Across the country, record-low natural gas prices have raised questions among some policymakers about the wisdom of promoting solar and wind energy, which are still dependent on public support to attract private investment, despite exponential growth in recent years. But Massachusetts officials say now is precisely the time for government to ramp up funding for renewables, given their critical role in diversifying the region’s energy mix, lowering emissions and serving as a hedge against future price shocks.
“We have a perfect window now to make clean-energy investments,” said Gov. Deval Patrick, in a speech on energy policy last month. “We invest in energy efficiency to save money by using less energy. And we invest in homegrown renewable power to free ourselves from the rollercoaster of fossil fuels imported from out of state and out of the country, sometimes from places hostile to the United States.”
With few indigenous energy resources, Massachusetts businesses and consumers spend $20 billion a year on energy, and the bulk of that outlay — $18 billion – leaves the state to pay for natural gas and oil from other states and nations including Venezuela, Colombia, Canada and producers in the Middle East, said David Cash, Commissioner of the Massachusetts Department of Public Utilities, speaking during a roundtable on electricity markets in Boston on June 15. That contrasts with dollars spent on energy efficiency and renewable energy, which largely pay for suppliers and installers who reside in Massachusetts, he said, thereby promoting a range of local economic gains.
The region is currently benefiting from rock-bottom natural gas prices, which creates a ripe opportunity to catalyze investments in renewables, said Cash. In recent years, energy providers in New England have been switching from coal to cleaner-burning natural gas to take advantage of cheap, abundant resources flooding the market from the Marcellus Shale. Natural gas now fuels 52 percent of New England’s energy use, and prices are extremely low by historical standards – they currently hover between $2 and $3 per MMBtu (one million British thermal units), compared with around $15/MMBtu in late 2005.
Nevertheless, certain fundamental issues continue to make Massachusetts and all of New England vulnerable to price volatility, said Cash. Rising consumption in India, China and other Asian countries will put upward pressure on gas prices as the market becomes more globalized. In the Northeastern U.S., New England sits at the end of the energy pipeline, and growing demand for shale gas has created congestion along limited supply routes, which could lift prices, particularly during heavy usage times.
Massachusetts officials have shown that fostering cleaner, indigenous energy sources yields dividends. In recent years, the state has implemented some of the most aggressive energy efficiency and clean-energy policies in the nation, and reductions in energy use, combined with cheap natural gas, have led to a decline in monthly electricity bills of up to 40 percent in the last three years. That drop more than compensates for the comparatively small portion of a typical ratepayer’s bill goes toward subsidizing clean-energy investments – three to five percent on average, said Cash.
Renewable-energy mandates that are in place in more than half of all U.S. states are intended to make energy markets fairer, given the lack of a level playing field for sources like solar and wind that can’t otherwise compete with fossil fuels, which have historically enjoyed generous tax breaks and other forms of government support, said Cash.
He pointed to data from the federal government and consultancy MISI that show the very low level of subsidies provided to solar and wind development compared with natural gas and oil. The Paris-based International Energy Agency last year estimated that globally, countries spent $409 billion in subsidies for fossil fuels in 2010, compared with $66 billion for renewable energy. President Obama has repeatedly called on Congress to end $4 billion in subsidies to the oil and gas industry annually.
Meeting State Climate-Action Targets
One issue that sometimes gets lost in the discussion over low natural gas prices, said Cash, is complying with state mandates to reduce greenhouse-gas emissions.
“Part of the story that’s happened in the last five to six years is that energy efficiency has proven to be a very good way of supplying energy,” and will enable suppliers to avoid new generation going forward, said Cash. “The low price of natural gas has not changed the fact that climate change is real, and that we and other states around us are required to act.”
Jonathan Peress, director of clean energy and climate change at the Boston-based Conservation Law Foundation, said he was skeptical that a heavy reliance on shale gas would enable Massachusetts to meet its goal of reducing greenhouse gas emissions 80 percent below 1990 levels by 2050, given the life-cycle impacts of hydraulic fracturing through carbon-releases linked to drilling operations. They include emissions associated with transportation and handling of wastewater, as well as potentially large fugitive emissions of methane, a potent greenhouse gas, from well completions and natural-gas transport along pipelines.
Studies show that if more than two percent of methane emissions escape in the fracking process, overall carbon emissions from shale-gas would be greater than those from coal. Peress said he has seen estimates that in some operations in Colorado, four percent of emissions have been released in the extraction process, although so-called “green well completions” – meaning using technology that can capture fugitive or vented methane — could reduce those figures substantially.
Natural gas is more properly seen as a “niche fuel,” not the “bridge fuel” that it is commonly called by environmentalists who suggest it could serve as a substitute to more polluting coal as the region moves toward a low-carbon economy, said Peress. To demonstrate his point, he cited the European Climate Foundation’s Roadmap 2050 Project, which charts the path toward meeting the European Union’s greenhouse-gas reduction targets by mid-century. The analysis shows that while natural gas will be needed to replace more heavily polluting coal in the near-term and to provide back-up generation as more intermittent renewables are brought online, eventually carbon capture will be required for all natural gas generation if the European Union is to meet its goal of cutting emissions by 80 to 95 percent by 2050.
“In the long-term, natural gas is on the wrong side of the curve,” said Peress.
Going forward, he advised states to collaborate regionally to promote renewable energy, through long-term contract procurement and other measures to make renewables more cost effective. “If states work together [on] renewable energy policies, they will be able to withstand the current tsunami of natural gas,” he said.
But Jim Robb, senior vice president of enterprise planning at Northeast Utilities, suggested that from a cost perspective, sources like solar and wind are not the best option for meeting climate goals. Robb’s own analysis shows that expanding natural gas local distribution companies is the cheapest way to lower carbon pollution in the region. The next cost-effective strategy, Robb said, is to increase imports of Canadian hydropower via the proposed Northern Pass, a $1 billion transmission project that would send electricity from Quebec through New Hampshire and into southern New England. Ramping up wind and solar was by far the most expensive route, he said.
Addressing fossil fuel use in transportation – the highest source of greenhouse-gas emissions in the region — is also critical if Massachusetts and other New England states that have enacted carbon-reduction goals are to meet their targets, he said. Robb spoke of being “very bullish” on the prospects for electric vehicles to make large inroads in New England, given residents’ generally short commuting distances and the large preponderance of single-family homes that could support charging infrastructure.
“We need to think hard as a region about how to promote this,” said Robb. “If we’re really serious about reducing carbon dioxide, we should look at all sources of CO2,” he said.
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