|by David T. Stevenson, Center for Energy & Environmental Policy|
NEWARK, DE – With only a month to go in the 2022 legislative session, the Governor of Delaware has sent a major bill to the General Assembly. The bill expands the carbon dioxide emissions (CO2) reduction goals from 26% by 2025 to 50% by 2030 and to 90% by 2050.
Additionally, the bill requires implementing programs to meet these new goals and implies that state agencies could do this through regulatory actions requiring no further input from the legislature. As explained below, this could lead to significant increases in consumer and business costs with limited impact on emissions.
A bill of this magnitude should have been introduced in January to allow time for full vetting, and legislative approval should be needed separately for any major policy changes going forward.
The key provisions are below:
§10003. Greenhouse Gas Emissions Reductions.
(a) The State shall reduce its statewide greenhouse gas emissions by not less than 50% by 2030 from a 2005 baseline (the “2030 Target”).
(b) The State shall reduce its statewide greenhouse gas emissions by not less than 90% by 2050 from a 2005 baseline (the “2050 Target”).
(c) The State shall implement programs necessary to achieve the 2030 Target and the 2050 Target of economy-wide gross greenhouse gas emissions reductions.
The 2025 target will likely be met, sort of.
Emission reductions have come primarily from reductions in emissions from in-state coal and natural gas-fired electric generators driven by an emission tax on the generators. The tax is known as the Regional Greenhouse Gas Initiative (RGGI), which requires generators to buy emission allowances for each ton of carbon dioxide released.
Unfortunately, the RGGI policy just raised the cost for Delaware power plants and shifted electric generation to coal and natural gas plants in other states, so global emissions didn’t fall. Consultants for RGGI, Inc. have shown the tax cost raises the average competitive bid price throughout the thirteen-state regional grid.
So, the cost gets passed onto every electric customer in the region and shows up as a hidden tax on electric bills. For instance, an electric utility in Virginia is passing the tax cost onto its customers as a line item on electric bills and will raise residential rates by about $80/year.
Meeting the higher emission reduction targets will require new policies that may be equally ineffective but cost a lot more.
Three costly and intrusive candidate policies (mentioned below) are already being considered in the 2021 Delaware Climate Action Plan:
1.) Delaware’s Governor Carney made an executive decision to join California’s Advanced Clean Car II plan. The plan forces auto dealers to meet 35% of their sales with Zero Emissions Vehicles, which currently means electric vehicles (EVs), increasing each year to 100% in 2035, when gasoline and diesel-powered vehicle sales will be effectively banned.
2.) A second policy is being reviewed by DNREC right now to force electric customers to subsidize a major offshore wind project.
3.) The current Climate Action Plan adopted by executive action late last year would eventually ban the use of natural gas and propane in homes and buildings. This means no more indoor cooking or heating with gas.
Many people prefer gas for cooking, and electric heat pumps with gas backup are the most efficient way to heat a home in Delaware. However, the electric portion begins to become inefficient when outside temperatures go below 40 degrees and don’t work at all below about 30 degrees, so gas is needed.
The Caesar Rodney Institute has written full reports on the problems with offshore wind and EVs. Below is a summary with links to the full reports:
Offshore Wind (University of Delaware research paper on offshore wind costs gets an “F.”; US Offshore Wind Jobs are Highly Exaggerated). The US Energy Information Agency (EIA) projects new onshore wind, solar, and natural gas plants coming on line in 2027 are expected to produce power for $36.49 to $40.23/megawatt-hour, about the same as the current wholesale power cost from our existing regional grid. EIA projects offshore wind power will cost $136.51, about 3.5 times as much. The recently approved Skipjack 2 project is subsidized by Maryland (but off Delaware beaches) and will cost about $180/megawatt-hour, about five times as much as solar. A Delaware subsidized project of similar size could add $400 to $545 a year to residential electric bills and up to hundreds of thousands a year to some businesses. The developer reports Skipjack 2 will create 25 permanent jobs. Higher electric rates could cost electric customers $410 million a year, or $4.4 billion over twenty years, with a 7% discount factor. Diverting that money from spending on other needs could end 5,000 permanent jobs elsewhere in the economy and could harm tourism, the largest contributor to our state’s economy. Our recent review of a 30% increase of wind and solar power in the PJM grid from 2019 to 2021 led to no reduced emissions (study to be released soon). Even replacing generation at the current PJM systems mix will only save 1.4 million tons of carbon dioxide a year and could cost $293/ton for each ton saved. For comparison, the RGGI tax is currently $13.50/ton, and President Biden’s Executive Order on the value of reduced CO2 only estimated a value of $51/ton. Dominion Energy just increased its forecast for the total cost of an offshore wind project by 25% based on rising material and labor costs. So, forecasts of lower future costs are unlikely to materialize.
Electric Vehicles (Electric Vehicles v. Internal Combustion Engines). Second, to Tesla in sales, the all-electric powered Chevy Bolt has a base price of $31,500 and is comparable to the internal combustion engine-powered Honda Fit at $17,185, a $14,315 premium. The Bolt battery is guaranteed for eight years, or 100,000 miles, and has a published replacement cost of $15,734, excluding labor. A cradle-to-grave comparison in carbon dioxide emissions between the Bolt and the Fit in the PJM regional electric transmission area shows the Bolt may save between zero and 6 tons of emissions over an 8-year life. The initial cost premium is barely reduced by fuel and maintenance savings when extra finance payments, higher registration fees, and lower trade-in values are considered. It is unlikely anyone will buy a used Bolt facing that replacement cost. The lifetime cost of the Bolt may be $14,987 more than the Fit, so the best result would cost $2,498/ton of emissions saved. The worst result is a real possibility there will be little or zero-emissions savings. The price differential for the Bolt is driven by battery costs which have been rising significantly because of the rising cost of key minerals used in construction. Dreams of lower battery costs appear to be misplaced.
Establishing significantly higher CO2 emission reduction goals along with an indeterminate authority granted to the Executive Branch to implement potentially expensive enforcement policies without legislative review and approval is a risky idea. Likely policy adoption may include bans on natural gas and propane now effectively used for preferred home heating, cooking, and heating water; a ban on gasoline and diesel-fueled motor vehicles; and requiring state-subsidized offshore wind. If this bill gets passed, Delawareans’ electric rates may rise from $400 to $545 a year, motor vehicle prices could almost double, and our homes would be less comfortable. There are 17 more action items in the Delaware 2021 Climate Action Plan, which include no Benefit-Cost Analysis. These outcomes would hurt lower-income households the most, foiling state Environmental Justice priorities. The next Climate Action Plan update is not required in this Act until December 31, 2025.
We have to ask, what is the rush to approve this bill in the waning days of this legislative session with so many potentially serious policy implications?