Re: Case 14-M-0101 Proceeding on Motion of the Commission in regard to Reforming the Energy Vision

Transcription

1 August 21, 2015 NY GEOTHERMAL ENERGY ORGANIZATION Via Ms. Kathleen H. Burgess Secretary, NYS Public Service Commission Agency Building #3 Empire State Plaza Re: Case 14-M-0101 Proceeding on Motion of the Commission in regard to Reforming the Energy Vision Initial Comments on the 7/1/15 Staff White Paper on Benefit-Cost Analysis from the New York Geothermal Energy Organization (NY-GEO) New York Geothermal Energy Organization, Inc GEO

2 NY-GEO commends the PSC for its efforts to develop a rational way to address the marginal costs and benefits of Distributed Energy Resources (DER) versus traditional utility investments and expenditures (page 2) 1. We agree that it is important to develop structures for dynamically managing a platform that provides ratepayers with the greatest benefits at the lowest cost, while also maximizing consumer options (2) We also agree that system efficiency and benefits could be improved, and costs reduced, by specifically valuing, and providing appropriate compensation for, behind-the-meter generation, active load management, and conservation (2). The BCA is a crucial and progressive effort, and much of the content of this White Paper is excellent. However, NY-GEO believes there is a gaping hole in this analysis. 1 kwh = 3,412 BTU s to be more exact. The point is that energy is fungible. BTUs saved have similar impacts to kwh saved and there are ways to measure the equivalence. Utilities and other players in the energy industry can save energy, reduce greenhouse gases, increase efficiency in their systems and cut costs to consumers on both the electrical and thermal sides in ways that can be intertwined. New York State, to its credit, is increasingly recognizing the importance of this fact: NYSERDA s proposed Clean Energy Fund devotes resources to a new Renewable Thermal Program REV s Fuel Neutrality initiative is designed to allow a whole building approach to energy savings and tamp the impact of funding sources on the capacity to be effective in energy efficiency and renewable deployment projects New York State's December 1, 2014 comments to the USEPA on the 111D proposed carbon pollution emission guidelines note "When compared to New York's electricity sector, the thermal load sector is considerably more GHG-intense. To meet the State's overall GHG reduction policy, New York will be looking to make more "productive" investment in the thermal load sector, achieving greater levels of GHG reduction per dollar of investment. 2 The graph below, from the July 2105 New York State Energy plan illustrates the relative importance of transportation, buildings and electricity generation in New York s greenhouse gas production. 3 1 Numbers in parenetheses () will refer to pages in the 7/1/15 Staff White Paper on Benefit Cost Analysis 2 accessed 8/13/15, page NYS Energy Plan, Volume 1, page 29 2

3 Despite this growing recognition, the White Paper largely continues the practice of siloing electric and thermal issues to the detriment of achieving agreed upon goals. All six of New York's large investor owned utilities provide customers with both electricity and natural gas. Nonetheless the White Paper focuses almost exclusively on the electric function of the distributed system platform (DSP). The words thermal and BTU do not appear in this document. NY-GEO recognizes the importance of remaining technology neutral in this BCA analysis and seeks only a level playing field for geothermal heat pumps and other renewable thermal technologies. We contend it is crucial to clarify the role of renewable thermal measures within the BCA framework. NY-GEO has attempted to reach out to utilities as they plan demonstration projects and has gotten what amounts to a blank stare reaction because there is no history of fuel neutrality and little practice in counting the benefits of exchanging a small increase in kwh for the complete elimination of fossil fuel BTUs. The chart on page 12 lays out benefit and cost components of the BCA framework. Several of these benefits and costs apply to geothermal heat pumps, as well as other renewable thermal measures such as air source heat pumps, solar thermal and advanced biomass. It would be useful for the next iteration of the White Paper to explain how these benefits and costs might be evaluated in a fuel switching context, where for example a renewable thermal system replaces an oil heating/central air conditioning baseline. In spite of the many benefits renewable thermal measures bring to the BCA framework, such measures are excluded for all practical purposes by the self limiting scope of the framework as expressed on page 6 : This White Paper addresses a specific and quantifiable portion of REV implementation the evaluation of opportunities to avoid traditional utility distribution investments by calling upon the marketplace to supply DER alternatives. This is one way to frame a discussion of the impact of "Distributed Electrical Resources," but it is not appropriate for a discussion of "Distributed Energy Resources. There is a difference. " While Distributed Electrical Resources will reduce demand on the electrical grid and thus provide opportunities to reduce the need for utility investments, a broader range of effective and productive Distributed Energy Resources will often result in an increased demand for electricity and thus may not allow a reduction in utility investments. When we consider buildings' thermal energy needs or vehicle's energy needs, we find that we can often reduce the total amount of energy consumed, as well as total emissions, by increasing electrical consumption. Regarding greenhouse gas emissions (GHGs), as noted in the figure above, buildings and transportation account for 73% of New York s greenhouse gas emissions, while electrical generation accounts for 21%. The BCA framework discussed would only work properly in the renewable thermal (RT) context when considering a conversion from electrical resistance heat to an electrically powered RT system. In this case, we would typically expect there to be a reduction in electrical consumption. However, the framework is incomplete when one is evaluating an action that involves "fuel switching" to electrical powered thermal measures since that will require an increase in electrical consumption, even while eliminating fossil fuel consumption. 3

4 In order to do a proper BCA for an activity that involves "fuel switching," we would have to do two BCA calculations and then calculate a net Benefit/Cost. In terms of avoided energy per the chart n page 12 for example, when switching from oil heat to electrically powered GHP, we'd need to first do a BCA to determine the net benefit or cost of the change in electrical consumption. This would typically involve an increase in electrical consumption during winter heating season, balanced out to whatever degree by a decrease in electrical consumption during summer cooling season, due to the inherent efficiency of exhausting heat to the sink of the relatively cool earth. Second, a BCA would be performed to determine the net benefit of eliminating the combustion of the oil. The difference between the two would comprise total net benefit. While it is fairly easy to understand the general process of doing a "fuel switching" BCA, we are faced with the problem that there aren't established values that can be used in calculating the true costs of fuel combustion in buildings. This issue is alluded to in footnote 27 on page 35: To inform future refinement of this process, NYSERDA plans to conduct a study that would estimate and project externality values (including health and other effects) for all energy types (including electricity generation) on a regional basis in New York State. Since "electricity generation" is called out as just one of several "energy types," some of these "energy types" should include the various forms of fuel combustion in buildings and hopefully in vehicles as well. Unless an accepted means of estimating and projecting the externalities for fuel consumption in New York's buildings is established, the BCA framework will remain incomplete, and of questionable utility. Externalities Of the three Approaches to valuing social benefits and costs attributable to greenhouse gases and other air pollutants 4 (31) #1 and #3 appear to be exclusively relevant to electrical generation. For an analysis of the avoided costs of reduced fuel combustion, one would need to use something like Approach #2 (which relies on EPA estimates of social costs of emissions.). As the White Paper acknowledges, Approach #2 is the most complete, rational and defensible 5 even when evaluating the electrical market - though it is more difficult to implement than the alternatives. NY-GEO s suggestion is that since the BCA Framework needs to be extended to incorporate consideration of "fuel switching" and since Approach #2 is the "most complete, rational and defensible approach" for evaluating both fuel switching and alternative methods of electrical generation, Approach #2 should be consistently used in all cases. In essence, while Approach #2 may be "hard," the right thing to do is to deal with and overcome the difficulties... The White Paper rightly points out that Approach #2 would benefit from additional research, debate, etc. in order to establish the correct factors for various emissions. While this is certainly the case, it will always be so. To avoid use of Approach #2 because "more study is needed" would be like accepting the 4 pp p.31 4

5 claim that the relationship between Climate Change and human activity "needs more study." Or, as was long argued: "The relationship of tobacco consumption to cancer requires more study... We must accept that the scientific community will never be able to assign precise values to the various emissions factors. Thus, their levels will inevitably reflect political judgements. As a society, through our government, we should decide on values for these factors that are "rational and defensible." It is time that we dug into the problem of deciding what values we're willing to use and to put in place a process to continuously review them. Monetized Environmental Externalities Finally, in looking at the monetization of environmental benefits and costs 6 there is an intuitive disconnect. SO x and NO x appear to have relatively reasonable values based on health impacts and their associated costs. We are sure the values for CO 2 are being looked at rigorously, but question whether the values used are lagging behind the rapid pace of climate impacts being observed across the planet. The destruction of the climate as a life support appears to be grossly underestimated. This may have something to with the relative volume of CO 2 tonnage versus NO x and SO x. A revision or a broader explanation of why CO 2 appears to be minimized would be helpful in Appendix C 6 Appendix C 5