How should public utilities commissions navigate the evolving grid and regulatory landscape as utilities transition to a next-generation business model? During today's OnPoint, David Cash, commissioner at the Massachusetts Department of Public Utilities, discusses his state's aggressive clean energy agenda and the challenges associated with expanding renewables while maintaining affordable electricity costs for consumers. Cash, who will be leaving his post at the DPU to head up the Department of Environmental Protection at the end of the month, also talks about the opportunities posed by distributed generation.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is David Cash, commissioner at the Massachusetts Department of Public Utilities. Commissioner, thank you for coming on the show.
David Cash: My pleasure.
Monica Trauzzi: And, David, you'll soon be transitioning away from the Department of Public Utilities to head up the Department of Environmental Protection. As a state with an aggressive clean energy agenda, what will be your top items to tackle in your new position?
David Cash: Well, in the new position, one of the primary things is our goal to get organic waste out of the waste stream, and we see a win-win-win situation. That is, organic waste has caused problems in landfills because of methane emissions, takes up landfill space -- there are all kinds of odor problems. If we can convert that organic waste into clean energy through anaerobic digestion, we get multiple benefits, and part of the clean energy agenda in the state is to get these kind of multiple benefits, because in addition to those environmental and energy benefits, we'll also get job growth in the development of these kinds of facilities. So that's one of the items on the agenda.
There's a whole series of others that could be on the energy agenda, but the Department of Environmental Protection is one of six agencies that are in the Secretariat, in which Gov. Patrick has integrated energy and environment. That was a new thing that he brought to the state when he first became governor and took all of the energy and environmental agencies and put them under one rubric, because how can you make wise environmental decisions without wise energy decisions and vice versa?
Monica Trauzzi: And Massachusetts is part of RGGI, the Regional Greenhouse Gas Initiative. Could RGGI potentially serve as a compliance mechanism under EPA's existing power plant results?
David Cash: Absolutely, and it's demonstrated the effectiveness. We've seen emissions drop in the Northeast from the RGGI states. We've seen that if a state auctions off the allowances and uses the funds from that to invest in energy efficiency, we get multiple benefits from that. So it's been a very successful model, and the conversations have already been going on between the RGGI states and EPA as -- using RGGI as a compliance mechanism, and we're hoping it will actually become a platform for other states to join, either directly RGGI or similar kind of cap-and-trade program.
Monica Trauzzi: How big a role should natural gas be playing in the energy mix, and what's your strategy regarding gas-fired power plant approvals moving forward?
David Cash: So gas can -- should be playing an important role. It's relatively clean, though not totally clean, so as a replacement for coal and oil, it's been very beneficial in New England in terms of lowering greenhouse gas emissions. At the end of the day, though, at least in Massachusetts, where we have the Global Warming Solutions Act, which requires us to get to 80 percent below 1990 levels by 2050, eventually, we'll be moving away from fossil fuels. So at this point, as a bridge fuel, natural gas is going to play an important role and should play an important role. In the long run, we're going to need to move away to renewables and all of the other kinds of technologies, storage, et cetera, that can help us get there. At this point, natural gas has been -- because it's so abundant, has reduced energy costs in New England, and so there's been a real opportunity to continue our investments in the clean energy side of the ledger while prices are relatively low.
Monica Trauzzi: When you consider the incoming challenges that may be posed by the new and existing power plant rules coming out of EPA, how should regulators, how should Massachusetts be navigating those roles?
David Cash: Well, first of all, I guess we see them more as opportunities than challenges -- opportunities to get a cleaner environment, opportunities to address climate change and opportunities for the development of the clean energy economy that is booming in Massachusetts, so alternatives to fossil-based energy production are ramping up incredibly quickly in Massachusetts and in New England and in any other parts of the country, and so there's huge opportunities that we can jump on to take advantage of the framework that EPA is creating.
Monica Trauzzi: The Boston Globe recently reported that Massachusetts customers could pay up to $1.50 per month as a result of the governor's solar power expansion. How do you weigh the costs versus benefits when it comes to plans like these?
David Cash: So that's a great question, and it's something that all of the agencies -- DPU in particular -- looks at in approving any of the kind of projects, long-term contracts, renewable long-term contracts, et cetera. The benefits have to outweigh the costs, and clearly at this time, we need to be making these kinds of investments because we see really big benefits in the future, and some of these benefits are not even so far in the future. There are thousands and thousands of businesses, residential customers, low-income, high-income, all across the board, that are availing themselves of these programs and they are seeing declining bills, mitigation of the volatility that we're seeing as natural gas prices -- even though low compared to eight years ago -- are going up and down, and generally, we're seeing price suppression as demand is decreasing from all of our programs -- from our renewable energy programs and from our energy efficiency programs. And that's causing a decrease generally in the price of energy over time. And we don't see the need as much for transmission development and the cost that would be incurred from that as well.
Monica Trauzzi: On when the department recently approved 12 long-term power purchase agreements for onshore facilities in New England, how critical of a step is this to addressing the capacity and pricing issues that have been experienced in New England?
David Cash: Hugely important. I mean, as I mentioned, it's critical that we move away from fossil fuels. We have a renewable portfolio standard program in Massachusetts and other New England states. Those targets need to be met. So this is a way to address what's been a problem in the market; that is, we have a very robust renewable energy credit program, but it's difficult to go to a bank and say we're going to be getting renewable energy credits and the bank will say, "Well, what are those going to be worth in 10 years?" And the developer has to say, "Well, we don't know because we don't know what the market is." By having these long-term contracts, that decreases the uncertainty for the developer in the market, and so that's been a critical tool for us to move forward with establishing renewables in New England.
Monica Trauzzi: We had PSEG CEO Ralph Izzo on the show recently, and he said distributed generation should be a secondary option for consumers. Some utilities have this mindset; others are moving forward aggressively on the DG issue. What's your view on how utilities should be approaching the challenges associated with distributed generation?
David Cash: In my mind, utilities should be looking at distributed generation as a new business opportunity: somehow playing in the market, not necessarily competing with third-party solar, but having their business models be such that distributed generation can play a major role. Because it will have to play a major role. Consumers are demanding it; the renewable energy benefits that come from distributed solar are huge, and so what we're trying to do in Massachusetts is figure out what are the kind of regulatory structures that will allow utilities to see this kind of thing as an opportunity.
Monica Trauzzi: Is there a clear path forward on net metering?
David Cash: I think net metering has created a very powerful signal, and the states that have had progressive net metering programs, they've done exactly what they're supposed to do. At this point, distributed generation is still a relatively small part of the mix, and so the price impacts, at least in Massachusetts, are relatively small, but we're all looking forward to that day when distributed generation is much bigger and we're going to have to think of a model that may include net metering, it may not include net metering, but we're going to have to figure out a way that we can have those who want to avail themselves of distributed generation can do so, get incentives to do so, and the impacts on other rate pairs are not so large. Again, in Massachusetts, they're not large right now, but we need to figure out how to get that future.
Monica Trauzzi: What does the next-generation utility look like?
David Cash: So here's -- let me paint a picture, because I think it's important to start with the consumer in terms of what the utilities should look like, right? The utility needs to have a business model, and the PUCs have to create a regulatory structure to allow the services that consumers are demanding.
So think of this future: Think of this future where, in 20 years or 15 years, I don't know, you have your electric vehicle plugged in at your house and there's a chip in it that says, "When the price of electricity is at a certain point, fill up my battery." And because at this point, we now have a lot of far-offshore wind, very cheap at night wherein there's a lot of wind blowing offshore, your battery gets filled up. You drive in your car to work in the morning, you plug it in -- that's if you don't have available public transit -- you drive in your morning, you plug in, and that same chip says, "When the price of electricity is really high, sell back to the market." And the ISO in that region on that hot July day doesn't have to turn on a natural gas plant or a coal plant; it has to turn on the 30,000, 40,000, 50,000 cars that are parked in the metropolitan area, and essentially, you'll have a generator there. Now, of course you're worried that your battery might not have enough juice to get you home. The software takes care of that. You say, "I need to pick up my kids. I need to go shopping, et cetera. There's enough left," and that's the smart part of the grid of the future. But lot of different regulatory rules have to change and the utility has to have a different model for that. So that's one piece of it.
The other piece is, I know that in this region, there've been a lot of outages in the last three or four years. So imagine the grid of the future in which your house and utility knows it right away, and through communication to your smartphone, to your iPad or some other way, they immediately alert you that, "Here's what the situation is. Here's when your estimated time for restoration is going to be," and some other information, "Your town has a shelter over here, et cetera, et cetera, et cetera." So that's the other piece of the -- and the utilities have avoided a lot of those outages.
The third piece is, the prices are just not reflective of what the costs are. In New England, we have about 6,000 megawatts of generation that waits for those 5 percent of the days of the year that it's really, really hot to run air conditioning. Six thousand megawatts, so 60 100-megawatt plants, four big 1,500-megawatt plants, I mean, we're paying for that; we're paying for the transmission for that. In the grid of the future, those price signals will be there such that consumers can make the right decisions and lower their cost because you're lowering everybody's cost. So the utility of the future has to be nimble and innovative enough to provide all of those kinds of services, and the regulator of today and the future has to create the incentives and the regulatory structure so that utilities can play in that game and have the right incentives to provide those kinds of services.
Monica Trauzzi: All right, very interesting insight. Thank you for coming on the show.
David Cash: My pleasure.
Monica Trauzzi: Good luck with the new job.
David Cash: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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