The following is a contributed article by Roger Lin, vice president of marketing at NEC Energy Solutions.
Our nation’s transition to a renewables-based energy future continues to gain momentum, despite the challenging times we face. Now more than ever, innovative policy frameworks are important drivers to accelerate our clean energy future — ensuring a ‘no compromise’ approach to how we use energy. Renewable Portfolio Standards encourage adoption of clean, renewable generation technologies like solar or wind onto the grid and exist in just about every state.
Trailblazers like Massachusetts’ Clean Peak Energy Standard (CPS) are much more uncommon, however. Finalized and approved in late March, and anticipated to take effect in June, this first-of-its-kind piece of legislation may very well set the policy model for other states.
At its core, the CPS was formulated to incentivize better utilization of clean energy technologies to supply power when electricity demand is at its peak — for instance, during high demand timeframes in the summer and winter. However, there are times when the sun is not shining, and the wind is not blowing, and energy demand eclipses clean energy availability. To solve this problem, PV and wind generation, combined with energy storage technologies, can harvest local "fuel" in the form of wind and sun, and deliver that clean power efficiently, consistently, and at the right time.
In Massachusetts, the CPS requires electric retailers to produce a minimum percentage of their annual retail electricity sales from clean generation technologies. Starting in 2020, the CPS will be 1.5% of retail electricity sales. This will increase at least 1.5% each year to ensure the minimum CPS by 2030 is 16.5%.
In order to meet these obligations, electricity suppliers will purchase Clean Peak Energy Certificates (CPECs), which are generated during seasonal peak periods by qualified clean generation resources. Because of these requirements, the CPS will play a substantial role in bringing additional clean energy technologies to Massachusetts. If similar policies were established in other locales, it could lead to states having a better chance of meeting their aggressive renewable energy goals.
The CPS can also serve to clean up and reduce infrastructure costs by allowing peak demand to be served more completely by local renewable energy sources, instead of relying on greenhouse gas-emitting generation resources under expensive reliability-must-run contracts. In fact, the top 10% peak hours of demand account for nearly 40% of the total cost of electricity, according to a study commissioned by the Massachusetts Department of Energy Resources.
In addition to the cost savings, the CPS will help states reach their carbon emissions reduction goals. In Massachusetts, the CPS is expected to reduce CO2 emissions by 560,000 metric tons over the next ten years, according to the Department of Energy Resources.
CPS in other states
In the near term, the effectiveness of the CPS as a regulation can be assessed within states that are dealing with high amounts of intermittent and variable renewables on their grid — like those in the Southwest. Those states, and others with the highest amounts of installed solar, experience the infamous solar "duck curve." When the sun is shining, solar floods the market and then drops off as electricity demand peaks in the evening. In these scenarios, implementing a CPS to help drive the adoption of energy storage helps combat those issues, since curtailment can be avoided if the excess energy can be stored.
Outside of Massachusetts, states like Arizona, California, North Carolina and New York have all explored CPS regulation with varying degrees of success. When these states, or others, begin to consider what a CPS could look like, there are important market conditions that must be considered.
These include assessing if the financial incentive is strong enough to support the economics of the renewable energy project; ensuring the resources will be available in practice; understanding if the resources in practice participate in other retail or wholesale market services; and, realizing if there is a floor price or sufficient long-term contract opportunity for the participating resources. These must all be balanced against the ultimate cost to the ratepayer, including not only the absolute cost of the clean peak program, but also the cost avoidance of extra-market interventions for incumbent fossil fuel generation.
Over the last five years, as clean peak policies have been evaluated, concerns have also been raised about their effectiveness. Most recently, researchers challenged the idea that a CPS in Massachusetts is an effective way to reduce emissions and said that a carbon tax scheme would be better. However, I believe the fundamental impact of the Massachusetts Clean Peak Standard is the framework precedent that it could set for the nation, and should not be an either/or choice with respect to carbon tax-like mechanisms.
While the parameters of the Massachusetts CPS can and will shift over time as generation and emissions rates change, the attraction of a clean peak concept is that it is a simple, common sense policy that can be communicated and understood easily. Overall, the CPS encourages efficiency and flexibility, enabling dramatic increases in clean generation, all the while encouraging adoption of energy storage resources that improve control, reliability and infrastructure efficiency of our grid.
As the first clean peak standard in the nation takes hold, it may become the go-to policy framework for all states. The success of this particular program design, along with the standard's benchmarking elements such as credit multipliers is yet to be seen, but the vision is clearly there. As Massachusetts continues to strive towards its emissions and clean energy goals, we’ll continue to invent and deploy advanced solutions to help our home state meet its ambitious targets and cement its place as a clean energy epicenter.
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June 10, 2020 at 06:53AM
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Massachusetts' Clean Peak Standard — A trailblazer in the nation's clean energy transition - Utility Dive
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