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E3 releases study that examines ‘least-cost’ and ‘least-regrets’ path to decarbonizing PJM

As policymakers and utilities set increasingly ambitious targets for clean energy procurement, they have begun to reshape the grid with important implications for grid operators across the continent.

In a new study released yesterday, consulting firm Energy and Environmental Economics (E3) examines a variety of policy options to help the region served by the largest of those grid operators, the Pennsylvania-Jersey-Maryland (PJM) Interconnection system, cost-effectively achieve long-term decarbonization. 

The group says that the region is currently governed by a hodgepodge of different state and municipal clean energy targets, which so far have been effective at bringing renewable energy to the region but at elevated prices, says E3.

E3’s study concludes that PJM’s diverse resource mix and geographic reach can provide substantial opportunities for low cost decarbonization by pursuing market-based policies such as carbon pricing instead of continuing to rely on fragmented and restrictive clean energy policies and subsidies. According to E3 Senior Partner Arne Olson, “Our study of decarbonization policies in the PJM region finds that the most effective policies are ones that maximize market participants’ choices and leverage diversity across the PJM footprint.”  

Another key finding of the report is that a region-wide Clean Energy Standard can approach the efficiency of a carbon pricing system. For example, extending the Regional Greenhouse Gas Initiative (RGGI) to the entire PJM region would add little cost compared to the current footprint but would reduce annual CO2 emissions by almost 100 MMT by 2030, said E3. However, applying carbon pricing to only part of the PJM footprint could result in both higher costs and higher carbon emissions.

According to the Center for Climate and Energy Solutions, ten states are member of RGGI: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey (withdrew in 2012, rejoined in 2020), New York, Rhode Island, and Vermont. Virginia is scheduled to join RGGI starting in 2021. In 2019, Pennsylvania Gov. Tom Wolf directed the state’s Department of Environmental Protection to develop regulations for the state to join RGGI. The proposed regulation is expected by July 31, 2020.

E3 says this partial approach is detrimental to the PJM region. From the report:

Finally, the suite of currently approved energy policies in the region, which include a series of targeted investments in and mandates for specific resources (i.e. state RPS programs), as well as partial carbon pricing through RGGI, is found to have significant costs but limited effectiveness in reducing carbon emissions. The aggregate impact of these policiesis estimated to add $3 billion per year to electricity bills in the region by 2030, while reducing carbon emissions by only 40 million metric tons (MMT) relative to a policy-free “Reference Case.”

The last key finding of the E3 report is that 50-90 GW of firm capacity continue to be needed through 2050 even under 100% GHG reduction scenarios. 

The final report is available here