AS RESIDENTS OF THE COMMONWEALTH of Massachusetts, we live in a state where we spend more than over $22 billion a year on energy, about $18 billion of which we import from outside of our region. These dollars go primarily for gas, oil, coal, and transportation fuels, sending our hard-earned money out of Massachusetts and New England instead of spending it here to create jobs and develop the regional economy.
We live in a region at the end of the traditional “pipeline,” making us an expensive energy region and subject to price fluctuations in national and global markets. We’re also a state that embraces innovation, with a strong history of civic involvement, business investment, and public sector leadership that come together to solve problems and agree on new approaches to advance our economy and improve our environment efficiently and cost-effectively. One of the most recent, successful examples of policy makers, businesses, and consumers coming together in this way, under the leadership of Gov. Deval Patrick, is in the crafting of a robust clean energy and climate strategy for Massachusetts.
Massachusetts’ strategy recognizes that there is no single answer to securing a cost-effective clean energy future for our citizens, businesses, and industry. We need to embrace an “all-of-the-above” strategy that starts with energy efficiency (the first fuel), adds distributed renewable and clean generation to a smarter, more modern grid, and complements those investments with cleaner imports. If we do this the right way, we will create thousands of new jobs, not only in the energy sector, but also in companies that are more efficient and sustainable.
So, while some are suggesting that we need to shift our focus from diversifying our energy mix and instead enter into new contracts to import large hydro from Canada that would send tens of billions of dollars out of the regional economy, including ratepayer subsidies, I respectfully disagree. Large hydro is not the answer—but it is part of the mix we need to cost-effectively put in place an electricity system that will power our economy with reliable, secure, and clean energy. Where does hydro fit? And what are the roles of subsidies to make our energy system cleaner? To answer these questions we need to revisit our climate goals while also looking at the track record from recent years to see how we’re doing, and how hydro can help, not undermine, success.
Massachusetts’ policies and regulations aim to reduce the level and volatility of energy costs to consumers, as well as the environmental impacts of energy use. The Commonwealth’s approach has wisely not taken a short-term, cost-only approach. Our policy framework has appropriately taken a long view to achieve a combination of important goals:
• Pursuing all cost-effective energy efficiency to reduce our energy use and costs;
• Using market mechanisms to increase competition and help drive down costs;
• Investing in renewable and clean energy development across Massachusetts and New England, making our energy system cleaner while stabilizing energy costs and creating significant in-region job growth;
• Designing incentives and standards so that new, clean energy technologies can begin to come to market at increasing scale, competing more as subsidies decline and as specific technologies become a larger part of our energy mix;
• Supporting replacement of the dirtiest generation sources with cleaner fuels by encouraging natural gas-fired power plants and imports of hydro to replace the energy from aging baseload units; and
• Across all sectors of our economy, embracing a diverse mix of solutions to reduce greenhouse gas emissions.
So how are we doing with this daunting set of goals? The evidence shows that the portfolio strategy is working better than we thought—and that there also is a place for more large hydro. Over the last five years, investments in energy efficiency have reduced energy demand, producing savings for consumers and eliminating the need to sink costs into new power plants. Average residential energy bills in Massachusetts have fallen faster than the national average, dropping from the 16th most expensive bills in 2008 to 35th in 2011.
We’ve brought down costs while accelerating renewable energy growth, greenhouse gas (GHG) reductions, and job growth. Investments in solar have outpaced targets, leading to an increase in Massachusetts solar generation from 3.5 megawatts in 2006 to 220 megawatts today. Clear, stable policies have helped create thousands of jobs in the Commonwealth, and convinced leading US solar companies to expand, all while helping contribute to solar cost declines of 60 percent over the last five years.
Solar, wind, and other new and rapidly developing renewable technologies would not be growing so rapidly without the renewable energy standards and credits the Commonwealth established—not to perpetually subsidize renewables in the way the federal government continues to do with fossil energy, but as a transitional approach to bring these new technologies to scale. Providing declining subsidies to distributed renewables while they grow from 2 percent of our energy to 5 percent, 10 percent, and above, is an investment in a lower-cost, cleaner-energy economy over the long term. Given these significant successes, what is the place for large hydro in our energy mix? And should it count toward Renewable Portfolio Standard (RPS) targets?
First a quick definition: large hydro is not the repowering of the small dam that used to run a textile or paper mill in a small New England town. Those repowering and new projects are 1, 5, and 10 megawatt projects that appropriately compete against solar and wind for renewable credits today, and produce distributed power while also creating local jobs.
Large hydro is different. In the Northeast, it has been developed over decades in Canada, at project sizes in the hundreds or thousands of megawatts, enjoying significant economies of scale and producing power at low cost. New England already takes advantage of this resource. We can and should look to increase our large hydro purchases from existing projects to provide clean baseload electricity to the region.
However, large hydro does not belong in the RPS, and does not fit as a replacement for homegrown renewables. It makes little economic sense to provide renewable credits to large hydro projects. These limited subsidies are intended to help new, emerging renewables reach economic scale, while diversifying our energy resources and creating regional jobs. Large hydro is a mature technology that doesn’t need subsidies and has enough capacity to consume the entire requirement for new, utility renewable power purchases, effectively shutting solar, wind, small hydro, and other emerging clean technologies out of the Massachusetts market. Solar and wind companies would lay off workers. Companies that invested in expansion in Massachusetts on the promise of consistent policies to create increasingly competitive and cost-effective markets would have the rug pulled out from under them.
So is there a policy change that might define an increased role for large hydro? After all, the Massachusetts Global Warming Solutions Act set a goal of reducing the Commonwealth’s greenhouse gas emissions 25 percent below 1990 levels by 2020, and included a key role for additional large hydro to help achieve this goal, which is broader than the 2020 RPS goal. To expand the Commonwealth’s “all of the above” portfolio strategy, one approach that’s been considered and should be taken up by the Patrick administration is the creation of a broader and larger “Clean Energy Standard” that includes large hydro while leaving the subset RPS intact. This would provide consistent policies for investment in efficiency and distributed renewable and clean technologies, while confirming that we should target additional large hydro in the broader clean energy mix to meet our greenhouse gas reduction goals. It would also confirm the appropriate role for emerging technology credits and regional job creation, while embracing a diverse strategy to invest in an increasingly cost-effective, clean energy system supporting jobs and a growing economy.
The answer for a cost-effective transition to cleaner energy, reduced greenhouse gases, and economic gain for ratepayers and our regional economy should include increased use of large hydro as part of the portfolio. But shutting down progress in small, distributed renewables such as wind, solar, anaerobic digestion, geothermal, biomass, small hydro, and others, which are all on pathways to becoming competitive, while shifting energy dollars that generate local jobs to dollars that leave our region, is the wrong approach. The answer is not to change course but to continue to diversify our clean energy mix while investing in our successful all-of-the-above strategy.
Peter Rothstein is president of the New England Clean Energy Council, a non-profit organization with hundreds of member and affiliate clean energy companies across all sectors of the region’s clean energy industry.