Hosted by the Massachusetts Executive Office of Energy and Environmental Affairs (EEA) in partnership with the German Federal Ministry for Economic Affairs and Energy (BMWi), the New England – Germany Energy Transition Forum offered an opportunity for officials from government, industry, and academia to discuss shared energy challenges, pursue urgent action on climate change mitigation, integrate lessons learned in Germany and New England, and incorporate best practices. Industry leaders from both countries discussed recent developments and challenges in the energy transition including the rapid increase of renewables, power sector decarbonization, heating sector innovation, clean transportation and offshore wind.
Below are Electricity Law Initiative Director Ari Peskoe’s opening remarks for the May 16th event.
Good morning. Thank you all for being here this morning. I am grateful for the opportunity to host you today at Harvard Law School. Thank you Secretary Theoharides, Consul General Menzebach, and Director General Herdan for your remarks. Thank you to the organizers of this event – Adelphi and the German American Chamber of Commerce and Kathy Curley from Harvard Law School. I’m going to give my very high-level perspective on three of our main topics for the day: decarbonization of electric power, heating, and transportation in New England.
But before I get there, I must begin with what may be the most significant difference between the energy transitions in Germany and New England — there is no national climate policy in the United States. The US Congress has enacted various tax incentives for renewable energy, energy efficiency, and carbon capture. But it has never passed a climate policy or even renewable energy targets. The Obama Administration tried to act by using decades-old laws to issue greenhouse gas reduction rules, notably rules that mandated more efficient cars and cleaner power plants.
But the current Administration is trying to rescind those rules. It is actively moving backwards on climate – boastful of its hostility toward climate regulation and international cooperation, and proud of its embrace of coal.
Fortunately, over the past two decades, some states have moved to fill the void. In New England, four out of six state legislatures have passed economy-wide GHG emission reduction goals – roughly speaking, each targets 80% reductions by 2050, although not all state targets are legally enforceable, and states are putting together implementation plans piece-by-piece. Much work remains, as we will discuss today.
Thus far, climate policies in New England have mostly focused on the power sector. All six New England states are part of RGGI, the only multi-state CO2 cap-and-trade program in the country.
Each New England state has also enacted renewable energy mandates on utilities. More than half of US states have been adopted such mandates. Targets in New England states vary – although, for the most part, they are ambitious and will require considerable additions of renewable energy over the coming decades. To achieve these goals, some New England states have required utilities to conduct competitive procurements for new renewable capacity, including offshore wind.
CO2 emissions from power sector in the region have dropped by a third from 2001 to 2016. That’s far better than the nation’s power sector as a whole – nationally emissions fell 20% over this time period. RGGI, and state renewable and efficiency mandates on utilities played a role in this decline, but cheap natural gas imported from other regions was the driving force that pushed coal and oil mostly off the system. The federally regulated regional power market, ISO-NE, enabled this shift by facilitating entry of new economically efficient plants in the market.
Cheap natural gas, however, poses a challenge – when natural gas is inexpensive, and when power plants burning natural gas are efficient and fit neatly into the market system, what will push the region to move past natural gas? Because there is no federal climate policy, the federally regulated market operator has no climate mandate.
As mentioned, state renewable energy mandates will continue to bring more renewable energy online. But these out-of-market procurements highlight tension between state climate goals and the market operator’s longstanding mission to be resource neutral.
The region’s winter reliability program is another example. Today, the market operator pays generators to maintain fossil fuel supplies in the winter. During times of peak demand, less natural gas is available to the power sector, as heating takes priority. The region’s power sector burns oil to keep the lights on. Of course, burning oil has adverse environmental consequences.
Is there a market solution that can both drive a cleaner system and maintain reliability, not just during these peak periods but throughout the year? Or will decarbonization be driven by state clean energy mandates on utilities, requiring the regional market operator to react with various mechanisms for ensuring that resources needed for reliability stay operational?
New transmission is surely needed for deep decarbonization. Much of the renewable resources are in the northern part of the region or in Canada, while the load is in the South. In addition, energy from the gigawatts of offshore wind that will likely be constructed in the next decade must be integrated into the grid. Each state decides whether to allow transmission construction within its borders. In the past few years, we have seen contentious proceedings about proposals to move hydro energy from Canada to Massachusetts.
Just yesterday, the highest court in New Hampshire heard arguments about regulators’ decisions to deny permits to one such line over its visual impacts. Is there a regional path forward for transmission development? States may, for example, submit proposals to Congress to create regional siting boards. Seems far-fetched that any state would give up unilateral control – but is going it alone a sustainable path for the region?
Cheap natural gas also presents a challenge for reducing emissions from building heat. With low natural gas prices, what policies are needed to induce consumers to switch to a lower emitting technology? Should policies be aimed at installers rather than consumers?
But there is a more urgent problem. New England leads the nation in its use of oil for heat. About 1/3 of households burn fuel oil or kerosene during our long heating season. Switching to natural gas would reduce direct emissions, but is it wise policy to lock these households into fossil fuels? Should policy seek to electrify or use geothermal or another technology? What is the mix of incentives, mandates, and taxes that will enable this shift? I look forward to learning more about this topic today.
Finally – transportation is the region’s top source of GHGs. The good news is that regional transportation CO2 emissions are down 10% from their 2004 peak. The bad news is that emissions have increased over the past few years and are about 10% higher than they were in 1990. Transportation CO2 emissions are nearly twice those of the regional power sector.
Transforming transportation strikes me as particularly complex. Transitioning to cleaner vehicles requires reaching consumers and constructing infrastructure, as the heating challenge does. But cleaner transportation may also include improvements to public transit, regulation of transportation network companies (such as Uber), and perhaps retail electricity pricing reform – and if we really want deep emission reductions – the transportation challenge raises questions about how we plan our cities and communities.
Regional discussions that include four New England states are underway. I look forward to hearing about their progress today.
Decarbonizing the power sector, building heat, and transportation are generational projects that should have started a generation ago. We are farther along in the power sector but have a long way to go on all fronts. Achieving the targets that New England states have already set will require consistent political commitment and sustained public support. It would be helpful too if the national government was on the same page.
Thank you all for being here today and I look forward to learning from today’s speakers and from all of you.