Questions about Boston’s New Large Scale Renewable Buying Plan

Boston’s Mayor Marty Walsh announced a new plan on Thursday, June 7, to potentially join forces with other large cities around the country to buy into large-scale renewable energy projects together. The initiative will start with an information-gathering phase, to be conducted by Boston and six other cities. Mayor Walsh claimed that the plan will “help power our cities and create more clean energy jobs.”

BostonCAN is excited to see the administration taking this active new step toward carbon reduction. We’re interested in the details of how this large-scale purchasing plan is going to be set up, and what effects it will have, both on our own city and on the country as a whole. Below are some questions that we hope the city will answer as more information becomes available.

Would this project meet the environmental principle of additionality?

The term “additionality” means the extent to which an investment creates more greenhouse gas reduction than would have occurred without it. In particular, we want to know if Boston’s investment would create additional reduction that would not have occurred anyway.

An example of a project that would not meet the additionality criterion would be a wind farm sited in the Midwest. Wind power is already commercially competitive in states with strong natural wind resources and large rural areas with low real estate costs. In these states, market forces are already yielding many wind power projects, which are profitable without government or environmentalists needing to invest in them. Another decision that would limit the additionality of a project would be to put it in a state with a weak regulatory mandate for renewable energy.

Would the city’s investment yield other public benefits to Boston residents besides low-cost renewable energy?

Would our air be cleaner, or our public health improved? Would local innovative energy businesses be stimulated? Would Boston residents gain employment opportunities? In particular, Boston should not try to cut costs by locating clean energy projects in “Right to Work” states with poor worker protections.

How soon could such a plan be implemented?

Climate change is already damaging our cities, and the more slowly we reduce greenhouse gases, the more problems we will have. The potential effectiveness of a project is a combination of how much it will reduce annual emissions and how soon it will start.

A final note: We hope that this new project will not distract from the effort to implement Community Choice Energy (CCE). Multiple industry experts have said that CCE is relatively straightforward. BostonCAN recommends that EEOS follow through with the directive from City Council to set up an advisory group and issue a Request for Proposals to get the ball really rolling on CCE. By implementing it as soon as possible, the city will score a win on carbon reduction even as it explores other promising proposals.

 

CCE is not Rocket Science!

At a hearing on May 30, Boston City Councilors, energy experts, and community members all pressed Alison Brizius, Boston’s Director of Climate and Environmental Planning, for answers she often could not supply. Asked by Councilor Matt O’Malley to project a timeline for implementation of Community Choice Energy (CCE)—the climate mitigation measure passed unanimously by the City Council and signed by the Mayor seven months ago—Brizius indicated that her department, Environment, Energy, and Open Space (EEOS), was still studying its options.

Significance of CCE to Climate Mitigation

The five City Councilors in attendance: O’Malley, Michelle Wu, Ed Flynn, Josh Zakim, and Michael Flaherty, and the two that sent letters of support: Tim McCarthy and Lydia Edwards, all urged EEOS to move more quickly to implement what they see as a significant step to reducing the City’s collective carbon footprint. Invited panelist Ann Berwick, formerly the Undersecretary for Energy for the Commonwealth of Massachusetts and the Chair of the Department of Public Utilities, described CCE as the most significant GHG reduction tool at a municipality’s disposalWinston Vaughn, Senior Manager for Renewable Energy at Ceres invoked Boston’s commitment to the Paris Accord and asked administrators to make good on that pledge to urgently reduce emissions. Liz Stanton, Director and Principal Economist at Applied Economics Clinic, reported on the significant environmental benefits reported by other municipal aggregations.

may 30 hearing

Historical Pricing

Brizius repeatedly spoke of the department’s need for historical pricing data from other municipal aggregations as a way to project what rates Boston might attain through CCE. The panelists urged Brizius and EEOS to stop trying to gather this historical data. Stanton declared, “Historical energy prices are in no way indicative of future pricing.” Vaughn noted that energy pricing is “extremely dynamic,” and Berwick noted that “Trying to get pricing information now will not be fruitful. No one can tell you what prices will be a year from now.”

Boston’s Size

Brizius also referred to Boston’s relatively large size in comparison to other Massachusetts municipal aggregations as an explanation for why the department has not made more progress.  Stanton offered that Boston’s size would put it at an advantage when negotiating the consultant’s fee, as well as the wholesale price of electricity. Berwick also emphasized that virtually all municipalities simply hire an energy consultant to guide the process of implementation. “This isn’t rocket science. Hire an energy consultant to get the ball rolling.”

2018-5-30 CCE Hearing

Cost of a Consultant

Brizius countered that the payment for the consultant might be exorbitant given Boston’s size. Stanton and Berwick both reassured her that all aggregation consultants work on spec—that no city funds would be paid to the consultant, whose fee is generated instead through a small “adder” to the wholesale price per kilowatt that city residents would purchase, and then only if they successfully delivered a favorable bid. Councilor Wu summed up this practice common to all other aggregations in the state: There is no risk, either to the City budget or to ratepayers, of engaging a consultant.

Moving Forward – An Advisory Committee

Councilor Michelle Wu implored Brizius to understand the importance of appointing the CCE advisory committee called for in the Council’s authorization. This committee of Councilors, EEOS staff, energy experts, and community members would resolve the remaining questions about what Boston would want a consultant to be responsible for and what parts of the implementation Boston would perform through dedicated staff. Then, “in quick order” as Wu put it, a request for proposals (RFP) from experienced aggregation consultants could be finalized.

BostonCAN agrees wholeheartedly with Wu’s priorities: Mayor Walsh needs to appoint a CCE advisory committee with the goal of EEOS choosing an aggregation consultant this summer.

Refuting Common Objections to Community Choice Energy for Boston

In advance of the City Council hearing today at City Hall, BostonCAN has compiled a list of responses to the common objections we hear from the Office of Energy Environment and Open Spaces (EEOS) about why they should delay implementing Community Choice Energy.

Community Choice Energy (CCE) could cost more than basic supply, which would put an unacceptable burden on ratepayers.

The cost of renewable energy is steadily dropping and will continue to drop as economies of scale are achieved. Already many community choice aggregations (CCAs) have been successful in getting better rates. In a study by the Applied Economics Clinic in Nov. 2017, the residential rates procured by local aggregations saved 19% on average below the Eversource rate. By delaying the implementation of CCE, the Office of Environment, Energy, and Open Space (EEOS) is costing ratepayers by not getting residents and businesses a better option.

There will be fluctuations in the market, but if the City finds that all the bids it receives for CCE are higher than Basic Service it can delay entry into the market until a better opportunity arises. Over the course of a contract the price will likely stay below Basic Service since many forces mitigate against significant declines in Basic Service rates. If at the time of contract renewal the bids would be significantly above Basic Service, the city can choose not to renew. In addition, individual ratepayers can always opt out.

But it happened in Chicago. In fact, Chicago’s aggregation had to be stopped when basic service prices became cheaper than their aggregation’s. What if that happens here?

In Illinois, rates for basic service had been kept high by a temporary state regulation for several years. Then that regulation expired, so basic service became much cheaper and was able to underbid aggregation contracts. In Massachusetts, there are no temporary regulations on basic service rates that are set to expire.

What about Melrose, MA? When their first contract was up, none of the new bids was competitive with basic supply.

Melrose had to pause its aggregation due to a spike in capacity charges in National Grid territory. Boston’s default electricity supplier is Eversource, who has not had the problem with capacity charges that National Grid has. Melrose plans to petition DPU to re-start its aggregation once the capacity charge issue has abated.

The Request for Information (RFI) invited vendors to share historical pricing data for municipal aggregations. Since none of the respondents did so, the cost of CCE to Boston ratepayers cannot be estimated.

Vendors were probably the wrong people to ask for historical pricing information. It is understandable that they might consider this information proprietary. Typically, vendors provide prospective pricing information in response to a Request for Proposals (RFP).

CCE will cost too much to administer. Between start-up activities and on-going maintenance, EEOS simply does not have enough staff.

Most municipalities with CCE programs hire a consultant who handles most administrative details of the program. The best way to ascertain administrative cost is to issue an RFP and see what competing consultants would charge.

Additionally, however, the city needs to weigh the cost of providing a CCE program with the cost of not providing one. The slower we reduce greenhouse gas emissions, the more the city will have to spend on adaptation and on responding to emergencies.

Boston is so big it has to move cautiously when considering CCE and can’t follow the same template that smaller towns followed.

Boston has more than 600,000 residents. It can follow the example of the Southeast Regional Planning and Economic Development District (SRPEDD), which also has a population of more than 600,000, and has had a joint municipal aggregation since early 2015. SRPEDD followed the standard aggregation pattern of using a consultant to create an aggregation plan and administer the program.

EEOS needs time to study the trade-offs of making CCE an opt-in vs. an opt-out program.

This is not the way the law works—the path to set up a municipal aggregation is a clear and well- understood process. Setting up an “opt-in,” and entering the market as an individual competitive supplier muddies the waters and is not what the city council authorized the mayor’s office to do.

According to a city report showing GHG emissions through 2015, Boston is on track with its GHG reductions, based on a per capita decrease.

Boston’s commitment to reduce GHG emissions from 2005 levels was never based on per capita emissions, nor are the commitments in the Paris Accord. Global warming depends on CO2 levels in the atmosphere and not on how many people live on the planet. So tying GHG reductions to population doesn’t make sense. Moreover, in 2017 Mayor Walsh pledged to reduce GHG emissions to zero by 2050, changed from the previous goal of an 80% reduction and zero emissions can’t be adjusted per capita. In order to get to the new 2050 goal, the 2020 goal not only has to be met, but exceeded.

CCE – Quantifying The Cost of Delay

Almost half the world’s population lives in cities, which are bearing the brunt of climate change impacts: sea level rise, extreme weather, and declining air quality and public health. Thankfully, a growing global alliance of cities is committing to mitigate these climate change impacts by reducing greenhouse gas (GHG) emissions. Boston is actively involved in these efforts. In fact, Mayor Marty Walsh is hosting an International Climate Summit on June 7, as a prelude to the U.S. Conference of Mayors from June 8 to 11.

For these developments to be truly hopeful, however, city departments must meet the commitments made by city leaders. This is not the case with Community Choice Energy (CCE) in Boston. Although the Boston City Council passed an order authorizing CCE in October, 2017, the Office of Environment, Energy, and Open Space has tabled implementation. Such a delay comes at a cost. CCE would cut Boston’s GHG emissions by 33,000 metric tons annually, as shown by an analysis from the Applied Economics Clinic (AEC) at Tufts University. The city cannot afford to postpone this significant tool to reduce emissions.

Boston’s goals are in line with those of many other cities: a 25% cut in emissions from 2005 levels by 2020, and 100% carbon neutrality by 2050. With regard to reducing emissions from city government operations, Boston has exceeded its 2020 target. What is troubling is that community-wide emissions reduction is falling short of the goal. Boston tracks its GHG emissions rates annually in the GHG Emissions Inventory, a publicly accessible database. The data show that GHG emissions declined from 2005 through 2012, to almost 20% of 2005 levels. However, between 2012 and 2015, emissions have shown a continued upward trend, with the 2015 rate only 12% lower than in 2005. While the GHG Emissions Inventory is only up to date through 2015, the EEOS budget (p.225) mentions that GHG reductions for 2017 were unchanged from 2015. Thus, with only two years left to go, the achievement of Boston’s 2020 goal cannot be taken for granted. This strongly suggests that more urgent measures are needed.

CCE - Cost of Delay Figure 1 v2

The data we’ve presented so far have been community-wide (that is, for Boston as a whole). The GHG Emissions Inventory divides these community-wide GHG emissions into three segments: small residential buildings, commercial/industrial/large residential, and transportation. CCE would mostly affect small residential buildings. Electricity supply to most large organizations is covered by pre-existing contracts and would not become part of the CCE program.

GHG emissions by small residential buildings show the same concerning trend as the community-wide data: they steadily increased from 1.20 million metric tons in 2012 to 1.33 million metric tons in 2015  (No more recent public data are available.) In order to meet the 2020 goal, GHG levels in the small residential buildings segment would need to be cut by 150,000 tons from the 2015 levels. CCE would immediately cut 33,000 tons, or 22% of that goal, and may be able to reverse the upward trend.

cce-cost-of-delay-figure-2-v2.jpg

In order to have a chance to limit the global average temperature increase, it is imperative that cities meet their pledged GHG emissions targets. Therefore, cities simply cannot afford to ignore or slow down any measures available to help meet their climate targets. Boston needs to implement CCE now!

Carbon Reduction: The Cost of Delay

Last fall, the Boston City Council passed, and the mayor signed, an order authorizing the implementation of a Community Choice Energy (CCE) program. The Office of Environment, Energy, and Open Space (EEOS) said that this process would take two years—longer than the norm for surrounding cities and towns with CCE programs—and involve a formal feasibility study. The order recommended soliciting bids from suppliers and establishing a stakeholder advisory group, but EEOS has as yet done neither. Instead, it issued, in March, a Request for Information (RFI) soliciting pages of advice from electricity suppliers, consultants, and other organizations. After reviewing the results, EEOS announced that the failure of any respondent to provide pricing information still leaves questions about the advisability of CCE. EEOS has now added CCE to the mix of alternatives being studied as part of the Carbon Free Boston initiative, whose report is due out at the end of the summer.

BostonCAN is deeply concerned about this series of decisions, which have added months to an already lengthy process. In principle, we agree that CCE should be thought of as one part of Boston’s carbon reduction plan. CCE is not a magic bullet: it will take multiple strategies, implemented soon, to reduce greenhouse gas emissions in time to make a difference. The operative word, however, is “soon.” There is world-wide consensus that we have a limited window of opportunity to reduce carbon emissions before climate change reaches a point of no return. In its concern over the costs and risks of implementing the “wrong” solution, we wonder whether EEOS feels this urgency; whether it is sufficiently in touch with the costs and risks of waiting too long. Rather than deferring all new carbon reduction options until the end of an exhaustive study, we would like to see the city fast-track the most “shovel-ready” approaches even as it explores others.

The RFI findings themselves support simplifying the investigation of CCE. Of the seven respondents who replied about whether the city should conduct a feasibility study, five said no. “The feasibility, risks, costs, and benefits of aggregation are well known as a result of the experience of the over 125 Massachusetts communities with active aggregation programs,” explained one writer. Another warned that “offering no real benefit to launch planning, feasibility studies needlessly cause launch delays.” The two organizations who did suggest some form of preliminary research on CCE agreed that it “would not have to be elaborate.”  

Several sayings come to mind: “The perfect is the enemy of the good,” “Not to decide is to decide”—and the one we must never allow to describe Boston’s carbon reduction outcome, “Too little and too late.”

East Boston meme

 

BostonCAN on Earth Day

BostonCAN celebrated Earth Day in Dorchester this weekend, handing out fliers for Community Choice Energy and talking with local residents and activists.  We had lots of people pose in front of Rosie the Riveter to make a statement to the City of Boston to speed up its climate action efforts.

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Competitive Electric Supply: A Choice Best Made by the Community

A research report released in March by the Massachusetts Attorney General’s office says that the competitive electricity supply market has been harmful to consumers who signed up as individual customers. The study found that residents who contracted directly with competitive suppliers paid a total of $178.6 million more for electricity than they would have paid the utility, over a two-year period. Low income neighborhoods were harmed the most. For these reasons, as well as the high number of complaints against competitive suppliers received by the Attorney General’s office, the report recommends eliminating the competitive supply market for individual customers.

This report reinforces concerns that BostonCAN has long expressed about the way that many competitive suppliers do business with individuals. Some suppliers offer low introductory rates that increase dramatically later, or even engage in deceitful practices like calling and claiming to be the utility company. While some offer extra renewable energy, they may source it from other regions of the country, which does not help shift the New England grid away from fossil fuels or create “green” jobs here.

But what about Community Choice Energy? Doesn’t it use a competitive supplier?

Yes, but with CCE, the city chooses one supplier for all of its businesses and residents, using a formal evaluation process conducted by energy and financial experts. Unlike a competitive supplier, the city has an incentive to keep rates low. CCE can specify extra renewables that are locally sourced. The attorney general’s report specifically states that its recommendations do not apply to CCE.

BostonCAN strongly supports the speedy establishment of a CCE program in Boston. Tell Mayor Walsh you want your city to choose your competitive supplier.