Governor Baker recently submitted Senate Bill No. 1965 to the Legislature. It calls for utilities to solicit long-term purchases of renewable energy. We are talking about as much as 1/3 of Massachusetts’ annual electricity use over a 15-25 year period. Two rationales are often provided to justify the large purchase of Canadian hydropower. First, cheap hydropower will ameliorate the high cost of electricity. Second, it will help Massachusetts attain its initial Global Warming Solutions Act goal of reducing GHG emissions by 25% below 1990 levels by 2020. Sounds like a win-win.
However, a report issued earlier this month by Susan Tierney of Analysis Group provides a cautionary note about the likely results of the bill’s passage. Tierney makes several cogent points:
- The electricity sector has already attained its share of the GWSA goal. The state’s plan called for the sector to make up 7.7% of the reduction – slightly more than ¼ of the overall 25% reduction. Tierney does not address the Commonwealth’s concern about meeting the overall target, but she implicitly takes the Administration to task for imposing greater reductions on the power generation sector than on other sectors of the economy that were supposed to bear their share of the burden.
- Canadian hydropower cannot be brought from Canada in the anticipated quantities without substantial investments in new transmission. Once the cost of the new transmission is included, the costs are likely to be above market.
- Although the net cost to consumers of the power will be significant, once available, Canadian hydropower will be a price taker, leading to significantly lower day-ahead and real-time prices. This will discourage relatively low cost producers in Massachusetts, including other renewable sources and nuclear energy.
- The procurement anticipated by Senate Bill 1965 would undo to some extent the electricity market restructuring implemented in 1997, shifting significant risk from power suppliers to consumers.
I’m not in a position to assess the merits of Tierney’s analysis, though it is worth noting that, like Sara Lee, nobody doesn’t like Sue Tierney. In any case, she certainly raises a number of issues that the Legislature needs to address before going all-in on Canadian hydropower as the solution to both high electricity prices and the need reduce GHG emissions further.