Pennsylvania, SCOTUS push RGGI back into focus
The Regional Greenhouse Gas Initiative (RGGI) has been back in the news as of late, as Pennsylvania withdraws (again) from the program, citing higher electricity costs. Electricity costs have been a growing issue of concern for voters as we’ve seen in the last two cycles (both Presidential and Midterms), as changing economic realities put consumer goods and services under the spotlight.
Blame for increasingly burdensome electricity prices gets attributed to wildly different causes, unsurprisingly, along party lines. The current takes are that data centers and their inordinate use of power are driving up demand and thus costs for consumers ultimately (from the left), or that climate initiatives, regulatory burdens, and the lack of infrastructure including closing existing plants and shutting down pipeline proposals for new sources of energy to plants (from the right). The truth is, as usual, a combination of the two, where inordinate new demand from data centers is running into a lack of infrastructure to meet the new demands and driving costs through the roof for the consumer at the end of the equation.
What’s that got to do with the RGGI? The RGGI is a cooperative program of several states in the Northeast and Mid-Atlantic that attempts to reduce greenhouse gasses by capping CO2 emissions from fossil fueled power plants. It does so through a series of regulatory caps, which proponents like the State of MA (on their website) consider a “market incentive instead of top-down legislation to combat climate change” but opponents consider a cap and tax system being imposed. Massachusetts joined the RGGI under the Green Communities Act in 2008.
The “cap and invest” setup of the RGGI is that participant States set limits on CO2 emissions, and then the power plants impacted purchase allowances at RGGI auctions to equal their emissions. Those allowances are then sold, and the proceeds are invested into green initiatives like clean transportation, energy efficiency projects, and other related programs in the local community.
Since its inception, the program is credited with dropping emissions in participating states by around 46% and creating a net economic benefit of $4.7 billion from 2009 to 2017. However, the initiative has also resulted in wholesale electricity price increases of between 4.5 and 6.7$ per MWh within the PJM footprint (Northeastern and eastern portions).
Pennsylvania’s withdrawal is part of a budget deal in the State that would withdraw them. The RGGI is currently tied up in the Supreme Court as to whether the levy the RGGI imposes on power producers counts as a fee (legal) or a tax (illegal). Governor Shapiro of PA is seeking to replace the RGGI by establishing a “lightning plan” – essentially a state version of a cab and invest system, that includes credits for adding carbon free energy sources to the grid (ie hydrogen, sustainable aviation fuel, etc) that would apply across several years, per facility added. Advocates argue the Lightning Plan would be critical to keep clean energy goals in mind and on track going forward, but critics cite that subsidizing green energy sources and funding rebates means electricity rates for consumers should still be expected to climb, which means withdrawal from the RGGI would fail to accomplish the goal of preventing skyrocketing rates.
Other Northeastern States are grappling with electricity costs and it will be interesting to see the ripple effects of PA’s withdrawal, as well as what avenues are explored for relieving consumer utility pain.
