Market Forces

Solar power can have positive health impacts for Chile’s most vulnerable. Here’s how.

By / Bio / Published: May 17, 2021

We know that solar power helps replace fossil fuel generation, getting the world closer to the international goal of keeping global warming to 1.5°C. But does it have other benefits? What happens to people’s health if we replace coal generation with solar power?

The Atacama Desert in northern Chile is one of the world’s most extreme landscapes. It is often used by NASA and film companies to stand in for Mars and is the sunniest place on Earth. It is also the best place in the world for solar power.

Since 2012, Chile has installed over 3300MW of solar power throughout the country, with a large percentage built in the regions in and surrounding the Atacama Desert. This rapid introduction of large-scale solar capacity makes the Atacama region a perfect case study for us to look at the health benefits of solar power replacing fossil fuel generation.

Due to Chile’s heavy reliance on fossil fuels, the country’s power sector releases large amounts of local air pollutants, including sulfur dioxide (SO2), nitrogen oxides (NOX), mercury (Hg) and particulate matter (PM). All of these pollutants are associated with adverse health effects, along with increased hospital admissions, mortality risks and threats to life expectancy. Annual air pollution in Chile generally exceeds life-threatening levels with daily average fine PM concentrations well above World Health Organization guidelines. Thus, Chile’s growing reliance on renewables is extremely important from a health perspective.

To that end, my co-authors and I have spent the past two years investigating the health benefits that solar generation produced in northern Chile due to this massive solar expansion. Our research found that the investments in solar capacity led to a displacement of daily coal- and gas-fired power generation. We estimated a direct, causal link between greater installed solar capacity and fewer cardiovascular and respiratory admissions due to reduced pollution from fossil fuel generation. Importantly, reductions were largest among the most vulnerable age groups: infants, children (ages 6–14), and seniors.

To estimate the effect, we relied upon wind direction to identify which cities were downwind of and close to the fossil fuel plants we found to be displaced by solar. For the populations living within 10km of displaced plants, we estimate that 1GWh of solar generation reduced annual respiratory hospital admissions by 13% on average. Similar findings, with decreasing magnitudes, occur in cities 50km and 100km downwind of displaced coal and gas-fired generation.

Our conclusions remained unchanged after several robustness checks, including the use of cities upwind of displaced facilities and those downwind of non-displaced units, as well as the use of hospital admissions of patients with diseases presumably not related to air pollution.

This research quantifies some of the benefits that solar power can provide in terms of reducing health impacts of air pollution in developing nations, yet our findings are likely an underestimate of the total health benefits that can emerge from solar generation. This is because:

  • Chile’s northern region has limited healthcare infrastructure. This means any reduction in hospitalizations increases the number of hospital beds available, which helps reduce the number of untreated unrelated injuries and illnesses.
  • Reductions in air pollution exposure for young children and infants has a lifelong benefit in terms of reduced illnesses and improved economic outcomes.
  • As demonstrated in both the US and India, disadvantaged populations often live closer to large air polluters. If this is the case, improvements in air quality may also help to reduce inequality.
  • Though the area we studied has relatively low population density, we were able to estimate a significant benefit on health outcomes- thus, solar’s contribution to cleaner air will produce even larger benefits in more populated regions or countries.     

Our research is a working paper published in the Environmental Defense Fund Economics Discussion Paper Series. You can download the paper for free here. This blog was co-authored with Nathaly M. Rivera, Research Fellow at the University of São Paulo.

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How innovative policies can help clean the transportation sector

By / Bio / Published: September 22, 2020

As climate week gets underway, policymakers should prioritize ways to reduce emissions from one of the biggest contributors to greenhouse gases: the transportation sector. A diverse group of stakeholders recently came together to discuss opportunities to do just that.

Transportation accounts for nearly one third of all greenhouse gas emissions in the U.S. and a substantial share of local pollution in urban areas. Not only do these emissions greatly contribute to climate change, they can cause significant health concerns, from respiratory and cardiovascular illnesses, to premature mortality. Furthermore, communities of color and low-income communities have suffered much more from the health and well-being impacts of transportation-related air pollution than non-disadvantaged communities. Thus, it is both a social and environmental imperative to clean our transportation system.

However, cleaning our transportation system is not a trivial task—the effects of pollution vary widely in space and across different communities; the impacts of pollution are felt locally, regionally and globally; and multiple challenges across many different sectors of our economy to achieving this goal still exist. We will need a coordinated, multi-sector approach, with major investments and targeted policies.

To discuss these solutions and explore opportunities, Resources for the Future, Environmental Defense Fund, and Duke University’s Nicholas Institute hosted a two-day virtual workshop in July 2020. We invited individuals from all over the country, and from different sectors, including local governments, non-governmental organizations, stakeholder and community groups, industry, and academics, in an effort to increase communication across sectors, explore diverse policy solutions, and hear from different points of view.

Though we heard diverse approaches and assumptions from the different speakers and participants, we all agreed on the following: Cleaning our transportation system is a necessary and urgent action, and we can leverage this transformation to achieve even more improvements in social outcomes, above and beyond those caused by the transportation sector.

Panel I: Effectiveness and Behavioral Responses to Carbon Pricing and Vehicle Regulations under Existing Policies  

The first panel of the day discussed the effectiveness of carbon pricing and vehicle regulations on cleaning the transportation system, given existing policies and the nature of our “business as usual” future.

One of the main takeaways: though carbon and gasoline taxes can and have had an impact on reducing gasoline consumption, these taxes won’t be enough to achieve the major structural changes needed for the sector.

Other policies, such as vehicle efficiency standards and scrappage programs (like cash-for-clunkers), can help ensure older vehicles are replaced with better, more efficient (or even electric) alternatives, and can also work in conjunction with gasoline and carbon taxes to help achieve a cleaner transportation system. However, these programs may cause some unintended consequences if not pursued cautiously or developed jointly with policies that increase access to alternative modes of transportation.

Panel II: Distributional Effects of Transportation Policy

The workshop’s second panel focused on how to structure transportation policies to reduce the inequalities that transport-related pollution creates among different communities. The speakers highlighted the many different types of inequalities created by unjust and problematic housing and transportation policies, magnified by disadvantaged communities’ greater exposure to pollution, and how the transformation of the system can be leveraged to improve these distributional outcomes.

To be able to achieve these improvements, several steps must be taken, including:

  • Use data and modeling to identify disadvantaged communities most affected by transportation pollution;
  • Actively engage with community and environmental justice groups from the beginning when setting policy in order to identify their most pressing issues and concerns and ensure they have a seat at the table;
  • Conduct research to identify the most beneficial policies and actions for these communities and address their concerns;
  • Work to avoid unintended consequences of transportation policy that may harm disadvantaged communities in our quest to green the transportation system.

Panel III: Investments on Carbon Revenue: Efficacy and Impacts Across Groups

Our third panel explored the many avenues for investments of revenue raised from policies such as a carbon tax. There exist almost infinite options for investments- in both the private and public sectors, to individuals or corporations, for education and behavior modification, to infrastructure and technology, and so much more. Identifying the investment that provides the largest bang for buck is a challenge worth pursuing in order to maximize the benefits of our clean transportation transformation.

One of the difficulties is understanding the distributional impacts of investments. It is important to identify who will benefit the most from these investments, and whether there are important spillovers such as job creation. When the benefits of an investment are diffuse or long term, this can create a political challenge in its implementation. Furthermore, understanding the policy context around the investment is key: non-transportation-related policies such as zoning or housing regulations can affect the benefits of any investment in this space. For example, changing zoning rules could improve access to alternative modes of transportation, making investments in electric vehicle charging stations and public transit more effective at shifting driving away from private, fossil-fueled vehicles.

Panel IV: Changing the Rules: State and Local Policies and Potential Interactions with Carbon Pricing

The final panel of the day discussed how non-carbon pricing policies at the state and local level may interact with existing carbon policies, such as the Regional Greenhouse Gas Initiative (RGGI, a regional cap and trade program covering GHG emissions from 10 states in the northeast). Though cap and trade or carbon pricing sends a price signal to reduce carbon emissions, it alone may not be enough to achieve the large transformation required.

Alternative policies, such as the low carbon fuel standard, congestion pricing, or even policies outside of the transportation sector can help to bring about even greater reductions of transportation emissions, especially when combined with carbon pricing policies.

Electricity sector policies are an especially important one to get right. As our transportation system becomes less reliant on gasoline and more reliant on electricity for fueling, we need to ensure that the electric sector is clean (and carbon pricing can play an important role in achieving this outcome), while also implementing policies to reduce the costs that charging vehicles can place on the system.

A Vision for a Clean Transportation Future

This workshop made a strong case for urgent action—the emissions associated with transportation are too large and affect too many vulnerable communities to allow the status quo to continue unabated. Many different types of policies can be implemented, and even in the face of political challenges – particularly at the federal level – cities and states across the country are already taking action.

The speakers envisioned a future where transportation is clean; where all individuals across the country, regardless of where they live, have mobility access and alternatives in their modes of travel; where investments are made with an eye towards maximizing the public benefit and ensuring those most disadvantaged are uplifted; and where all communities have a voice in shaping the path of this clean transformation. This clean future exists; now it is up to us to shape policies in order to achieve it.

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How we can make Time of Use Pricing work for everyone

By / Bio / Published: March 9, 2020

How we pay for electricity has important implications for our bills, as well as for the costs of the electric system. Most people pay a flat rate, essentially one price per unit of electricity (or kWh) they consume, regardless of when they consume it. However, because the cost of generating and delivering electricity varies throughout the day, having varying prices over the course of the day creates an important and actionable signal: use less electricity during high-priced and high-cost times; use more of it when it’s cheaper. This helps keep costs down in the long run and allows customers to save money by shifting their consumption to low cost times.

Yet there is some evidence that certain communities may be disadvantaged under this type of pricing structure; thus, we must identify and implement policy solutions to address this misalignment.

New study highlights inequities

A new study by Lee White and Nicole Sintov published in Nature Energy highlights some of these challenges. They looked at a pilot study in a southwestern electric utility that implemented time-of-use (TOU) tariffs (with a high cost peak period and a low cost off-peak period). White and Sintov gathered data from participants, including Hispanic, low income, elderly, and those with disabilities, and found some areas for concern.

For example, they find that the elderly and customers with disabilities saw greater increases in bills on TOU than their non-vulnerable counterparts, likely due to a reduced ability to shift their consumption to cheaper, off-peak times.

They also find that some of these customers who faced smaller bill increases, likely due to underlying preferable load profiles, faced either worse health outcomes (this was true for Hispanic households), or more discomfort than others (true for low income households).

Low-income and Hispanic households reported turning off AC more often than their non-vulnerable counterparts, but did not have a greater reduction in on-peak use. These households appear to have made a much more extreme sacrifice to achieve the same level of peak time reduction achieved by other pilot participants without negative health and comfort impacts.

It is likely that these potential negative health and comfort outcomes of TOU rates are exacerbated by the stock of older, less efficient appliances and leaky homes, common in low-income households. When households have to rely on less efficient appliances, it is harder for them to shift the timing of their cooling to cheaper hours of the day; many have to turn off the A/C altogether, leading to severe discomfort. Furthermore, when the house is leaky, any efforts to pre-cool the home during cheap times will not result in comfortable indoor temperatures during costly times of day.

Policy solutions can make TOU rates work for everyone

So we face a dilemma: TOU rates can help improve the system, and could help all customers reduce their bills, but achieving these benefits with old appliances and leaky homes is a major challenge. How can we maximize the benefits of implementing TOU rates while ensuring that all communities can participate?

Fortunately, policy solutions exist that can help level the playing field.

  • Bill protection: Utilities can implement bill protection, whereby customers will not face bill increases under a TOU rate for a limited period of time. This allows customers to benefit if they are able, but will not harm those who find themselves unable to adequately shift consumption. In California, for example, Southern California Edison provides a full year of bill protection for customers transitioning to TOU rates.
  • Programs to help with weatherization and appliance upgrades: Programs like the Low Income Home Energy Assistance Program (LIHEAP) target less affluent customers and can provide assistance with either weatherization or efficiency improvements in appliances.
  • Robust marketing, education and outreach (MEO): Ensuring electric customers understand what rate they are on, and how changes in consumption can help them achieve lower bills is key to maximizing the benefits of TOU rates. This requires significant marketing, education and outreach. For customers who may face language or information barriers, the need for targeted MEO is even more pronounced.
  • Ensure that TOU rates are actionable: For TOU rates to be most effective at reducing consumption during peak hours, the ratio of peak to off-peak prices needs to be significant, and the length of the peak hours manageable. This provides ample space for customers to shift away from peak times and benefit from a greater number of low cost hours.
  • Allow TOU rates to be opt–out: Mandating TOU for all customers can exacerbate these disparities, especially among those who face challenges in responding to the time differences. Many low-income customers rent rather than own their homes, making it more difficult to invest in home weatherization or energy efficient appliances, two strategies that can make TOU rates easier to respond to. Allowing customers to opt out provides an important option to ensure equitable outcomes from more advanced electricity pricing, particularly for low-income renters. California utilities currently implement all TOU rates as opt-out.

TOU rates can provide many benefits to society and the environment, and could help put money back in the pockets of low-income and elderly customers. However, in order to avoid any negative consequences due to inefficient appliances and leaky homes, we will need to take extra measures outside of rate setting itself.

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How More Transparent Electricity Pricing Can Help Increase Clean Energy

By / Bio / Published: July 12, 2016

By: Beia Spiller and Kristina Mohlin

The price of most goods we purchase is CostPriceImagegenerally based on the costs associated with the goods’ production, including the raw materials used to generate them, the labor associated with their manufacturing, and so on. However, when it comes to pricing residential electricity, many regulators choose to use a flat price per unit of electricity (kilowatt-hours, or kWh) that unfortunately fails to adequately reflect the underlying costs of generating and delivering energy to our homes.

This creates incorrect incentives for conservation and investments in distributed energy resources (like rooftop solar, energy storage, and demand response). Getting these incentives right can go a long way in creating more opportunity for efficiency and clean energy resources.

Pricing electricity generation

The cost of generating electricity from large-scale power plants varies significantly over the course of a day. When demand is low, electricity providers call upon the most efficient and inexpensive power plants to produce electricity. As demand increases, they must also utilize more inefficient and expensive power plants. So, for the price of generation to accurately reflect these costs, it too must vary with the time of day. Time-variant pricing charges customers more for using electricity during periods of high demand (such as during hot afternoons) and less when demand is not as great. This pricing system is an accurate reflection of generation costs.

In contrast, flat rates that don’t vary over time incentivize customers to consume more electricity when it’s most valuable to them, even though consuming during times of high demand places a larger cost on the system. Thus, the current, static pricing system creates incorrect incentives for conservation and electricity use. Read More »

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Transforming the Electric System to Reduce Costs and Pollution

By / Bio / Published: April 8, 2016

electrical-power-linesBy: Beia Spiller and Kristina Mohlin

Electricity markets around the world are transforming from a model where electricity flows one way (from electricity-generating power plants to the customer) to one where customers actively participate as providers of electric services. But to speed this transformation and maximize its environmental and cost benefits, we need to understand how customer actions affect the three distinct parts of our electric system: generation, transmission, and distribution. Read More »

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When it comes to developing natural gas – not all impacts are created equal

By / Bio / Published: December 18, 2015

Over the past decade, Pennsylvania has seen a huge increase in natural gas production due to technology advancements. Horizontal drilling combined with hydraulic fracturing, the process of cracking rock open deep underground to release the gas trapped inside, has made Pennsylvania the nation’s second largest natural gas producer. While a thriving natural gas industry is a boon for the state’s economy, well-documented accounts of air and water pollution have been associated with its development.

But do the benefits and risks of natural gas production impact Pennsylvania’s communities equally? In particular, while the broad economic benefits (more jobs, cheaper gas prices, etc…) may accrue to all members in the community, the local environmental impacts may only affect those living in close proximity to a shale gas well.

A recent paper published this month in the American Economic Review examines the impact of increased drilling activity on the property values of homes located in close proximity to a well, and in particular, estimates whether this impact differs for homes dependent on groundwater for drinking compared to those with publicly supplied water. To determine how property values for these different types of homes may be affected, EDF, working with economists from the University of Calgary and Duke University, utilized transaction level data across the state to conduct comparisons in three different dimensions simultaneously:

  • properties very near a well to those further away;
  • properties dependent on groundwater for drinking to those with access to piped water;
  • and properties sold prior to a shale gas well being drilled with those sold after the well was drilled.

Furthermore, to account for the fact that many groundwater-dependent properties may be located further away from urban centers, the data were restricted to homes located near the piped water boundary. This helps eliminate differences in neighborhood characteristics that could affect both the price of the home and its proximity to a shale gas well.

The analysis determined that property values are impacted by proximity to a shale gas well, though results differ depending on the property’s drinking water source. Those with piped water can economically benefit from being very near a well (a value increase of 3 percent for properties within 1.5km of a well), potentially due to royalties and bonuses companies pay to develop on a homeowners land. However, the property values of homes that are dependent on groundwater and located within 1.5km of a shale gas well declined by an average of 13 percent. Importantly, the impact on both types fades with distance; showing that both the benefits (increased royalty payments) and costs (increased groundwater contamination risk) of proximity diminish as one moves further from shale gas development.

This analysis does not draw information from observed air or water contamination. Instead, the data reflects public perception and brings to focus two important observations.

The first is that oil and gas communities are becoming more aware of the environmental risks posed by development. Managing these risks is critically important, as nearly 10 million Americans live within one mile of a hydraulically-fractured oil or gas well.  Smart policies that improve operations and create more opportunities for public transparency are necessary to ensuring communities in close proximity to drilling feel adequately protected from the inherent risks of oil and gas development.

But the study also highlights another key issue – the economic and environmental consequences of oil and gas development (both positive and negative) do not impact communities evenly. There is a clear detriment to some populations – as there often is with any industrial activity.  And rigorous, economic and scientific analyses are important tools for helping policy leaders understand these discrepancies to respond effectively.

Economic research can provide insights into how markets internalize the environmental costs of economic activities, even if these costs do not have a monetary value associated with them (for example, you can’t buy greenhouse gases, but economic research has demonstrated that the social cost of a ton of carbon is around $40). This analysis demonstrates that the threat of drilling activity causing groundwater contamination – which has no market value – still has true costs. Rigorous economic analysis allows us to quantify these costs, leading to more informed policy decisions and better outcomes for both the environment and the local community.

 

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