Tag Archives: climate

Climate and Dereg With Your Fish and Chips?

Britain is the fatherland of deregulated power markets.  So it was a bit of suprise to read this in The Economist:

Climate change, a looming shortage of electricity and worries about the risks of relying on imported energy are causing many to doubt whether Britain’s vaunted liberalised energy markets are up to the job.

Recently, some U.S. proponents have tried to argue that deregulated markets are promoting renewables.  (Frankly, neither regulated nor deregulated states are doing what needs to be done; it’s proper policy that makes the difference in either case.   Stupefying ideological debates about “markets versus regulations” seem only to slow things down.)

Left to its deregulated devices, the U.K’s private sector hasn’t delivered the goods in terms of new investment in low-carbon power:

…doubts about the wisdom of the markets are to be found throughout the energy sector, from academics and analysts to managers at some of its biggest companies. Lord Browne, a former boss of BP, an oil firm, opined publicly this year that state-owned banks should be forced to lend money to renewable-energy projects. Sam Laidlaw, head of Centrica, a big generating company, has admitted that nuclear and renewable power will struggle under the current arrangements.

Not only does Britain need substantial new generation capacity but also needs to replace a large amount of current capacity that is scheduled to go out of service.  Thanks to the magic of the market, neither is happening.

Such tardiness lends strength to an alternative reading of the past 15 years: that low prices were as much a result of firms sweating their assets as of competition and ingenuity.

Just let the dirty, old coal-fired power plants crank out the cash.  We know that feeling on this side of the pond.  We call it: “Take the money and run!”

The Economist astutely acknowledges the unspoken political deal that underlies deregulation:

A deregulated industry is useful: ministers can bask in the benefit of low prices while deflecting blame for price rises on to rapacious energy giants. Reimposing central control at a time when bills are rising to pay for new power stations and other infrastructure risks attracting the odium of a hard-pressed public.

That, too, has an all-to-familiar ring.

The United States (29.3) and the United Kingdom (6.3) together have contributed 35.6 percent of the cumulative greenhouse gas emissions that have accumulated in the atmosphere since 1850.  Can the politicians of our two countries meet the challenge?

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Electricity Restructuring and Climate Change

Have you ever wondered whether restructured (“deregulated”) electricity markets or regulated public utilities will do a better job at getting us on the road to a low-carbon economy?

You might have hoped that a new report from Navigant Consulting and spnsored by the Compete Coalition would help answer that question.  

Readers of the report know, going in, that it’s produced as an advocacy job, to shed the best light on proponents of restructuring who would like to advertise their model as “greener” than the alternative.  One would expect, the report, while slanted, to marshall the best and strongest sources and data for their persepctive.  After all, that’s precisely what the Compete Coalition was paying for.

The result, “Price Signals and Greenhouse Gas Reductions in the Electricity Sector,” is quite revealing — for what it doesn’t say.  

Firstly, consider the citations.  They mention only a single, recent statement from one environmental organization favoring re-structured markets as part of climate policy — not exactly a ringing endorsement.  Second, there are a very small number of academic or independent sources referenced in support of their contention.  And finally, there is only a single publication, from any RTO/ISO (each of who produce PLENTY of reports) that references climate policies.  The fact is that RTO/ISOs, like their godfather FERC, have had relatively little to say about reducing carbon emissions until very recently.

Perhaps if the debate remains at the abstract level of markets, deregulation and monopolies, combined with understandable confusion of electricity markets and carbon markets, the contention that “cap and trade” works better under deregulation can be sustained.  However, one would hope that, after the meltdown of California’s electricity markets, not to mention last year’s meltdown of deregulated financial markets, that the American public would appreciate that real-world outcomes have more to do with nitty-gritty details of who and how than with abstract sloganeering.

When we consider the actual data in the report, it’s extremely thin.  The main data set displays the performance of coal and nuclear generation under deregulation.  One of the arguments for that policy is that it encourages generators to operate plants, especially coal and nuclear, more efficiently.  And yes, their graphs (Figures 3 and 4) do show that, although in the case of both coal and nuclear the biggest efficiency gains happened earlier (in the 1990s mainly) and have flattened out recently.  This would suggest that further gains of this type in markets already restructured are likely to be limited.

Because they used plant-specific data, presumably it would have been possible to show that these efficiency gains also resulted in aggregate reductions of carbon-dioxide emissions in the respective RTO/ISOs.  Unfortunately, that data was not forthcoming.  One suspects that although coal generators became a bit more efficient, the actual functioning of the administered wholesale markets favored coal generation over other fuel sources, at least in some of the RTO/ISOs, resulting in an upward trend in emissions.  

Once again, the dog did not bark.  The report contains no information whatsoever about the actual performance of restructured markets with respect to carbon emissions.  It would be easy enough to divide the states into deregulated and not, presenting trends in electricity-related emissions for both groups, if it could be shown that deregulation, to date, would do a better job reducing carbon emissions.

The Compete Coalition report cites an NREL technical report: Facilitating Wind Development: The Importance of Electric Industry Structure.  Kirby and Milligan emphasize the point that integrating wind projects over a larger geographical area increases the capacity value of wind development (because the wind fluctuations become less correlated).  Restructured markets, in theory reveal this value and make wind more attractive to investors for that reason.  For the most part, they rely on the current distribution of wind capacity that is concentrated in RTO/ISO states.  It’s a leap however to say that this variation was caused by the changed market structure.  The sample, after all is dominated by California and Texas, which have had very aggressive state-level policies to promote wind.  

A report from the Carnegie Mellon Electricity Industry Center: Do RTOs Promote Renewables? A Study of State-Level Data over Time found no strong association between the growth of renewables and the shift towards restructured markets in many states.  This study, by Spees and Lave, is perhaps most useful to showing just how difficult it would be demonstrate a strong association.

In many states, renewable portfolio standards — state laws requiring utilities to source a fixed portion of their power from renewables — were included in  the original legislative deals that launched deregulation out of concern that restructured markets might favor excessively the use of fossil fuels.  (See the recent report on state RPS programs from the Clean Energy States Alliance.)  To the extent that RPS have contributed to the growth of renewables (a legitimate research question in itself), it hardly seems fair to give RTOs and ISOs the credit!

And everyone would agree (probably) that federal tax incentives dominate all other factors in driving annual construction of wind capacity.

Instead of cherry-picked data and speculation about the possible impacts of possible future policies, what’s needed is an actual assessment of how restructured markets have actually performed with respect to reigning in carbon emissions.  It’s not a new issue and many in the power industry started taking appropriate steps many years ago.  Others have suppressed discussion of the problem, hoping to prolong the profits of dirty power for as long as possible.We need to ask hard questions about the environmental performance of the RTO/ISOs and FERC itself and not be distracted by the green smokescreen being drawn across their carbon-promoting practices.  

And the same touogh questions should be asked of the power industry in the regulated states as well.

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PJM Interconnection — America’s Top Carbon Polluter?

Responsible companies concerned about climate change have disclosed their carbon footprints and pledged to make them smaller. Many have joined organized efforts like the Chicago Climate Exchange, the Carbon Disclosure Project and EPA’s Climate Leaders.

The list of corporations joining the effort even includes big carbon polluters like American Electric Power.

Where’s PJM Interconnection? Why don’t they disclose the carbon dioxide emissions associated with the electricty they sell through the wholesale markets they manage in 13 states and District of Columbia?

The answer may be that PJM’s carbon footprint could, in fact, be the largest of any power company in the United States!

According to the 2008 State of the Market Report for PJM, energy produced by fuel source was as follows (GWh):

Coal 404,719
Gas 53,552
Oil 1,918

To keep things simple, use the following factors to convert GWh into metric tons of carbon dioxide: 1000, 600, and 800. That is, one GWh of electricity produced by burning coal results in 1,000 metric tons of carbon dioxide emissions, natural gas — 600 tons and oil is in between at 800. (These numbers are rough and approximate — greater precision would require the use of proprietary data about precise types of fuel used and methods of combustion — which PJM has yet to disclose.)

The result?  438 million tons of carbon dioxide.

That carbon footprint dwarfs even American Electric Power, one of the nation’s largest, coal-fired generators, who reported a baseline carbon footprint of 150 million tons under EPA’s Climate Leaders program.  It’s bigger even than the Tennessee Valley Authority — TVA claims their emissions are under 110 million tons annually.  

AEP is part of PJM Interconnection and could easily provide advice to PJM management and other members on how to gather and report data on greenhouse gas emissions.  FERC (the Fossil Energy Regulatory Commission) could require Regional Transmission Organizations like PJM to disclose the carbon emissions caused by the electricity they sell.  States like Maryland, whose residents are threatened by the consequences of climate instability made worse by carbon pollution, could decide whether it really makes sense to purchase dirty electricity from PJM Interconnection.  

So, the nomination stands: PJM Interconnection is America’s Number One carbon polluter!


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