are allowed to “net meter” in Massachusetts is capped; in much of the state, we’ve reached the cap, or we’re about to. The result: fewer solar installations exactly when we need more (and more!) clean solar power to help us get rid of the dirty fossil-fuel generators that are destroying our climate. That’s why we encouraged the Governor to join the state Senate in raising Massachusetts’ net metering caps all the way to the state’s 2020 goal of 1,600 megawatts of installed solar – or, better yet, to get rid of them altogether as Rhode Island has successfully done.

But the Governor’s bill did neither, instead simply bumping the caps up again from about 9% of the utilities’ total load to about 13%. That’s well shy of what’s needed to either re-energize the state’s solar industry or to get the state to its 1,600 megawatts goal. That small bump should help a few solar projects that have been waiting in the wings in certain parts of the state, but there is every indication that, with those projects and others, we would quickly hit the new caps if this bill were to become law.

And that’s a problem.

According to a recent study by the National Renewable Energy Lab, when the number of solar installations in a state approaches the level of a net metering cap, uncertainty about the availability of net metering impedes the market. To thrive under a cap, the study found, the solar market needs clear and strong signals regarding the future availability of net metering.

Baker Bill Is a Set Up for Solar Deja Vu
Unfortunately, Governor Baker’s bill would keep the future of solar in Massachusetts an open question. Instead of moving decisively to build up our solar industry and ensure that we reach our goal in 2020 and beyond, the bill would guarantee that in the very near future, we will have to (again) press pause on solar installations across the state while we (again) argue about whether, when, and by how much to (again) raise or remove the caps.

Moving ahead in such fits and starts seems particularly short-sighted for at least two key reasons. First, climate change demands serious action, not halting baby steps, right now. Second, the need for net metering caps vanished years ago. In Massachusetts and elsewhere, caps were imposed in the early days of solar power, when we were all a bit uncertain as to how much variable solar power our steady-state grid could accommodate without becoming unstable. In that context, volumetric caps on installations made sense as a way to judiciously control the system. But those days are long gone.

We now know that solar power brings extra value to our electric power system beyond the electrons it produces. We also know that the existing grid, without significant modification, can be expected to operate reliably and safely with renewables like solar power providing up to about 30% of our power. Here in Massachusetts, that’s more than nine times the amount of solar power we hope to have by 2020 – and just over ten times more than allowed by the Governor’s proposed new caps!

It should come as no surprise, then, that a majority of the members of the state’s recently concluded Net Metering and Solar Task Force voted in favor of doing away with net metering caps altogether as long as the value of solar is accurately priced (more on that soon).

So the imperative remains: To ensure Massachusetts remains an innovator and leader in the drive to a clean energy future, the Legislature should immediately lift the net metering caps system-wide to at least our 2020 goal of 1,600 megawatts-installed or, better yet, remove them altogether to allow the true value of solar to shine through!

Sunny Days Ahead: Securing Massachusetts’ Role as a Renewable Energy Leader

Aug 7, 2015 by  | Bio |  1 Comment »

Governor Baker’s administration announced late last week that it would file, this week or next, legislation designed to continue the growth of solar power in Massachusetts and achieve the state’s goal of 1,600 megawatts of installed solar capacity by 2020. No details have been released yet on the draft bill, but those are goals that CLF enthusiastically supports.

Solar panels at Exeter Area High School (photo credit: flickr/SayCheeeeeese)

(photo credit: flickr/SayCheeeeeese)

Solar is a sustainable source of carbon-free electricity that must play a central role in our clean energy future. In addition to providing low-cost, clean energy whenever the sun is shining, solar brings extra value to our electric power system. Particularly when oriented to the southwest, solar panels generate power when we need it most, during “peak load” in the late afternoon.

That reduces the need, in the short-term, to turn on dirty, climate-warming fossil fuel “peaker plants.” In the long term, it reduces the need to build more of those plants and the expensive transmission and gas pipeline infrastructure they require.

Importantly, with the cost of installing solar power steadily dropping – down 45% since 2010 nationwide and almost 5% just in the last year in Massachusetts – solar also makes great economic sense. Massachusetts has a healthy, growing solar industry that employs more than 10,000 people statewide. And, for every dollar invested in solar, the state sees $1.20 in economic benefits returned to our local economy – some $950 million dollars last year alone.

So the time is now to continue our leadership in solar energy. Despite its small size and northern latitude, Massachusetts currently ranks an impressive sixth in the nation in installed solar capacity thanks to the solar-friendly policies that we encourage the Baker administration to strengthen and continue.

First and foremost among those policies is net metering, which makes it economical for individuals and businesses to either install solar on their own property or share in the benefit of solar power installed nearby. Despite the state’s commitment to reach 1,600 megawatts of installed solar in the next five years, installations across Massachusetts have slowed as we’ve bumped up against old, outdated net metering caps put in place before we knew solar power’s full value – for the utilities, for the grid, and for the people of Massachusetts. As we anticipate the filing of the Governor’s solar bill, we urge the administration to include provisions to lift those caps (as the state Senate just voted to do) or, better yet, to remove them altogether (as Rhode Island has successfully done).

As Massachusetts works to further develop a comprehensive, long-term renewable energy strategy, we encourage Governor Baker to be bold and secure the state’s role as an innovator and leader in the drive to a clean energy future. Stay tuned for our analysis of the strengths of the final bill once it’s filed.

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Experts Weigh In: Maine Doesn’t Need New Gas Pipelines

Jul 17, 2015 by  | Bio |  Leave a Comment

This week consultants hired by the Maine Public Utilities Commission (PUC) concluded that Maine should not enter into contracts to purchase gas pipeline capacity because the costs of doing so would outweigh the benefits to Mainers.

In many ways, this was a foregone conclusion – one that CLF predicted nearly a year ago and that the PUC itself (unofficially) reached before soliciting proposals from pipeline companies and spending taxpayer dollars on a lengthy consultant’s report. It’s a cautionary tale not just for Maine but for all of New England as the region weighs its energy future – and decides whether it will overinvest in natural gas or blaze a trail based on cleaner, renewable resources.

This process all started back in March 2014. After a cold winter sparked region-wide fears of an imminent shortage of natural gas to power our homes and businesses, Maine’s PUC was tasked with determining whether the state should contract for additional gas capacity under the Maine Energy Cost Reduction Act (MECRA). The PUC approached this work in two phases: first, soliciting and examining evidence and testimony from a variety of interested parties, including CLF, as to the need and economics of gas pipeline capacity procurement. And, second, if the economics made sense, to request proposals from pipeline companies.

CLF testified before the PUC as it gathered the evidence and data it would need to make their determination. We reasoned that Maine should not enter into new contracts with pipeline companies – both because the legal basis for them was suspect (the investment in these new projects would have been paid for by ratepayers, which is unprecedented and risky) and because the costs – to our wallets and our climate – would ultimately outweigh the benefits to consumers.

PUC staff agreed with the economic argument in their own preliminary report, but the Commission nonetheless went ahead and accepted supply proposals from pipeline companies. As required by MECRA, the PUC hired an independent consultant, London Economics International (LEI), to examine these proposals. The consultant’s detailed report compared scenarios in which the state didn’t contract for additional pipeline and ones in which it did (based on the actual proposals the state had received).

LEI’s analysis reinforces both CLF’s testimony and comments and the PUC’s own staff report issued during the first phase of this proceeding: The costs of any contract for Maine to buy natural gas pipeline capacity trumps the benefits. In fact, LEI concluded that, even without Maine entering into a gas contract, gas prices should drop by 25% for Maine customers over the next few years due to already planned, market-based gas capacity expansions. The group also found that electricity prices should drop by 15% due to these lowering gas prices.

The LEI report rightly calls into question whether the PUC should have accepted proposals from gas companies in the first place – a process that has been costly to all participants, expended valuable resources of the PUC, and resulted in no different a conclusion than the PUC’s own staff analysis.

Maine law requires that, for any contracts like these proposed expansions, the benefits must outweigh the costs. The conclusions drawn by the PUC’s expert consultant in their report should prevent Maine from entering into such a contract any time soon.

Ultimately, there’s a larger lesson here – one for every state in the region considering its electricity future. Over this year-long process, the PUC spent hundreds of thousands of (tax-payer) dollars on experts and an intense, litigation-like process, only for their experts to conclude what was readily apparent at the outset – that subsidizing the gas industry on the backs of ratepayers is a bad idea, both economically and for the environment.

Those gas shortage fears that sparked this whole process in the first place ended up being completely unfounded over this past winter. Since then the economics of the energy markets have started to shift, with wholesale electric prices declining by 50% over the past year alone. Meanwhile, energy efficiency is decreasing the need for energy resources, fuel-free renewables are supplanting polluting power plants, and liquefied natural gas has become cost-competitive and available at times of peak need. With at least two new small-scale pipeline projects already set to come on-line and reduce energy costs even more over the next two years, now is the time for the New England states to invest in the stability of the cleanest energy future we can create – one that weans us off of natural gas within the next 35 years.

UPDATE: Take Action: Restore Energy Efficiency Funding in Maine

Jun 23, 2015 by  | Bio |  Leave a Comment

UPDATE: Governor LePage vetoed the revised bill on Tuesday, June 23, but the state legislature voted overwhelmingly to override his veto that same night. “With their override vote, the legislature has served the best interest of all Mainers by restoring funding for energy efficiency,” CLF’s Executive Vice President, Sean Mahoney, said in a statement.

From here, it’s up to the Public Utilities Commission to draft a new rule that will properly fund energy efficiency. Thank you to everyone who contacted their legislators and asked them to stand strong on efficiency in Maine. Your voice made a difference.

My original blog post follows:

Do you like wasting energy? How about paying more for electricity? What about leaving nearly $200 million in energy savings on the table every year because a single “and” was accidentally left out of a law?

Who would say “yes” to any of those questions? Governor Paul LePage.

If Governor LePage gets his way, then Maine will leave more than $200 million in energy savings

If Governor LePage gets his way, then Maine will leave more than $200 million in energy savings on the table.

With one stroke of his veto pen, Governor LePage plans to wipe out $38 million in funding for energy efficiency in Maine by vetoing a bill that simply restores the missing “and” into the law.

Contact your state legislators today. Tell them to stand behind their decision to restore energy efficiency funding. Tell them to override LePage’s veto.

Less energy efficiency funding means losing hundreds of jobs. It means fewer residential homes and commercial businesses in Maine will be able to install energy efficient light bulbs and HVAC equipment. It means fewer energy assessments to help Mainers reduce their electricity bills. It means fewer rebates for solar panel installation. And the list goes on. Energy efficiency fuels our economy. It’s the foundation of a strong energy future. The stakes could not be higher.

Here’s the back story on how energy efficiency funding has come under threat and why it’s so important that you act now:

Efficiency Maine Trust lost $38 million in funding due to an accidental omission of the word “and” when the Maine legislature passed the Omnibus Energy Act in 2013. The legislature has now wisely acted to correct that error and passed LD 1215, an act that restores the missing “and.” The bill to restore energy efficiency funding received nearly unanimous support from the Maine legislature! But Gov. LePage is threatening to veto it.

LePage’s threat to veto is nonsensical. Energy efficiency measures not only benefit the environment and help address climate change, but they also save the state — and all of us — money!

Luckily, the Maine legislature has the power to override Governor LePage’s veto. Tell your legislators to do what’s best for Maine and vote to override LePage’s veto. The veto could come anytime today. The legislature could vote to override it in the next 48 hours. So please act now!

Please contact your Maine legislators immediatelyThis is an opportunity to thank your senator and representative for their initial vote (the lone vote against the bill came from Rep. Ricky Long) and let them know how important it is that they override a veto.

Take action to restore energy efficiency today! 

 

Newly Released ISO White Paper Confirms the Value of Renewable Energy in New England Wholesale Electricity Markets

Jun 11, 2015 by  | Bio |  1 Comment »

ISO-NE, the nonprofit entity that runs the New England electricity grid, is circulating a 12-page White Paper on (in the ISO’s words) how “To Ensure Reliability as the Grid Adapts to a Renewable Energy Future.”  In a memorandum accompanying the paper, the ISO says that it is hoping to stimulate a broad discussion on the paper at meetings of stakeholders and regulators this month.

You can read background on what the ISO is and what it does, here.  And you can read the full ISO White Paper, here.

The ISO’s White Paper is both interesting and important.   As the title of the document makes clear, the entire paper is about the impact of and the importance of renewable energy in the wholesale electricity markets.  Of course, environmentalists and renewable energy developers have been discussing the importance of renewable energy for years.  So, it is nice to see that several of the things we have been saying are now receiving confirmation from the operator of the New England electricity grid!

I.  Renewables Are Going To Lower Electricity Clearing Prices in New England. For years the overall structure of the public debate about renewable energy has been that environmentalists argue that we need renewable energy to avert a climate-change disaster, while consumer advocates sometimes argue against paying a premium for the environmental benefits of renewable energy.  Now the debate is changing.  As I pointed out in a blog last year, renewable energy resources are now bringing down the cost of electricity for customers.

The just-released ISO White Paper confirms that what CLF and other environmentalists have been saying about this is true.  Specifically, the ISO says:

  • “State subsidies for renewable resources will put downward pressure on energy-market prices . . .” [Page 1, ¶ 2.]
  • And this: “Additional renewables are expected to decrease wholesale electric energy prices . . . .”  [Page 1, ¶ 3, emphasis supplied.]
  • And this: “As the penetration of wind and solar resources grows, the price-reducing effects of renewables on electric energy prices will increase.”  [Page 3, ¶ 5.]

The paradigm is changing.  Where once it was thought that customers would have to pay more for renewable energy, it is now widely understood that renewable energy is working to drive down electricity costs in New England.  And the important thing is that it is not the environmentalists that are saying this; it is ISO-NE, the entity that runs the electricity markets that set prices for all electricity customers in New England.

II.  Clean, Low-Cost Renewables Are Going to Drive Coal, Oil, and Nuclear Out of the Market.  This is another point that environmentalists have been making for years – and, here, too, it is wonderful to see the ISO confirming what we have been saying all along:

  •  Wind and solar will “in turn increase the financial pressure on . . . nuclear and coal.”  [Page 3, ¶ 5.]
  • “The addition of large quantities of renewable resources . . . will affect what resources retire . . . and not all resource types will be affected equally.  New England has already experienced a number of retirements of coal, oil, and nuclear units in recent years . . . . With the expected increased penetration of renewable resources, more such retirements should be expected in the future.”  [Page 7, ¶¶ 3, 4, 5.]

Points I and II, taken together, mean we are going to get a cleaner environment with less carbon pollution – and at a lower cost to electricity customers.

III.  New England’s Forward Capacity Market is Working the Way It Was Meant to Work.  There is another consequence of the large number of “retirements” of coal, oil, and nuclear power plants in New England:  the clearing prices in the last two “Forward Capacity Auctions” in New England (specifically, for FCA-8 in February 2014; and FCA-9 in February 2015) have been higher than the clearing prices for prior auctions run by ISO-NE.  (For background on what these capacity auctions are, and how the capacity market relates to the electricity market, read this.)   The fact of higher auction clearing prices in the last two auctions shows that the ISO-run Forward Capacity Market (FCM) is working properly, and in exactly the way it was designed to work and meant to work.  The FCM was carefully designed specifically to send appropriate price signals to create the proper economic incentives for the entry of new generation resources into the market when those resources are needed.

The reason that the first seven Forward Capacity Auctions (2007 through 2013) cleared at very low prices is that, back then, there was excess generation capacity in New England; thus, there was no need to incent new generation to enter the market.  The reason that the last two FCAs cleared at relatively higher prices is that the dirty old coal, oil, and nuclear plants are retiring; thus, the auction is sending the very price signals that it was designed to send and meant to send:  for new generation capacity to enter the market.  As I discussed in a blog post a few months ago, the capacity market is working the way it was meant to work.  And that conclusion is confirmed by the  ISO’s White Paper, on pages 8 through 12.

Summing It All Up:  ISO-NE runs the entire New England electricity grid in real time, and also runs the wholesale markets that determine the price of electricity for all customers in New England.  CLF has been working for years to push the ISO to more fully integrate renewables into the New England electricity grid and compensate renewable generators more fully for their contributions to the grid.  The underlying themes of the just-released ISO White Paper are about the impact and importance of renewable energy in the energy and capacity markets.  This is a big deal.  The ISO is recognizing – and not tacitly, either – the increasing importance of renewable energy in the New England wholesale electricity markets!

In a very real sense, this newly released White Paper is a validation of work that CLF has been doing at the ISO literally for years.  Hooray!

New Legislation in Vermont

May 18, 2015 by  | Bio |  Leave a Comment

Lake Champlain

New legislation passed this session could help clean up ailing Lake Champlain.

It was a long and tiring Legislative session this year in Vermont.

On a very warm Saturday in May, Vermont’s legislators headed home. But not before making some good progress on key CLF priorities.

Clean Water

The key water quality bill, H.35,  focused on Lake Champlain. It sets a roadmap for further work. It provides funding for some additional staff for education and outreach as well as enforcement. It also creates a Clean Water Fund to keep track of funds spent on water quality.

Renewable Energy

The RESET law, H.40, finally eliminates the odd practice in Vermont that allowed the sale of Vermont created renewable energy credits to customers in other states while still claiming the power is renewable for meeting Vermont’s renewable energy goals.

The bill would set the highest standard of any place in the region for renewable energy – 75% by 2032. Much of this energy will come from existing facilities including from power imported from Hydro Quebec.

The new law will also require that 10% of the electricity in 2032 come from smaller scale renewable projects and provides for a new innovative program that encourages utilities to reduce overall fossil fuel use including from transportation and heating.  A troubling amendment that placed a cap on energy efficiency efforts was eliminated.

Toxic Soils

With growing development in downtown areas, disposing of contaminated soils has been challenging. A proposed bill, H.269, would have created a very broad exemption until new state rules are in place. CLF opposed the broad exemption and worked to strengthen the bill. As passed, the law provides a clear and safe way to manage soils from downtown developments. It avoids giving a broad handout to developers and makes sure that soils are managed to protect against any contact with people or water. It also provides a good test of effective soil management that should be helpful as the State develops rules.

The Alternatives to New Natural Gas Pipelines

May 15, 2015 by  | Bio |  Leave a Comment

Now that we’ve made it through the winter, policymakers in Massachusetts are taking a look at the state of energy in the Commonwealth and trying to sort out what to do about the big energy policy questions currently on the table. First among these questions is what, if any, public policy support and funding should be invested in natural gas pipeline infrastructure.

How policymakers answer this question is important because now, more than ever, we must look beyond fossil fuels and ensure that our energy system is one built on the cleanest energy sources. Overinvestment in natural gas is simply a bad bargain for our climate, for consumers, and for our economy.

For several years now CLF has been calling for caution in the pipeline debate by debunking myths presented by pipeline proponents, exploring the environmental and economic ramifications of overbuilding natural gas infrastructure, and highlighting alternatives to pipeline investments. I had the opportunity this week to present CLF’s broad vision for the future of energy in New England to the Massachusetts legislature’s Joint Committee on Telecommunications, Utilities, and Energy. The plan I presented to the legislators:

1. Strategic public investment in the resource with the best rate of return for ratepayers: Energy Efficiency.

2. Strategic public investment in clean electric generation that is not tied to fossil fuel prices: Renewables.

3. Encourage the electric and gas markets to utilize existing gas storage and pipeline to meet peak gas demand.

4. Overall, the need for new gas pipeline has not yet been demonstrated, but if it occurs, we should begin with small pipeline upgrades and peak storage projects first.

5. If we still need more pipeline capacity after doing all of the above, go incremental first (by increasing the capacity of existing pipelines), and let the markets support the capital costs rather than putting them further on the ratepayers.

CLF is skeptical about new gas pipeline infrastructure buildout and efforts to put additional public money toward such projects. This skepticism is based in 1) the climate implications of entrenching gas further in our energy system, 2) the short-term economic effects of building new infrastructure when we’re not maximizing the infrastructure we already have, and 3) the medium- to long-term economic effects of fossil fuel prices dictating our energy prices.

Strategic investments in renewable energy sources will reduce our reliance on climate-changing fossil fuels. Photo credit: CLF

Strategic investments in renewable energy sources will reduce our reliance on climate-changing fossil fuels. Photo credit: CLF

Rather than more investments in fossil fuel-based energy, then, let’s instead invest wisely in energy efficiency and long-term contracts for renewable energy. And where the use of natural gas is currently necessary, let’s use LNG to supplement natural gas supply during periods of peak usage. Expanding our natural gas pipelines and our reliance on this carbon intensive and price volatile fuel should be New England’s last resort.

Effective, clean and economic alternatives are available now and they’re certainly a better deal for our climate and for ratepayers in Massachusetts and across New England.

My full slides and written testimony are available here and here. And, speaking of this winter, check out this paper collecting my colleague Christophe’s blog series on the energy lessons to be drawn from the performance of New England’s energy markets this winter.

The Final Word on Winter in New England’s Energy Markets, Part III: Some Lessons from a Calm, Cold Winter

Apr 2, 2015 by  | Bio |  Leave a Comment

With the winter behind us, New England can look to its energy future with the benefit of what we learned as predictions of crisis fizzled and historic cold tested the region’s energy system. In the first post of this series, I explained the data showing that New England energy markets this winter were much less expensive and volatile than during the winter of 2014. In the second post, I identified some reasons for this turnaround: market shifts that increased imports of liquefied natural gas and lowered fuel prices, and reforms that improved energy market rules and procedures. In this final post, I offer a few of this winter’s lessons, with important implications for the billion-dollar decisions on the future of our energy system that are now pending in state houses and government agencies around New England.

#1: With the savings this winter, the benefits of big bets on new infrastructure just got more questionable.

This winter’s most important lesson was that we can significantly reduce winter volatility and prices by more wisely using and upgrading the infrastructure we already have. Wholesale prices were way down, and electric reliability wasn’t at risk, despite the coldest February on record. But there was virtually no new energy infrastructure on the system; in fact, it was just the opposite: four large non-gas power plants retired before cold weather set in.

This lesson is not a new concept: CLF made this point well before the winter when we raised questions and released documents on the New England governors’ energy infrastructure “grand bargain” to subsidize new gas pipelines and power lines. At the time, an advocate of the Governors’ plan called CLF’s perspective “very dangerous.” It looks like we weren’t so off target.

In the next few years, several incremental gas pipeline projects will come online, adding to the region’s capacity by 10%. Although these projects’ capacity is not dedicated to power plants, it is intended to meet peak heating needs of gas users in a decade or more, meaning that in the short-term most of the new capacity will be available to serve electric generation. These projects should help ease some of the stress that cold winter weather places on our increasingly gas-dominated electric system. If the region’s many clean energy advocates can help it, we will also continue to accelerate investment in our cheapest resource—energy efficiency—and local, zero-carbon renewable projects like wind and solar that help reduce demand for fossil fuels, in the winter and year-round.

Skiers at Jiminy Peak ski resort in Hancock, Massachusetts.

In the meantime, we need to move past panic over illusory energy shortages and the idea that building every costly energy project on the table will inevitably lower costs. Unfortunately, these are the very arguments we continue to hear in favor of spending billions on new energy infrastructure now. According to these arguments, the winter was a minor, lucky reprieve from the dire trend of higher prices driven by insufficient gas pipeline capacity and power plant retirements. From this perspective, there are huge risks of “inaction,” with “action” meaning large new ratepayer-funded bets on new gas pipelines and also new power line infrastructure.

But all infrastructure is not created equal: there are promising approaches to addressing winter challenges that make greater use of existing infrastructure and that are tailored to meet market needs. In CLF’s view, we should favor these approaches first and evaluate any big new investments—especially those funded by the public and with major ramifications for climate, the environment, and local communities—with extreme caution and exacting scrutiny.

Some of the more important questions to answer: do the supposed benefits (lower wholesale electric prices) outweigh the costs (of constructing new projects with financing from electric customers)? Do alternatives to big new infrastructure provide a better bargain by providing similar benefits but lower costs?  While a number of studies completed before this winter have been cited as evidence of benefits, those studies posit that new infrastructure will lower wholesale energy prices by more than the cost of the infrastructure. However reputable or independent the authors of these studies may be (and many are far from the latter), their numbers are based on speculation about what energy markets will do in the future—speculation that will certainly be wrong in one direction or another.

This winter suggests that wholesale prices can come down a lot without big new projects subsidized by electric customers, with modest approaches that cost much less. If that’s true, the money devoted to new infrastructure would add to customer bills with little benefit, at a time when across New England (in New Hampshire, Vermont, Massachusetts, and Maine just this month) proven strategies to advance our clean energy future like efficiency and renewables are at risk of being deprived of the public policies and support they need.

#2: Gas pipelines aren’t a panacea in cold weather.

To some, February’s cold weather and higher wholesale market prices still prove the need for much more pipeline capacity to feed gas-fired power plants. So what should we make of this February’s higher prices?

While New England typically had higher natural gas prices than other parts of the country, the whole Northeast—including areas with robust, brand-new pipelines and closer access to Marcellus shale gas—experienced price spikes during the month, as wave after wave of Arctic air boosted heating and electric demand. Here are snapshots of electric market prices in New York and the mid-Atlantic spiking higher than in New England during February’s cold weather:

This was a more modest repeat of the same phenomenon last January during the “polar vortex” cold spell. The following chart compares natural gas prices at a hub in eastern Pennsylvania with New England prices.

Daily Wholesale Natural Gas Prices

Clearly, both New England and the rest of the country have considerable room for improvement in coordinating the gas and electric markets to ensure timely, predictable, and cost-effective delivery of gas to power plants when heating and electric needs are both high. The benefits of additional LNG imports and ISO-NE’s modest efforts this winter are strong evidence that better use of existing gas infrastructure and additional market improvements—including ISO-NE’s forthcoming “pay for performance” changes to the forward capacity market—can help meet our cold weather challenges. With so many market variables, it is not clear that adding huge amounts of pipeline capacity will necessarily or cost-effectively reduce market prices, as the infrastructure studies that use data from before this winter so confidently predict.

Nor is it clear that more pipelines will consistently price oil or coal out of the market during the coldest weather. As I pointed out in the second post in this series, New England’s dirtier power sources actually ran less this winter than last winter, and we can better avoid using them at all by improving the gas supply and storage products available to gas-fired generation and deploying more no-carbon (and winter-peaking) resources like wind.

#3: Scare tactics aren’t helpful; finding solutions that don’t break the bank or worsen the true crisis of climate change should be the objective.

With high retail electric bills making headlines and arriving in real customers’ mailboxes, this winter provided fertile ground for arguments that the region’s energy costs pose an existential threat to its economy and competitiveness. The term “energy crisis” was everywhere (and still is).  There are two big problems with this frame for our winter energy challenges.

The first is that it’s a gross exaggeration. As I’ve shown in this series, there wasn’t a “crisis” in New England’s energy market this winter, whether we’re talking about energy supplies, the reliability of the electric grid, or wholesale energy costs. That’s why I tracked wholesale energy data all winter with a facetious Twitter hashtag, “#winterenergycrisis,” with a goal of showing that reality was diverging from the rhetoric:

 

Certainly wholesale energy costs were quite high last winter, and retail electricity prices (set last fall on the fear of the same thing happening again) were quite high this winter. CLF believes that the region can and should work on market and policy solutions, including needed infrastructure. But calling these problems a crisis creates the false impression that we need to mobilize a massive, all-hands-on-deck response; after this winter’s modest market changes made such a big difference, it’s hard to see any wisdom or prudence in reacting this way.

The second problem with the “crisis” frame for winter energy costs is that the alarm is deeply misplaced. It detracts from graver threats to our region’s economy, like this winter’s crippling of Greater Boston’s public transportation infrastructure. At the very top of the list is the undeniable crisis facing the region and beyond: climate change.

As we seek to address the climate crisis, we should avoid building more of the same long-lived, polluting, and costly systems we have today than are absolutely needed, whether as a supposed solution to winter energy costs or otherwise. Our focus should be speeding the transition to an innovative, self-sufficient, much cleaner, less volatile energy market that is less—not more—reliant on fossil fuels from outside New England. From this perspective, the ongoing retirements of inefficient, polluting power plants are not a strategic risk, as ISO-NE describes them; they are an opportunity and a necessity.

A young bull moose in a bog near the Connecticut River in Pittsburg, New Hampshire.

Whether impelled by legal requirements like Global Warming Solutions Acts or federal climate regulations, or by the clarion calls of disappearing wildlife, coastal destruction, and increasingly extreme weather, our region’s leaders should be devoting their efforts to building an affordable, decarbonized energy future that stops making climate change worse. Our cleanest resources—efficiency and renewables—are affordable and getting more cost-competitive all the time. Moving us to an energy system with those resources at the center should be New England’s most pressing priority.

Read Part I of this series: The Difference a Year Makes

Read Part II of this series: Why This Winter Was Different

(Photos: Skiers at Jiminy Peak ski resort in Hancock, Massachusetts; A young bull moose in a bog near the Connecticut River in Pittsburg, New Hampshire. Copyrights Jerry and Marcy Monkman/EcoPhotography)

The Final Word on Winter in New England’s Energy Markets, Part II: Why This Winter Was Different

Mar 25, 2015 by  | Bio |  2 Comment »

As late as last fall, many observers and traders watching the New England energy markets were predicting a repeat of last year’s very expensive winter, or worse. By January, CLF was able to post an update showing that those predictions weren’t materializing. In fact, the expected energy crisis was fizzling, with much lower wholesale power and natural gas prices than last year and no signs that gas-fired power plants were struggling to get fuel. We laid out a series of market shifts and changes that were making a difference.

Two kids cross country skiing in a snow storm on a woods road near Greenville, Maine.

As I mentioned in the first part of this series on this winter in New England’s energy markets, February was a major test for New England’s energy system. It was the coldest February in modern times, with bitter cold, record-breaking snowfall, and no “February thaw” whatsoever. Adding to retirements of several major non-gas power plants in 2014, some of New England’s remaining non-gas power plants experienced outages or problems. The whole Northeast was much colder than normal, driving record natural gas demand for heating and electric generation. On February 2, New England set an all-time record for daily gas demand of 4.21 billion cubic feet.

Despite the challenges, the factors we identified in January helped keep prices in check and the lights on for the balance of the winter:

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  • Thanks to the global crash in oil prices, fuel oil was available for about half last year’s price, moderating the price of liquefied natural gas, which is linked to oil prices. During the coldest weather, especially in February, lower oil prices directly lowered power prices as well because, with oil cheaper than spot-market gas, oil-fired power plants (or gas-fired power plants with the capability to run on oil) were setting electric market clearing prices. While it’s not good news that more-polluting resources like oil and coal plants were able to run, they did not run as much this winter as last winter (even accounting for dual-fuel oil demand):

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  • Regional grid operator’s ISO-NE market changes implemented in December, including hourly offers and re-offer opportunities, improved price transparency and formation, which clearly helped dampen and lessen the duration of cold weather price spikes. Other gas-electric coordination steps encouraged by the Federal Energy Regulatory Commission also made a difference. What we’ve seen in March is a rapid drop in prices from February levels, something that didn’t happen last year in similarly cold weather.

This winter, we also saw reasons to worry less about two other concerns: the very real and legitimate hardships of this winter’s high retail prices for ordinary customers and the ongoing retirements of older power plants.

  • With lower oil prices, households and businesses also have been paying much less for oil and petroleum fuels this winter. A January government estimate puts these savings in 2015 at $1500 for the average family that both drives and heats with oil, and at $750 for the average family that drives and heats with other fuels. These savings are totally offsetting (and more) the $30 to $50 monthly increases in average electric bills that some New England households are facing through the first part of the year. And as noted in the first part of this series, summer electric rates are on the way down; when 2015 is over, average electric supply rates for the year will be higher than in 2014, but by far less than the eye-catching percentages cited in the news reports announcing this winter’s retail increases.
  • In February, ISO-NE held its annual auction to buy electric generating capacity to meet the region’s electric needs three years from now. As my colleague Jerry Elmer noted at the time, that auction successfully procured an overall surplus beyond the very high “installed capacity requirement” that ISO-NE has determined is appropriate. With somewhat higher prices than past auctions, ISO-NE’s capacity market is serving its purpose—to ensure that new power plants, especially wind and natural gas, will be replacing the plants set to retire in the next few years. Another signal of a strong market for new resources came earlier this month, when 16,000 megawatts of new generating capacity (an amount equivalent to nearly half of the region’s power plant fleet) expressed an interest in participating in next year’s capacity auction for 2019-2020. Analysts are expecting capacity prices to decline in future auctions as these new power plants compete against each other. Our region’s growing energy efficiency and solar investments will also moderate peak demand and keep overall electric demand flat, as acknowledged in ISO-NE’s plan to count behind-the-meter solar generation in calculating that demand and its energy efficiency forecast.

With this winter behind us, what are its lessons for future winters—and our region’s energy future? With massive proposals for new energy infrastructure on the table, with supposed goals of solving our winter energy problems, what should New England do next? I will explore these issues in the next post in this series.

I followed New England’s energy markets all winter on Twitter at #winterenergycrisis. A Storify collecting my best tweets, with more market data and charts, is here.

Read Part I of this series: The Difference a Year Makes

Read Part III of this series: Some Lessons from a Calm, Cold Winter

(photo: Two kids cross country skiing in a snow storm on a woods road near Greenville, Maine, copyright Jerry and Marcy Monkman/EcoPhotography)