How will New York lead the clean energy proliferation?

[A lot of what I normally write about relates to innovations that capture and convert CO2 from emission sources or directly from air. However, it is impossible to ignore the elephant in the room leading the charge in the transformation of energy systems to close the carbon cycle: distributed energy resources. Indeed, the purpose of this blog – and the overall scope of my company – is not only to amplify innovations that reduce, stop and reverse carbon from accumulating in the atmosphere, but also to write with a lens on new ideas to transform infrastracture to not put carbon there in the first place (better ways to deploy clean energy)…]

The gears are in motion for a rapid clean energy proliferation in New York State. And I couldn’t have asked for a better primer into this space than the event hosted by Columbia University’s Center for Global Energy Policy (CGEP) “New York’s Renewable Energy Future” on May 2.  CGEP director Jason Bordoff moderated the panel, which included:

  • Knut M. Aanstad, President, Statoil Wind US LLC
  • Dan Esty, Hillhouse Professor of Environmental Law and Policy, Yale University
  • Richard Kauffman, Chairman of Energy and Finance for New York – aka “New York Energy Czar
  • Eric Martel, President and CEO, Hydro-Quebec
  • Vijay Modi, Professor of Mechanical Engineering; Director, Infrastructure Programs, Millennium Villages Project

Got 90 minutes on your hands? Watch the whole event below.

Bottom line, there is a real commitment to clean energy proliferation and the state is slowly but surely moving from ambition to operation.

Some anecdotes to show positive traction

Here are some anecdotes that were discussed which in general show that things are going in the right direction.

  • Statoil has a goal to invest 15-20% into the renewable energy space by 2030. For a company that has traditionally made money in oil extraction, this is a big deal.
  • They also recently won a bid to develop almost a gigawatt of power off the shore of Long Island. They consider themselves as able to push offshore wind as ‘the new kids on the block’ because the barrier to entry is so high.
  • In general, the off shore wind industry has the wind at its backs given the recent deal struck in Germany that marks the first off shore wind development that requires no subsidies
  • More precipitation from climate change is good for Hydro-Quebec who model an 11% increase water in a dam, which is equivalent to about 11% more power output from their dams in the future. Ironic, eh?
  • Costs of clean energy continue to fall precipitously.
  • Lower costs and and greater availability of digital technologies can enable substantial efficiency innovations and greater grid resiliency.

But there is still an uphill battle to make things work

I put together this graphic below to try to synthesize some common themes of what I learned from the event in terms of what is working for and against the clean energy sector at the moment.

The New York State policy maker sits in the middle. She is aware of the green arrows driving the state to reaching the mandate of 50% energy by 2030, but she also must be cognizant of the red ones that prohibit this target.

Indeed, New York is not on track to reach that mandate unless it there is a shift in how the utility does business.

  1. First, the force that comes from modular technology with plummeting costs is only going to get stronger. This means that smaller units have flexibility to go anywhere as more economic options open up. However, this flexibility also creates locational roadblocks because the utility has no incentive to approve them. Not all areas are created equal. Furthermore the current model actually disincentivizes utilities from partnering with distributed energy resources in some locations even when the project makes perfect sense.
  2. Second, while its obvious that there are many ways that utility companies can save money with low carbon infrastructure through becoming more efficient or adding less expensive, low carbon power onto the grid, in many times this is not the case because utilities are not set up to make money this way. In simple terms, utility companies don’t want to play ball because they don’t have to and they aren’t able to make money from carrying the ball.
  3. Third, it’s clear that the available types of information technology could dramatically shift how projects are originated, sourced, managed, and deployed. Through the internet of things, digitization, machine learning, and augmented reality there are an array of ways that the electric utility can move quickly into the future. Yet traditional processes have not yet showed that they are ready to prime time, let alone any form of standardization.
  4. Forth, the 50% renewable mandate by 2030 is phenomenal as it is a mandate not a goal. However, there is not an energy pricing structure that considers the attribute of clean energy. For renewables to really to scale, a price on carbon would help.

Which leads me to my question…

How should New York State lead in energy innovation?

With a federal government that seems to care more about the number of people who showed up to the inauguration than pragmatic steps to produce cleaner energy, it is unlikely that anything will happen on a national level in support of clean energy. Yet with all of the work going on through “REV” (Reforming Energy Vision), NY State is optimally positioned to lead. It has a goal to spend the least amount of public funds to get the most done. How can it be a model?

The panel made it clear that the utility model needs to change from the traditional rate based incentive. Rate based incentives reduces the need to deploy capital. 93-94% of a customer bill right now is a pass through cost where utility makes no money on saving the low carbon capital. Is New York going to be one of the states that figures it out first, and allows the utilities to act like a business? It’s quite possible that once the FERC positions are filled (which ironically is stalling $20 bn worth of energy infrastructure projects – mostly fossil fuel based – as a result of the executive branch’s general ineptitude) that states will have greater freedom to make their own rules.

But the big problem remains. There are 50 different states, 50 different goals on how to proliferate clean energy and 50 different regulating bodies. There is no way to share best practices, and even if there were, getting the same leaders in the same room is a logistical nightmare.

I’ll leave you with a million dollar idea…

Dan Etsy presented a really good idea at 1:04:30.. A big problem that faces the grid is what to do the several hours a year when it is at capacity. There are very expensive plants that sit idle most of the year just to run an hour or a few minutes just to ensure stability and that there are no black outs/brown outs. More renewables onto the grid only makes this problem more pronounced. What if instead of needing to power these expensive plants, people could sign up to an opt in program where they could get paid to turn off refrigerators? With remote control techonlogies this is simple, this would be a demand response solution that could make a software company a lot of money. It would be a lot cheaper for a utility to pay someone not to use power than to turn on expensive power.

Do you have other ideas of testable initiatives that could happen in New York State or other states that allow sharing of best practices? What can NY do to demonstrate leadership to other states trying to proliferate clean energy? Leave your comments below.

-Christophe

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