Testimony of Francis Pullaro, Executive Director, RENEW Northeast
Chairmen Barrett and Roy and members of the Committee,
My name is Francis Pullaro. I am the Executive Director of RENEW Northeast (RENEW), an association uniting environmental advocates and developers and operators of the region’s largest clean energy projects, which include hydro, offshore wind, land-based wind, solar and energy storage. RENEW’s mission involves coordinating the ideas and resources of its members with the goal of increasing environmentally sustainable energy generation in New England from the region’s abundant renewable energy resources.1
RENEW offers its deep appreciation to this Committee and Governor Baker for their bipartisan leadership over the past several years to grow the green economy and keep the Commonwealth on a trajectory to meet its commitments to reduce greenhouse gas emissions. This year’s adoption of An Act Creating a Next-Generation Roadmap for Massachusetts Climate Policy marks its most recent in a string of triumphs.
RENEW supports a “renewables first” strategy that couples a strong Renewable Portfolio Standard (RPS) backed by state procurements of cost-effective RPS and energy storage resources to provide:
- Price stability compared to volatile fossil fuel prices;
- Meet GWSA greenhouse (GHG) reduction requirements;
- Reduce power plant toxic emissions;
- Propel clean energy job growth; and
- Secure fuel diversity and increase reliability.
Renewable energy projects are providing Massachusetts with positive economic benefits to host communities including much needed new tax revenue. The stream of projects supports local construction and service jobs during development and new opportunities in operations and maintenance once projects are supplying clean energy.
New renewable resources are cost-effective. Competitive solicitations across the region continue to show wind and solar developers are providing renewable energy at prices that compare favorably to the projected long-term market prices of power and renewable energy certificates. We must also ensure the region’s original renewable energy resource- small hydropower- does not succumb to the economic pressures as other existing carbon frees resources like nuclear have and can continue to assist Massachusetts directly in achieving its requirements under the GWSA.
H.3269 An Act addressing Class II renewable energy credits
H.3311 An Act relative to hydro
These bills are important to support the region’s existing non-RPS small hydropower resources that face the same economic pressures from today’s low wholesale electricity prices. Small hydropower facilities are the region’s oldest carbon free energy resources. They have many of the same operations and maintenance costs as larger renewable energy facilities but with lower output to spread across the cost. Contracting opportunities and including more of the small hydropower portfolio as an eligible RPS resource can assist legacy hydropower remain economic.
In bringing re-licensed small hydro into Class I RPS alongside new, H.3311 recognizes how relicensing requires significant community consultation, costly studies and often capital investment and operational changes to ensure operation at the latest environmental standards, much like a new facility. H.3269 also takes an important step to assist legacy renewables resources not eligible for Class I of the RPS. While the increase to 3.8 percent is probably low when considering potential supply, it is a step in the right direction to ensure the program maintains its goal of adequately supporting existing small-scale hydro that is increasingly more valuable to states given expanding carbon reduction requirements and to operators due to low energy and capacity market prices.
Energy Storage Bills
H.3314 An Act relative to enhancing reliability of renewable resources in the Commonwealth
S.2155 An Act relative to enhancing reliability of renewable resources in the Commonwealth
S.2220 An Act relative to energy storage procurement for 2030 and 2035
These bills seek to establish an energy storage target in Massachusetts as neighboring states like New York and Connecticut have recently done. Targets should be set at a level to foster development and usage of new and existing energy storage systems and renewable energy facilities that can lower peak emissions according to goals set by the GWSA and reduce costs arising from fossil fueled generation units running during peak hours. By accelerating the switch from fossil fuels to energy storage at peak times, we can reduce emissions and improve the environment. Further, recent wholesale electricity auctions have shown that battery energy storage is among the least cost of new resource technologies – which is a win for consumers.
While several years ago the General Court enacted the Clean Peak Standard, the Department of Energy Resource’s (DOER) recently finalized design for the procurement component of the program relies on a tariff-based approach which will exclude the larger, least-expensive projects and consequently harm ratepayers through higher procurement costs for Clean Peak certificates. DOER’s proposal will limit annual procurements of energy storage to about 25 to 50 megawatts per year in each of the two largest utility service territories. By contrast, today, one battery energy storage project can be several hundred megawatts. For financing, developers of these large projects need contractual commitments up front and cannot bid only a portion of the project into a Clean Peak solicitation. This could be remedied by an improved procurement design from DOER, potentially one that does not rely on tariffs and instead utilizes a more typical RFP contracting approach. Without a remedy, the Clean Peak procurements are not likely to encourage growth of the storage industry in Massachusetts.
RENEW opposes the provision in S.2220 for utility ownership of storage. States like New York have determined energy storage resources are provided more cost-effectively by private developers on a competitive basis rather than by utilities through guaranteed rate-of-return regulation. Massachusetts should follow suit and require that any utility ownership of energy storage should be limited to small distribution systems and a utility should have to demonstrate that alternatives from competitive developers are, in the words of the New York commission, “clearly inadequate or more costly than a traditional utility infrastructure alternative.”
The New York Public Service Commission recently concluded that “competitive ownership of energy storage assets . . . is a core principle and the existing limitations on utility ownership of energy storage should be maintained if possible.” A competitively developed project that is willing to cap the total cost exposure to consumers will ultimately be more beneficial to customers than a project that retains the ability to seek recovery of all costs, including any overruns, without limitation.
Massachusetts’ long-standing pro-competition law enacted over twenty years ago was based on the principle that private investors have a greater incentive to lower costs than utilities under cost-of-service regulation and they and their shareholders and not consumers should bear the risks of generation ownership.
Offshore Wind Bills
H.3302 An Act to promote offshore wind energy and renewables
H.3310 An Act to provide for the investment in and expansion of the offshore wind industry in the Commonwealth
S.2154 An Act to provide for the investment in and expansion of the offshore wind industry in the Commonwealth
S.2158 An Act to create offshore clean energy and new renewable jobs
Bid Evaluation Committee
Offshore wind solicitations today use an evaluation team that consists of the electric distribution companies (EDCs) and DOER that are responsible for bid review and project selection. RENEW prefers models in which a state energy agency alone selects winning bids without an EDC decision-making role in project selection to eliminate the appearance of any conflicts of interest with several EDC affiliates making investments in bidding projects. RENEW therefore supports legislation excluding the EDCs from the evaluation team in competitive RFPs. DOER should be the sole entity responsible for project selection while being able to consult with the EDCs and receive recommendations from the Attorney General’s Office.
Declining Price Requirement
RENEW supports eliminating the requirement that the price in subsequent procurements of offshore wind be lower than the cost of offshore wind generation procured under any prior solicitation. As the Section 83C winning prices over the years have been at near parity with onshore wind and solar resources and even the cost of new natural gas generation, the declining price requirement has proven to be unnecessary to protect the interests of consumers. The use of competitive long-term contracting for offshore wind has been a success for attaining low prices.
Bid Scoring Criteria
Offshore wind RFPs have established evaluation criteria consisting of quantitative and qualitative factors with proposals now scored at 70 points for quantitative factors (largely price) and 30 points for qualitative factors. The current RFP like past ones did not provide information on the weighting of criteria for either the quantitative factors or qualitative factors. RENEW supports legislation that requires the evaluation team to disclose the details on the weighting of all criteria. The RFP should provide details on the weighting of criteria in the interest of promoting objectivity and transparency in the evaluation process. The RFP has scores of evaluation criteria. If developers see the weightings, they will learn which criteria are considered more important by their assigned higher weightings and they will tailor their proposals to meet policy objectives.
Environmental Mitigation Plans
Before a leaseholder may build an offshore wind energy facility it must submit a Construction and Operations Plan (COP) for review and approval by the Bureau of Ocean Energy Management (BOEM). BOEM uses the information presented with the COP to evaluate the project in accordance with the National Environmental Policy Act and other applicable laws under a process that includes multiple opportunities for public involvement throughout the environmental review process. The evaluation team can assess bidders’ mitigation plans against existing federal laws involved in the approval of offshore facilities, applicable state environmental laws, best available science, and any best management practices available at the time each proposal is due.
The current RFP for offshore wind contains criteria to be considered under the qualitative evaluation that concerns environmental and socioeconomic impacts. These criteria pertain to impacts on the environment, wildlife, commercial and recreational fishing, and environmental justice populations. RENEW recognizes that offshore wind projects must be developed with strong, and reasonable, protections in place to protect our coastal and marine environment and wildlife, especially vulnerable species like the endangered North Atlantic right whale.
H.3302 requires developers to include environmental and fisheries mitigation plans that consist of an “explicit description of the best management practices and any on- or off-site mitigation the Applicant will employ, informed by the latest science at the time the proposal is made.” RENEW supports an approach in which the developers supply plans based on current state and federal laws, stakeholder input, and the science and technology at the time of the bid and are afforded the opportunity to modify their mitigation plans over time to ensure compliance with all applicable laws and understandings about current science. The finalization of mitigation measures will ultimately arise after the developer has conducted survey work and consulted with government agencies and stakeholders.
For this reason, RENEW generally has recognized adaptive mitigation frameworks that include the scope and status of responsible development practices a project will employ. In the current RFP, RENEW endorsed having each bidder submit a preliminary plan describing how it will “avoid, minimize, or mitigate environmental impacts (onshore and offshore) from the wind farm array, transmission cabling, substations and other infrastructure from pre-construction through the duration of the project based on best management practices.”
Economic Development and Organized Labor
RENEW has been concerned about placing too much of the cost of economic development benefits into bids as it will increase rates on electricity consumers. Directing state and federal taxpayer funds for this economic development investment rather than placing the costs in Massachusetts electric rates will help keep Massachusetts businesses competitive with other regions and protect residential consumers particularly low-income households who spend a disproportionate amount of their income on energy. On Tuesday, for example, RENEW testified in favor of using $100 million in federal American Rescue Plan Act (ARPA) funds for Massachusetts ports development to support offshore wind related economic development.
For economic investments being proposed in bids, the evaluation team should assign weight to those activities, expenditures and investments that create long-term institutional or labor capabilities in Massachusetts. Credit should also be given to investments that will lower the cost of offshore wind projects in future procurement rounds. Economic development benefit criteria should consist of maximizing project-specific spending and job creation, investment in enabling supply chain and infrastructure, and commitments that will stimulate supply chain development.
RENEW has supported consideration of labor standards in the RFPs and recognizes the importance of prevailing wage and Project Labor Agreement (PLA) benefits. Along the East Coast, we are seeing offshore wind developers signing PLAs with just this week one Massachusetts developer having announced an agreement that will ensure at least 500 jobs go to union workers.
RENEW has several suggestions for H.3302 to adopt to promote fair bargaining between developers and labor and the best interest of consumers. Unless otherwise provided in a PLA covering construction on the project, all laborers, workmen and mechanics with respect to the project should be paid wages and benefits in an amount not less than the prevailing rates that would be applicable to a public work in the area where the project construction activities occur. A prevailing wage requirement should be limited to the construction activities at the pre-assembly harbor and United States-based offsite fabrication traditionally performed on-site by construction craft when that fabrication produces items specifically designed for construction of a project, fabrication off-site for the convenience of the contractor, and the fabrication that is part of a single integrated construction process. For construction activities in federal waters, the rates should be those applicable at the location of the port or ports from which the laborers are based for purposes of that offshore work.
In contrast to an absolute PLA mandate on developers, legislation should require each developer to submit with its proposal a plan attesting to its intentions to negotiate in good faith for a PLA with one or more building trade unions to cover all construction activities on the project. Each winning bidder should be required to keep DOER apprised of the progress on negotiations, and DOER should have the option to have a representative attend the negotiations. Developers should be able to negotiate provisions for staffing if qualified referrals are not available, recognizing that some percentage of OEM-experienced and qualified technicians will be necessary for safety and quality assurance.
Like that proposed in H.3302, RENEW also supported the provisions in the current offshore wind RFP for developers to commit to racial equity and advancing minority economic participation and including a requirement that bidders submit Diversity & Inclusion Plans (“D&I Plans”) with their proposals.
Clean Energy and Energy Storage Procurement Bills
H.3315 An Act relative to clean energy resources
H.3316 An Act relative to a competitive market for clean energy
Additional Clean Energy Procurements
RENEW supports H.3315’s directing additional procurement opportunities based on Section 83 and Section 83A of the Green Communities Act, which were limited to Class I RPS resources, to promote local and New England economic development and energy security. RENEW opposes additional procurements based on Section 83D which allows Canadian large hydropower providers to submit bids.
As discussed above, any update to procurements under the Green Communities Act and its amendments should include removal of the EDCs from the selection process to help ensure any bid selection process is conducted in a non-discriminatory way. The decision of the bid evaluation team in the Section 83D RFP to exclude any stand-alone bid, particularly the top two ranked bids, from consideration in the final Stage 3 evaluation based on their not offering the maximum 9.45 terawatt-hours was not supported in any requirement in the RFP or Section 83D but was used to favor the Canadian hydropower bids. That and statements by the Independent Evaluator revealed that the evaluation process was neither fair nor non-discriminatory in favoring a lower ranked project.
Centralized Regional Procurement of Clean Energy
H.3316 requires the Executive Office of Energy and Environmental Affairs (EEA) to investigate regional or multi-state competitive market mechanisms or structures to facilitate the financing of clean energy generation resources as a successor to the current approach that uses power purchase agreements. RENEW strongly supports exploration of whether a new centralized approach to clean energy procurement can procure new clean generation and maintain existing clean energy resources at a lower cost to consumers than existing programs.
Under any new clean energy procurement program, it will be of utmost importance that projects will be financeable or projects will have to continue to have to rely on state policies for long-term contracts. The same is true for existing non-emitting resources that also need revenue certainty and market predictability to continue investing in the maintenance of their resources to provide value into the region.
The bill should also have EEA examine whether a centralized procurement can be integrated with transmission planning to deliver all the energy resources to meet state policy requirements over the long term at the lowest cost. The need for transmission upgrades to deliver the least-cost renewable energy has been around in Maine for years and is quickly becoming apparent in southern New England for the offshore wind resource. RENEW encourages states to prioritize solutions to meet these needs expeditiously even as the planning to address longer-term needs continues.
Thank you for the opportunity to offer this testimony.