Aug 16, 2019

Axios Generate

Welcome back! Today's Smart Brevity: 1,202 words/< 5 minute read.

Situational awareness: July was the hottest month in records dating back to 1880, per federal data released Thursday that underscores the Earth's warming trend as greenhouse gases pile up in the atmosphere. Go deeper.

And at this moment in 1998, the Beastie Boys led the Billboard album charts with "Hello Nasty," which takes us into the weekend and outer space...

1 big thing: Why achieving a 100% renewable grid is hard
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Data: WoodMac; Chart: Axios Visuals

Axios' Amy Harder explores why, despite rapid renewables growth and falling costs, future grids powered by these resources alone would face daunting hurdles.

Driving the news: A 100% renewable electricity system would greatly increase the risk of blackouts, per internal modeling by the consultancy Wood Mackenzie.

  • Renewable energy would also need significant government support to remain afloat, the work described to Axios in an interview shows.
  • It's part of the analysis conducted for a study released in June which found that such a transition would cost $4.5 trillion within a couple decades.

What they’re saying: “Not only are [renewables] causing intermittency issues, they can no longer recover costs in the power market,” said Robert Whaley, a senior WoodMac analyst.

  • "At the point of 100% saturation, they’re completely dependent upon government policy or subsidy," he said.
  • Whaley said a lot of markets could eventually handle 45%–50% wind and solar. "It’s when you get past that 50% mark that it gets trickier and more nuanced."

But, but, but: The analysis doesn't assume technological breakthroughs, which could lower costs and improve storage capabilities that minimize blackout risks.

By the numbers: Right now America’s electricity mix is mostly gas and coal (63%) and about 17% renewable sources. This includes 6.5% wind, 2.3% solar and 7% hydropower.

Where it stands: The chart above illustrates steep declines in wind and solar costs compared to natural gas and coal. The visualized renewable costs exclude federal tax credits (they’re even cheaper with them).

Why you'll hear about this again: There's an ongoing fight between advocates who argue a 100% renewable grid would be affordable and stable, and those who say other resources — including nuclear and gas with CO2 capture — should be on the table.

Read more

2. A case for CO2 taxes over regulations
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Data: Knittel, 2019; Chart: Harry Stevens/Axios

Even "modest" carbon taxes, like those seen in the chart above, would cut emissions as much as the Obama-era vehicle and power plant rules that President Trump is abandoning, an MIT economist finds in a new working paper.

Why it matters: The results "underscore the economic power of a carbon tax" compared to "economically inefficient" regulations, writes Christopher Knittel, who directs the MIT Center for Energy and Environmental Policy Research.

The big picture: The pro-tax argument arrives as Democratic 2020 hopefuls are tossing around plans to revive and toughen Obama-era initiatives, while lawmakers from both parties have recently floated CO2 tax bills.

Driving the news: The new paper attempts to calculate what level of taxes on CO2 or greenhouses gases more broadly would provide emissions cuts equivalent to these 3 major policies combined...

  • Auto mileage standards imposed by the Obama administration.
  • President Obama's Clean Power Plan for electricity (which never took effect).
  • A 2007 law that expanded the national biofuels mandate.

But, but, but: Carbon taxes have very little traction among Republican lawmakers despite a few members' recent efforts.

  • And they've got limited cachet among progressive climate activists these days, at least as a primary weapon against global warming.
  • Leading Democratic contenders — even the ones who support carbon pricing or are open to it — aren't emphasizing them either.

Of note: The paper is limited in scope. It's exploring emissions cuts that are too small to deeply decarbonize the U.S. economy, or even achieve the U.S. goals under the Paris agreement.

  • As the Rhodium Group consultancy has noted in the past, even the wider suite of Obama policies would not have met the Paris pledge his administration submitted of a 26%–28% cut in U.S. GHG emissions by 2025.
  • However, Knittel cautioned against inferring that extremely high taxes would be needed to achieve steep emissions cuts.
Bonus: More on the MIT paper

Meanwhile, Knittel tells Axios his short paper could help provide guidance to the next White House by encouraging them to explore recent Capitol Hill ideas.

  • “If a new administration were to come in, maybe their efforts should be focused on starting with one of these carbon tax proposals, rather than pushing on [mileage standards] and the Clean Power Plan,” he says.
  • More broadly, the paper acknowledges that carbon pricing has been "vilified" from the left and right (albeit for different reasons). The analysis "opens the door for building a consensus," the paper states.

What they're saying: "Showing that even a small carbon tax would have achieved larger emissions reductions than the Obama climate regulations is a useful exercise," said Noah Kaufman, a pro-carbon tax economist.

  • But, but, but: Kaufman, who is with Columbia University's Center on Global Energy Policy, believes the MIT working paper is "significantly overestimating the carbon taxes that would be needed to achieve these emissions outcomes."
3. Making sense of Texas power price spikes

Transformers at an electrical substation in Houston. Photo: George Rose/Getty Images

Axios Expert Voices contributor Joshua Rhodes explains why recent high electricity prices in Texas are a feature of the state's power market, not a bug.

Driving the news: Demand for air conditioning across Texas helped drive wholesale electricity prices to the market cap of $9,000/MWh earlier this week, testing both the grid's capacity and the public's response to price spikes under the state's wholesale electricity market.

The big picture: ERCOT, the grid operator for most of Texas, runs an “energy-only” market that pays power plants only when they produce energy, and not merely for being available to do so.

  • Many ERCOT plants thus rely on high-priced scarcity events to stay profitable in the otherwise low-cost grid, where prices are kept down by cheap natural gas prices and, to a lesser extent, renewables.

How it works: ERCOT boosts the wholesale market price when reserves are low, sending a market message that capacity is valuable. But this process has been criticized for not providing enough scarcity pricing to drive new investment across the electricity system.

  • The Public Utilities Commission of Texas responded this summer by accelerating the rate of price increases during high demand.
  • Undesirable as they may appear, these high seasonal prices are a crucial part of how energy-only markets work.

Where it stands: The grid has so far survived summer with no real damage, and the weather forecast promises near-term relief.

Read more

Rhodes is a senior energy system modeler at Vibrant Clean Energy and a research associate in the Webber Energy Group at UT Austin.

4. Following up: Ohio's new energy law

On Tuesday we covered new research on the health and emissions benefits of renewables in the Rust Belt — a story that noted Ohio's new law that cuts the state's requirements.

But, but, but: Ohio's GOP Lieutenant Gov. Jon Husted reached out to argue the law is an environmental win.

Real fast: It creates $150 million in annual subsidies in 2021-2027 that will keep 2 nuclear plants operating; aids 2 coal plants (1 in Ohio and 1 in Indiana); and, steers $20 million annually for 6 solar projects being developed in Ohio.

What they're saying: "We would have had a larger carbon footprint had the bill not passed. A substantially larger carbon footprint,” Husted tells me.

  • “If we hadn't passed the bill, all of that nuclear energy would have gone away, meaning that it would have been replaced by essentially gas power plants," he says.
  • He adds that it enables more in-state solar because the existing system has supported out-of-state projects via its crediting system.
  • “I believe it will be higher in terms of what’s actually built in Ohio.”

The other side: Interests ranging from environmentalists to the oil-and-gas industry opposed the bill. This Vox story lays out the lines of attack.

Go deeper: Nuclear bailout bill passes Ohio legislature, signed by Gov. Mike DeWine (