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How Maryland’s New Climate Plan Could Actually Lower Energy Costs

By Jeff Spross  

"How Maryland’s New Climate Plan Could Actually Lower Energy Costs"

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Gov. O'Malley tours one of Maryland's largest solar installations.

Gov. O’Malley tours one of Maryland’s largest solar installations.

CREDIT: MDGovpics/flickr

Maryland’s Climate Action Plan could actually lower electricity prices and boost job growth for the state’s residents. That’s according to two studies put together by the University of Maryland’s Center for Integrative Environmental Research (CEIR) and Towson University, which were commissioned by the Maryland state government when it passed the Greenhouse Gas Emissions Reduction Act of 2009.

That law put in place the original requirement that Maryland cut its greenhouse gas emissions 25 percent below 2006 levels by 2020, kicking off a process that culminated with Governor Martin O’Malley’s announcement last week of a finalized Climate Action Plan. The 2009 law also called for the two CEIR studies — one of the plan’s impact on the state’s supply of electricity, and the other on the state’s manufacturing sector — to ensure the plan didn’t damage Maryland’s economy. The studies modeled a range of possible scenarios through 2020, and under all of them Maryland’s electricity costs came down. As for jobs and economic growth, the worst case scenario showed a very small drag on both, but the best case scenario delivered modest improvements to both. In either case, nothing to get terribly excited about.

The Climate Action Plan involves a lot of moving parts, but there are three key pieces to it whose effects were covered by the studies:

1. Accelerating and increasing the state’s renewable energy portfolio (RPS) to get 25 percent of the state’s power from green sources by 2020 — though it looks like the studies modeled an earlier goal of 20 percent by 2022.

2. Participation in the Regional Greenhouse Gas Initiative, a cap-and-trade program shared by nine states in the northeastern corner of the country.

3. The EmPOWER Maryland Initiative to reduce per capita energy consumption 15 percent by 2015 by boosting efficiency.

Due to data limitations, the electrical reliability study specifically wasn’t able to cover the Allegheny Power zone on the western end of the state. But that area doesn’t represent much of Maryland’s electricity demands and is facing fewer capacity problems anyway. The rest of the state falls under the Delmarva Peninsula Southern region (DPL-South) and the Southwestern Mid Atlantic Area Council region (SWMAAC). The study found a modest improvement in the supply of electricity minus demand in 2020 for the former, and a much bigger improvement for the latter.

ceir-electricity-chart

CREDIT: DATA FROM CEIR

That’s largely thanks to the reductions in demand brought about by the RPS and the energy efficiency improvements. And a bigger buffer between supply and demand means both more reliability throughout the state’s electrical system and lower costs for consumers.

There were several other permutations run, based on what would happen if various infrastructure projects were canceled and that sort of thing. But virtually all of them resulted in the baseline performing even worse, while the climate plan scenario remained positive. The one exception was the construction of the Calvert Cliffs 3 reactor in 2017 for the SWMAAC region: that kicked the baseline balance up to just over 1,000 MW in 2020. But that was still well under the climate plan balance in 2020 of almost 4,000 MW if the reactor is built.

As for the manufacturing study, it didn’t really find much to report. At most, energy costs for manufacturing industries would increase about 3.5 percent in 2020 over what they’d be without Maryland’s climate plan. The biggest hits would fall on large, electricity-intensive manufacturers like those in the metal and chemical industries. But smaller and less-intensive industries with higher participation in the efficiency programs could actually enjoy cost savings under the plan, and state incentives would also help lower any initial costs. Under one permutation those costs were even slightly lower under the plan, and increases in capital costs never topped one percent. “Jobs in the manufacturing sector attributable to select [Climate Action Plan] policies will be minimal and may not occur at all,” the researchers concluded.

For the effect on the state’s economy as a whole from changes in manufacturing, the study reached much the same conclusion: at worst 650 fewer jobs, and at best 595 more jobs. Impacts on economic growth and the state’s budget were similarly modest.

Table33

CREDIT: CEIR

Keep in mind that loss of $162 million in economic activity under the high cost scenario is spread over the ten year period of 2009 to 2020, while Maryland’s economic production was about $320 billion in 2012 alone.

So with the caveat that the RPS is now a bit more ambitious than what the CEIR studies modeled, the models suggest Maryland will at worst pay an exceedingly small price to help avert the climate change that’s already threatening its coasts, cities and residents.

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