Clean Energy Procurement for Consumers
Every energy bill has the potential to impact costs to consumers, but few have greater potential than the bill just passed by the Massachusetts legislature. In the final hours of the Massachusetts legislative session, conference committee members passed much anticipated legislation providing for massive procurement by the electric distribution companies, National Grid and Eversource, of offshore wind (1,600 MW) and “clean energy generation,” including imported hydro (~1,200 MW). That’s more than four times the capacity of Pilgrim nuclear power plant and roughly a third of the total power consumption of the state.
Despite vastly different views on the scope of the legislation, the Senate and the House were able to come to a compromise that sets a course of dramatic shift to a cleaner mix of resources for Massachusetts customers and, ostensibly, at reasonable or lower cost. In the original House legislation, “clean energy generation” only allowed for hydroelectric and for Class I resources, which are certain renewable technologies such as solar, wind, geothermal, and more, firmed by hydro. Essentially, hydro was the primary option with very limited competition. As part of the compromise, “clean energy generation” now includes both hydro and standalone Class I resources. The compromise is a clear bow to Governor Baker’s priority for Canadian hydro imports, which he views as “affordable,” and part of his plan to reduce electricity costs in the state. But inclusion of Class I renewables in competition with the hydro is vital to protecting customer interests.
By forcing hydro to compete economically with other forms of clean energy, the final bill ensures that procurements come from the most cost-effective clean resources available. With customers being asked to foot the bill for any project that arises as a result of this legislation, allowing for as many projects as possible to compete lowers the likelihood of inefficient proposals being accepted. The legislature should be applauded for recognizing the need to facilitate competition in order to protect customers.
Importantly, the legislation also allows the utilities and a third-party evaluator to conclude that the cost is too high for any procurement. So, the real question is how these proposals will be evaluated to ensure lowest cost, or whether even the lowest cost is low enough to warrant procurement at all. As raised by the Greater Boston Chamber of Commerce, both branches of the legislature failed to include language that more clearly defined “cost-effective” in the original bills. The final bill, again, includes no such language. Though the legislature has taken some steps to alleviate this issue (e.g. mandating independent assessment of the long-term contracts), there is still a lack of clarification on what it means to be cost-effective. What factors will be included? How heavily will environmental benefits be weighed? Customers are the ones who stand to lose in the face of bad contracts, and they ought to be able to see the criteria with which proposals are being weighed.