I'll be on a Columbia Law School panel to discuss these issues on Tuesday, April 12 at 6:30pm; info and post-event video available here.
In December, when New York Governor Andrew Cuomo directed the state's Public Service Commission (PSC) to create a Clean Energy Standard (CES) that ensures New York gets 50 percent of its electricity from renewable sources by 2030, he wrote to PSC Chair Audrey Zibelman, "By mandating a Clean Energy Standard, we ensure that this goal is converted from aspirational to actionable."
Well, actionability came one step closer late on Friday, when, as part of the regulatory process necessary to enact the CES, the state's Department of Public Service (DPS) released a study that analyzes how much it will cost New Yorkers to meet this ambitious and worthy goal.
Here's the very good news from that report: Hitting the 50-percent target is projected to add less than a dollar to the monthly electric bill of the average New Yorker—that is, add less than 1 percent to the cost of the typical residential electric bill—while creating benefits totaling $1.8 billion by 2023. And those benefits don't even include the sizeable public health gains that result from when we replace dirty fossil fuel power with clean, renewable energy. In fact, state renewable energy standards in 2013 alone provided a wide range of benefits, according a recent study from Lawrence Berkeley National Laboratory:
- $5.2 billion in reduced air pollution;
- 200,000 renewable energy jobs; and,
- $1.3-$3.7 billion in reduced natural gas prices.
In other words, the cleaner the power, the better the benefits for New Yorkers overall.
In addition to the DPS study's striking topline conclusion—$1.8 billion benefits for less than a dollar on the average electric bill—below are three key initial takeaways. (Recognize that we're still sifting through all 297 slides of the report and will inevitably have additional reactions going forward in the formal comment process).
The role of energy efficiency in minimizing CES costs is pivotal. But will it materialize?
Importantly, the study emphasizes the pivotal role energy efficiency must play in keeping clean energy costs down. After all, when New Yorkers swap out inefficient lighting and appliances for energy-saving models, they don't just cut their own electric costs; they also reduce energy demand overall, thereby lowering electric costs for everyone across the Empire State. In addition to reducing wholesale electricity and capacity prices, energy efficiency also directly reduces the cost of meeting the CES: When the pie is smaller over all, you need fewer supplies to bake it. (Conversely, if New York drops the ball on efficiency, it'll cost a whole lot more to get to 50 percent.)
That's why, even as New York tests out new utility business models (pdf), market designs, technologies, and scales up innovative distributed energy resources under Governor Cuomo's groundbreaking Reforming the Energy Vision initiative, it's essential we rely on some tried-and-true models that can guarantee energy efficiency savings across New York. As we continue to ramp up renewables (which the CES will deliver), we need comparable regulatory certainty for energy efficiency: New York needs a clear energy-efficiency standard, even as the means of delivering that efficiency will continue to evolve under the REV. Once this standard is put in place, it can ensure New York accomplishes what other leading states already have—year-over-year electricity savings of 2 percent a year or more.
Projected gas prices are a key variable. But 50x'30 delivers savings in various scenarios.
Another key takeaway from the new cost study relates to projected natural gas prices. They're a key variable in any analysis of this kind, particularly given that New York currently relies heavily on that fossil fuel for electricity generation. Some argue that cheap gas poses a major barrier to the deployment of renewable energy. And while that does alter the calculus somewhat, the good news is that even if the "premium" paid for renewables increases if gas prices plunge further, that increased per megawatt-hour premium to meet the CES is largely offset by cheaper wholesale electricity prices overall. And if in the future gas prices are higher than anticipated, renewables become even more cost-effective and reduce our exposure to those volatile fossil fuel price spikes going forward.
(For those interested, check out Figure 9.1 from slide 98 of the report, below, which illustrates this relationship. From the report: "Figure 9.1 illustrates projected CES gross program costs relative to total historic and projected statewide wholesale electricity spend. As an example, in the base case the maximum cost impact of the CES until 2023 on typical monthly residential electricity bills is estimated to be less than $1 in real terms(1). While CES program costs would be higher under low energy prices, this would be outweighed by customers' savings on their overall energy bills due to lower energy prices.")
The cost study gets it right on the societal value of carbon reductions.
In this study, it's important that the state factored in the benefits that come from cutting carbon pollution under the CES. To do these calculations, the PSC rightfully used the EPA's well-vetted social cost of carbon. That metric details the costs carbon pollution impose on us all, on a per ton basis. (Here's how the EPA explains it: "The SC-CO2 is an estimate of the economic damages associated with a small increase in carbon dioxide (CO2) emissions, conventionally one metric ton, in a given year. This dollar figure also represents the value of damages avoided for a small emission reduction (i.e., the benefit of a CO2 reduction.") Included here are the climate-change-related costs of extreme weather events such as Hurricanes Irene (which resulted in damages totaling $20 billion) and Sandy ($65 billion), along with the costs we incur from increasingly dangerous floods, wildfires, and heat waves that are fueled by global warming.
Achieving the proposed New York State Clean Energy Standard has so many benefits to offer: less global warming pollution, cleaner air for our kids to breathe, new, good-paying jobs in fields like wind and solar power and (hopefully, ultimately!) energy efficiency. Pretty impressive: All these benefits could move from inspirational to actionable for less than four pennies a day.