Climate 411

Washington and Wall Street must act now to protect Americans’ financial futures from unfolding climate change harms

This piece was co-authored by Stephanie Jones, Attorney, Climate Risk and Financial Regulations, and Gabe Malek, Project Manager, Investor Influence at EDF.

Climate change poses grave risks across society, including “more frequent and intense storms, wildfires, and heatwaves as well as more damaging droughts and more extensive ecosystem losses.” All people face climate harms, today: “this year alone, extreme weather has upended the U.S. economy and affected one in three Americans.” Policymakers must act with urgency to protect all Americans in the face of the unfolding climate crisis, and safeguarding peoples’ financial health and stability is urgent and paramount – no American should face financial jeopardy due to the harms climate change poses to their retirement account or ability to prudently manage personal and home finances.

Importantly, Washington and Wall Street are increasingly taking steps to recognize and manage climate risks. A number of important activities have taken shape in recently weeks, all designed to protect Americans’ financial futures. Measures range from proposed rules that would improve lifelong retirement savings plan selection to report findings that make transparent the harms climate change presents to the foundational stability of our banking system.

Eight of the most significant recent U.S. developments in the last few months of 2021 are highlighted below. It is crucial that we build upon these steps and take concrete, urgent action now to protect families, all people with bank accounts small and large, investors from main street to wall street, retirees, and all who depend on a financial system that is not destabilized by climate change.

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Posted in Greenhouse Gas Emissions, Policy / Read 2 Responses

Why Electric Utilities Must Engage in Climate Resilience Planning

(This post was co-authored by EDF’s Sarah Ladin and Romany Webb of the Sabin Center for Climate Change Law at Columbia Law School)

As the owners and operators of immense infrastructure, electric utilities are particularly vulnerable to the impacts of climate change.

Many electric utilities are already struggling to respond to higher temperatures, changing rain patterns, more intense storms, and other climate impacts. Those impacts impair the operation of electric generation, transmission, and distribution infrastructure. The situation will only worsen in coming decades, which makes it imperative that electric utilities act now to identify future climate impacts and develop tools and processes to manage them.

This type of planning is not just good practice, however. In our new report, Climate Risk in the Electricity Sector: Legal Obligations to Advance Climate Resilience Planning by Electric Utilities, we show that it is also legally required under state public utility law and tort law.

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Posted in Energy, News, Partners for Change / Comments are closed

DOE seeks unprecedented action to exempt coal from competitive markets

(This post was co-authored by EDF’s Rama Zakaria)

Secretary of Energy Rick Perry today announced a sweeping and unprecedented proposal to pay coal and nuclear power plants, a move that would increase electricity bills and climate pollution for Americans.

The proposal would impose a new cost on all electric ratepayers that would be paid primarily to owners of coal plants, undercutting billions of dollars of investment by people risking their capital to compete in and transform our energy markets.

The decision, based on mischaracterized reliability concerns, ignores a recent Department of Energy (DOE) report Secretary Perry commissioned that found no reliability concern. The report’s finding is consistent with voluminous literature and evidence that concludes there are no signs of deteriorating reliability on the grid today, and cleaner resources and new technologies being brought online are strengthening reliability.

DOE’s proposal will increase electricity bills and hurt American families

DOE’s proposal provides cost recovery for uneconomic baseload generators such as coal-fired power plants at the expense of Americans’ electricity bills, families and communities’ health, and the environment.

Cost recovery, put simply, means that no matter how expensive coal-fired power gets Americans must foot the bill. No matter how old, expensive, or dirty a coal plant may be, it would be paid to remain online at the expense of cleaner, newer, and less expensive energy resources.

Such regulatory intervention would stand in the way of an economic and efficient electric grid required by law and would impose massive financial losses on the companies that have been investing to build a new and lower cost power system.

Multiple studies have already shown that coal generators that are retiring are old, inefficient units that are relatively expensive to operate. According to one study, coal units that announced plans to retire between 2010 and 2015 were 57 years old – well past their intended life span of 40 years. These units are not retiring prematurely; they are retiring because they are unable to compete against cheaper, more efficient, and cleaner resources.

As Secretary Perry’s own report stated, coal retirements are primarily driven by low natural gas prices. Yet with this proposal, DOE again appears determined to ignore competitive market forces and instead attempt to bail out coal-fired power plants, no matter the cost to Americans. Not only would this increase electricity bills for the public but also unnecessarily expose the public to dangerous and harmful air pollution.

The costly solution to a non-existent problem

A wide range of literature, including DOE’s own baseload study, confirm that electric reliability remains strong and bulk power system resilience continues to improve. Yet, DOE ignores its own findings and suggests that coal bailouts are needed for reliability and resiliency. Not only is DOE trying to solve a problem that doesn’t exist, it is doing so by forcing ratepayers to pay for a solution that doesn’t work.

DOE’s proposal would compensate coal units for a 90-day on-site fuel supply, yet just recently we saw in the aftermath of Hurricane Harvey that W.A. Parish, one of America’s largest coal plants, was forced to shutter two of its units after its coal piles were flooded. Indeed, available data indicates that coal plants fail more than any other resource.

In contrast, clean energy resources are increasingly demonstrating their ability to support reliable electric service at times of severe stress on the grid. For instance, wind energy contributed critical power during Hurricane Harvey. In another example, during the 2014 polar vortex – when frozen coal stock piles led to coal plant failures – wind and demand response resources were increasingly called upon to help maintain reliability.

Cleaner resources and new technologies boost grid reliability and resiliency

Many studies have highlighted the valuable reliability services that emerging new technologies, such as electric storage, can provide. DOE’s own report found that cleaner resources and emerging new technologies are creating options and opportunities and providing a new toolbox for maintaining reliability in the modern power system.

FERC has also long recognized the valuable grid services that emerging new technologies could provide. From its order on demand response to its order on frequency regulation compensation, FERC recognized the value of fast and accurate response resources in cost-effectively meeting grid reliability needs. More recently, FERC’s ancillary service reforms recognize that, with advances in technologies, variable energy resources such as wind are increasingly capable of providing reliability services such as reactive power.

Any action should allow all technologies to compete to provide the least-cost solution to a reliable and resilient grid

Essential Reliability Services, such as frequency and voltage support, are already being procured today to meet grid reliability needs. For instance, frequency regulation is procured as part of the ancillary services markets. These markets allow all resources to compete and to provide the necessary grid services at least cost to Americans.

FERC should ensure that any additional action taken in response to DOE’s proposal continues to be fuel-neutral, non-discriminatory and in-market. By doing so, Americans can not only have reliable and affordable electricity but can also reap the benefits of cleaner and healthier environment.

Posted in Economics, Energy, News, Setting the Facts Straight / Read 6 Responses

The Supreme Court Decides in Favor of a Critical Clean Energy Resource: Demand Response

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Supreme Court of the United States of America

Today, the Supreme Court issued an important decision in support of a vital clean energy resource: demand response. The case, FERC v. EPSA, revolves around demand response, a resource that helps keep prices low and the lights on, all while being environmentally friendly.

It’s a significant victory for anyone in favor of a cleaner, cheaper, accessible, and more reliable grid. That describes a diverse group — consumer advocates, environmentalists, economists, states, grid operators, and leading legal scholars all filed in support of a critically important and well-designed policy creating access for demand response in wholesale energy markets.

How Demand Response Works

The incredible support for demand response exists because of how the resource works. Demand response reduces energy demand when power is needed most, rather than increasing supply from costly, carbon–emitting fuels. It relies on people and technology, not power plants, to affordably meet our country’s rising electricity needs. Think of it like crowd-sourced energy reductions, helping to reduce costs for everyone by taking the place of very expensive generation.

The Supreme Court Case

The Federal Energy Regulatory Commission (FERC) is the federal agency responsible for keeping our electricity rates “just and reasonable” (that is, fairly priced). FERC created Order 745 to further that goal, with the Order giving demand response access and equal footing in wholesale energy markets, where electricity is bought and sold. It levels the playing field between demand response and traditional sources of electricity, letting the resource compete alongside others.

And demand response has done more than compete – it’s reduced our use of unneeded, costly electricity – the exact type of electricity that should be limited if one wants “just and reasonable” rates.

In a strong, 6-2 decision written by Justice Kagan and joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Sotomayor, and Breyer, the Supreme Court ruled in favor of FERC, stating that “[w]e will not read [FERC’s authority], against its clear terms, to halt a practice that so evidently enables the Commission to fulfill its statutory duties of holding down prices and enhancing reliability in the wholesale energy market.”

Continuing Demand Response Benefits

The Supreme Court’s decision ensures that demand response will keep providing important benefits — and these benefits are numerous. For example, demand response saved customers $11.8 billion in the mid-Atlantic region of the United States in 2013 alone. It likewise helped avoid blackouts during the polar vortex in 2014. And it gives customers the choice and opportunity to save money – for the grid and themselves – by taking part in demand response programs. All this, while being environmentally friendly and carbon reducing.

Posted in Energy, News / Comments are closed

FERC, Grid Operator, Others File Supreme Court Briefs in Demand Response Case

Source: iStock

Source: iStock

The Federal Energy Regulatory Commission (FERC), a grid operator, states, and other parties just filed briefs with the U.S. Supreme Court in a case that could decide whether Americans have access to low-cost, clean and reliable electricity.

The case, EPSA v. FERC, revolves around demand response, a resource that helps keep prices low and the lights on – and does so while also being environmentally friendly.

In 2013, for example, demand response saved customers in the mid-Atlantic region close to 12 billion dollars. And during the polar vortex, which threatened the North-East with freezing cold in 2014, the resource helped prevent black-outs.

The clean energy rule at issue in this case is called FERC Order 745. EDF has been writing about this demand response case throughout the past year. We’ve been fighting for low-cost demand response and we’ll keep fighting in the Supreme Court.

History of the Case

The case involves a FERC rule that allows demand response – a low-cost, clean, and reliable energy conservation resource – the chance to compete fairly in our nation’s wholesale energy market.

EDF and a broad coalition of consumer advocates, environmental groups, companies, and industry organizations support it.

Demand Response – How It Works, Why It’s Popular

The broad support for demand response exists because of how the resource works.

Demand response reduces energy demand when power is needed most, rather than increasing supply from costly, carbon–emitting fuels. It relies on people and technology, not power plants, to affordably meet our country’s rising electricity needs. In so doing, it reduces costs for everyone by taking the place of very expensive generation.

Anyone in favor of cleaner, more reliable, lower-cost energy has a reason to support demand response.

What’s at Issue

FERC is the federal agency responsible for keeping our electricity rates “just and reasonable” (in other words, for making sure we get fairly priced electricity).

FERC created Order 745 to further that goal. Order 745 allows demand response access to the wholesale energy market, where electricity is bought and sold. It levels the playing field between demand response and traditional sources of electricity generation, like coal.

In doing so, demand response has been able to reduce our use of unneeded, costly electricity – the exact type of electricity that should be limited if one wants “just and reasonable” rates.

Electricity producers challenged FERC’s Order 745, arguing that the agency lacked jurisdiction to create it. A three-judge panel for the U.S. Court of Appeals for the D.C. Circuit Court, in a split 2-to-1 decision, ruled in favor of the challengers.

Now FERC — as well as states, demand response providers, grid operators, and others – have stated their case to the Supreme Court.

The Case Before the Court

In its just-filed brief, the Solicitor General said on behalf of FERC:

Given that demand-response programs unquestionably confer significant benefits on wholesale markets, including lower rates, there is no defensible justification for concluding that the [Federal Power Act] nevertheless altogether excludes the programs from wholesale markets or FERC regulation. (FERC brief page 34)

The FERC brief also says:

By exercising authority over wholesale demand-response programs, FERC can ensure that a practice that occurs in wholesale markets, and has been widely recognized as tremendously important to the efficient functioning of those markets, will continue to provide benefits to consumers and the economy and is deployed in a way that results in just and reasonable wholesale rates and a reliable electricity system. (FERC brief page 45)

Another party to the case, demand response company EnerNOC, said in its brief:

Without demand response participation, wholesale energy markets will not ‘function…effectively’: Competition will be constrained; and prices will be higher. (EnerNOC brief page 39)

What Happens Next

Next, attention will turn to the amicus briefs – briefs filed in support of the parties to the case. Those, including EDF’s amicus brief, will be filed by July 16.

The Supreme Court is expected to hear oral arguments in the case this fall.

You can find all the briefs in the case here. And EDF will keep you updated as the case moves forward.

Posted in Economics, Energy, News, Policy / Comments are closed

NERC’s Report is Flawed: We Can Reduce Climate Pollution and Ensure Electric Reliability

power-poles-503935_1920If reducing climate pollution from power plants were a football game, the U.S. team would be halfway to the goal line while fans were still singing the national anthem.

That is, we have already gotten about halfway to the expected goals of the Clean Power Plan – before the rule is even final.

The Clean Power Plan is the U.S. Environmental Protection Agency’s (EPA) historic effort to place the first-ever limits on climate pollution from our country’s existing fleet of fossil fuel-fired power plants. When it’s finalized this summer, it’s expected to call for a 30 percent reduction in carbon emissions compared to 2005 levels — but U.S. power plant emissions have already fallen 15 percent compared to 2005 levels.

That’s because renewable energy, energy efficiency resources, and natural gas generation have been steadily deployed and growing for years. Even conservative estimates forecast continued growth of these resources — which makes last week’s report from the North American Electric Reliability Corporation (NERC) seem really strange.

NERC’s report about the Clean Power Plan’s impacts on electric grid reliability makes predictions that starkly contrast from the progress we’re already seeing.

How did this departure from reality happen?

It’s due in large part to severely flawed assumptions underlying NERC’s analysis, which yield unrealistic results.

Those flawed assumptions cause NERC to greatly overstate the generation mix changes required to meet the Clean Power Plan. The NERC Assessment’s assumptions regarding energy efficiency, renewable energy deployment, and retirement modeling are at odds with both recent experience and current trends.

Unrealistically Low Energy Efficiency Gains

NERC assumes that demand for electricity will grow at an average of one percent per year through 2030, even after accounting for growth in energy efficiency investments. That growth rate is more than 40 percent higher than the U.S. Energy Information Administration (EIA) predicts.

It also fails to reflect likely energy efficiency growth. An analysis by McKinsey & Company found that implementing only those efficiency measures that pay for themselves would reduce the nation’s total end-use energy consumption by 23 percent by 2020.

Arbitrary and Unrealistic Projections on Wind and Solar Expansion  

NERC predicts expansions of wind and solar power that are far below those observed in recent years.

U.S. solar capacity stood at 20.5 gigawatts at the end of 2014. The NERC Assessment predicts an addition of 13 to 20 gigawatts of solar energy between 2016 and 2030 — when solar capacity is expected to grow by 20 gigawatts over the next two years alone.

The U.S. wind industry is also expected to add 18 gigawatts of new capacity in the next two years.

NERC’s low-ball assumptions greatly limit renewable energy deployment in their study. This in turn greatly increases the burden on other compliance options, namely coal-to-gas generation shifting.

Failure to Account for Dynamic Grid Reliability Management Tools

NERC assumes that the Clean Power Plan will drive coal power plant retirements over its entire life-span. However, numerous studies — including one by the Brattle Group and three by the Analysis Group, show that total output and emissions from coal units can decrease without retiring units that are needed to operate on occasion in order to maintain electric reliability.

There are also numerous tools and processes available to grid operators to ensure reliability in light of dynamic market, technological and regulatory change, including capacity and energy markets, resource adequacy forecasting, and reliability must-run contracts.

These instruments, for example, have worked well to maintain adequate capacity during the recent wave of coal-fired power plant retirements, so much so that the electric grid has added an average of roughly 30 gigawatts of total power every year since 2000. The NERC Assessment, however, finds only 11 to12 gigawatts of total power will be added every year – a significant departure from the past 15 years of evidence.

A History of Inaccurate Assessments

This report is not the first time that NERC has issued an inaccurate assessment of threats to reliability.

NERC has assessed previous public health and environmental safeguards, each time raising reliability concerns that were not borne out in reality.

  • In 2011, NERC issued its Long-Term Reliability Assessment, which looked at the Mercury and Air Toxics Standards, the Cross State Air Pollution Rule, the Clean Water Act Cooling Water Intake Structures rule, and the Coal Combustion Residuals rule. NERC raised numerous reliability concerns about these protections, which the EPA noted at the time were flawed and exaggerated. None of NERC’s concerns have manifested during implementation of these standards.
  • In a 2011 companion study, NERC issued its Potential Impacts of Future Environmental Regulations about the Mercury and Air Toxics Standards and a number of other regulations. NERC again raised reliability concerns, none of which have occurred in practice.
  • In its 2007 Long-Term Reliability Assessment, NERC predicted several regions, including New England and New York State, would drop below target capacity margins, threatening reliability. NERC’s prediction was based on a number of factors, including proposed environmental protections. Some power generators used the report to oppose to the Regional Greenhouse Gas Initiative. NERC’s predicted reliability shortfalls did not occur, nor has the Regional Greenhouse Gas Initiative caused reliability issues – even while emissions fell almost 50 percent below the region-wide emissions cap.
  • In 2000, NERC drafted a review of EPA’s nitrogen oxide emissions standards for eastern power plants, knows as the NOx SIP Call. Yet again, NERC predicted a number of reliability concerns that did not occur after the rule was implemented.

NERC has repeatedly produced analyses indicating that public health and environmental safeguards will come at the expense of electric reliability – and these analyses have consistently been contradicted by reality. In fact, emission standards have never caused a reliability problem in the more than four decades that EPA has been administering the Clean Air Act.

NERC’s newest report is no better. It gives no solid reasons to doubt that the Clean Power Plan will be compatible with a reliable electric grid.  

For a clearer picture of the link between reliability and environmental protections, read this post by my colleague Cheryl Roberto, a former Commissioner of the Ohio Public Utilities Commission and electric system operator.

You might also like EDF’s fact sheet about the Clean Power Plan and the latest flawed NERC report.

The progress made in the past demonstrates that our nation is already approaching the goal line under the Clean Power Plan. The tremendous flexibility that the Clean Power Plan provides to states and power companies alike, together with time-tested grid management tools, provides the framework we need to reach the goal line — protecting our communities and families from dangerous carbon pollution, strengthening our economy, and providing a steady flow of cost-effective electricity.

Posted in Clean Air Act, Clean Power Plan, Energy, Policy, Setting the Facts Straight / Comments are closed