Clean power will cost more

Report says state is in bind on emissions

The push to add clean power resources to the region’s energy mix is going to drive up electricity prices, at least in the short term.

Clean energy advocates have hinted that the state could meet its greenhouse gas reduction targets and stabilize or even cut electricity costs, but a new study that synthesizes all the previous studies makes clear that will be impossible. The study, conducted by the Brattle Group and funded by the Barr Foundation, said the state is caught in a bind: It needs clean power to meet legally mandated greenhouse gas emission targets but that power will be more costly.

“The studies reviewed above have included clean energy resource cost assumptions that are more expensive than current and projected market prices, at least in the near term,” the study said.

The Brattle Group also seems to endorse a criticism voiced by existing power generators, who have raised concerns about the state’s decision to negotiate long-term contracts at above-market prices directly with suppliers of Canadian hydroelectricity and offshore wind. The long-term contracts are needed because hydro and offshore wind suppliers can’t push ahead without them and cannot compete directly with existing, primarily natural gas-fired, generators.

The study says the clean energy contracts are likely to drive down wholesale energy prices. If those lower prices drive existing power generators out of business and discourage others from investing in new power plants, the market may respond by pushing wholesale prices up again. “The studies that conclude customers’ rates will decrease based on significant downward pressure on wholesale energy and capacity market prices may not have fully considered these effects,” the study said.

The long-term contracts also burden electric ratepayers with more risk, according to the study. One of the reasons Massachusetts deregulated the electric industry was to shift the risk of building power plants from consumers to energy developers. Fixed-price, long-term contracts negotiated by utilities under the direction of the state would shift the risk needle back in the direction of electric ratepayers.

David Cash, who commissioned the report and is the dean of the McCormack Graduate School of Policy and Global Studies at the University of Massachusetts Boston, said he doesn’t think the long-term contracts will distort the electricity wholesale market. He said the market isn’t completely free of interference now, noting subsidies for fossil fuel generation and barriers to entry for new power sources. He described the long-term contracts envisioned by legislation on Beacon Hill as “market corrections.”

Cash said he pushed for the Brattle Group report because lots of studies have been done on the state’s energy situation but nearly all of them have adopted a fairly narrow view. Indeed, he said one of the report’s most important conclusions is that the Legislature and Gov. Charlie Baker are lurching from crisis to crisis in energy with no one attempting to formulate a long-term, comprehensive plan.

“Considering the importance of energy to the state economy, and the need to plan for reducing greenhouse gas emissions from all sectors of the economy, the fact that no entity is charged with comprehensive energy planning authority makes it almost impossible to create optimal solutions to meet Massachusetts’ energy challenges,” the report said.

Without saying so, the Brattle Group study also suggests the energy bill passed earlier this month by the House should be viewed as a starting point and not an end point. The House bill directs the state’s utilities to negotiate contracts for roughly 1,200 megawatts of offshore wind and 1,200 megawatts of Canadian hydroelectricity or some combination of hydro and another form of clean energy.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

The study recommends an increase in the state’s renewable portfolio standard, which mandates how much renewable energy electricity suppliers must purchase. It also calls for more investment in energy storage and energy efficiency. The state’s current three-year energy efficiency plan is expected to cost $2.5 billion but save $6.2 billion. The Brattle Group says more energy efficiency gains are possible.

Sen. Ben Downing of Pittsfield, the Senate’s point person on energy who is crafting a redraft of the House bill, has said he expects to include measures dealing with energy efficiency and storage in the measure.

  • NortheasternEE

    We have gone from a deregulated competitive market, set up some 15 years ago, to one that is now dictated by Beacon Hill legislators. You want to sell electricity in Massachusetts, don’t bother sending in bids, just lobby the Massachusetts legislators to include a 20 to 30 year power purchase agreement for you favorite source of electricity and leave the rest for the suckers.
    These legislated contracts are sucking out all the revenue from the competitive wholesale market forcing the early retirement of old reliable baseload power plants which run on coal and nuclear, leaving the grid vulnerable to shortages that threaten reliability.
    It is not the market that is killing coal and nuclear, it’s Beacon Hill. And, if you think that all this is worth it to save us from Global Warming, forget it. Killing nuclear works against that goal.
    Beacon Hill has us on a path to face Global Warming without the means to adapt!

    • L. C.

      I don’t agree with you. Because the article was about clean power, it didn’t include the costs of keeping things the way they are. There was no contrast citing the history of increases in the costs of natural gas & coal in our state. Our aging power plants will need to be replaced. The costs of generating nuclear power are low but the cost of equipment & long term impact to the environment is too great. When I look at my electric and gas bills I see regulated costs per BTU stay low (relatively) but the rest of my bill….the part not tied to BTUs… just keeps growing. It dwarfs the cost of power usage tenfold. So, I use much less energy but my bill is still increasing. Renewables better serve the middle class, the real tax-payers. Increasing high-pollution power generation only creates more environmental abuse. Your statement, “path to face Global Warming without the means to adapt!” The problem with adaptation is no one can control what choices nature will make. It’s pretty obvious that Americans want more “stuff” at any cost. That’s not adapting, It’s ignoring.