Written on: September 16, 2024 by Joe Uglietto
The march towards full electrification in the Northeast has been swift and steady over the past five to 10 years. States have leapfrogged one another in an attempt to adopt the most aggressive plans to become the “California of the East Coast.” However, the all-out push to “electrify everything” has begun to run up against real-world concerns that are leading to interesting outcomes and possible course corrections in even the most ambitious States.
Northeast and Mid-Atlantic States have been tasked with meeting their 2030 and 2050 greenhouse gas reduction goals and have been grappling with the question of how to best achieve these targets in the building sector. The answer in New York, Vermont and Massachusetts—with other States planning to follow their lead—has been to develop market-based regulatory programs that will bring about a transition for the heating fuels industry and require low-carbon fuels or the electrification of the building sector.
Alas, cracks are showing, and the economic realities of such a vast overhaul of the State energy infrastructures are coming to light. As the rulemaking process has progressed in the Massachusetts Clean Heat Standard, Vermont Clean Heat Standard and the New York Cap-and-Invest program, a number of issues have begun to crop up. Cost concerns, feasibility issues, grid pressure and other issues are making legislators and regulators—and even Governors—nervous about the impact of these programs on consumers.
Here’s what we’ve begun to see in the process:
New York
New York’s Cap-and-Invest Program (NYCI) is an economy-wide program that caps the amount of greenhouse gas emissions allowed in the State. The original plan was for NYCI to be implemented in 2025, but the State is behind in the regulatory process and the chances of delayed implementation become greater each day.
Additionally, cost concerns have fueled significant pushback from business associations and other opponents of the NYCI program. Those concerns have reached Governor Hochul’s office and she has recently shared those concerns. In a recent television interview, Governor Hochul said, “The costs have gone up so much I now have to say, ‘What is the cost on the typical New York family?’ The goals are still worthy. But we have to think about the collateral damage of these decisions. Either mitigate them or rethink them.”
Later she was quoted as saying, “I can’t do things without knowing the cost on consumers in either educating them that they believe this is the way to go because it’s good for the future … or making it go just a little bit slower.”
Cost concerns have been compounded by several reports that have questioned New York’s ability to meet its 2030 carbon reduction goals. The New York Public Service Commission released a Draft Report in July 2024 that stated the 70% renewables target in 2030 would not be met before 2033. A few weeks later, the New York State Comptroller, Thomas DiNapoli, released an audit stating that outdated data was used in the New York State Climate Leadership & Community Protection Act (CLCPA) projections and that the Public Service Commission had failed to estimate the costs of the transition to renewables and those costs would be placed on ratepayers. Following that report, the New York Independent System Operator (NYISO) warned that there were risks of blackouts in the next 10 years unless substantial new generation comes online.
It’s against this backdrop that Governor Hochul announced the Future Energy Economic Summit in Syracuse in September. This conference will explore how the State “can accelerate the deployment of dispatchable emissions-free resources that will be needed to bolster its notable and ongoing efforts to scale renewable energy” and will be important in determining the future of the NYCI program.
Massachusetts
In Massachusetts, we’ve already seen modifications to the draft Clean Heat Standard (CHS) and the targets that will dictate the compliance obligation for energy companies in the State. Initially, the MA Dept. of Environmental Protection (DEP) stated that the compliance obligation on fossil fuel retailers would be a 29% emissions reduction from 1990 levels in 2026 and a 49% emissions reduction from 1990 levels in 2030, aligning with the State goals. Due to public comments and concerns about the cost impact on consumers, the DEP rolled back the compliance obligation in its Draft Framework.
Currently, the Massachusetts CHS has a compliance obligation of 4% emissions reduction from 1990 levels in 2026 and a 16% emissions reduction in 2030. While the DEP has created a separate standard called the “Full-Electrification Standard”—which places an additional compliance obligation on energy companies to convert homes to heat pumps or purchase credits from those who do—the overall outcome of the modifications is a reduction in potential costs, both to energy companies and to consumers.
Vermont
The Vermont CHS is in the rulemaking process and is scheduled to be implemented in 2026, although it is certainly possible that this program could be pushed back.
Vermont’s CHS may have the same name as the Massachusetts CHS, but the design of the program is much different.
As of now, the Vermont CHS has a compliance obligation of 40% below 1990 levels by 2030; while Massachusetts has rolled back the compliance obligation in its CHS, Vermont has not done so.
When the CHS bill was being debated by legislators, Julie Moore, Agency of Natural Resources Commissioner, estimated the cost of the program would be $2 billion between 2026 and 2030. At the beginning of August, hired consultant NV5 released its preliminary findings and estimated the cost of the State’s CHS to be $7 billion between 2026 and 2030 and $17 billion between 2026 and 2050.
These cost estimates by NV5 have put pressure on the State and the people who are currently developing the CHS. Even though Vermont has adopted some of the most aggressive positions to attain full electrification, it would not be a shock if the realities of these program outcomes—increased costs, undue burdens on business, etc.—result in modifications or delays to the program.
Preparing for What Comes Next
While the modifications to these programs are welcome news, it is a virtual certainty that emissions-reducing programs will be put in place in some form in the coming months and years. There are plenty of ways for States to reduce the cost of these programs to consumers while still implementing programs that will change how companies in our industry are required to operate. Preparation is necessary, even if the ultimate program details are a moving target.
Here is what every company should be doing, especially those in States where a Clean Heat Standard or similar program is imminent:
Contact Joe at joe@diversifiedenergyspecialists.com.
Renewable Energy Insights is a regular column by Joe Uglietto, President of Diversified Energy Specialists, consultant to the industry with a focus on emissions reductions and renewable energy innovation. Visit: diversifiedenergyspecialists.com
