governors suggest carbon pricing for New England grid electricity

“Vision Statement” recommends study of electricity carbon pricing in New England 

By Guy Page

October 19, 2020 – An organization representing the New England states wants the regional power transmission grid to cut carbon emissions, and suggest carbon pricing as a means to do it. 

The “Vision Statement” issued October 16 by the New England States’ Committee on Electricity urges ISO-New England, the region’s electricity transmission grid, to make and deliver more carbon-free electricity. Seeking to make regional power consumers less reliant on fossil fuels, it recommends these changes:

  1. Develop better transmission for more onshore and offshore wind power. 

Although popular with the renewable power industry and some environmental groups, large wind power farms on New England’s land and seacoast have been tepidly received by ISO-New England. It is ISO policy to buy the lowest cost power, typically fossil-fuel, nuclear or large-scale hydro power. Equalizing the wholesale price of expensive wind and solar power and cheap fossil-fuel electricity can be accomplished through carbon pricing. 

  1. Consideration of a Forward Clean Energy Market, a type of carbon pricing. Under an FCEM, very low-carbon power generators (wind, solar, hydro, nuclear, and battery)  would sell not only electricity but the monetized value of carbon-free power. Buyers – carbon-emitting utilities, companies, cities and states – would apply the credits towards their carbon reduction goals. Sale of credits would of course make otherwise market-challenged power more financially sustainable. 

Because the buyers would pass along the cost of purchasing these credits to ratepayers, New England electricity rates would almost certainly increase, all other cost-drivers being equal. New England already has the most expensive electricity among regions in the continental 48 states.

Renewable energy credits are already used in other renewable power arenas in New England. Solar power producers can sell Renewable Energy Credits, in a system similar to the FCEM. The State of Vermont participates in the Regional Greenhouse Gas Initiative, in which states with carbon-emitting power plants pay those that don’t via a carbon credit “auction.” And finally, Vermont is experimenting with a carbon credit plan to compensate forest owners for growing carbon-consuming trees.

One Vermont state senator recently compared the carbon credit concept as deciding “who carries the bricks.” Carbon emitters must “carry the bricks” of artificially-created carbon pricing. The revenue then goes to carbon power producers and users.

Carbon pricing was suggested this March by ISO-New England President Gorfon Van Welie. He said it would be the simplest way to help states meet their carbon-cutting mandates. But ISO-New England won’t act without the states’ consensus that carbon pricing is needed, he said. It remains to be seen if New Hampshire’s absence from the Vision Statement will be interpreted as lack of consensus. 

At his press conference last week. Vermont Gov. Phil Scott said he had joined the other states’ governors in sending a letter to ISO for grid “decarbonization” because transitioning Vermont to more electrified transportation and home heat will require grid upgrades. Scott said he’s not asking ISO for carbon pricing. Yet the Vision Statement – published several days after the governors’ letter – expressly suggests the Forward Clean Energy Market form of carbon pricing. 

3) Give state government more say in ISO-New England decision-making.

The governors are only one of the key stakeholders in ISO-New England. Power generators and utilities and the federal government also have significant influence. Governors realize their current influence with ISO is limited.

The governor’s suggestion that New England consider carbon pricing is a long, long way from becoming implemented policy. Given the number of stakeholders and the slow pace of energy regulatory change, time – and probably a lot of it – will tell whether ISO-New England employs carbon pricing to help the states meet their ambitious carbon reduction goals.


Categories: Energy

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