Category Archives: Risks of climate change

Even if we don’t know if the magnitude is large, can we afford to be wrong?

Creative Pie Slicing To Address Climate Policy Opposition | Energy Institute at Haas

Severin Borenstein’s post raises an important issue that economists have ignore for too long. I posted the following comment there:

We gave politicians the tool of benefit-cost analysis which they have used to justify their policy objectives, but we completely failed to drive home the requirement that those parties who are on the losing end need to be compensated as well. I looked in my edition of Ned Gramlich’s book on Benefit-Cost Analysis (who taught my course), and the word “compensation” is not even in the index! Working on environmental regulations, I regularly see agency staff derive large positive ratios for the “general public” and then completely dismiss the concerns of particular groups that will be carrying all the burdens of delivering those benefits. If we’re going to teach benefit-cost analysis, we need to emphasize the “cost” side as much as the “benefit” that politicians love to extol.

Source: Creative Pie Slicing To Address Climate Policy Opposition |

Another reason SB 775 is a bad idea: Virginia to establish cap-and-trade program in push to regulate carbon emissions | Utility Dive

California’s SB 775 would prohibit interaction with other states’ cap and trade programs. The best alternative to a federal program is a network of state markets.

“A cap-and-trade program in Virginia would be the third in the U.S., and buck direction from the White House to pull back on carbon regulation.”

Source: Virginia to establish cap-and-trade program in push to regulate carbon emissions | Utility Dive

Clean energy too big to be shut down by Trump – San Francisco Chronicle

I’ve been struck by the lack of panic in the energy industry about President Trump’s decision. This article goes into that underlying confidence that the momentum appears unstoppable.

WASHINGTON — President Trump’s decision to abandon the Paris Accord will slow the battle against climate change in the U.S., but there’s too much momentum in the nation’s clean-energy economy to shut it down, energy experts say.

Source: Clean energy too big to be shut down by Trump – San Francisco Chronicle

The misguided fix to cap & trade

Meredith Fowlie at the Energy Institute at Haas (California’s Carbon Border Wall ) and Dallas Burtraw at RFF have taken on the specific issues in the proposal to replace California’s cap & trade program (CATP).

Yet there’s a bigger issue with SB 775: Why are we so focused on getting every last ton of GHG reduction out of California, when instead we should be focused on creating a system that can easily accommodate integrating with other jurisdictions and encourages others to join the effort? What California does alone is absolutely meaningless in changing climate change risk. It requires a truly global effort. Putting up border walls won’t accomplish this.

Proposed TOU rate revisions are “fighting the last war” in California

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California’s investor-owned utilities (IOUs) have asserted that the underlying costs molding time variant or time of use (TOU) rate structures should be largely, or even exclusively, derived based on conventional fossil generation costs. The IOUs rely on “net load” to determine TOU prices, calculated by subtracting all load met by renewables, nuclear and hydropower generation—the majority of the utilities’ generation fleets.

In theory, net load is the portion of the load served by fossil-fueled generation that has the highest short-run operating costs, and therefore is “marginal.” The infamous “duck curve” shown above depicts the net load (not the metered load.) Yet, the marginal energy generation for most load is no longer served by natural gas; it is now met by renewable energy contracts. The utilities’ net load approach ignores the bulk of their true marginal costs to serve added load, which arise from procuring renewables.[1] The IOUs’ resource procurement has been dominated by adding solar, wind, biofuels, and other renewables since at least 2006 to meet the state’s renewable portfolio standard (RPS), first at 20 percent, then 33 percent, and soon 50 percent.

The tunnel-vision focus on net, rather than the entire, load is especially problematic in the context of State policy to phase-down fossil fuel generation. Eventually, natural gas production will even more significantly diminish, and could disappear from the grid entirely, leaving no price-setting metric under this paradigm. Insistence on the net load approach in the face of this transformation is akin to evaluating the economics of ridesharing based on the exclusive cost of taxis, without consideration of Uber® and Lyft®.

Once fossil-fuel resources are used minimally – an explicit state goal reflected in SB 350 – and potentially no longer on the margin, it is unclear what price benchmark the utilities will propose to set time-variant rates.  Continuing the trend toward fewer fossil-fuel resources is already reflected in pending legislation in Sacramento that proposes a clean-peak standard – AB 1405[2] – and a 100 percent Renewable Portfolio Standard—SB 584.[3] Relying solely on the cost of generation resources that State policy plans to phaseout to define TOU periods is inconsistent with good, long-term, ratemaking principles.  Instead, marginal energy generation costs should be calculated, at least in part, from a set of recent RPS-eligible PPAs, weighted by time of delivery.

Likewise, the marginal energy costs derived using the net load method, which drive the proposed shifts in TOU periods, reflect less than one-third of total average utility rates. The IOUs do not explain why cost differences within a modest component of overall rates should steer determination of TOU periods.

Further, it is not clear why the California Public Utilities Commission (CPUC) should rely on a speculative forecast about load shapes in 2024—seven years from now—to set today’s TOU periods. As the CPUC is well aware, the electricity system is changing rapidly along many dimensions. Infusion of utility-scale renewables, which is driving the IOUs’ rate analyses, is but one factor. Increasing amounts of storage and electric vehicles, shifting work patterns, and other social and economic factors will substantially influence load profiles over the next decade. In 2006, few energy experts foresaw stagnant, or even falling, electricity demand; there is even greater uncertainty today.

[1]This perspective excludes contributions made by utility-scale renewables that meet most of the remaining load, and by customer-side resources.

[2] See http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1405

[3] See https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB584

Repost: Three Revisions Not to Overlook in California’s New Cap-and-Trade Proposal, SB 775 | Legal Planet

 

The proposal would eliminate allowance banking and offsets, and add a border adjustment mechanism. This would isolate California from global efforts to mitigate GHG emissions.

Source: Guest Blogger Dallas Burtraw: Three Revisions Not to Overlook in California’s New Cap-and-Trade Proposal, SB 775 | Legal Planet

Current winter setting a new California-wide record precipitation accumulation | Center for Western Weather and Water Extremes (CW3E)

Source: Current winter setting a new California-wide record precipitation accumulation | Center for Western Weather and Water Extremes (CW3E)