Op-Ed: BPU Passed Up a Preview of Looming Concerns over Energy Efficiency

Franklin Neubauer | January 23, 2020 | Opinion
Groupthink limited the Integrated Energy Plan and energy efficiency received inadequate attention

As part of developing the state’s Energy Master Plan, the Board of Public Utilities hired Rocky Mountain Institute to produce an Integrated Energy Plan (IEP) that models clean energy strategies for New Jersey through 2050. The institute’s founder, Amory Lovins, is an authority on clean energy, and the ambitious IEP aims to evaluate pathways to achieve the administration’s clean energy goals. IEP modeling results were presented on Nov. 1, 2019. Modeled scenarios represent different mixes of long-term strategies to decarbonize New Jersey’s energy use, strategies such as electrifying transportation and scaling up renewable energy, with all too brief assumptions for energy efficiency programs that will be central to clean energy efforts starting next year. What I learned raises several concerns.

First, the IEP’s rigor is limited due to how the BPU manages its research responsibilities. The Energy Master Plan (EMP) outsourced at least nine research contracts, much of whose results should feed into the modeling. Besides the IEP contract, I am most familiar with Optimal Energy’s assignment to conduct research on energy efficiency (EE) potential in New Jersey. Unfortunately, the BPU did not develop a consistent set of input assumptions for all EMP research. Consequently, the IEP’s data will include some inconsistencies (for example, cost assumptions), which could have been avoided if BPU’s research efforts were better coordinated. The IEP team showed awareness of this issue back in June, so I expect they tried to rectify this problem.

Consultants used the EnergyPATHWAYS model, supported by Evolved Energy Research, to analyze the state’s energy system and greenhouse gas sources for strategies that would satisfy the Global Warming Response Act’s 2050 emissions goal and produce 100% clean energy by 2050. EnergyPATHWAYS has been used for clean energy planning in other states, and it triggered my interest due to my prior experience in regional energy planning. EnergyPATHWAYS was used to create seven scenarios that achieve New Jersey’s goals. In RMI’s analysis, offshore wind, solar energy, relicensed nuclear plants, imported electricity from PJM, and even biogas were identified as contributing to a projected modest cost increase for New Jersey to manage the transition to clean energy. What was assumed, but inadequately documented, throughout this analysis was the contribution of EE programs run by utilities and the Office of Clean Energy. The model was capable of analyzing energy efficiency policies, but New Jersey chose scenarios that focused elsewhere.

In need of guidance on energy efficiency

New energy efficiency programs will play a major role in holding down costs of the transition to clean energy. Accelerated efficiency was assumed in all IEP scenarios that achieve the administration’s goals. Generally speaking, accelerated efficiency programs would adopt the most energy efficient technology available when energy-consuming appliances and equipment reach the end of their useful life. Since accelerated efficiency was an integral part of all scenarios that achieve the administration’s goals, I would like to see RMI’s final report provide practical guidance to help the BPU move forward with new EE and peak load reduction programs mandated by law.

By inviting only a limited group of stakeholders into the IEP workshop that was held in June, the EMP introduced groupthink into the planning process. New Jersey’s clean energy dialogue has been concerned with novel aspects of renewables, challenges of cutting reliance on fossil fuels, and nuclear power’s role. Consequently, there were corresponding scenarios in the IEP. Meanwhile, stakeholders and the BPU have not yet figured out how to move forward with energy efficiency and peak demand reduction programs that are vital to maintaining affordability. Energy efficiency received inadequate attention in the IEP. A scenario showing delayed EE deployment could easily have been included, which would have provided insight to planners. Since the IEP presentation omitted this, I have provided an estimate of the cost of the BPU’s delaying energy efficiency deployment that is based on analysis performed by Optimal Energy for the BPU in May.

If BPU delays its decision, what it may cost

I have three reasons for concern about delays launching the energy efficiency programs mandated by the Clean Energy Act. First, the BPU has already delayed its plans to announce requirements for new EE programs from 2019 until spring 2020 (according to the BPU’s proposed timeline released in September). Secondly, the electric and gas utilities have submitted comments to the BPU pointing out unreasonable expectations the BPU has concerning how quickly utilities can submit complex EE plans to satisfy new filing requirements. The BPU’s proposed schedule seems to ignore the utilities’ legitimate concerns. Third, through its EE stakeholder processes the BPU is being lobbied to adopt reforms whose supporters do not realize could delay the launch of programs by months or years. Most clean energy supporters do not realize all the resources and steps needed to design, plan and deliver large-scale EE programs across the state. It is vital for the BPU to stick to the spring 2020 date in its proposed timeline, and make clarifying decisions as soon as possible that allow utilities to proceed with their planning concurrently.

 

In the absence of an IEP scenario to analyze energy efficiency strategies, I used the best available data to estimate the cost to New Jersey of a one-year delay in launching new EE programs. The energy efficiency study conducted by Optimal Energy for the BPU, which concluded in May, was the source of the data. Optimal estimated that net benefits to New Jersey from a maximum achievable energy efficiency scenario over the ten-year period 2020-2029 are $14 billion (net present value, including the value of reduced emissions). Relying on energy savings data and the discount rate from Optimal Energy’s final report to the BPU, I estimate that a one-year delay in launching EE programs would cost New Jersey about $1.3 billion. Those costs would be spread across all stakeholders throughout New Jersey —  consumers, businesses, government and other institutions, and all residents because of emissions. Intuitively, the $1.3 billion represents roughly one-tenth the amount of net benefits that New Jersey stands to gain from pursuing EE over the next decade (determined by the BPU’s consultant). This calculation considers only the impacts of EE programs, not electrification or other strategies included in the IEP. The calculation ignores dynamic factors that integrated modeling would account for. Without an integrated analysis for this scenario, it is a useful estimate of the cost of inaction on energy efficiency. More information about the IEP’s limitations is available from Core Metrics.