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How realistic is a 100% renewable energy portfolio?

Recently the New England states jointly agreed to reduce their carbon dioxide emissions by an additional 30% beyond current goals by the year 2030. New Massachusetts regulations will require utility companies to obtain 16% of their energy from renewable sources in 2018. In Rhode Island, utilities must increase their purchase of renewable energy by 2-3% per year. The Commonwealth of Massachusetts has put out a request for bids for renewable energy projects, and received almost four dozen responses. All signs point to a future of growing renewable energy production, but how realistic is a 100% renewable energy portfolio?

To start, we are many years and many billions of dollars away from meeting all of New England’s energy needs with solely renewable power. It would take hundreds of wind turbines or more than 30 square miles of solar panels to fill New England’s energy gap in the coming years. If we also tried to replace all of our existing natural gas, coal, and oil with renewables, those numbers would be exponentially higher. In 2015, natural gas accounted for 49% of New England’s fuel mix, while renewables and hydro accounted for just 16%.

Massive investment in renewable energy infrastructure would be needed before renewables can grow to a substantial part of our energy portfolio, let alone the only source of energy for New England. Likely, these projects will be taxpayer subsidized and any costs incurred to build new renewable capacity will be passed along to ratepayers. While there are laws that prohibit ratepayer funding of natural gas infrastructure, renewable energy projects have been supported by billions of dollars in costs to ratepayers. For those already struggling to pay their utility bills, rising energy costs could be devastating. It’s unfair to dismiss this reality when we talk about what a renewables-only future would look like, at least in the near future.

Furthermore, renewables do not provide as flexible or reliable a stream of energy as fuels like natural gas. When it’s still, wind turbines do not turn. When it’s cloudy, solar panels don’t capture the sun’s energy. Renewables’ generating capacity can fall dramatically under less-than-ideal weather conditions, a challenge fuels like natural gas do not present. Renewables’ energy production also cannot be ramped up when needed, to meet peak demand on cold winter days or hot summer days; their generating capacity is fixed. In an all-renewables world, without improvements in battery technology to allow us to store large amounts of renewable energy to deploy on these peak demand days, we could have critical energy storages when demand spikes.

Natural gas is the natural choice to pair with renewable energy sources. It can solve both of these challenges – it is less expensive that renewable energy, is twice as clean as coal, already supports almost half of all of New England’s power needs, and is incredibly flexible and reliable. Without balancing natural gas with renewables, middle and working class residents and small business owners would face not only crippling shortages of power but also increased energy prices as we work to build out our renewable energy infrastructure. While there is a lot of conversation about a renewables-only energy system in New England, it’s important to keep these realities in mind – balancing cost, reliability, and carbon emissions will require capitalizing on the benefits of both renewables and natural gas.

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ISO New England’s Winter Outlook: A Cause for Concern

Grid reliability challenges, emission increases and price spikes

ISO New England, the operator of the region’s power system, recently announced that electricity supplies should be sufficient to meet the region’s demand for electricity this winter barring “unexpected resource outages or fuel delivery constraints.” For those who expect affordable, reliable electricity 24/7, this should be a cause for concern.

Natural gas generates about half of the region’s electricity. It is also used to heat about 40 percent of all households and remains the heating fuel of choice for new homes in New England. In addition, some 260,000 businesses and manufacturers rely on natural gas for industrial processes and space heating.

While the region’s demand for natural gas has increased substantially, natural gas infrastructure has not kept pace. Pipeline constraints during cold weather contributed to more than $7 billion in higher energy costs over several recent winters as the system struggled to meet demand from both space heating and power generation customers.

This winter, ISO has identified about 3,450 MW of natural gas-fired generating capacity (about a quarter of the total) that may be at risk of not being able to get fuel this winter.

To make sure the lights stay on, ISO has instituted for the fourth year in a row a “winter reliability program,” which pays power plant owners to buy and store oil or liquefied natural gas (LNG) as a back-up if natural gas-fired plants can’t get enough fuel during the winter. At a cost of $38 million last year, these measures are essential to ensure reliability, but they are limited, potentially costly short-term fixes.

LNG imports supply about 30 percent of the region’s peak winter day natural gas requirements. Since LNG is traded globally, pricing varies and can be expensive. It is also transported from foreign countries to New England by tankers – which can be delayed in severe weather, making price and availability uncertain.

Burning oil is also costly and jeopardizes the significant progress the region has made in reducing carbon emissions from electricity generation, which are down 26 percent since 2000.

Even with winter reliability measures in place, ISO notes emergency procedures may be needed to maintain reliability under a combination of extreme cold, power plant outages and limitations on natural gas delivery.

Beyond this winter, the situation is expected to become more uncertain in the spring as the region will lose 1,500 MW of coal and oil-fired generation. It will be replaced primarily by new gas-fired generation despite lack of additional natural gas infrastructure. ISO has warned that the operating situation is “precarious” and may be “unsustainable by 2019” when options to maintain reliability will become even more limited.

On a positive note, the recently completed Algonquin Incremental Market (AIM) Project will bring additional natural gas from the Appalachian Basin into New England to help meet winter demand. However, the project’s customers are not power plant operators but local gas companies serving homes and businesses.

More pipeline capacity for power generation is needed to ensure delivery year-round. According to ISO’s 2016 Regional Electricity Outlook, it will take a combination of pipeline, LNG and storage solutions to address both reliability risks and price volatility.

New England’s recent energy policymaking has focused on reducing climate change impacts spanning decades. Much less attention has been paid to the challenges facing the region in the next five to ten years when power plant retirements and lack of new infrastructure portend even higher costs, more price volatility, reduced reliability – and significant lost opportunities for economic growth.

Not only does failure to address these challenges threaten regional economic competitiveness in the near-term, it undermines the region’s ability to attract energy-intensive advanced manufacturing companies in highly specialized industries such as life sciences, medical devices, aerospace, semi-conductors and nano-technology. Those companies will look elsewhere unless their concerns about energy prices are addressed. As the New England Council cautions in a comprehensive report on advanced manufacturing, “…these challenges have costly implications….”

ISO is doing what it can within its mission, but ISO alone cannot solve this problem. Only broad recognition and action to support an all-resource approach to meet future energy needs can – including natural gas for power generation, as well as expansion of wind, hydro and solar power.

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High Energy Costs -- A Competitive Issue for Employers

Electricity prices and uncertainties about future power supply reliability are a drag on regional competitiveness.

Just ask Judson Reis, president and CEO of Gorton’s Seafood in Gloucester, MA. When asked recently by Massachusetts State Senator Bruce Tarr how officials could help Gorton’s continue its dominance in the frozen seafood industry, Reis pointed to the cost of electricity. He suggested that making electricity more affordable would be very helpful to a company in “a very, very competitive business.” (Gloucester Times, Oct. 20, 2016)

Anyone familiar with Gloucester and the fishing industry knows that local fishing itself has been in decline. Yet, Gorton’s, with its iconic fisherman logo, remains the leading frozen prepared seafood brand in the US in a world-wide industry that introduced hundreds of new brands in the last decade.

While Reis is concerned about electricity costs, Gordon Van Welie, who heads ISO New England, the non-profit responsible for ensuring that the region has a reliable supply of electricity, is warning about pending shortages. Van Welie has described a “precarious” and “unsustainable” electric grid operating system over the next few years during periods of extreme cold. That’s a concern for any business operating 24/7 year-round. It is a huge concern to individual consumers who depend on electricity to keep their homes warm and families fed.

The warnings are not new. The New England governors in December 2013, declared that a reliable and affordable energy system requires “…investments in additional energy efficiency, renewable generation, natural gas pipelines, and electric transmission.”

A flurry of recent legislation has focused on renewable generation -- hydropower from Canada, off shore wind projects and subsidies for solar power to address climate concerns. But the region is falling behind on energy infrastructure needed to make electricity more affordable and reliable for Gorton’s Seafood and other employers throughout the region.

In 2014, the New England States Committee on Electricity (NESCOE), which reports to the governors, found that “All studies … (reviewed) concluded that New England needs additional natural gas supply infrastructure to satisfy New England’s power system demand.”

In 2015, the New England governors agreed that the region “continues to face significant energy system challenges with serious economic consequences for the region’s consumers…. The problem is greater than any one state can solve alone.”

Later in 2015, a Massachusetts Attorney General study concluded that burning oil and LNG during severe cold spells, when natural gas may not be available, would maintain electric system reliability. But largely overlooked was the conclusion that “Increasing natural gas transportation capacity in New England would lower wholesale electricity costs by lowering natural gas prices….”

Anti-natural gas activists have used the AG report as a sledgehammer to turn the earlier concerns of all six New England governors about natural gas pipelines and electric transmission lines into something akin to touching the third rail of a subway system.

No organization today looks at the regional impacts of state-by-state policies with a comprehensive, integrated approach that considers electric reliability and the environment, as well as regional economic competitiveness. This approach was recommended by Daymark Energy Advisors in a recent update of an August 2015 study conducted for the New England Coalition for Affordable Energy, whose members include the region’s largest business organizations.

The earlier study concluded that the region’s energy costs could be $5.4 billion higher by 2020 unless actions are taken to add energy infrastructure of all types. The update found that inaction on infrastructure development has increased the risk of even higher energy costs.

Major natural gas pipeline projects that would relieve constraints have been cancelled or blocked, transmission lines that would bring large amounts of wind energy from northern New England and hydropower from Canada to load centers have been delayed or stopped, and up to one-third of the region’s electric power generation has either been retired or is likely to do so in the coming years.

This is a serious near-term regional challenge. It is time to take action to support infrastructure projects – pipelines, transmission lines, power generation of all types -- based on the concerns the governors expressed in 2013 and have reiterated since.

Just ask Judson Reis at Gorton’s -- and CEOs throughout New England -- who battle every day to keep their companies competitive with domestic and foreign producers whose energy costs are a fraction of those in New England.

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Don’t Block Regulators from Doing Their Jobs

In Massachusetts, in mid-July, opponents of a natural gas pipeline walked 43 miles along the proposed route of the line to protest planned construction.  Their journey received considerable press coverage.  And no doubt many people sympathize with their desire to block new supplies of natural gas from getting to power plants and consumers. 

But as well-intentioned as they may be, they’re not serving the interests of consumers and businesses concerned about high and increasingly volatile energy prices, which largely stem from lack of natural gas. 

In Maine, a day after the pipeline opponents arrived in Boston, the Maine Public Utilities Commission unanimously approved a plan that would allow utilities to seek permission to help fund a pipeline by recovering costs through rates.  A Maine newspaper reported that “Mark Vannoy, PUC chairman said in an interview after the vote that the region’s heavy and growing reliance on natural gas leaves the state at risk for future price spikes. Without more pipeline capacity, he said, future prices will be higher.”  But for the Maine decision to have any impact, other New England states will have to take similar action, which today remains highly uncertain.

In the meantime, some local gas companies can no longer allow customers to hook up to natural gas for space heating and other end-uses.   The future of electricity supplies may also be jeopardized without new gas pipelines as nearly one-third of New England’s older oil, coal and nuclear generating capacity faces shutdowns and retirements in coming years.  That capacity will need to be replaced.  That is if New England consumers and businesses really want a reliable and relatively affordable electricity supply system, which they do as shown below. 

Electricity rates for homes and businesses in New England already are at least 50 percent higher than the national average with rates for manufacturers nearly twice that.  Residential and commercial consumers of natural gas don’t fare much better – if they have access to it – and manufacturers see rates that are more than twice the national average.

To gauge real consumer and business concerns, the New England Coalition for Affordable Energy conducted two region-wide surveys a couple of months ago that tell a very different story than the one told by those who oppose new pipelines and any expansion in natural gas usage.

What the coalition found is that four out of five consumers (79%) are concerned about the affordability of energy and about half think state governments are doing nothing or not much to address those concerns.  For businesses surveyed, the findings are similar with 88% expressing concern about energy prices in the region and three-quarters of respondents rated government performance in this area as either poor or fair. 

Business respondents were offered a chance to leave a comment.  A Connecticut manufacturer said “the cost of energy may make us move.”  “Our policy makers don’t appear to care about the high costs of operations…(we may be) forced to move to lower cost environments,” wrote a Massachusetts company.  And a New Hampshire company representative wrote this: “We compete against manufacturers in other states.  High electricity costs put us at a competitive disadvantage….” 

So those protesting new pipelines and those concerned about energy affordability are heading in different directions.  The vast majority of consumers and businesses surveyed support an all-resource strategy – one that includes natural gas along with renewables and energy efficiency. 

Unfortunately, some government leaders are moving to take away regulatory authority over options that may help make energy more affordable and reliable in New England.  For example, by blocking consideration of standard and widely used funding mechanisms, such as tariffs used to fund energy efficiency and renewables, to support needed natural gas and electric transmission facilities, government officials would be setting a bad precedent. 

More importantly, they could be sending the region down a path to higher costs, less reliable supplies of both electricity and natural gas and ultimately to an economy that is even less competitive with fewer jobs in segments such as manufacturing, trade and construction.  Apparently Maine regulators share that concern and the concerns of consumers and businesses throughout New England.  Legislation and administrative actions that would block the legitimate role of regulators should neither be encouraged nor implemented.

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Climate Goals – Focus on Power Plants Misplaced

Ken Kimmell, president of the Union of Concerned Scientists and former head of the state’s Department of Environmental Protection in the Patrick Administration, made a disturbing statement to Boston Globe reporter David Abel in a lead story May 16 on carbon emissions in Massachusetts.  

In reporting that the state would have trouble meeting its legally required target to reduce overall greenhouse gas emissions by 25 percent below 1990 levels by 2020, Abel quotes Kimmel saying, “The electricity sector is by far the lowest-hanging fruit…. We need to make disproportionately large cuts there to meet our overall goals.” 

It apparently doesn’t matter to Kimmel that carbon emissions from electric power generation are already 50 percent below 1990 levels thanks to natural gas and renewables.  Nor does it seem to matter that the electricity generation sector now produces less than a quarter of the region’s carbon emissions. 

Nevertheless, Ian Bowles, former secretary of energy and environmental affairs in the Patrick Administration chimed in saying “We need steep, sustained declines in emissions here (in the electricity sector), and not a step back.”

The shutdown of the carbon-free Vermont Yankee nuclear plant is one reason for the uptick in carbon emissions last year.  Its power had to be replaced by plants burning natural gas, a relatively clean fossil fuel, but still a fossil fuel.  Another reason is that because natural gas pipelines are inadequate, some power plants during cold spells often switch to dirtier oil.

There’s no mention in the story of the warnings from ISO New England, the organization responsible for keeping the lights on, that nearly one-third of the region’s oldest and largest power plants are at risk of shutting down in the coming years and will need to be replaced regardless of whether demand for electricity grows or not.  Fueling new plants with natural gas is the only realistic option for now.  There’s no mention of study after study -- with the exception of one from the MA Attorney General’s office, paid for by private funds, not the state -- that have concluded that the region desperately needs additional natural gas supplies. 

There’s no mention of the challenges facing electric transmission line construction in New Hampshire that makes imports of Canadian hydro by 2020 uncertain and speculative.   And there’s no mention of the low capacity factors of wind and solar, and the lack of energy storage technologies today. 

While not mentioned in the story, these are realities and addressing them will require highly reliable, relatively clean-burning natural gas power plants to provide backup to intermittent sources while also meeting the around the clock energy needs of businesses, manufacturers and other employers.

No.  Instead, we have Kimmel calling for “disproportionately large cuts” in the power generation sector and we have Bowles saying, “We need steep, sustained declines in emission here, and not a step back.” 

It’s no doubt blasphemes, at least to those who see molecules as a bigger threat to our future than loss of jobs and a weak economy, to suggest that maybe we do need to take a step back – or at a minimum a pause. Maybe, just maybe, 25 percent is too much too soon.  The least we could do is shed more light on the relationship between affordable and reliable energy, and the sources that make a major impact today and those that are growing but remain more aspirational than currently dependable.  

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