Part 2 in a two-part conversation about the Green New Deal. (Read Part 1 here.)
Political feasibility aside, there are many unanswered questions about what a Green New Deal would mean for clean energy. Broad regulatory change and federal stimulus could drive the continued growth of cleantech, but specific policies could result in big wins — or losses — for industry players.
Below, analysts suggest some policies that could emerge as part of a Green New Deal and discuss the implications of those policies for industries tracked by Wood Mackenzie Power & Renewables.
A note on the “Green New Deal policies” listed below: No draft legislation of the Green New Deal that features specific policies currently exists. The potential policies below are presented as hypotheticals by Wood Mackenzie, influenced by materials released by GND advocates (including the Sunrise Movement). The list does not include all potential Green New Deal policies.
Green New Deal policy: Simplify the process for siting and permitting of renewable energy projects
Austin Perea, Senior Solar Analyst at Wood Mackenzie: The Solar Energy Industries Association is doing a lot of work to streamline the permitting process for solar because considerable differences exist across states, counties and municipalities. This increases the cost of the overall product, with a second-order impact on the cost of residential customer acquisition due to the time it takes from point of sale to installation (which can average from 30-60 days, depending on the market), as well as the increase in soft costs.
Daniel Finn-Foley, Storage: For storage, the Aliso Canyon procurements proved that energy storage can be sourced and made operational in a dramatically expedited time frame, particularly when compared to conventional fossil fuel generation. However, barriers remain in many markets that slow down storage system deployment.
Interconnection requests, studies and processes, both at the transmission and distribution level, are often cited as one of the key drivers of time and cost facing storage developers today. A top-down reform of the interconnection process would grease the wheels significantly and provide storage with a surer footing.
Of note is that this is already happening on some levels — FERC Order 845 eases interconnection restraints for storage co-sited with existing renewables — but much more would need to be done to make the process developer-friendly.
Austin Perea, Solar: Former Sungevity CEO Andrew Birch actually wrote an article for GTM about this problem in solar a year ago. He highlighted a very instructive comparison between U.S. residential solar costs and other global solar leaders and delineated the oft-ignored vicious cycle that contributes to the high cost of customer acquisition in the States.
Using Australia’s permitting regime as an example, he highlights a significant positive correlation between cost of compliance of permitting plus electrical code and customer acquisition cost (CAC). Looking at Australia’s market, one can’t help but notice that with a less-stringent permitting and code compliance standards, CAC in Australia is one-sixth the CAC in the U.S., with overall system pricing less than half the price of PV in the U.S. Prices in Australia stood at $1.34 per watt in the first half of 2018, while U.S. pricing stood around $2.85 per watt in the third quarter of 2018.
The takeaway is that expensive products are harder to sell to mass markets — especially, as is the case with solar, when most of the low-hanging fruit (i.e., early-adopter demographics) have been reached.
If part of the Green New Deal involved putting in place simpler, national-level permitting standards like those that exist in Australia, we could see a substantial reduction in the price of solar that would most certainly increase adoption simply on a cost-competitive basis, which also means an increase in jobs and gets us that much closer to our ambitious renewable energy targets.
Green New Deal policy: A moratorium on constructing new fossil fuel infrastructure (including natural gas)
Daniel Finn-Foley, Storage: If you live in New England, you might be forgiven for thinking this regulation already exists! Pipelines of all kinds are facing increased pushback at the local level. Federal guidance on them would likely affect extraction operations as logistical challenges and transport constraints impact the bottom line.
Dan Shreve, Wind: An all-out war on fossil fuel development is not in the best interest of anyone, especially renewable energy developers.
Daniel Finn-Foley, Storage: It’s true that even if an effort were made to fully transition to electrification of heating, it would take enough time that pipeline infrastructure would need to be reviewed and potentially replaced to meet heating needs safely. Any moratorium would have to include clauses for updating existing infrastructure for reliability and safety.
Brett Simon, Senior Energy Storage Analyst at Wood Mackenzie: A policy I think would be cool to see at scale would be what New York is doing now with the state’s peaker plant assessments. The state is doing a full inventory of peakers, with a goal of identifying the dirtiest so that they can be incrementally retired to make way for a cleaner generation. It would be awesome to see something like this on a national scale. Challenging? Sure. But the impact on carbon emissions would be substantial.
Dan Shreve, Wind: Intermittent renewable energy assets need balancing resources, and there is no plausible means to develop the sort of energy storage and bulk transmission assets in the 10-year timeframe suggested by GND supporters.
A better solution may be to focus efforts on the elimination of the last remnants of the United States coal fleet and promotion of R&D into carbon capture and storage solutions for the U.S. natural-gas fleet. Over time, the older portion of the natural-gas fleet could be retired in favor of large-scale storage assets as utilization rates dwindle.
Wade Schauer, Power: Carbon capture and storage currently costs $10,000 per kilowatt, and there aren't very many places to inject the captured CO2 underground. It only makes economic sense for enhanced oil recovery, which kind of defeats the purpose. CCS technologies may have merit, but they won't be in a position to contribute to any 2030 or 2035 targets in a meaningful way.
Potential Green New Deal policy: Regulations on where industry can source electricity
Daniel Finn-Foley, Storage: This point may almost be redundant soon. Renewables are already the lowest-cost option in many markets, and additional scale from a Green New Deal would further cement their lead. Industry will follow the money, making their transition to renewables a natural result of the Green New Deal, rather than a necessary step.
One wrinkle is when you expand the question beyond electricity to other industrial processes — putting limits or guidance on this may be necessary to fully decarbonize, but may be much less feasible from a cost standpoint.
Anthony Logan, Wind: If regulations are imposed on where industry can source electricity, obligated firms will hugely benefit from the pioneering work of commercial and industrial firms we’ve seen so far that have voluntarily sourced renewable power.
Green New Deal policy: Requirements to reduce carbon emissions from the building sector (solar-friendly, efficient, etc.)
Daniel Finn-Foley, Storage: There’s a social justice element to merging the housing and energy industries through regulations like this that doesn’t often get much attention. In California, where housing prices are already the second-highest in the country (behind Hawaii), forcing new houses to have solar panels would increase home prices, potentially exacerbating the problem.
While the overall societal costs may be positive, putting the heat on realtors and homebuyers can cause severe pushback, so combining solutions (like advocating low-income or denser housing regulations in addition to solar or energy-efficiency requirements, for instance) will be needed to truly tackle climate change from the residential sector.
Green New Deal policy: Subsidized smart grid and efficiency retrofit programs for homes and small businesses
Fei Wang, Senior Grid Edge Analyst at Wood Mackenzie: Energy efficiency is not generating as much excitement as other grid edge topics these days, but there is a great amount of work to be done there. This could involve more stringent and better-defined efficiency standards for buildings in all sectors and grades associated with property value (think mandatory efficiency performance disclosures for real estate listings in Europe). The hardware, software and labor required to push buildings to become more efficient are all part of the wider landscape of cleantech jobs, which would overlap with manufacturing and construction as well.
Similar to the mandate of solar PV on new builds in California, mandates of efficiency standards on both new builds and retrofits on existing buildings would be helpful for decarbonization and the growth of cleantech as a sector. For example, intensive efficiency projects can open doors for the deployment of demand management technologies and lay down the foundation for additional flexibility opportunities.
Green New Deal policy: Ending fossil fuel leasing on public lands
Daniel Finn-Foley, Storage: This would be a big deal — a 2018 report by the U.S. Geological Survey reported that a quarter of all U.S. emissions come from fossil fuels extracted from federal lands. Stopping that would not immediately halt those emissions, though, as other sources could make up the gap. Rather, the sudden reduction in supply could drive up prices, making renewable energy even more competitive.
Another study in the journal Climate Change by Peter Erickson showed that the net effect of a “leave it in the ground” approach would be a 5 percent reduction in CO2 emissions by 2030, which is nearly 20 percent of the amount the U.S. had previously committed to under the Paris Agreement.
Green New Deal policy: R&D stimulus geared toward cleantech (grant programs through the DOE, etc.)
Ravi Manghani, Storage: There is precedent for government financial support for clean energy technologies. The somewhat-controversial DOE loan guarantee program lost over $500 million with its loan to Solyndra, but the program also wiped out its losses and has since supported companies like Tesla. In order to mobilize a Green New Deal, we would need similar programs, with pockets a few hundred billions dollars deep.
Daniel Finn-Foley, Storage: According to a 2001 national academies study, every dollar spent on DOE-led R&D efforts resulted in $20 of economic benefits. As DOE efforts in the intervening years have accelerated job growth in renewable energy, led innovation of low-watt lighting, and spurred other efforts that have resulted in massive job gains and energy savings, it’s not hard to imagine this 20x multiplier being even higher today. Given this, it’s easy to understand why China’s energy R&D budget is nearly three times that of the U.S. as a percentage of GDP, and it's growing each year. DOE stimulus is a proven economy enhancer, so further investment is a no-brainer to create more jobs and save consumers money on their electric bills.
Ravi Manghani, Storage: Another program worth highlighting here is the stimulus bill, more accurately known as the American Recovery and Reinvestment Act of 2009. ARRA funding was the first massive round of funds to support advanced energy storage projects. The origin of the now-booming energy storage market in the U.S. can all be traced back to ARRA funding. After all, ARRA supported over 500 megawatts of energy storage projects.
Anthony Logan – Wind: Floating offshore will come into maturity right at the end of the discussion timeframe but funding a serious near-term R&D effort would help accelerate cost reductions and make the technology feasible on a much larger scale before the end of the decade.
A large, multi-gigawatt buildout of floating would provide not only higher capacity factors by opening up sites with higher windspeeds in deep water but also mitigate the lack of geographic diversity that will start to hamper the tightly-clustered fixed-bottom offshore wind farm plans on the Atlantic coast. There’s a question of quayside space availability, but on the surface, floating wind’s ability to build the entire unit in port and tow it out to sea would go a long way to mitigating the need to dance around Jones Act restrictions on installation vessels.
Since we would need to work with significant distances from shore to satisfy GND power demand, for maximum effectiveness, any R&D funding for the technology would also need to include an effort to accelerate the already massive reductions in cost per mile for export cables we’ve seen in recent years.
Return to Part 1 of this discussion on the Green New Deal. Access more Wood Mackenzie Power & Renewables commentary here. To learn more about the Green New Deal, refer to the Sunrise Movement.