Reduce Risk, Increase Benefits: More Energy Progress for Massachusetts?

A new analysis shows how strengthening a key Massachusetts energy policy can create jobs, cut pollution, and manage risks. Here are 5 questions (and answers) about what’s at stake and what the study tells us.

The study, prepared for the Northeast Clean Energy Council (NECEC) in partnership with Mass Energy Consumers Alliance, was carried out by two leading Massachusetts-based energy consulting firms, Synapse Energy Economics and Sustainable Energy Advantage (SEA). (UCS was part of an advisory working group providing input on assumptions and analytical approaches.)

An Analysis of the Massachusetts Renewable Portfolio Standard looks at what kind of benefits could come from strengthening that key policy. And the results look pretty attractive.

Why do we want more renewables?

First, back to basics: Why do we want renewables?  Turns out there are a lot of problems that renewables are a great answer to, from financial risks associated with potentially volatile fuel pricing (think natural gas), to pollution and associated negative public health impacts, to not enough jobs.

That was where we were coming from when we did a study last year about how we could cut our risk of overreliance on natural gas, make progress on climate change, and bring about other benefits. That study showed that a combination of policies to drive renewables could do all that, and at really reasonable costs.

How do we get renewable energy?

So if renewables are a good thing, how do we make them happen?

One of the most important policies for driving renewable energy in the US over the last two decades has been the renewable portfolio standard (RPS; also known as the renewable electricity standard). Under RPSs, utilities have targets for how much renewable energy they need to get for their customers by certain dates, and then let the market figure out the actual technology mix (wind, solar, etc.).

And Massachusetts has a particular leadership role for this particular policy. The Bay State was the first to put in place a state-wide RPS, and now 29 states have RPSs. They work, and they can do even more: a recent analysis by two premier national energy labs found good benefits from stronger RPSs: less pollution, potential savings, more jobs.

States can complement RPSs with policies aimed at particular technologies or approaches. Massachusetts has done that in a big new energy law that incorporated some of the policies we modeled in our study.

The 2016 Act to Promote Energy Diversity requires the state’s utilities to enter into cost-effective long-term contracts for renewable energy totaling 15-20% of the state’s electricity demand. It also requires utilities to go after offshore wind, to kick-start a major new source of clean energy, for another 10-15%.

Is too much of a good thing a bad thing?

In our 2016 study, before the legislation happened, we modeled versions of those polices coupled with a strengthening of the RPS. Why is that increase important? Because much of that renewable energy (not including large hydro, which is allowed to compete for those contracts) would count for meeting the Massachusetts RPS.

Alas, while the RPS increase was supported by the state senate, it didn’t make it in to the final bill. Without that piece, we’re on track to end up with more renewable energy credits than the policy calls for (each megawatt-hour of renewable energy is worth one REC, and that’s what utilities use to show that they’ve complied with the RPS).

So are too many RECs a bad thing? No—except that if supply outpaces demand, REC prices fall (sometimes precipitously). And we need REC prices to be high enough to not only keep existing renewable energy projects online, but also drive new renewables. RPSs work, and part of keeping them working is keeping them just out in front of the market.

So, why this study?

That’s what makes this new study so important. To use the RPS to best effect for Massachusetts, we need to understand what level of RPS will be enough to keep the market for renewables strong across the board, to complement the long-term contracts for land-based renewables and offshore wind under the Energy Diversity Act.

The study looked at a base case and compared it with a range of possible approaches to keeping REC prices driving renewables by increasing RPS demand in Massachusetts (and in Connecticut, as the next biggest electricity market in New England). Specifically, Synapse/SEA modeled the Massachusetts RPS increasing 2% or 3% per year (instead of the current 1%), combined in some cases with a continuation of the Connecticut RPS’s 1.5%-per-year growth past its current 2020 end date.

They also looked at what would happen under those scenarios if natural gas prices were to increase, and what it might mean to move more quickly to electric vehicles.

Can we drive more renewables, and what do we get from them?

So what does all this mean?

Renewable energy demand – What would it mean for the REC supply-demand picture—specifically, would there be enough demand because of the RPS to drive the additional renewables we know we need?

Here’s what the analysis found:

As the graph shows, the RPS base case wouldn’t be expected to drive additional renewables beyond that required under the offshore wind and other long-term contracting provisions of the Energy Diversity Act. The higher RPS targets, on the other hand, could do the trick in terms of keeping REC prices able to drive more renewables.

Global-warming pollution reduction – How would that extra growth in renewable energy match our needs, in terms of the requirements under the state’s landmark Global Warming Solutions Act (GWSA), for example?

Good news there, too:

As the graph shows, if the increase in the RPS is paired with more vehicle electrification, it gets us most of the way to where we’ll probably need to be in 2030 based on the GWSA.

Electricity price and bill impacts – What about the finances? While getting the RPS in balance means that REC prices will go up, those increases are partially balanced by decreases in wholesale electricity prices because of the added renewables. For the average Massachusetts homeowner/billpayer, they project that the overall effect would be an electricity bill increase of $0.15 to $2.17 per month.

More renewables can also mean less natural gas, and a corresponding drop in risks from natural gas overreliance, which would be particularly important if gas prices were to rise:

Between 2018 and 2030, increasing the diversity of New England’s electricity mix by adding more renewables and reducing reliance on natural gas could save New England up to $2.1 billion in wholesale energy costs, in the face of a higher natural gas price.

Job creation – What would these policies do for employment? One (other) great thing about renewable energy is that it means jobs. In this case, even when taking into account reduced jobs in the fossil fuel sector, it could mean something like 37,000 extra jobs (job-years) between 2018 and 2030—on top of jobs created by the requirements under the 2016 Energy Diversity Act.

Seeking harmony

The overall conclusion of the study is that balance is better:

Two of Massachusetts’ key renewable energy policies—the RPS and long-term contracting authorizations—require harmonization in order for the Commonwealth to meet its long-term clean energy and climate goals.

The numbers suggest that getting that “harmonization” right would bring a load of benefits to Massachusetts and the region, and provide extra oomph for a state on the move toward a truly clean energy future.

See here for the study press release.