PJM's Capacity Market: Clearing Prices, Power Plants, and Environmental Justice

Authors: Joshua R. Castigliego, Liz Stanton, PhD, Sagal Alisalad, Tanya Stasio, Eliandro Tavares

October 2021 (Updated November 2021)

Researcher Joshua Castigliego, Senior Economist Liz Stanton, PhD, Assistant Researcher Sagal Alisalad, Researcher Tanya Stasio, and Assistant Researcher Eliandro Tavares prepared a report reviewing the economics of power plants in the PJM region, focusing on the "capacity payments" given to owners of generating units that promise to be available if needed to generate power at times of peak customer demand. AEC finds that PJM has consistently overestimated its peak demand and as a result spent too much money on capacity payments, and generating units—including many in or near Environmental Justice (EJ) communities—are kept online despite being uneconomic and unnecessary to provide reliable electric service.

AEC adjusted PJM’s forecasts and market design to better represent customer demand and other market conditions, and estimated the prices that individual generating units bid into the 2021/22 capacity auction, which took place in 2018. The actual bids by power plant owners are not made public, so we model them based on available cost and revenue data. PJM’s overestimate of customer demand and costs of new generating units raises market clearing prices and capacity payments to power plant owners, resulting in what we call a “fat market” with payments made to unnecessary power plants and higher costs to customers. In place of PJM’s $140 per megawatt-day (MW-day) fat market clearing price, we estimate a clearing price of $100 to $104 per MW-day to serve customer needs without adding unnecessary costs. Our leaner, adjusted clearing price would lower customer bills without sacrificing reliable electric service and put an end to capacity payments propping up the bottom lines of uneconomic power plants, many of them in or near EJ communities.

Link to Report (Updated 11/30/2021)

Link to Presentation for PJM Cities & Communities Coalition

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An Analysis of NHTSA's Preliminary Regulatory Impact Analysis of 2021 Proposed Rulemaking for Model Years 2024-2026 Light-Duty Vehicle CAFE Standards

Clients: Office of the California Attorney General and the California Air Resource Board

Authors: Liz Stanton, PhD, Gabriel Lewis, and Chirag Lala

October 2021

On behalf of the Office of the California Attorney General and the California Air Resource Board, this Applied Economics Clinic white paper examines the National Highway Traffic Safety Administration’s (NHTSA) Proposed Rulemaking for Model Years 2024-2026 Light-Duty Vehicle Corporate Average Fuel Economy Standards. The proposal would increase the stringency of Corporate Average Fuel Economy (CAFE) standards from their 2020 levels, setting the standards close to the path established in 2012. The NHTSA provides an estimate of the expected benefits in its 2021 Preliminary Regulatory Impact Analysis (PRIA), and it expects benefits in fuel savings, energy security, and drive value.Our analysis finds the estimated benefits to be a conservative estimate. Other benefits not included in the cost-benefit analysis would increase the net benefits and provide additional support for stricter fuel economy standards, if included in NHTSA’s comparison.

Link to White Paper

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Recommendations for Cities and States to Improve Equity Evaluation and Reporting in Energy Efficiency Programming

Client: American Council for an Energy-Efficient Economy (ACEEE)

Authors: Bryndis Woods, PhD, Liz Stanton, PhD, and Sagal Alisalad

October 2021

On behalf of the American Council for an Energy-Efficient Economy (ACEEE), this Applied Economics Clinic white paper recommends measures that cities and states can undertake to facilitate equitable energy efficiency evaluation and reporting of energy efficiency efforts, based on the results of our review of low-income energy efficiency efforts in ACEEE’s top-scoring cities and states in their 2020 City and State energy efficiency scorecards.

We find that the cities and states most highly-rated for energy efficiency offer programs for low-income community members, but fail to take critical actions necessary for equitable evaluation and reporting to facilitate equitable outcomes. Based on our review of these programs, we find that—while these programs have made important progress on addressing equity concerns by offering efficiency programming specifically to low-income households—more robust energy efficiency evaluation and reporting are needed to shine a light on city and state equity-focused energy efficiency programming and ensure that efficiency benefits are equitably distributed. We recommend three main improvements that would drastically enhance the ability to evaluate these programs for their equity-related impacts:

• Mandate disaggregated efficiency program performance reporting;
• Identify, track, and target vulnerable populations; and
• Integrate energy efficiency, climate, and equity planning and reporting.

Link to Report

Link to ACEEE's Leading with Equity Initiative White Paper

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Testimony on Xcel Colorado's Energy Resource Plan

Source: The Denver Post

Clients: Natural Resources Defense Council and Sierra Club

Author: Tyler Comings

October 2021

Senior Researcher Tyler Comings filed testimony on Xcel's Colorado's Energy Resource Plan (ERP), focusing on the utility's decisions for two of its coal units--Comanche unit 3 and Pawnee. Mr. Comings' testimony found that earlier retirement of Comanche unit 3 and earlier conversion of Pawnee were lower cost. He provided inputs to modeling performed by Dr. Maria Roumpani at Strategen Consulting which quantified more than $1 billion in savings (including carbon costs) from their alternative plan compared to Xcel's ERP.

Link to Answer Testimony

Link to Cross Answer Testimony

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ConnectedSolutions: A Program Assessment for Massachusetts

Client: Clean Energy Group

Authors: Bryndis Woods, PhD, Liz Stanton, PhD, Eliandro Tavares and Sagal Alisalad

September 2021

On behalf of the Clean Energy Group, this Applied Economics Clinic report assesses the design and performance of the Massachusetts ConnectedSolutions program. Massachusetts’ ConnectedSolutions program offers incentives to customers in exchange for allowing their electric supplier to draw on the energy stored in their grid-connected batteries and/or to curtail energy use via smart thermostats or electric vehicle charging at times of peak electric demand. Launched as a full program offering in 2019, ConnectedSolutions had about 34,000 customer participants with 310 megawatts (MW) of capacity enrolled by the end of 2020.

This report compares the Massachusetts ConnectedSolutions program, as it has been administered in the first three-year program cycle, with related programs in other states across the country. In several important areas, the Massachusetts program administrators could benefit from best practices implemented elsewhere; chief among these is the treatment of income-eligible customers and those in historically underserved communities.

Link to Report

Link to Webinar

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Testimony on the Enbridge Energy Limited Partnership Proposed Replacement and Relocation of Line 5

Clients: The Environmental Law & Policy Center, The Michigan Climate Action Network, and the Bay Mills Indian Community

Author: Liz Stanton, PhD

September 2021

On behalf of The Environmental Law & Policy Center, The Michigan Climate Action Network, and the Bay Mills Indian Community, Clinic Director and Senior Economist Liz Stanton, PhD filed testimony on the Enbridge Energy LP (Enbridge) application to replace and relocate a segment of an oil and natural gas pipeline (Line 5)that crosses the Straits of Mackinac into a tunnel underneath the Straits of Mackinac. Dr. Stanton found that Enbridge failed to consider a “no-action” alternative to replace the oil pipeline and that shutting down the existing line is not only feasible but would also likely have a positive impact on Michigan’s economy while accelerating the state’s transition to a zero-carbon economy.

Link to Testimony

Link to Michigan Radio coverage

Link to Bridge Michigan coverage

Link to News-Review coverage

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Comments on Evergy Missouri's Integrated Resource Plan

Source: Missouri Independent

Client: Sierra Club

Authors: Tyler Comings and Joshua Castigliego

September 2021

Senior Researcher Tyler Comings and Researcher Joshua Castigliego co-authored comments with Sierra Club on Evergy Missouri's Integrated Resource Plan (IRP). AEC found several deficiencies in the utility's plan including: 1) the lack of optimization modeling, 2) limited consideration of battery storage, 3) failure to model power purchase agreements (PPAs), and 4) failure to consider other coal retirement portfolios (among others).

Link to Comments

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An Analysis of EPA's Proposed Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions Standards

Client: Office of the California Attorney General

Authors: Liz Stanton, PhD, Gabriel Lewis, and Chirag Lala

September 2021

On behalf of the Office of the California Attorney General, this Applied Economics Clinic white paper examines the Environmental Protection Agency’s  (EPA) Proposed Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions Standards. The proposal would increase the stringency of the Safer Affordable Fuel-Efficient (SAFE) Vehicles rule from their 2020 levels, setting the emissions standards close to the path established in the 2012 National Program for controlling light-duty vehicle greenhouse gas emissions. The EPA provides an estimate of the expected benefits in its 2021 Draft Regulatory Impact Analysis (DRIA), highlighting the proposal’s energy security benefits. Our analysis finds the estimated benefits to be a conservative estimate. Other benefits not included in the cost-benefit analysis would increase the net benefits and provide additional support for stricter greenhouse gas emissions standards, if included in the EPA’s calculations. AEC also compared the 2021 DRIA with the Final Regulatory Impact Assessment (FRIA) of the implemented 2020 SAFE final rule, finding that the methodology of the 2021 DRIA is more reliable than that of the 2020 FRIA.

Link to White Paper

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Comments on Astoria Gas Turbine Power LLC's Proposed Gas-Fired Combustion Turbines

Client: New York Lawyers for the Public Interest and Earthjustice

Authors: Bryndis Woods, PhD and Liz Stanton, PhD

September 2021

On September 13, 2021, New York Lawyers for the Public Interest and Earthjustice—on behalf of the New York City Environmental Justice Alliance, THE POINT CDC, UPROSE, Chhaya CDC, and Clean Energy Group, together with Sierra Club—submitted comments to the New York State Department of Environmental Conservation (DEC) regarding the Draft Title V Air Permit and the Draft Supplemental Environmental Impact Statement for Astoria Gas Turbine Power LLC's proposed Astoria Replacement Project. The comments urged the DEC to deny the permit for the proposed Project because of its inconsistency with New York State climate and emission reduction goals set forth in the 2019 Climate Leadership and Community Protection Act (CLCPA).

AEC's comments address Astoria Gas Turbine Power LLC's incorrect claims that the proposed Project is CLCPA-consistent and that a hypothetical future conversion to hydrogen fuel is zero emissions or CLCPA-consistent. AEC's comments also outline the negative environmental justice and public health implications of hydrogen fuel use. We conclude that—with or without switching from gas fuel to hydrogen—the proposed Project is not consistent with the CLCPA.

Link to AEC Comments

Link to Joint Comments

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Estimating the Net Change in Carbon Dioxide Emissions for Solar Projects in Massachusetts

Client: Borrego

Authors: Joshua R. Castigliego, Chirag Lala, Eliandro Tavares, and Liz Stanton, PhD

September 2021

On behalf of Borrego, Researchers Joshua Castigliego and Chirag Lala, Assistant Researcher Eliandro Tavares, and Senior Economist Liz Stanton, PhD conducted analysis estimating the net change in carbon dioxide (CO2) emissions of Borrego’s proposed solar projects at three sites in Wareham, Massachusetts. AEC estimated net emission savings of the proposed projects as the sum of “positive” CO2 emissions savings from the electric grid due to renewable energy generation, and “negative” CO2 emissions due to land use conversion from forestland to grassland. AEC found that Borrego’s proposed projects offset four times more CO2 emissions than are emitted in their development.

Link to White Paper

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Assessment of Backup Diesel Generators in Massachusetts and New York City

Client: Bloom Energy

Authors: Joshua R. Castigliego, Tanya Stasio, Sagal Alisalad, Liz Stanton, PhD

August 2021

On behalf of Bloom Energy, Researchers Joshua Castigliego and Tanya Stasio, Assistant Researcher Sagal Alisalad, and Senior Economist Liz Stanton, PhD prepared two reports assessing backup diesel generators in Massachusetts and New York City. AEC compiled inventories of backup diesel generators in each jurisdiction based on publicly available data and reviewed the quantity, combined capacity, proximity to environmental justice (EJ) communities, and emissions impact of backup diesel generators.

AEC found that there is an abundance of backup diesel generators throughout both areas that are commonly sited near EJ communities and represent a considerable—and largely avoidable—source of air pollution and greenhouse gas emissions that threaten public health and the environment.

Link to Massachusetts Report

Link to New York City Report

Link to Download Shapefile for Massachusetts Environmental Justice Communities

Link to Download Shapefile for New York City Environmental Justice Communities

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Background Report: Benefits of Coal Ash Cleanup and Remediation

Client: Earthjustice

Authors: Joshua R. Castigliego, Tyler Comings, Sagal Alisalad, Liz Stanton, PhD

July 2021

On behalf of Earthjustice, Researcher Joshua Castigliego, Senior Researcher Tyler Comings, Assistant Researcher Sagal Alisalad, and Senior Economist Liz Stanton, PhD prepared a report outlining the benefits of coal ash cleanup and remediation at three power plants: Montana’s Colstrip Steam Electricity Station, South Carolina’s Grainger Generating Station, and Indiana’s Michigan City Generating Station.

AEC staff found that the more complete and more effective cleanup scenarios with full excavation of coal ash in contact with groundwater and contaminated soils results in more than double the jobs compared to the less effective cleanup plans. In all three case studies, workers’ income and local economic activity follow this same pattern with more stringent clean up protocols resulting in greater benefits for both workers and the community.

Following release of this report, on August 6, 2021, Michigan City Council passed a unanimous resolution supporting the more stringent coal ash cleanup option. Read the resolution below.

Link to Report

Link to Earthjustice Publication

Link to Press Release

Link to Resolution

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“Measuring Climate Equity" at LIEN Annual Conference 2021

Event:
“Measuring Climate Equity" at the Low-Income Energy Network (LIEN) Annual Conference 2021

Speaker:
Sagal Alisalad

July 2021

AEC Assistant Researcher, Sagal Alisalad presented on “Measuring Climate Equity" at the Low-Income Energy Network (LIEN) Annual Conference 2021. Ms. Alisalad gave a primer on climate equity, described AEC’S climate and social equity framework, and introduced four types of metrics for climate equity: Outcome Metrics, Distributional Dimensions, Process Metrics, and Structural Metrics. This year’s LIEN conference focuses on Energy Equity: Using Energy Efficiency to Fight Energy Poverty in Canada.

Link to Presentation Slides

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Consumers Energy Rate Case Testimony

Client:
Michigan Environmental Council, Natural Resources Defense Council, Sierra Club, and Citizens Utility Board of Michigan

Author:
Tyler Comings

June 2021

AEC Senior Researcher Tyler Comings filed testimony on the Consumers Energy 2021 rate case in Michigan. Mr. Comings analyzed the economics of coal units Campbell 1 and 2, concluding that they should be considered for retirement in 2024 or 2025. He also recommended that certain capital costs not be allowed in rates because they could be avoided if the units were to retire in those years. (Subsequent to Mr. Comings' testimony, Consumers Energy announced a plan to retire all of its coal units by 2025.)

Link to Testimony

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Benefits of Net Zero Buildings for the Town of Bedford

Client:
Facilities Department of the Town of Bedford, MA

Authors:
Bryndis Woods, PhD and Joshua R. Castigliego

June 2021

On behalf of the Facilities Department of the Town of Bedford, Massachusetts, Senior Researcher Bryndis Woods, PhD and Researcher Joshua R. Castigliego prepared a report outlining the Town’s climate and energy goals and how investments in Net Zero and Net Zero Ready buildings can contribute to these goals and provide additional health, comfort, cost savings, resiliency, and safety benefits. Achieving the Town’s goal of net-zero energy use in all municipal buildings by 2030 will require investments in “Net Zero” buildings—which generate at least as much renewable energy in a year as they consume—and “Net Zero Ready” buildings—which reduce building energy and fossil fuel use to the point that any remaining emissions could be offset with purchases of carbon offset credits. In this report, AEC analyzes proposed Net Zero Ready investments in Bedford High School’s heating and cooling system. We find that Net Zero Ready investments are $2.9 million more expensive than a gas-fired alternative over 20 years; every “extra” thousand dollars invested in Net Zero Ready would provide the Town with a reduction benefit of 2 metric tons of carbon dioxide over the equipment lifetime. A Net Zero Ready Bedford High School would reduce average annual emissions from the High School by 64 percent and the Town’s municipal buildings by 21 percent.

Link to Report

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Comments on 2021 Guidance Towards Updating the U.S. Social Cost of Greenhouse Gases

Client: Friends of the Earth

Authors: Liz Stanton, PhD, Chirag Lala, and Tanya Stasio

June 2021

Director and Senior Economist Liz Stanton, PhD and Research Assistants Chirag Lala and Tanya Stasio prepared comments on the 2021 guidance towards updating the U.S. social cost of greenhouse gases (SC-GHG) on behalf of Friends of the Earth.
AEC staff recommend that the current revision to the U.S. SC-GHG: (1) Estimate climate damages in a single model; (2) Include climate damages around the world; (3) Value for future climate impacts; (4) Place equal value on all people, all families, and all communities; (5) Set fair and effective emission reduction targets, and; (6) Have a clear process for updating the SC-GHGs over time.

Link to Comments

Link to News Release, Common Dreams

Link to News Release, Friends of the Earth

Link to News Release, Red, Green and Blue

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Conditional Benefits of Sustainable Community Microgrids

Client: GreenRoots

Authors:
Joshua R. Castigliego, Tanya Stasio, and Eliandro Tavares

May 2021

On behalf of GreenRoots, Researcher Joshua Castigliego, Research Assistant Tanya Stasio, and Assistant Researcher Eliandro Tavares prepared a policy brief on the impacts of community microgrids on vulnerable populations. AEC staff defined “sustainable community microgrids” as independently controlled energy systems that, depending on their design, have the potential to enhance grid resilience, lower electric bills, improve public health, and strengthen local communities while prioritizing equitable outcomes.

Link to Policy Brief

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Ameren MO IRP Comments

Source: USFWS Midwest Region

Authors: Tyler Comings, Joshua Castigliego, Sagal Alisalad, Eliandro Tavares, and Sierra Club

March 2021

AEC co-authored (with Sierra Club) comments on the Integrated Resource Plan (IRP) from Ameren Missouri. The comments discuss Ameren's failure to: economically optimize coal unit retirements, adequately address substantial costs from pending litigation, and adequately consider low-cost solar and solar-battery hybrid resources.

Link to Comments

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Utility Reporting Practices

Client: District of Columbia Office of the People’s Council

Authors: Liz Stanton, PhD

March 2021

On March 26, 2021 Senior Economist Liz Stanton, PhD presented on gas and electric utility reporting practices to the DC Climate NOI Reporting Working Group on behalf of the District of Columbia Office of the People's Council. Dr. Stanton addressed current reporting requirements for the District's utilities, how these requirements compare to those around the United States, and potential best practices for reporting.

Link to Presentation

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Initial Assessment of the Climate Justice Working Group’s Recommended Policy Priorities – Tracking Equity and Justice

Client: Massachusetts’ Climate Justice Working Group

Authors: Bryndis Woods, PhD and Liz Stanton, PhD

March 2021

On behalf of members of the Massachusetts’ Climate Justice Working Group (CJWG)—Conservation Law Foundation, Health Care Without Harm, Neighbor to Neighbor, Alternatives for Community and Environment, GreenRoots, Coalition for Social Justice, Clean Water Action, and Unitarian Universalist Mass Action—this Applied Economics Clinic report describes how progress could be tracked, measured and evaluated for each of CJWG’s six policy priorities by recommending specific metrics to evaluate their equity and justice impacts. This report also includes a discussion of the importance of setting measurable, actionable equity goals that include clear standards for community engagement in the Massachusetts 2030 Clean Energy and Climate Plan (2030 CECP).

For Massachusetts equity goals, including those specified by the CJWG and those contained in the 2030 CECP, to be more than just lip-service, it is of vital importance that they be formalized with concrete, specific plans that meaningfully engage the community and actionable metrics to facilitate their evaluation. In other words, all equity and justice goals need to be measurable, actionable, and involve robust, meaningful, and transparently conducted community engagement processes. This report demonstrates that much of the data and information needed to measure progress towards equity and justice goals do not currently exist or are not currently publicly available, and draws attention to the additional efforts that will be required to measure progress regarding the impacts of climate policy in EJ populations and other historically marginalized communities.

Link to Report

Link to Comments

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