New York Climate Act: Cost Estimate Sleight of Hand

Roger Caiazza

The major concerns for any net-zero transition program are the effects on reliability and affordability.  On March 25, 2022 an article of mine was posted: New York Climate Act: What the Experts are Saying Now that explained why the experts responsible for the reliability of the New York electric grid are concerned about the mandated transition to a “zero-emissions” electric grid by 2040. This post addresses affordability showing that the costs presented in the plan for the transition are mis-leading at best.

Background

New York’s Climate Leadership and Community Protection Act (Climate Act) was passed in 2019 and became effective on 1/1/2020. The Climate Action Council has been working since then to develop plans to implement the Act.  Over the summer of 2021 the New York State Energy Research & Development Authority (NYSERDA) and its consultant Energy + Environmental Economics (E3) prepared an Integration Analysis to “estimate the economy-wide benefits, costs, and GHG emissions reductions associated with pathways that achieve the Climate Act GHG emission limits and carbon neutrality goal”. Three Integration Analysis implementation strategies were incorporated into the Draft Scoping Plan when it was released for public comment at the end of 2021.  These scenarios include different policy options to meet and exceed the Climate Act targets. 

My last post highlighted results shown in a draft presentation at a New York Independent System Operator (NYISO) meeting about an analysis being done to project the amount and type of generating capacity needed to transition the New York electric grid to “zero-emissions” by 2040.  The experts at the meeting are concerned because “Some scenarios do not represent realistic system performance” and the total projected wind, solar, energy storage and “dispatchable emissions-free resources” capacity additions projected are on the order of double the total current capacity.   The 2021-2030 Comprehensive Reliability Plan report concludes “While there are hundreds of projects in the NYISO interconnection queue, there are none that would be capable of providing dispatchable emission-free resources that could perform on a multi-day period to maintain bulk power system reliability. Such resources are not yet widely commercially available.”   That resource alone is greater than the total existing capacity so there certainly are reliability concerns.

A couple of weeks ago I posted an article on my blog showing an egregious example of hiding the true costs of the Scoping Plan. While I was drafting an overview presentation on the Draft Scoping Plan for my state Senator, I took another look at information supporting the assertion that the “cost of inaction exceeds the cost of action by more than $90 billion”.  I realized my concerns with the cost projections could be more clearly explained using the figures in Draft Scoping Plan Appendix G: Integration Analysis Technical Supplement Section I (Appendix G).  This post is the result.

Benefits and Costs Summary

Appendix G Figure 51. Net Present Value of Benefits and Costs relative to Reference Case, Including GHG benefits, Health Benefits, and Net Direct Costs (2020 – 2050) on page 69 is the primary documentation for the assertion that the “cost of inaction exceeds the cost of action by more than $90 billion”.  Note that three scenarios are shown: “Strategic use of low carbon fuels”, “Accelerated transition away from combustion”, and “Beyond 85% Reductions”.  This net-zero program plans to reduce greenhouse gas emissions by 85% and then offset the remaining 15% to get to “net-zero”. The $90 billion number is the net benefit difference between the net system costs and the total benefits.  My first impression was that these numbers represented the total costs for New York State to meet the net-zero mandate.  I should have known better. 

Unpacking the title: the numbers are the “net present values”.  According to the Draft Scoping Plan

the integration analysis included calculations for three cost metrics: net present value (NPV) of net direct costs, annual net direct costs, and system expenditures.  The Plan defines NPV of Net Direct Costs as the levelized costs in a given scenario incremental to the Reference Case from 2020 through 2050 using a discount rate of 3.6% and including incremental direct capital, investment, operating expenses, and fuel expenditures.  The annual Net Direct Costs are defined as the levelized costs in a given scenario incremental to the Reference Case for a single year snapshot and include incremental direct capital

investment, operating expenses, and fuel expenditures.  I don’t have the background to comment on the impact of these definitions relative to the acceptability of the projections. 

System Expenditures

System Expenditures are defined as an estimate of absolute direct costs (not relative to the Reference Case) and do not reflect direct costs in some sectors that are represented with incremental costs only. Appendix G Figure 48, New Present Value of System Expenditures in Reference Case and Scenarios 2-4 (2020-2050) shown below describes these costs.  

An important aside: the Climate Act requires the Climate Action Council to “[e]valuate, using the best available economic models, emission estimation techniques and other scientific methods, the total potential costs and potential economic and non-economic benefits of the plan for reducing greenhouse gases, and make such evaluation publicly available” in the Scoping Plan.   This figure and the others included represent most of the cost documentation.  For example, the component costs in the reference case in this figure are not included in any supporting documentation.  There are spreadsheets that document other figures in the Draft Scoping Plan with the data tables used to generate the figures but I have been unable to find this information for any of the cost figures.  I submit that the Council has not fulfilled this requirement.

Figure 51 notes that the values listed are relative to the Reference Case.  Figure 48 is important because other than a text mention that the Reference Case is $2.7 trillion, it is the only documentation for Reference Case values.  It looks like the scenarios are all approximately $3 trillion consistent with the difference relative to the Reference Case ~$300 billion costs in Figure 51. 

In my recent article looking at this issue I described what was included in the Reference Case.  I searched the Draft Scoping Plan and the technical supplements for the phrase “Reference Case” for the analysis.  The best description of the Reference Case contents was in Appendix G, Section I on page 12 in a footnote for Figure 4: Gross Greenhouse Gas Emissions by Mitigation Scenario:

The Reference Case is used for evaluating incremental societal costs and benefits of GHG emissions mitigation. The Reference Case includes a business as usual forecast plus implemented policies, including but not limited to federal appliance standards, energy efficiency achieved by funded programs (Housing and Community Renewal, New York Power Authority, Department of Public Service, Long Island Power Authority, NYSERDA Clean Energy Fund), funded building electrification, national Corporate Average Fuel Economy standards, a statewide Zero-emission vehicle mandate, and a statewide Clean Energy Standard including technology carveouts. For more details see Chapter 5.3.

If the documentation included a cost component breakdown that would enable readers to determine whether the reference case is a reasonable estimate of the costs without the Climate Act.  In my opinion many of those programs should not be in the Reference Case.  Looking at the bar chart the four biggest cost components are electricity, transportation investment, buildings investment and fossil liquids.  Note that the transportation investment (~700 billion) does not vary much between the four bars.  Keep that in mind.

Costs Relative to Reference Case

Appendix G Figure 47 lists the NPV of net direct costs relative to the reference case.  This illustrates what is meant by the net direct costs label.  In each of the mitigation scenarios there are avoided fossil fuel expenditures that are subtracted from the total costs of the implementation strategies to get the ~$300 billion net direct costs. 

Note that the transportation investments listed are no more than $30 billion for the scenario, Beyond 85%”, with the highest costs.  My original impression of Figure 51 was that it represented all the costs necessary for New York to get to net-zero.  Clearly $30 billion is nowhere near the cost to replace all the approximately 10 million vehicles in New York with electric vehicles that use batteries or fuel cells even if the cost differential was $3,000.  The total cost has to be higher to include the cost for personal electric charging stations or public electric chargers, at least. 

I think that the true cost to electrify New York transportation is shown in Figure 48.  The system expenditures listed suggest the transportation investment component cost is around $700 billion which makes more sense.  The justification to put those costs in the Reference case is a bit of semantic sleight of hand based on the footnote that says that the Reference Case includes a “business as usual forecast plus implemented policies”.  It is true that New York passed legislation setting a goal for all new passenger cars and trucks sold in New York State to be zero-emissions by 2035 in April 2021 so the Scoping Plan is consistent with the only explanation of the Reference Case components.

However, suggesting that this “implemented policy” should not be included in the Climate Act implementation costs is disingenuous. The press release announcing that the Governor signed the legislation states: “The actions announced today in advance of Climate Week 2021 support New York’s ambitious goal of reducing greenhouse gas emissions by 85 percent by 2050, as outlined in the Climate Leadership and Community Protection Act.”  It goes on to quote Governor Hochul: “New York is implementing the nation’s most aggressive plan to reduce the greenhouse gas emissions affecting our climate and to reach our ambitious goals, we must reduce emissions from the transportation sector, currently the largest source of the state’s climate pollution”.  I think that these statements pretty well represent any dispassionate observer’s belief that the only reason for the law is to support the Climate Act.  As such those are not legitimate Reference Cases costs.

Conclusion

The major concerns for any net-zero transition program should be the effects on reliability and affordability.  It is not in the best interests of society to implement a policy that does more harm than good.  Ultimately the underlying problem for the Texas Energy Debacle of February 2021 was poor reliability planning. As mentioned here, the rush to implement an energy policy that depends on a non-existent dispatchable emissions-free resources technology surely increases the possibility of a similar blackout in New York.  This post shows that the total costs for the New York energy system (2020-2050) are on the order of $3 trillion but that the costs attributable to the Climate Act are subject to interpretation. The affordability comparison of costs and benefits is strongly affected by that interpretation.

Appendix G Figure 51: Net Present Value of Benefits and Costs relative to Reference Case shows that costs relative to the Reference Case are on the order of $300 billion and that benefits are on the order of $400 billion to justify the claim that the “cost of inaction exceeds the cost of action by more than $90 billion”.  The Draft Scoping Plan claimed that vehicle electrification costs should be included in the Reference Case because the electric vehicle legislative mandate was an “implemented policy”.  However, the $700 billion costs to electrify the transportation investment component of Figure 48 system expenditures are a necessary cost for the net-zero transition and should not be included in the Reference Case.  Clearly those costs are a necessary transition expense.  If those costs are moved from the Reference Case to the mitigation scenarios where they belong, the costs are much greater than the benefits.

The Draft Scoping Plan was written to prove the desired conclusion that the benefits were greater than the costs.  In order to make that case both benefits and cost estimates have been perverted.  I have shown elsewhere that the benefits are uniformly exaggerated and the largest benefit is dependent upon an incorrect application of the social cost of carbon.  The cost estimates are inadequately documented and, as shown here, a semantic trick was used to claim that the cost to de-carbonize transportation was claimed to be “business as usual” because the electric vehicle conversion legislation was already “implemented”.

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Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York.  More details on the Climate Leadership & Community Protection Act are available here. This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.

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Tom Halla
March 26, 2022 6:13 pm

So New York claims that that if they get the feds fo mandate the expensive parts of their mandate, those costs for electric cars and such do not count?

Reply to  Tom Halla
March 26, 2022 7:15 pm

Embarrasingly yes

Michael Elliott
Reply to  Roger Caiazza
March 26, 2022 8:07 pm

We still have just one Atmosphere.

Anything that the West does is swamped by the so called “Undeveloped Countries Emissions.

So why do we produce such complex plans.

It is just Virtie Signilling.

Look at me, I am greener than you.

Michael VK5 ELL

Reply to  Michael Elliott
March 27, 2022 3:31 am

Incredibly expensive, and disruptive, so not just virtue signaling.

Reply to  Roger Caiazza
March 27, 2022 3:32 am

A truly amazing deception!

MarkW
Reply to  Roger Caiazza
March 27, 2022 8:06 am

That does seem to fit the left wing philosophy. Anything paid for by other people is considered free.

Paul Johnson
March 26, 2022 8:37 pm

At the rate “health benefits” are accumulating, healthcare in America will soon reach zero cost.

Old.George
Reply to  Paul Johnson
March 27, 2022 7:51 am

Zero cost to the consumer due to government subsidy? Government subsidy is funded mainly by the working poor through upper middle class through taxes and inflation. The retiring boomer class has medicare. The abjectly poor, medicaid.
Inflation is caused by spending more than taxes collected.

MarkW
Reply to  Old.George
March 27, 2022 8:09 am

The bottom 57% of households when ranked by income, pay no income taxes at all.

Bob
March 26, 2022 9:09 pm

“I think that these statements pretty well represent any dispassionate observer’s belief that the only reason for the law is to support the Climate Act. As such those are not legitimate Reference Cases costs.”

This whole thing is just so much nonsense it takes my breath away. The above quote is all you need to know about this mess. The take away is (the only reason for the law is the Climate Act. As such those are not legitimate Reference Cases costs.) We are asked to accept a useless, harmful and expensive law that can’t do anything to change climate and are expected to buy the lie that it comes with benefits. The only thing these knuckleheads should be doing is proving beyond a doubt that there are costs for not doing anything. These people make me sick.

Chris Hanley
March 26, 2022 9:38 pm

… the only reason for the law is to support the Climate Act …

However at the same time as ‘scoping’ the net costs of wind and solar the nuclear plant at Indian Point is shutting down with no plans for replacement.
To 2019 no-emission nuclear was supplying around 30% of NY State electricity generation.
It follows that either the ‘scoping plans’ are not about supposed climate change or the Climate Act itself is not really about supposed climate change.

… maintain bulk power system reliability. Such resources are not yet widely commercially available …

Precisely, how can they cost non-existent technology?

commieBob
Reply to  Chris Hanley
March 26, 2022 10:00 pm

They fervently believe we will achieve the breakthroughs that will enable their renewable energy dreams to come true. They don’t believe that largely incremental technological improvement will offset any (illusory) problems due to warming.

Incremental improvements are a given. Breakthroughs … well, don’t bet the farm the ones you want will happen.

People look at computers and assume that all technology improves in a similar manner. Well, Eroom’s Law is much more likely than Moore’s law.

observa
Reply to  Chris Hanley
March 26, 2022 11:09 pm

Lots of scoping going on but Australia’s largest gas producers simply ask the hard question-
Oil giants under scrutiny as climate pressure intensifies (msn.com)
Do you want the lights on or not stoopids?

Dave Fair
Reply to  observa
March 27, 2022 2:54 pm

That article presages massive stockholder lawsuits. Invest in oil and gas companies and management ruins returns by going off-message. Hell of a business plan.

Graham
Reply to  Chris Hanley
March 27, 2022 12:59 am

If there really was a problem why not double the Nuclear generation in the state of New York?
Problem solved 60% base generation from non carbon fuel .

Ken
March 26, 2022 11:18 pm

The ‘costs and benefits’ analysis is a charade!
Any realistic appraisal of a push for NET ZERO would be hard put to identify any real benefits:
GHG reduction benefits – RUBBISH! CO2 is not a problem in any case.
Health benefits? How the hell can one identify any heath benefits in such a proposal.

The only ones who are likely to benefit are the rent seekers harvesting subsidies paid for by taxpayers.

Megs
Reply to  Ken
March 27, 2022 12:02 am

And if CO2 was a problem they would have to put forward honest audits to prove the ‘savings’. Cost and CO2 savings. But then they harmoginise everything these days, as though that’s a thing. Used to be called creative accounting.

We know there aren’t any real benefits regarding renewables.

Rod Evans
March 27, 2022 12:18 am

Here in the Saudi Arabia of wind power generation, the UKs entire fleet of wind turbines, those on shore and off, amounting to some 25GW is producing 1.3 GW as I type. That is what happens government agents place all the state energy investment, i.e. peoples taxes, in an intermittent energy option.
The bitter truth about Net Zero programs is. They do not deliver energy reliability.
The only thing Net Zero can guarantee is, it will achieve a Net Zero economy poverty and an ongoing zero impact on climate.

Graham
Reply to  Rod Evans
March 27, 2022 1:27 am

We have a bunch of crazies in government in New Zealand .
They will stop any hydro schemes or irrigation dams on our rivers but the woman minister in charge was touting a pumped hydro scheme in the South Island to a lake at a reasonable altitude to make use of the solar and wind surplus power .It will flood a lot of farmland but that is OK she says .
Dumber than dumb .
Why generate power to push water up hill to generate less power than what has taken to pump the water up .
Why not install more dams on existing rivers .”Oh no we are against damming rivers “.
We have 8 hydro stations on the Waikato river and they are switched on and off as needed to balance fluctuating generation from wind and solar and at night time .
The hydro lakes act the same as a massive battery storage installation.
We have plenty of gorges that can be dammed and the lakes behind the dams will not flood very much farm- able land .
In our district 2 schemes have been stopped by the greens and an irrigation dam was scuttled in the Hawkes Bay which would have irrigated mostly orchards wineries and market gardens .

Rod Evans
Reply to  Graham
March 27, 2022 2:22 am

Graham,
I love NZ and have watched in horror as the freedoms once enjoyed by Kiwis disappear, bit by bit..
My last visit in 2019 was revealing. The rate of state control over the basic freedoms /pleasures once typical of a country bigger than the UK but with only 4 million residents was frightening.
The green blob had landed. It was smothering the nation with Green New Deal propaganda. In a country, awash with more than enough thermal and hyrdo power to meet the nation’s needs. The greens were pushing for wind turbines to be erected in pristine landscapes to save the planet!
The saddest part of my last visit down under, was discovering Australia was not a safe option to run to either. They are even more Green Blobb fixated than NZ .
No one expected that to happen.

Graham
Reply to  Rod Evans
March 27, 2022 7:51 pm

Thanks Rod for those kind words.
I to love New Zealand as I was born hear 79 years ago and as you say we are loosing a lot of our freedoms .
I am still farming with family but the absolute nonsense of accounting for our carbon foot prints and many other regulations that make no sense to most farmers are a pain in the but.
The UNIPPC stated that countries should not jeopardize food production when taking action to curb carbon emissions .
This government does not care that New Zealand provides enough food for 30 million people in other countries .
They seem to want to take New Zealand back to the 1940s which I can remember very well .
I was brought up on a farm high up on the side of a mountain with 12 volt lighting run by a wind charger ,charging batteries for lights and a point for a radio ..
No power for a refrigerator or washing machine ..
A wood stove for cooking and an open wood fire for heating .
I remember snow falling each winter around the house but it soon melted.
A draught horse pulling a sledge was the tractor for distributing bags of fertilizer to spread by hand and to carry fencing materials and fire wood .
No carbon emissions except the fire wood.

Tekov Yahoser
Reply to  Graham
March 27, 2022 6:39 pm

It makes sense when you consider their unstated goal is scarce and expensive energy, which forestalls growth and thus Gaia is pleased.

2hotel9
March 27, 2022 4:43 am

Democrat Party did this so of course right has been perverted. They contaminate everything they touch.

Frank from NoVA
March 27, 2022 7:55 am

Roger,

The citizens of NY would be well advised to heed your concerns, but to the extent any might do so, they will be buried under an avalanche of pretty graphs and bogus analysis, courtesy of the ‘consultants’.

I maintain that the only way out of this mess is to undo the EPA’s endangerment finding. This will not happen until a future administration ‘red teams’ the bogus government-funded climate science and forces the recipients of that funding to either address the obvious holes in the science or retract their claims entirely.

Smart Rock
March 27, 2022 11:03 am

The Draft Scoping Plan was written to prove the desired conclusion that the benefits were greater than the costs

Thanks for the exposé Roger.

Manipulating “data” and “logic” to reach the desired conclusion is SOP in most of what passes for climate science these days. So it’s no surprise to see Climate Economics go down the same well-trodden path. In fact, given their obvious adherence to strategies that are self-evidently based on dogma rather than factual observation and analysis, they have no choice but to fabricate numbers and hide the fabrication in page after page of spurious (and intentionally mind-numbing) prose.

michel
March 27, 2022 1:13 pm

Roger,

Great piece. Very valuable indeed as a case history of why this project (and the similar ones in the UK and elsewhere) are simply impossible of achievement. Thanks!

Tekov Yahoser
March 27, 2022 6:36 pm

Pushaw! Full steam ahead New York! In fact, your timetable is slack, man!

Last edited 1 month ago by Tekov Yahoser
Bill S
March 28, 2022 2:00 am

A huge cost entirely ignored is the opportunity cost of the capital spent to implement the plan. I have not studied the plan in enough detail to know what the numbers are, but the concept is fundamental finance.

Warren Buffett today is worth about $125 billion. How did he get there? He started with investments of a couple of million dollars, and invested into assets that earn 20% annually over about 70 years. The important concepts that Buffet understands is the magic of compounding and the time value of money. He famously figured out that delaying a $20 haircut by a week over the same 70 years earned him an additional $350,000.

The same math works in reverse. New York State, and the US on a larger scale, plan to extract trillions in capital from the economy of NY, where ithat capital earns around 10% over any reasonable time period, and investing into wind and solar energy, which has a negative rate of return. The return is negative because the cost of power will be at least 3x the cost that it is today. Capital invested that creates a higher cost product has a negative rate of return by definition.

No one would intentionally sell a stock returning 10% and buy a stock losing 5% every year, and commit to this plan into the infinite future. Such a plan destroys wealth by the same math, losses are compounding and the time of value of money grows the loss exponentially. This is economically what NY is planning, and economically what the US is planning.

The outcome is mathematically certain, a much lower standard of living for everyone.

Last edited 1 month ago by Bill S
Paul Penrose
March 28, 2022 10:30 am

From what orifice did they pull that discount rate? Did they just use the current Risk-Free Rate? How is that in any way appropriate?

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