Initially posted at Local weather And many others.
by Roger Caiazza
A case research on the challenges of controlling CO2 emissions.
The Regional Greenhouse Gasoline Initiative (RGGI) is a carbon dioxide management program within the Northeastern United States. One side of this system is a program evaluate that could be a “complete, periodic evaluate of their CO2 funds buying and selling applications, to think about successes, impacts, and design components”. On September 26, 2023 the RGGI States hosted two webinars describing technical modeling & analyses that examined the electrical energy market, emissions, and financial impacts of modifications to RGGI. This submit describes the disconnect between the outcomes of RGGI up to now relative to the expectations within the RGGI Third Program Evaluate modeling that I addressed in my feedback to RGGI.
Background
RGGI is a market-based program to scale back greenhouse fuel emissions. Based on RGGI:
The Regional Greenhouse Gasoline Initiative (RGGI) is a cooperative effort among the many states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia to cap and scale back energy sector CO2 emissions.
RGGI consists of particular person CO2 Finances Buying and selling Packages in every taking part state. By unbiased laws, based mostly on the RGGI Mannequin Rule, every state’s CO2 Finances Buying and selling Program limits emissions of CO2 from electrical energy vegetation, points CO2 allowances and establishes participation in regional CO2 allowance auctions.
Extra background info on cap-and-trade air pollution management applications and RGGI is obtainable from the Environmental Safety Company and my RGGI posts web page. Proponents of those applications think about them silver bullet options. Nevertheless, I agree with Danny Cullenward and David Victor’s e-book Making Local weather Coverage Work that the politics of making and sustaining market-based insurance policies for Greenhouse Gasoline (GHG) emissions “render them ineffective practically in all places they’ve been utilized”.
Third Program Evaluate
The RGGI taking part states hosted two public conferences on September 26, 2023, to debate updates on the Third Program Evaluate and electrical energy sector evaluation. Assembly supplies included the next: Assembly Agenda PDF; Presentation Slides PDF; Matters for Consideration PDF; Draft RGGI Emissions Dashboard ArcGIS Dashboard; RGGI Emissions Dashboard Draft Person Information PDF; Assembly Recording – Session 1, Assembly Recording – Session 2 and Draft IPM Matrix Case Outcomes XLSX.
The RGGI States contracted ICF to research the completely different situations to tell the choices for future RGGI. ICF has a proprietary mannequin, the Built-in Planning Mannequin (IPM©), that has been utilized by the RGGI States for the reason that inception of this system and which EPA makes use of to guage lots of its management insurance policies. Based on ICF:
ICF’s Built-in Planning Mannequin supplies true integration of wholesale energy, system reliability, environmental constraints, gas alternative, transmission, capability enlargement, and all key operational components of turbines on the facility grid in a linear optimization framework. The mannequin captures an in depth illustration of each electrical boiler and generator within the energy market being modeled.
In March the RGGI States defined that they deliberate to make use of IPM to guage a number of points. One downside is “fluidity of state participation”. 9 states have been members of RGGI since its inception. New Jersey was a constitution member, obtained out, and now’s again in; Virginia was in however is now getting out; and Pennsylvania is making an attempt to get in however participation has been stalled by litigation. RGGI planning should deal with local weather and complementary vitality insurance policies that may dramatically influence electrical energy load resembling electrical automobiles and EV infrastructure, electrification within the constructing sector, and aggressive vitality effectivity efforts. A significant concern of this system evaluate was allowance availability so the decarbonization timeline for the electrical energy sector was thought of. That is difficult as a result of taking part State timelines fluctuate, implementation of offshore wind deployment impacts decarbonization charges and grid-scale battery storage deployment, length, and provide certainties have an effect on the outcomes.
The September 26 webinar described three key observations from the modeling outcomes:
- Modeling exhibits how present state decarbonization and renewable necessities can considerably scale back emissions;
- Federal incentives for clear vitality have the potential to quickly remodel the RGGI area era combine; and
- Situations modeled up to now present comparatively low allowance costs in comparison with the ECR/CCR worth triggers within the Mannequin Rule
The RGGI States haven’t proposed their plans for the Third Program Evaluate. The modeling observations assist the concept the RGGI allowance availability might be made extra stringent. A lot in order that the modeling plans modified from the spring so as to add a extra stringent trajectory to succeed in zero emissions by 2035 slightly than simply taking a look at a zero emissions by 2040 trajectory. My feedback addressed these key observations .
I’ll summarize my issues beneath however first it’s essential to evaluate RGGI outcomes up to now.
RGGI Outcomes to Date
There may be an unlucky disconnect between the outcomes of RGGI up to now relative to the expectations within the Third Program Evaluate. In the course of the September 26 assembly the reason of cap-and-trade techniques said that “States reinvest the proceeds in decarbonization and different applications to ship advantages to their communities.” What was lacking was any point out of the efficacy of these investments relative to the emission reductions noticed.
The first explanation for the noticed RGGI emission reductions has been the gas change from coal and residual oil to pure fuel. Desk 1 lists the emissions by gas sorts for the 9 RGGI states which were members for the reason that begin. I consider that RGGI had little or no to do with these gas switches as a result of gas prices are the largest driver for operational prices and pure fuel was cheaper. The fee adder of the RGGI carbon worth up to now has been too small to drive the conversions from coal and oil to pure fuel.
Desk 1: RGGI Program Unit CO2 Emissions (tons) by State and Yr
RGGI sources inside the nine-state area have already carried out a lot of the coal and residual oil gas switching alternatives accessible so this management technique shall be much less impactful sooner or later. For instance, in New York coal-fired electrical era has been banned and the remaining models that burn residual oil primarily run to solely present essential reliability assist so their emissions usually are not anticipated to vary a lot from present ranges. Sooner or later, RGGI affected supply emission reductions will depend on the displacement of pure fuel fired models with wind and photo voltaic zero emitting sources.
The 2021 funding proceeds report launched on June 27, 2023 supplies perception into the success of RGGI investments as an emission discount software. The report breaks down the investments into 5 main classes:
Vitality effectivity makes up 51% of 2021 RGGI investments and 55% of cumulative investments. Packages funded by these investments in 2021 are anticipated to return about $418 million in lifetime vitality invoice financial savings to greater than 34,000 taking part households and over 570 companies within the area and keep away from the discharge of two.3 million brief tons of CO2.
Clear and renewable vitality makes up 4% of 2021 RGGI investments and 13% of cumulative investments. RGGI investments in these applied sciences in 2021 are anticipated to return over $600 million in lifetime vitality invoice financial savings and keep away from the discharge of greater than 1.7 million brief tons of CO2.
Helpful electrification makes up 13% of 2021 RGGI investments and three% of cumulative investments. RGGI investments in useful electrification in 2021 are anticipated to keep away from the discharge of 370,000 brief tons of CO2 and return practically $164 million in lifetime financial savings.
Greenhouse fuel abatement and local weather change adaptation makes up 11% of 2021 RGGI investments and eight% of cumulative investments. RGGI investments in greenhouse fuel (GHG) abatement and local weather change adaptation (CCA) in 2021 are anticipated to keep away from the discharge of greater than 10,000 brief tons of CO2 and to return over $20 million in lifetime financial savings.
Direct invoice help makes up 14% of 2021 RGGI investments and 13% of cumulative investments. Direct invoice help applications funded via RGGI in 2021 have returned over $29 million in credit or help to shoppers.
There is a vital caveat to the emission reductions reported within the report. The RGGI compliance metric is annual emissions and the above quote lists the lifetime emission reductions. The sum of the lifetime emission reductions from the 2021 investments is 4.38 million tons however the annual emission reductions on account of RGGI investments have been solely 235,299 tons (Determine 1). The 9-state allowance allocation annual discount in 2021 was 2,275,000 allowances so RGGI was solely liable for round 10% of the emission reductions required.
Determine 1: Desk 1 from the 2021 funding proceeds report
The leads to 2021 are in line with historic observations. To make a comparability to the CO2 discount targets I needed to sum the annual values within the earlier studies as a result of RGGI doesn’t report the annual RGGI funding CO2 discount values amassed for the reason that starting of this system. Desk 2 lists the annual prevented CO2 emissions generated by the RGGI investments from earlier studies. The amassed whole of the annual reductions from RGGI investments is 3,893,925 tons whereas the distinction between the three-year baseline of 2006-2008 and 2021 emissions is 58,334,373 tons. The RGGI investments are solely immediately liable for 6.7% of the overall noticed annual reductions over the baseline to 2021 timeframe!
Desk 2: Accrued Annual RGGI Advantages By 2021
Dividing the overall RGGI investments by the overall tons diminished supplies the associated fee per ton diminished. The cumulative RGGI funding price effectiveness is $927 per ton diminished. That’s excess of the Assets for the Future Social Price of Carbon estimate of $185 per ton and signifies that prices exceed societal advantages.
Considerations with Outcomes – Suggestions are highlighted in daring
The September 26 RGGI assembly noticed that “Modeling exhibits how present state decarbonization and renewable necessities can considerably scale back emissions”. There’s a distinctive side of the Third Program Evaluate modeling course of that has not been accessible beforehand. There are two unbiased modeling projections of the New York electrical energy system assets essential to satisfy a zero-emission goal by 2040. The New York Impartial System Operator (NYISO) has evaluated situations that mission the assets essential to attain the New York Local weather Management and Neighborhood Safety Act aim of a zero-emissions electrical energy producing system by 2040. New York’s Scoping Plan was guided by an Integration Evaluation that modeled the transition. Comparability of these projections with the Built-in Planning Mannequin (IPM) projections permits a verify on how these necessities can scale back emissions utilizing completely different methodologies.
It seems that there are vital variations between the RGGI IPM modeling and the opposite analyses. Essentially the most obvious distinction between the RGGI IPM modeling of New York and the New York analyses is the era fossil-fuels sector (Desk 3). The desk subtracts the NYISO Useful resource Outlook Situation 1 projected era from the RGGI IPM modeling allowance provide situations for Assumption Set B and Integration Evaluation Situation 2. The proportion distinction exhibits that the IPM initiatives considerably extra era than NYISO and the Integration Evaluation.
Desk 3: Fossil Useful resource Sector Distinction in Technology (GWH) Between the NYISO Useful resource Outlook and the RGGI IPM and Scoping Plan Integration Evaluation Strategic Use of Low-Carbon Fuels Situation
As a result of RGGI affected supply emissions are so strongly correlated with operations these larger working charges imply that the RGGI IPM modeling initiatives decrease fossil-fired emissions than both mannequin. In Desk 4 I estimated New York CO2 emissions by multiplying these projected era variations occasions the 2022 calculated CO2 emission fee per MWh. Within the NYISO Useful resource Outlook column the emissions are relative to these state of affairs variations. Equally, the emission variations within the Integration Evaluation are relative to the Scoping Plan projections. IPM underestimates the fossil sectors emissions considerably.
Desk 4: Fossil Useful resource Sector Distinction in Projected CO2 Emissions (tons) Between the RGGI IPM and NYISO Useful resource Outlook and Scoping Plan
The RGGI States selected to not embrace any allowance provide numbers so I used to be compelled to make my very own estimates to find out the importance of those emissions. I projected allowance availability utilizing a linear interpolation between 2023 allowance allocations and 0 by 2035 and 2040. For the zero by 2040 allowance provide state of affairs, the 2030 emissions distinction represents 27% of my estimated allowance allocation. For the zero by 2035 allowance provide state of affairs, the 2030 emissions distinction represents 42% of my estimated allowance allocation. This means that this modeling distinction must be reconciled to find out its influence on the RGGI State allowance allocation trajectory proposal.
There may be one other difficulty related to the modeling outcomes. The ICF description of those modeling outcomes notes that “because of the stringency of this system after 2040, the mannequin exhibits an over-compliance of emissions within the early years (2025-2030) and banking of these allowances for when the cap is diminished in 2035 and past. “ That is an artifact of the proper foresight methodology of IPM and, I consider, is unlikely to happen.
I believe that is improper as a result of the modeling method claims affected sources “over-comply”. RGGI sources don’t “over-comply” however slightly purchase allowances to satisfy their compliance obligations with a slight surplus to make sure compliance My major concern is New York and in New York sources that would gas change to pure fuel have already achieved so. They can’t immediately have an effect on their compliance besides by limiting operations. Thus, RGGI sources in NY are on the level the place they have to depend on renewable vitality to displace their must function. Which means they solely buy the allowances they anticipate to make use of for his or her compliance obligations plus a small compliance cushion.
Primarily based on the modeling description, IPM “excellent foresight” initiatives outcomes over longer planning horizons than utilized in follow. I consider that affected-sources throughout RGGI deal with the allowance necessities as a short-term, not more than a few compliance intervals, compliance obligation. It’s extremely unlikely that the majority affected sources are planning past short-term compliance intervals so the concept affected supply would over-comply in early years for extra stringent limits ten years forward is inaccurate. The open query is how does this have an effect on the allowance trajectories. It may additionally account for variations between the NYISO and Integration Evaluation projections. The easiest way to reconcile that is in an open public discussion board with the modeling teams.
The September 26 RGGI assembly additionally noticed that “Federal incentives for clear vitality have the potential to quickly remodel the RGGI area era combine” however latest developments recommend that this can be overly optimistic. Renewable developments are struggling on account of hovering rates of interest and rising gear and labor prices. Reuters describes two “procured” initiatives within the RGGI area which were cancelled:
- On Monday, Avangrid (AGR.N), a U.S. subsidiary of Spanish vitality agency Iberdrola (IBE.MC), mentioned it filed agreements with energy firms in Connecticut to cancel energy buy agreements for Avangrid’s proposed Park Metropolis offshore wind mission.
- “One yr in the past, Avangrid was the primary offshore wind developer in america to make public the unprecedented financial headwinds going through the trade,” Avangrid mentioned in a launch. These headwinds embrace “report inflation, provide chain disruptions, and sharp rate of interest hikes, the combination influence of which rendered the Park Metropolis Wind mission unfinanceable beneath its current contracts,” Avangrid mentioned.
- Avangrid has mentioned it deliberate to rebid the Park Metropolis mission in future offshore wind solicitations. Additionally over the previous week, utility regulators in Massachusetts authorized a proposal by SouthCoast Wind, one other offshore wind developer, to pay native energy firms a complete of round $60 million to terminate contracts to supply about 1,200 MW of energy.
In New York, on October 12, 2023 the Public Service Fee turned down a request to handle the identical price points. Instances Union author Rick Karlin summarizes:
- At difficulty was a request in June by ACE NY, in addition to Empire Offshore Wind LLC, Beacon Wind LLC, and Dawn Wind LLC, that are placing up the offshore wind tower farms.
- All informed, the request, which was within the type of a submitting earlier than the PSC, represented 4 offshore wind initiatives totaling 4.2 gigawatts of energy, 5 land-based wind farms value 7.5 gigawatts and 81 massive photo voltaic arrays.
- All of those initiatives are underway however not accomplished. They’ve already been chosen and are beneath contract with the New York State Vitality Analysis and Growth Authority, or NYSERDA, to assist New York transition to a clear energy grid, as known as for within the Local weather Management and Neighborhood Safety Act, authorized by the state Legislature and signed into legislation in 2019.
Developer response to the PSC resolution means that “numerous deliberate initiatives will now be canceled, and their builders will attempt to rebid for the next worth at a later date — which is able to result in delays in ushering in an period of inexperienced vitality in New York”. Karlin additionally quotes Fred Zalcman, director of the New York Offshore Wind Alliance: “Right this moment’s PSC resolution denying reduction to the portfolio of contracted offshore wind initiatives places these initiatives in critical jeopardy,”
These points influence the proposed RGGI allowance trajectories based mostly on the “potential to quickly remodel the RGGI area era combine”. The IPM modeling initiatives vital emission reductions presuming that procured renewable vitality initiatives will come on line in line with the contracts on the time of the modeling. The 2 cancelled initiatives in New England whole 2,000 MW and the threatened New York wind initiatives whole 11,700 MW. Any initiatives delayed imply RGGI-affected supply emissions won’t be displaced as initially anticipated. If the allowance trajectory proposed doesn’t account for this new info, then compliance shall be threatened as a result of affected sources have so few choices accessible to scale back emissions. I advisable {that a} RGGI IPM modeling state of affairs be run to think about the impact of a delayed implementation schedule earlier than finalizing Third Program Evaluate suggestions. In reality, given the significance of renewable growth on the emission trajectories it would even be applicable to delay the timing of completion of this program evaluate.
There may be one other consideration relating to feasibility. As famous above, the amassed annual emission reductions on account of RGGI investments is 3,893,925 tons and RGGI investments over the identical timeframe whole $3,608,950,013 so the associated fee per ton prevented is $927. If the one supply of future emission reductions have been the results of RGGI investments, then RGGI allowance costs must equal $927 to get the mandatory reductions. In fact, different investments may even scale back emissions however the RGGI States ought to think about price issues for the viability of renewable vitality assets wanted to get RGGI affected supply emissions to zero. None of those fashions deal with this uncertainty.
The ultimate commentary famous on the September 26 webinar was that “Situations modeled up to now present comparatively low allowance costs in comparison with the ECR/CCR worth triggers within the Mannequin Rule”. Low allowance costs point out that emissions are decrease than the allowances auctioned so there’s a surplus of allowances. My description of RGGI outcomes up to now famous that RGGI-affected sources have restricted choices to modify from coal and residual oil to pure fuel. I anticipate that because the alternatives to modify fuels diminish that the allowance market will get tighter and allowance costs will go up. This might set off the RGGI price containment reserve. If allowance costs exceed predefined worth ranges, this RGGI function will launch further allowances to the market. If the allowance trajectory is just too aggressive and emissions don’t lower as anticipated as a result of wind and photo voltaic don’t come on line as deliberate or there may be an irregular climate yr rising load and reducing wind and photo voltaic availability, then there may very well be a state of affairs the place there merely usually are not sufficient allowances accessible for compliance. The Price Containment Reserve may stop this from occurring. Nevertheless, no situations with this function have been modeled but. I advisable that the RGGI States ought to mannequin a state of affairs the place the renewable implementation is delayed and the Price Containment Reserve is employed.
Conclusion
I’m afraid that the RGGI States are inserting a lot reliance on the IPM evaluation outcomes that they might suggest unrealistic allowance discount trajectories. It’s naïve to deal with any mannequin projections of the longer term vitality system with out a great deal of skepticism as a result of the electrical grid is so advanced and at present dependent upon dispatchable assets. Alternative of RGGI-affected sources with intermittent and diffuse wind and photo voltaic assets that can’t be dispatched is a gigantic problem with seemingly unintended penalties. Subsequently, the outcomes must be thought of relative to historic observations.
I don’t see a lot indication that the RGGI States are contemplating the outcomes of RGGI up to now. I’m leery of any mannequin projections of this future system however I’ve a lot better religion in projections by the NYISO as a result of they’re liable for electrical system reliability. I believe there are vital variations between the NYISO projections and IPM. Till these variations are reconciled, I shall be skeptical. Kevin Kilty summed up a rational method to using mannequin outcomes that I worry the RGGI States will ignore:
“Beware. Anticipate Surprises. Costly Ones”.
Private Background
Roger Caiazza blogs on New York vitality and environmental points at Pragmatic Environmentalist of New York. He blogs in regards to the RGGI program as a result of he has been concerned with it since its inception and no person else apparently desires to critically evaluate it. This represents his opinion and never the opinion of any of his earlier employers or every other firm with which he has been related.
