What is the Clean Peak Standard and Will We See It In MA
BY JONAH KURMAN-FABER, APRIL 3rd, 2018
A couple of weeks ago, Gov. Baker announced a $1.4 billion bond bill tackling some of Massachusetts’ most pressing climate adaptation needs. Using bond funding, the bill addresses conservation and recreation, climate change prevention and adaptation, environmental protection, and other local investments.
Of note, two pages of the bill are dedicated to establishing a “clean peak standard,” which requires using cleaner energy sources during peak periods to meet demand. In a state like Massachusetts, where 10 percent of hours in the year contribute around 40 percent of energy costs, a clean peak standard could be a powerful tool in solving demand issues that the Renewable Portfolio Standard (RPS) fails to address. In order to be successful, it must be designed in a way that encourages a diversified and renewable-oriented energy system, rather than simply increasing our reliance on natural gas. Let’s take a look at what the clean peak standard could look like in Massachusetts and make sure we are asking the right questions.
WHAT IS PEAK DEMAND?
Peak demand occurs during our coldest, most inclement weather periods, when high demand for both electricity and home heating leads to excessive GHG emissions and/or spikes in energy price. This has become a central issue for Massachusetts, a state that heavily depends on natural gas for home heating and electricity generation. In order to deal with spikes in natural gas prices due to regional supply and demand fluctuations, Massachusetts has repeatedly turned to shipments of fossil fuels and liquified natural gas (LNG) to help get us through peak demand periods. This winter has taken a heavy toll – during a 15 day period in December and January, Massachusetts burned more oil than in all of 2016 and 2017 combined.
Even while annual emissions in the power sector are declining on a yearly basis, this success is undermined when we cannot reduce our reliance on fossil fuel imports to get through demanding winters. The clean peak standard, if implemented correctly, can guide us away from imported fossil fuels, towards a system of renewables and energy storage that protects residents from volatile prices and GHG emission spikes.
THE BILL BASICS
- The Department of Energy Resources (DOER) and our regional electric grid (ISO-NE) will establish an objective definition of peak periods, which cannot exceed 10 percent of total demand hours from a given year.
- The DOER also determines a “clean peak standard” – meaning a minimum percentage of electricity sales during peaks must come from clean energy resources.
- What qualifies as a “clean energy resource” is up to the DOER, but the bill suggests Class 1 renewables, demand response resources, and energy storage systems.
- Clean peak regulations must not raise energy prices by more than .5 cents per kWh in a given year.
- The clean peak standard expires at the end of 2040.
COULD THIS LEAD TO MORE NATURAL GAS PIPELINES?
Technically, yes. DOER has plenty of discretion within this bill to define natural gas as a clean peak resource and fund pipeline projects. However, the Administration has informally stated that it does not intend to use this bill as such. Recent cold snaps have confirmed that natural gas pipelines will not solve peak demand issues. Residential electric rates have doubled in New England since 1990, while other areas of the country that are less dependent on natural gas have not seen comparable rate increases.
However, both government and grid operator leadership espouse the narrative that additional natural gas pipelines will solve our winter woes. The Baker Administration has demonstrated support for natural gas pipeline projects in the past, incorrectly labeling our energy mix as a “combo platter”. The regional operator ISO-NE, who will be involved in designing the clean peak standard, publicly calls for pipeline expansion despite their recent report proving the opposite. When it comes to the clean peak standard, these red flags should not be ignored. Until an official statement is made by the Administration, we must remain vigilant to how the bill is implemented.
CAN WE CLEANLY REDUCE PEAK ENERGY EMISSIONS WITHOUT RAISING COSTS?
Absolutely. Clean peak standards can create huge opportunities for investment in storage installations. These are projects that Massachusetts desperately needs – a 2016 report found that creating 600 MW of storage by 2025 could cover five percent of the state’s peak load,saving residents $800 million. Meanwhile Synapse Energy reports that even if a new natural gas pipeline project were to reduce peak demand prices (which it likely wouldn’t), it would still end up costing residents hundreds of millions of dollars.
The Energy Information Administration projects that natural gas prices will rise through 2030 due to expansion into less prolific and expensive natural gas reserves, as well as increased demand from both petrochemical and liquefied natural gas export facilities. After 2030, these prices stagnate as technological improvements and rising demand cancel each other out. Meanwhile, the National Renewable Energy Lab projects renewable energy to become the dominant source of energy in the United States by mid-century.
Even short-term investments in natural gas infrastructure are not justifiable. Including the available tax credits, wind and solar units will be among the most cost effective sources of new generation in 2022 and beyond. Cheap renewables and storage are right around the corner (or in some cases, already here). According to Wood Mackenzie, storage system units will become competitive with peaking gas combustion plants in as little as five years and will consistently outperform them within a decade.
Advocates of renewable energy and storage should be cautious of the broad definitions that this bill allows. But there is massive potential for renewable energy and storage if the clean peak standard is implemented correctly. Massachusetts has already set an ambitious energy storage target of 200 MWh by 2020, and Baker awarded $20 million to a group of storage projects back in December. Another $4.7 million is going towards DOER initiatives in energy demand reduction, the majority of which is going towards storage. Considering the substantial evidence in favor of renewables and storage as a solution to peak demand, any attempt by the DOER to exploit this bill in favor of natural gas would face stark opposition.
JONAH KURMAN-FABER COMMUNICATIONS AND POLICY FELLOWJonah is currently a Masters candidate of Sociology at Northeastern University, where he completed his Bachelors. He developed an appreciation for the environment at a young age, growing up on Lake Massapoag in Sharon, MA. He recently held multiple positions at Oxfam America as a grasstops and grassroots organizer, prior to which he served as an outreach coordinator for the Mass Save program. His academic expertise includes renewable energy policy, urban development, and gerrymandering. In his spare time, Jonah enjoys playing/coaching Ultimate Frisbee, traveling, and eating food he can’t afford.