An all-inclusive way to look at energy transition in New Jersey

By Elizabeth B. Stein and Cole Jermyn

Update: On August 17^th, the BPU voted to accept the final version of the Ratepayer Impact Study. The final version has the same limitations EDF and others identified in comments on the proposed study, including not accounting for the environmental and public health benefits of the energy transition, and failing to fully account for modernized utility practices that can minimize costs such as innovative price signals and grid modernization. But even with these limitations, the final study shows that electrification is the pathway to both lower costs and less greenhouse gas pollution.

 By 2030, New Jersey ratepayers who adopt electric vehicles, electrify their buildings and improve their energy efficiency will see lower energy costs than both their fossil fuel-reliant neighbor and the average customer today. This is true for small and large commercial customers, residential customers and low-income residential customers. These results should be a wakeup call to ensure all customers can afford to deploy these technologies in order to meet the state’s environmental and energy affordability goals.

New Jersey, like many other states, has been hard at work developing a strategy to drastically reduce its own climate impact. The state’s residents are already experiencing more than their share of climate change. With 130 miles of coastline, including population centers near much-loved beaches, more frequent extreme weather events are an existential threat to the state.

The state’s Energy Master Plan identifies and coordinates efforts, in various parts of the economy, to achieve a sustainable pathway to substantial decarbonization by 2050. But a new study, proposed by the New Jersey Board of Public Utilities, that seeks to estimate the financial impact of these efforts to eliminate fossil fuels on gas and electric utility customers, is infected with methodological flaws and faulty assumptions that would put it out of step with the state’s energy and climate policy.

It’s not all bad

A good reason to examine the costs associated with New Jersey’s transition to a clean energy future at this early point would be to find ways to minimize the costs and maximize the benefits of these strategies, particularly when it comes to powering vehicles and heating buildings with electricity.

The study, as proposed, gets one thing right: it tries to evaluate customers’ “total energy burden,” not just their utility bills. It identifies the cost impact of adopting more zero-emission vehicles and accounts for the savings from reduced gasoline purchases alongside changes in electricity bills. But it does not consider all energy savings associated with the energy transition, such as how much consumers may save in avoided fuel oil purchases, a particularly glaring omission in a time of high oil prices.

What is the point?

The study’s proponents have failed to state any purpose for their analysis, which might explain some of the confusion and contradictions in the methodology. A study capable of advancing ways for New Jersey to minimize the costs and maximize the benefits of its clean energy transition would need to:

• State its goals, so the study can be designed around those goals and the results could be evaluated based on them.
• Fully recognize the financial, environmental and public health benefits of the energy transition contemplated in the Energy Master Plan.
• Recognize the value of various aspects of the energy transition in combination.
• Recognize the BPU’s and utilities’ own roles in reducing costs through a variety of measures.

The BPU and the utilities can largely affect the exact price tag of the energy transition, yet they have barely begun to take the steps that will be needed to keep it low. To start, the BPU is responsible for sound planning that allows clean energy initiatives to reinforce one another, while minimizing duplicative projects. For example, stationary battery storage and renewables help reduce the costs of charging zero-emission vehicles, while flexible charging helps improve the economics of intermittent solar generation.

Sound planning is also essential to minimizing stranded cost risk — the risk that customers or utilities will be stuck paying for infrastructure they will not need in the future. For example, if utilities continue to invest in natural gas pipeline infrastructure as gas reliance decreases, those assets could cease to be useful long before the utility has recovered its costs, which makes for a bad investment.

It is up to regulators to make sure utilities create opportunities for customers and non-utility parties to help keep system costs down by installing distributed energy resources and integrating them with the utility grid in an efficient manner. The BPU should require utilities to adopt business practices, such as price signals, demand management, and vehicle-grid integration, that can minimize costs by ensuring optimal use of utility systems.

Some of this is already happening!

The BPU does have work underway that can potentially prevent costs from soaring out of control — including a grid modernization proceeding aimed at improving interconnection processes, and serious attention to vehicle-grid integration in its medium- and heavy-duty vehicles proceeding. Unfortunately, based on information shared at a recent stakeholder meeting, the proposed study’s methodology disregards this work. Instead, the analysis requires the costs of all programs mentioned in the Energy Master Plan to be considered without regard to these actions. It completely ignores how these efforts and future BPU actions to ensure smart planning and intentionally leverage interactions between and among clean energy resources of different types can help keep total costs down.

The creation of a report that can artificially inflate the price tag of New Jersey’s clean energy future while ignoring the cumulative harm to public health of current infrastructure comes as a surprise. The BPU has been hard at work to transition the state to cleaner forms of energy and seems ready to invest in a better future. However, its proposed study treats climate and local air pollution reduction as an afterthought.

It’s not too late to get this right

We hope that the BPU will order a course correction. It needs to ensure its upcoming study seriously considers the various pathways to New Jersey’s clean energy future, and that it accounts for the climate and health costs of delayed action. This will produce actionable guidance that can help shape utilities’ and policymakers’ next steps in realizing the Energy Master Plan’s clean energy vision.