Setting the Record Straight on RPS and Clean Energy Procurements
Less than two months remain for lawmakers on Beacon Hill to take action on a number of important measures to ensure Massachusetts remains a clean energy leader and reaps the benefits of diversifying its energy mix with clean resources. At the top of this list is the growing momentum in both the House and the Senate to solidify and expand the Renewable Portfolio Standard (RPS), which has served as the foundation for clean energy growth, job creation, and emissions reductions in Massachusetts (and in 29 other states in the country).
The mounting momentum on the RPS – from the current one percent per year growth to the two percent annual increase advanced in the House (H.1747/H.4575) and the three percent increase included in the Senate’s refined Clean Energy Future legislation (S.2545/S.2564) – is evoking increasingly strained counterarguments from opponents of an RPS increase.
The Associated Industries of Massachusetts (AIM) published a blog recently alleging that a more ambitious RPS could undermine the planned Section 83D importation of large hydroelectric power from Canada, and National Grid echoed similar sentiments in a recent OpEd. The arguments they raise simply do not pass muster; we will need all the zero-carbon electricity we can get to meet our 2050 energy needs and emissions reduction goals, with ample room for in-region renewables to grow and thrive alongside planned hydroelectric imports.
The new line of argument goes like this: legislation to increase the RPS threatens to undermine the hydro contract chosen under the 83D procurement by “crowding out” the roughly 9.45 million megawatt-hours (MWh) per year of hydro being purchased. AIM asserts that the RPS increase will somehow make hydropower “ineligible” to be sold in Massachusetts, leaving us paying for hydropower that we can’t use; National Grid contends that a higher RPS will “eventually negate the benefits” of the hydropower purchase. Both claims are untenable under scrutiny.
The concerns seem to be that a two percent or three percent RPS increase could fill-up or eventually overtake the Clean Energy Standard (CES), a set of Massachusetts Department of Environmental Protection (DEP) regulations requiring 40 percent of sales to be “clean” by 2030 and 80 percent by 2050 (our RPS Class I is currently slated to be 25 percent and 45 percent in these years). Large hydropower contracted under 83D will qualify for the CES, but not the RPS.
The CES tracks the crediting and retirement of attributes (Clean Energy Credits, or CECs), not the physical delivery of energy into Massachusetts. This is an important distinction. Massachusetts is part of a regional electric grid, one that consumes over 120 million MWh each year and that faces the need to replace a substantial amount of retiring generation capacity – at least 4,600 MW shutting down between 2013 and 2021, with more at risk. With all this room to fill, there’s no doubt that the energy associated with the 83D contract will be used to meet the state and region’s needs. However, if the hydro imports need the pricing support provided by the Clean Energy Credits earned, then DEP can adjust the Clean Energy Standard to exceed the RPS requirement as necessary.
Replacing retiring resources is not the only challenge we face. We also have a pressing obligation to accelerate the pace of decarbonization in the electric sector and across the economy. Opponents fail to take this into account. They appear to assume that the annual electric load served by Massachusetts suppliers – roughly 48 million MWh per year today – will remain constant through 2040 and beyond. Doing so overlooks the electrification of heating and transportation that will be needed for the Commonwealth to stay on track to achieve its Global Warming Solutions Act (GWSA) goals. Recent analysis1 reveals that staying on pace with our long-term GWSA emission reduction requirements will require electrification that substantially increases our total electric energy demand between 20 percent and 40 percent to roughly 58 to 67 million MWh per year by 2040 (even when accounting for substantial energy efficiency savings). National Grid separately agrees that the increases will be substantial, according to their recent “Pathway to 2050” white paper2. Multiple recent analyses3 show that even with the planned importation of hydro under 83D, we will quickly fall off track for meeting emission reduction mandates and interim benchmarks if we do not increase the RPS. Importing hydro is insufficient by itself.
Let’s consider the numbers. The 20-year 83D hydro contract is expected to stretch from roughly 2022 to 2042, covering 9,450,000 MWh of annual electric deliveries. Fast forward to 2040, where the phased-in two percent RPS increase recently advanced by the House would move the RPS Class I obligation to 55 percent. An additional roughly five percent will be accounted for in RPS Class II. Another 10 percent will be covered by the Alternative Portfolio Standard (APS). Under this tally, as much as 30 percent of retail sales would be open/unaccounted for under our portfolio standards – 30 percent of the roughly 58 to 67 million MWh in annual retail sales referenced above. This will leave enough room for almost twice the 9.45 million MWh of 83D hydro in 2040 or a more ambitious RPS increase trajectory to complement the planned contribution of hydro. See charts below:
The real bottom-line: we’re going to need just about every bit of clean and renewable energy we can get our hands on to meet our state and region’s medium and long-term needs, and we cannot afford a “wait-and-see” strategy. Despite their “seventh inning stretch” OpEd, even National Grid’s most recent modeling suggests we need to ramp up renewable supply to 50 percent by 2030 (including hydro), with almost 30 percent growth in solar and wind across the region between now and then.4 There’s more than enough room for RPS-eligible renewables to substantially expand without crowding out or otherwise undermining the 83D hydro contracts. Every passing year we kick the can down the road (or stop to stretch) makes our goals more difficult to reach and stalls the creation of in-state and in-region clean energy jobs. More RPS-eligible renewables will unequivocally be compatible with and complementary to the planned hydro imports; indeed, the need for additional clean energy supply is so great that the the Clean Energy Future legislation passed by the Senate5 would expand DOER’s authority to solicit proposals for clean energy generation (onshore Class I and hydro) and offshore wind (Class I) above the 2016 Energy Diversity Act authorizations.
Massachusetts has been a leader in deploying renewables and clean energy, but we need to redouble our efforts to secure greater levels of cost-effective renewable resources. Failing to do so will leave us falling behind, especially compared to several peer states that have recently increased their own RPS – including Rhode Island, Connecticut, New York, and New Jersey. We have a lot of work to do, and it starts with an increased RPS in 2018. Let’s keep our eyes on the prize, ignore the noise, and get it done.