Vermont’s “fundamentally flawed” renewable energy program

by Robert Maynard

Does Vermont have the “most fundamentally flawed renewable energy program in the country?”  That is the conclusion of Kevin Jones, an economist who is deputy director of the energy institute at Vermont Law School.  Mr. Jones is an advocate of wind power, but an obvious critic of Vermont’s renewable energy policy.  His concerns are covered in a Vermont Digger article from today.

That article starts out by citing dueling studies that point to different conclusions accounting for why there has been a reduction in ‘the “carbon intensity of US energy supply” since 2005.’  The first study is from the “Rhodium Group”, which credits wind power for this reduction.  Here is a little information about their assumptions and method, which came under criticism by another study:

What explains this unexpected drop in emissions? To answer that question we created a counterfactual (or “business-as-usual”) scenario against which to measure recent performance. We assume that between 2005 and 2012 the economy grew at 2.5% (on par with recent economist and CBO estimates of potential GDP growth), the energy-intensity of the economy declined by 1.9% a year (the average annual rate between 1990 and 2005), and the energy mix (and thus carbon-intensity of energy supply) remained constant. Under these assumptions, the US would have emitted 6,259 million tons of CO2 in 2012. Based on January-October data, the US is on track to emit 5,243 million tons, a 1,017 million ton reduction.

There was another study by a group called “The Breakthrough Institute” entitled “Debunking Rhodium,” which claimed that the rise in the use of natural gas caused the aforementioned reduction.  Here is their critique of the Rhodium study:

First, Rhodium invents a counterfactual emissions growth trajectory from 2005 to 2012, calculating the respective emissions reduction from slower economic growth, changes in energy intensity of the economy, and decarbonization of the US energy supply. They assume all emissions reductions from 2005-2012 resulted from slower or negative GDP growth relative to their counterfactual and decarbonization of the energy supply — none of the emissions reductions are due to decreases in the energy intensity of the economy, which they claim was too minor in the “vehicle, buildings and industry” sectors of the economy.

But this completely ignores the energy intensity effect in the power sector. Switching from coal to gas not only reduces the carbon intensity of the energy supply, but also reduces the energy intensity of the economy, since cheaper gas forces shut-down of less efficient coal-fired power in favor of more efficient combined-cycle gas turbines (combined cycle plants have about twice the thermal efficiency as coal plants). It is due to this effect, along with economy-wide sectoral shifts and increased end-use efficiency in other sectors, that Climate Central and the Energy Information Administration find energy intensity declined about 10% in 2012 under 2005 levels. Rhodium’s methodology would suggest that about 170 million tons of CO₂ emissions are avoided by the switch to natural gas, much less than the 300-500 tons estimated by the National Renewable Energy Laboratory, former Pennsylvania Department of Environmental Protection director John Hanger, and UC San Diego energy expert David Victor. Most analysts agree that natural gas is the largest factor in recent US emissions reductions.

By comparing 2012 energy intensity to a counterfactual as opposed to 2005 levels, and by ignoring the energy intensity improvement from the coal-to-gas switch, Rhodium dramatically underestimates the emissions reductions from natural gas.

Second, Rhodium engages in sleight of hand. Their definition of non-hydro renewables includes liquid biofuels, which are almost entirely supplied by conventional corn ethanol. Rhodium’s assumption is that a gallon of biofuel displaces 100% of the emissions of a gallon of conventional oil. But taking land-use and other life-cycle effects into consideration, the actual emissions improvement of corn ethanol is closer to 20%, at best. So they overstate the emissions reductions from biofuels by at least a factor of five. In the power sector, they assume that renewables like wind, solar, and biomass displace coal generation 100%—an erroneous assumption uninformed by a familiarity with electric power systems.

Putting aside the question of natural gas vs. wind argument, the issue that Kevin Jones is raising an alarm over is the fact that Vermont is the only sate in the country “where utility companies may both sell their renewable energy credits (REC) and count them toward their state-required renewable energy quotas.”  The result being that “”According to some authorities, that means that Vermont’s renewable energy projects aren’t renewable.”  In a nutshell, according to Jones:

What the utilities are doing is buying fossil fuel and nuclear energy for their customers.” Any claim to the contrary, he said, is “a sham.”

That seems to be what the FTC thinks, at least if utilities use the term “renewable” in marketing their products or themselves. The FTC is not an energy or environmental regulator. It is responsible for consumer protection and commercial transparency.

For those of us who maintain that most renewable energy sources do not have a high enough energy density to be an efficient source of energy, it is no surprise that these utilities would have to purchase fossil fuel and nuclear energy to satisfy their customers.  I refer once again to the Harvard study called “Rethinking Wind Power”, which concludes that the generating capacity of wind farms at large scales has been overestimated.