Summary
We can reconcile the urgent demand of citizens to have carbon-free energy and the obligation of our municipal light plants to provide affordable, reliable power when the two sides, citizens and light plants, join together.
In the name of conservation, climate, and public health, and to avoid the financial risk of investing in fossil fuel technology, we call for a complete halt to the Peabody peaker fossil fuel plant project managed by Massachusetts Municipal Wholesale Electric Company (MMWEC) and a consortium of 14 municipal light plants.
We can shift to clean energy within 3-5 years. We will build on the strong partnership of trust between our communities and our municipal light plants to devise a national demonstration funded by Federal and state government to create money-saving, community-based programs to transition to clean, renewable power with flexible use of energy to help cover peak demands.
Solving an “impossible” challenge
The existential challenge for our community, our state, our nation, and our world—is to have sufficient renewable energy for our daily needs.
The engineers who are responsible for providing our electricity traditionally use fossil fuels like natural gas and oil to generate reliable power. Experts in public health, the environment, and the climate crisis and a growing number of citizens seek to reduce and eliminate the use of all fossil fuels. Continued use of fossil fuels harms public health, the environment, and adds to the climate crisis. We must switch to renewable energy.
If either the engineers or the citizens wins, the other loses, and all of us are harmed in some way. If we work together, we all win.
Today, a group of Massachusetts municipal power plants want to install a new fossil fuel generator, the “Peabody peaker,” to provide the capacity to generate and sell power at times of exceptional peak demand. They claim that only fossil fuels provide the necessary reliability. Opponents want to stop this added use of fossil fuel.
If the peaker plant is killed, clean energy advocates win—but the municipal plants still must provide capacity. If the peaker plant is built, the emissions will cause disease and death, harm the environment, and worsen the climate crisis.
The peaker plant will not save money for ratepayers, although cost saving is a major goal of MMWEC. Paul Dale, Energy Committee Chair of the Massachusetts Sierra Club, says that the apparent justification for “...spending $85 million to build the plant would [be to] save money for the MLPs and their ratepayers...may be MMWEC’s primary goal, more so than emissions reduction, public health, safety risks or other concerns.”
MMWEC’s own data in their public presentation on 2015A on June 22, 2016 contradicts their assertions of savings—the peaker plant would not reduce the cost of capacity for at least 10-15 years. Capacity obligation can be covered at lower cost by buying it on the Forward Capacity Auction (FCA). They project the annual cost of the peaker plant to be $4.651 million or $4.28kW-month. However, the forecasted FCA capacity clearing price (cost of capacity) is lower than or equal to $4.28kW-month until 2036.
The argument that the peaker plant is needed to provide stability in the face of volatile capacity markets may have been true in the past, but MMWEC projects low and fairly stable prices going forward for at least 10 years. While it might make sense in another context to build a plant to be able to sell capacity power rather than to buy it, that plan is not justified today. It is risky because it depends on being able to win ISO-NE forward capacity auctions, which requires being cheaper than the competition. Coal and natural gas-fired generation assets are expected to become stranded as renewable energy resources grow increasingly cost competitive, according to S&P Global Market Intelligence.
Market Intelligence estimates that in ISO-NE a new CCGT (gas-fired turbine) needs to earn a minimum spread of $21/MWh from its energy production and capacity revenues. Under the current Market Intelligence forecast for wholesale electricity and capacity prices, this spread is realized only three years out of the next 10, with an average revenue contribution closer to $18/MWh during that time, potentially inadequate to service debt. S&P Global, Market Intelligence
Investing in the Peabody peaker plant is not a prudent investment and is not consistent with the fiduciary responsibility of each municipal power plant.
We have been told that ISO-NE will pay MMWEC to have the plant on standby, even if it is never called on to run. We have reached out to ISO-NE and to MMWEC for clarification and documentation but have not yet received their answer.
We are concerned at the apparent failure of MMWEC to exercise their fiduciary duty. They have spent or contracted $30 million before passing all of the required approvals, including the pending application to DPU for the right to borrow $85 million for the project.
MMWEC had not anticipated how rapidly renewable energy production and storage systems would advance in the last several years. Nor had they foreseen that Federal and state mandates like the newly enacted Next Generation Roadmap, (Acts 2021 Chapter 8) would threaten their business practices by discouraging the continued use of fossil fuels.
While MMWEC and municipal light plants have gone ahead and used renewable sources for their basic energy needs, they are being held back from using renewables for the capacity market by ISO-NE regulations and the constraints of the transmission network, even as renewables become more readily available.
Can we reconcile the urgent concerns of citizens to have carbon-free energy and the equally urgent obligation of light plants to provide affordable, reliable power? That would be possible when we create power with renewables, reduce our peak usage, generate more power locally, create new social networks, and upgrade the electric grid.
All electric plants are required to have capacity—the ability to reduce usage and/or produce power immediately when needed to match supplies to demand (usage). Peaks in demand occur daily and during heat waves or extreme cold. If the demand for power is not met, the power system can collapse.
Massachusetts Municipal Wholesale Electric Company (MMWEC) and a consortium of 14 municipal light plants, including the Peabody Municipal Light Plant (PMLP), have invested $30 million of a total cost of $85 million for the construction of a project 2015A, the Peabody peaker, a fossil fuel burning generator to provide peak capacity.
At stake today is a sunk cost of $30 million. If the plant is halted, ratepayers in Peabody, one of the project communities, would each owe $400. If the plant is built for a total of $85 million, and later forced to close, the loss would be significantly greater; Peabody ratepayers would each owe $1,100. Moving ahead with the project does not promise to be a good investment because it will just about break even for the next 10 years or more.
At a Department of Public Utilities (DPU) hearing to consider approving an $85 million construction loan for the Peabody peaker, experts testified that the plant will be a serious public health problem, pollute nearby wetlands, and contribute to the climate crisis. Furthermore, they noted that there are clean, renewable solutions at hand. Many clean energy advocates argue for the use of battery storage and renewable energy sources. They are determined to stop the project.
A path to success
Does one side have to win, and the other lose? Surely not—because we can solve this together. The MMWEC plan for the peaker plant is likely doomed. But there is another path that MMWEC, municipal light plants, and the community can follow to provide reliable power.
Each municipal light plants is a trusted and respected community institution. As sole providers of electric power, they are positioned to help lead a community transition to clean power. Their mandate is to provide reliable, low cost power, and they are not immune to considerations of public health, environment, and the climate. They already use renewable energy. They are constrained by the expectations of ratepayers and regulations imposed by ISO-NE, the regional power authority, and by the Commonwealth.
We can create a model demonstration program in localities like Peabody to shift to clean energy sources within 3-5 years.
MMWEC can demonstrate courage and leadership if they cancel the Peabody peaker project in the name of conservation, climate, and public health. They can cover their capacity obligations by purchase for 3-5 years or longer, and during that time the municipal light plants can work with each community to develop a modern energy system and reduce the need for capacity. There are many effective methods for mitigation, including: rooftop solar + battery storage; smart local grids; grid interactive buildings; demand response/load flexibility; virtual batteries using thermal storage; and more. We can expand local renewable generation, reduce peak usage through load flexibility systems that enable the power plant to shift the customer’s use away from system peaks, and apply a number of measures to increase energy efficiency that, even in a drastic winter storm, can reduce peak demand by up to 34%, according to a report from the American Council for an Energy Efficient Economy (ACEEE).
Paul Dale reports that ISO-NE considers that the future threat to reliable electric power lies in the risk of a fuel crisis during a prolonged winter storm or other emergency. Gas for heating will be a priority and become scarce for generating electricity, and oil burning generators would become the only reliable resources. As offshore wind installations grow, they will provide a reliable renewable resource especially during winter storms.
Today, renewable resources like wind and hydro can’t be imported to meet very high demand because of limitations in the transmission infrastructure. Wind power and battery storage are not given full value by ISO-NE for capacity requirements.
The answer is to upgrade the transmission grid and for ISO-NE to adopt regulations that favor renewable energy, as called for by governors of several states.
Federal and state programs to address climate change, the electric power transmission infrastructure, and community public health can create money-saving, community-based programs to transition to clean, renewable power with battery storage to help cover peak demands. Federal and state grants can finance running the program and provide incentives to the public and to the light plant. The program could extend to all 42 of the municipal light plants, and would be a national model—it hasn’t been done to scale. We already know the technical elements, we need to overcome the inertia of the old ways and discover how to motivate new social behaviors and manage new technical systems.
Southern Company, an electric utility, used software developed by Pacific Northwest National Laboratory (PNNL) to demonstrate load flexibility in neighborhoods.
There are regulatory and institutional barriers that we must overcome to unlock the significant potential in load flexibility systems. The economic consulting firm, Brattle Group, asserts that regulatory incentives are needed to encourage utility-customer cooperation to replace capital investment in infrastructure. Matthew Ide of MMWEC reported that a battery system for the Peabody peaker is not financially feasible due to regulations of ISO-NE, the regional manager of electrical power.
Federal oversight by the Federal Energy Resource Commission (FERC) can address those issues.
We don’t have to wait—there is much that can be done within existing regulatory frameworks and we must all pitch in to advocate for change in those frameworks to encourage more reliance on renewables.
We can develop a partnership between our community and our municipal light plant to adopt modern practices for shifting to renewable energy. That partnership will be expanded to a coalition that will engage every element in the system—Federal, state, municipality, university, public health, community medicine, community organization, citizens, light plant commissioners and managers, and citizens.
Together we can create a future with clean, reliable, affordable power.
A sensible policy
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Stop the plant: it is not needed, it is risky, and it is harmful
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Buy capacity on the Forward Capacity Market for a few years
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During the next 5 years get Federal and state money for demonstration programs; partnerships with universities
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Municipal light plants to work with citizens and engage whole community in mitigation efforts. Develop demand-side resources including energy efficiency, demand response, and distributed generation—reducing consumer demand for electricity is functionally equivalent to—and cheaper than—producing power from generating resources for keeping supply and demand in balance.
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Work with Feds and Federal Energy Resources Commission (FERC) to get ISO-NE to encourage wind, hydro, and solar; instead of continuing to favor fossil sources favor carbon reduction as well as cost of energy.
- Upgrade regional transmission grid to enable import of renewable energy
References
See Resources http://cleanpowercoalition.org/Resources
Department of Public Utilities, hearing April 26, 2021
Dale, Paul, The proposed peaker power plant in Peabody is unnecessary, harmful and costly, Massachusetts Sierra Club, July 5, 2021 https://tinyurl.com/hrdce68u
Dewey, Amanda and Nick Henner, Cities Are Using an Emerging Model to Boost Renewables, but What about Energy Efficiency?, ACEEE, August 11, 2021. In Massachusetts and other states, local governments are adopting a utility alternative for providing customers with electricity that boosts use of renewable energy called community choice aggregation (CCA); it can be combined with efficiency.
Hledik, Ryan and Ahmad Farujki et al, The National Potential for Load Flexibility: Value and Market Potential Through 2030 Brattle Group https://tinyurl.com/2w6szrrp
Gottstein, Meg and Lisa Schwartz, The Role of Forward Capacity Markets in Increasing Demand-Side and Other Low-Carbon Resources: Experience and Prospects, The Regulatory Assistance Project (RAP), May, 2010 https://www.raponline.org/
Hood, Marlowe with Patrick Galey and Kelly Macnamara, Crushing climate impacts to hit sooner than feared: draft UN report, yahoo, June 22, 2021 https://news.yahoo.com/crushing-climate-impacts-hit-sooner-010253436.ht…
Intergovernmental Panel on Climate Change (IPCC) https://www.ipcc.ch/assessment-report/ar6/
Ide, Matthew, Executive Director of Energy & Financial Markets, MMWEC; public meeting in Peabody, June 22, 2021
Medway, Massachusetts, Battery Energy Storage Systems (BESS), https://tinyurl.com/2e2dkxy7
MMWEC, Slides, Project 2015A Public Information Session, June 22, 2021 https://tinyurl.com/55v84mep
Pacific Northwest National Laboratory (PNNL) Residential Load Flexibility, https://www.pnnl.gov/projects/residential-load-flexibility ; Case studies demonstrating Eclipse VOLTTRON, https://tinyurl.com/5pfyzbk8
Specian, M., C. Cohn, and D. York. 2021. Demand-Side Solutions to Winter Peaks and Constraints. Washington, DC: ACEEE https://www.aceee.org/research-report/u2101
University of Massachusetts Amherst, Center for Agriculture, Food, and the Environment, Clean Energy Extension. https://ag.umass.edu/clean-energy/current-initiatives/energy-storage/bu…
Wilson, Adam and Steve Piper, A nationwide push for green energy could strand $68B in coal, gas assets, S&P Global, Market Intelligence, August 5, 2021
Cite as: Halberstadt, Jerry, Clean & Reliable Energy: Solving an “impossible” challenge, Clean Power Coalition, July, 2021; revised August 14, 2021
Copyright 2021 Jerry Halberstadt. All Rights Reserved.
This work © 2021 by Jerry Halberstadt is licensed under CC BY-NC-ND 4.0