,
17 tweets,
4 min read
Read on Twitter
Lots of people commenting on recent @UChiEnergy study on costs of renewable energy requirements. @JesseJenkins and @drvox both make good, specific critiques, which I recommend. Since I've got time while my train is broken down in an almond orchard, I'll add my own. 1/
I think one effect the study seems to miss is that part of the point of RPS policies was to drive technological progress and cost reductions. It was known back in the mid-2000's that wind and solar were more expensive than fossil fuels. That's precisely why we needed an RPS. 2/
The purpose of the RPS was not just to displace fossil generation and yield immediate benefits via reducing emissions and diversifying supply, it was to create a stable market for RE equipment, encourage investment in the space and drive down costs. 3/
It appears to have been quite successful. Wind and solar costs have declined faster than most projections I recall seeing. My recollection of modeling from ~10 years ago generally said RE wouldn't be cost-competitive with fossil until mid 2020's at earliest. 4/
It's hard to quantify, but impossible to ignore, the role that early RPS policies had in bringing the cost of RE down to the point where it's now cost-competitive w/ fossil even without policy incentives in some cases. 5/
The price of this cost benefit is that early RPS adopters had to pay RE prices that look quite excessive now. That's one of the perverse problems of exceedingly rapid technological change, especially when the change manifests itself as cost reduction. 6/
There are probably RE projects still paying construction debt based on project costs several times higher than what it would cost to build the same project today. PG&E is trying to get authorization to renegotiate some of these as part of bankruptcy. 7/
But, when you take a fairly blunt look at costs, as the @UChiEnergy paper does, they just look like really expensive RE, the cost of which gets passed on to consumers. 8/
RPS policies need to be contextualized as part of a decades-long effort to reduce emissions, not a series of marginal economic decisions. That's a really difficult thing to do given current modeling tools. 9/
As an aside, this is part of why economic models always find carbon price is the cheapest way to cut emissions: Those tools view policy as a series of marginal decisions based on cost at the moment, and struggle capture how planning and investments reduce costs over time 10/
Carbon prices are a critical tool for reducing emissions, but you do not always get the lowest net cost to achieve a long-term goal by constantly making the decision which minimizes short term cost. 11/
It's the difference between mapping out an efficient path through a city's complex road network vs. just setting off and always taking the turn closest to the direction you want to go. /End Aside. 12/
So, the study mis-interprets what those early RE contracts were "buying". Part of the price was buying down the future cost of emissions reductions. One of the reasons why RGGI can reduce emissions for <$10/tonne is because RE is dirt cheap. 13/
That effect isn't captured by the model, in part because it's really difficult to capture. But if you ignore it, you will tend to under-estimate the social benefit. 14/
The @UChiEnergy study seems to imply, and many of the subsequent commentaries explicitly state, that the high RE costs they find are indicative of future performance of those types of policies. That's poor framing and ultimately, wrong. 15/
Future RE policies will be much cheaper precisely because past RE policies mandated expensive deployment, which bought down the cost going forward. As evidence, see the multiple low-cost RE bids into open procurements over the last couple years. 16/
To be clear, I'm not claiming methodological failures or poor scholarship by the @UChiEnergy authors, but their conclusions are poorly framed and they should have foreseen how they'd be interpreted once released. 17/17
