Government Intervention in Energy Markets

Here is a textbook case of government intervention in energy markets.

Massachusetts Legislation

A bill passed last night in the Massachusetts Senate removes the state’s caps on net metering, sets a 100% renewable energy mandate, boosts the state’s energy storage procurement target to 2 GW and more. 

At the same time, the state’s solar market has been hamstrung by restrictive caps on its net metering program, which have been ratcheted up so slowly that new caps have at times been met as soon as they are raised. 

It would also change Massachusetts’ renewable portfolio standard (RPS) so that it increases 3% every year, meaning that utilities will be required to source 49% of their electricity from renewables in 2030, 79% in 2040 and 100% in 2047. While Hawaii is the only state that currently has a 100% mandate (by 2045), the rate of this mandate would make it the 6th-most aggressive such policy in the United States.

Furthermore, the bill sets new 2030 and 2040 greenhouse gas emissions reduction targets under the rubric of the Global Warming Solutions Act, which was passed in 2008. These were missing in the original bill, which has been identified by climate activists as a major hole that allowed for the state to fall behind on the path to the 80% reductions mandated by 2050 in the bill.

The bill would also supersize Massachusetts’ energy storage procurement mandate from the current 200 megawatt-hours (MWh) by 2020 set by the Baker Administration to 2 GW by 2025. Along with this, the bill would create targets for each utility, including municipal power companies, as well as mandating alternative compliance payments if utilities fall behind in deployment.

Utilities will not be allowed to own more than 20% of the storage they deploy, and the program will be subject to annual reporting.

Finally, the bill puts limits on the kinds of demand charges that state regulators can allow for residential customers, in light of Massachusetts’ recent approval of Eversource’s demand charge imposed on its residential customers who deploy solar.

These regulations will ultimately cause the cost of electricity to skyrocket and will favor some in the state economy. Either fortunately or unfortunately, these kinds of policies will drive more people and businesses to Texas as long as Texas allows the free market in energy to work in Texas.