Hidden Link

June 25, 2024

By Bruce Mohl

One section of the Senate climate bill, scheduled for debate today on Beacon Hill, attempts to solve two of the biggest challenges facing clear energy development in New England – how to pick up the pace and how to incorporate state procurements into the existing wholesale market for electricity.

It’s admittedly an esoteric subject, but one that has bedeviled energy planners across the region.

Sen. Michael Barrett of Lexington, the point person on climate issues in the Senate, said the Healey administration brought him the idea. The senator said the proposal is essentially a new business model for developing clean energy, one that does away with the current plodding procurement process involving the Legislature and utilities and instead gives the governor near-total control.

While some energy industry officials are raising concerns about giving the governor too much power, Barrett said he is intrigued by the idea. “Our job is to set policy, not to micromanage specific procurements,” the senator said.

The administration’s proposal dramatically changes how clean energy is procured. Currently, each procurement needs approval from the Legislature and is carried out by the executive branch with the help of the state’s utilities. The process can be long and cumbersome. The current procurement for offshore wind, for example, started nearly a year ago and won’t wrap up until the end of this year.

Healey administration officials say the state needs to pick up the pace dramatically if it is going to meet its emission targets for 2030 and beyond. The officials also say more flexibility is needed to take advantage of market shifts – purchasing more clean energy when the pricing environment is advantageous and less when it is not.

The Senate proposal would also change what is procured. Most electricity used in New England is bought and sold via wholesale energy markets overseen by the operator of the region’s power grid. The wholesale markets have not done a good job of incentivizing the development of clean energy, so states, struggling to meet emission targets, have sidestepped the markets and contracted directly with clean energy developers.

Massachusetts, for example, has signed long-term contracts for offshore wind and hydro-electricity from Quebec with electricity ratepayers picking up the tab. The contracts are orchestrated by the administration, but negotiated by the state’s utilities and carried on their books. For that, the utilities receive 2.5 percent of the contract value, which adds up to millions of dollars.

The approach is disruptive to the wholesale markets because the clean energy developers, unlike other power generators, are being paid directly by electricity ratepayers and don’t have to rely on the markets to cover their costs.

Healey administration officials say the Senate proposal would scrap the existing procurement process and replace it with a system where the state would only purchase the environmental attributes of a clean energy project and not the electricity itself. The electricity would be sold through the wholesale markets, making that system stronger. Payments to utilities for carrying energy contracts on their books could also be dispensed with.

Environmental attributes are basically certificates that provide proof of clean energy production. They help subsidize clean energy projects because developers can sell them to retail electricity suppliers, who are required by state law to obtain a steadily increasing amount of them.

Dan Dolan, the head of the New England Power Generators Association, said his reading of the Senate bill suggests the changes being sought by the Healey administration would give the executive branch carte balance to centrally procure almost any type of energy, which could undermine the wholesale markets. He has called for the provision to be stricken and studied more thoroughly.

After hearing details about the proposal from CommonWealth Beacon, Dolan said he was intrigued by the approach to focus only on the purchase of environmental attributes. Still, he said, the language of the bill needs to be cleaned up.