Energy and Environmental Economics, Inc.

Join our newsletter to receive a note every month or so with our latest clean energy analyses, explained. You can expect to read about topics like resource adequacy, electricity market design, AI and load growth, the future of gas, and green hydrogen. You are always welcome to respond and keep the conversation going. We expect these emails will be most relevant for utilities, governments, research groups, nonprofits, developers, investors, and operators, but we welcome anyone interested in clean energy. Sign up here: https://lnkd.in/g733iC9y

The Massachusetts Interagency Rates Working Group (IRWG) released the Near-Term Rate Strategy Recommendations, in addition to the Near-Term Rate Strategy Report, authored by Energy and Environmental Economics, Inc. See both documents at: https://lnkd.in/d52wfQ88 One of the principal recommendations (but not the only one) is for all electric distribution companies in Massachusetts to offer a seasonal heat pump rate similar to those recently approved by Massachusetts Department of Public Utilities, but expanded to apply beyond the distribution charge for a larger winter differentiation to be cost-based and ensure energy bill savings for customers transitioning from gas heating to electric heat pumps. This recommendation alone, which ensures customers adopting heat pump technology will see bill savings commensurate with the benefits of reduced energy use and greenhouse gas emissions associated with efficient electric heating, will drive the Commonwealth ever closer to our clean energy and climate goals. I am ecstatic that the IRWG is taking this next step to advance near- and long-term electric rate design and ratemaking that aligns with the Commonwealth's decarbonization mandates. We have a lot of stakeholders to thank for this work, but I would be remiss not to mention the numerous state employees who have dedicated over a year of their time, care, and attention to this effort: Jessica Freedman, Sarah Cullinan, Katie Gronendyke, Vyshnavi K., Michael Giovanniello, Jacob Chaplin, Genevieve Brusie, Jen Foley, Chris Connolly, and more! Our project partners at E3 (Vivan Malkani, Andrew DeBenedictis, Ari Gold-Parker, Paul Picciano, Brendan Mahoney, Morgan Santoni-Colvin, Dyami Andrews, Disha Trivedi, and Tory Clark) and Peoples Energy Analytics (Destenie Nock, PhD) also deserve a huge thank you.

At E3, we know that a well-tuned energy model—like a perfectly baked cookie—depends on precise inputs and adjustments. This week, our office hosted a delicious holiday bake-off to power us through the end of the year.   As we look ahead to 2025, we’re excited to announce upcoming job openings across all offices (San Francisco, New York, Boston, Denver, and Calgary) and practice areas (Integrated System Planning, Climate Pathways, and Asset Valuation), from Associates and Consultants to Managing Consultants, Directors, and interns.   If you’re ready to work on today’s most pressing energy challenges while being part of a team that values connection and collaboration (and sweets), stay tuned for more details—job announcements will be up in the new year.

E3’s recent report, published last week as part of Virginia’s Joint Legislative Audit and Review Commission data center study is a comprehensive analysis around grid and ratepayer impacts of continued data center growth. https://lnkd.in/g655tdxh There's a lot of interesting findings and insights in the study such as the following: ▶ Seasonal Shape and Peaks: Data center loads are fairly flat with a relatively mild seasonal pattern with a summer peak. The magnitude of projected data center load growth means that Virginia’s electric system will remain summer peaking over time. Without significant data center growth, the system would transition to winter peaking. This shift has major implications for the types of generation resources needed to maintain reliability over time. (See pages 45-47 of our report for details.) ▶ Infrastructure and Policy Scenarios: We analyze the infrastructure required to reliably serve new data center load under scenarios with and without clean energy policy targets. ▶ Ratepayer Impacts and Load Flexibility: The study evaluates both historical and potential future ratepayer impacts, along with the benefits of flexible data center loads in supporting grid operations. The scale and growth of data centers bring unique challenges and potential economic opportunities for electricity systems that are seeing or expecting this growth. I encourage those interested in grid planning and ratepayer impacts related to large data center growth to explore the report. #EnergyInfrastructure #DataCenters #LoadGrowth #GridReliability #EnergyPlanning

Northern Virginia currently has the highest concentration of data centers in the world and remains the fastest-growing market; by some estimates, about 70% of global internet traffic flows through the region. E3 published a first-of-a-kind analysis and report for the Joint Legislative Audit and Review Commission that rigorously quantifies the grid and customer impacts of continued data center growth in the state. Our analysis finds that serving unconstrained data center growth while also achieving Virginia’s clean energy goals would require unprecedented investments to accelerate the deployment of both existing and emerging clean energy technologies. The pace of infrastructure development required would far exceed what has occurred in Virginia in recent history — 3.6 GW/yr over the next 15 years, compared to a historical single-year high of 2.2 GW. Grid interconnection policies protect electric system reliability by delaying new load from connecting until the infrastructure to serve it reliably is in place. These policies protect the reliability of the system for existing customers and will constrain data center load growth to the rate of infrastructure expansion. Our full, quantitative examination, including resulting impacts on ratepayers and recommendations to avoid a cost-shift, is available for download here: https://lnkd.in/gytmzBJd. This report was prepared by E3 experts Kush Patel, Kevin Steinberger, Andrew DeBenedictis, Manfei Wu, Jonathan Blair, Paul Picciano, Pedro de Vasconcellos Oporto, Brendan Mahoney, Andrew Solfest, Riti Bhandarkar, and Aneri Shah, in collaboration with the Weldon Cooper Center for Public Service at the University of Virginia.

Many of the costs utilities recover in retail rates are sunk, meaning they reflect investments that have already been made. However, a share of forward-looking electric system costs could be avoided by reducing load during certain hours. These “avoided costs” have long been used to evaluate the cost-effectiveness of energy efficiency programs that provided durable load reductions; today, they’re being used to assess a diverse array of DERs. For more than 20 years, E3 has supported the California Public Utility Commission (CPUC) in developing the Avoided Cost Calculator, a public avoided costs model that is used across a wide range of CPUC proceedings and workstreams. Recently, we’ve worked to better connect the Avoided Cost Calculator with the state’s Integrated Resource Plan (IRP), so that the avoided costs associated with greenhouse gas emissions and generation capacity costs are directly linked to the upfront and operational costs of resources that provide emissions value and capacity value in the IRP. Over the last few years, E3’s analysis of avoided costs has extended to new parts of the country – find our broad learnings and best practices here: https://lnkd.in/gBGqvjNw

Next week's webinar with Smart Electric Power Alliance will cover the topic on every energy planner's mind: data centers. In the last 18 months, significant focus has been placed on increasing demand for electricity from data centers, with more demand expected in an increasingly electrified and digitized economy, which arises complicated questions: how much demand is there, really? Can utilities meet the demand quickly enough and secure local economic development benefits? What does this mean for clean energy goals? Electricity system infrastructure? And how can we fairly allocate costs among these new customers – and existing ones, who, in many places, are already facing price increases? Join us on Tuesday, December 3, at 11am PT / 2pm PT. The event will feature E3 expert Kush Patel, in addition to Ann Collier, Senior Manager on emerging technologies for SEPA, and Aly Koslow, responsible for developing data center strategy at Arizona Public Service - APS. Register here: https://lnkd.in/gPjPziuK

In the Los Angeles Basin, the City of Glendale set an ambitious goal: solar and storage adoption for 10% of customers by the end of 2027, plus an additional 100 MW capacity of dispatchable and peak-load-reducing distributed energy resources (DERs). E3 partnered with Glendale Water and Power (GWP) to develop a plan toward this goal, maximizing renewables while maintaining equity and resiliency. In addition to detailed analysis on DER potential, the project team conducted extensive community outreach to ensure the plan would align with community priorities. We found that although the 10% and 100 MW targets reflect Glendale’s commitment to local clean energy, reaching this milestone may require substantial increases in retail rates, which could disproportionately affect low- to moderate-income (LMI) households. Current adoption trends show that single-family homeowners with higher incomes are more likely to install solar and storage, which risks leaving behind multifamily and LMI residents in the transition to clean energy. However, there *are* ways to accelerate DER adoption while reducing the impacts on ratepayers. Through this engagement, E3 supported the community in justifying a cost-effective, realistic, and equitable approach to promoting customer DER adoption in a region where local resources are crucial. We are proud to have contributed to informed decision-making and remain committed to supporting cities, communities, and utilities in achieving sustainable clean energy goals. Find our full recommendations and analysis here: https://lnkd.in/gssYDaZT E3 experts Eric Cutter, Jun Zhang, Sierra Spencer, Fangxing Liu, Brendan Mahoney, Hannah Platter, Parker Wild, and Lindsay Bertrand contributed to this study.

Thank you to all who participated in the Probabilistic Planning Symposium this week! E3 co-hosted this stellar event with Midcontinent Independent System Operator (MISO) at their headquarters in Carmel, Indiana, bringing together representatives from RTOs and utilities across the country, along with experts from national labs and academia. It is a timely moment to discuss new probabilistic planning methods that can help ensure a reliable, clean grid of the future even under deep uncertainty. Many participants have been involved in electric system planning for 20+ years, and indicated that they could not remember a time with as much uncertainty as their regions were facing today. While climate-driven extreme weather and increases in variable renewables were identified as major challenges, the recent shift to an era of rapid load growth was often cited as the biggest challenge each region is facing. Probabilistic planning methods, though still emerging in the energy sector, offer a path to greater resilience and adaptability. Thank you to the E3 team Lakshmi, Kevin, Christopher, Edita, and Will, and to our fantastic collaborators at MISO: Ashleigh, Jonathan, Christina, Zheng, Jeanna Furnish, and Jarred Miland, among others. And thank you to all of our speakers for your contributions: Jeff Dennis, Eric Meier, Emmanuele Bobbio, Ben Hobbs, James McCalley, Parag Mitra, Michael Craig, David Mulcahy, Bilal Khursheed, Yachi Lin, William Gunther, W. Neal Mann, PhD, Kostas Oikonomou, Patrick Brown, Kirk Hall, RaeLynn Asah, Victoria Jones, and Shengnan Shao. Find an event recap and presentation materials here: https://lnkd.in/gsDG_gWZ

High levels of building electrification are expected to create a significant challenge for recovering the costs of California's gas system, potentially leading to very high gas rates for customers who are unable to electrify. Major changes to gas infrastructure planning and cost recovery will be needed to support a managed transition that limits adverse cost impacts for ratepayers. Although California was an early leader in identifying the need for a gas transition, other states have since implemented a range of actions to manage gas system spending and update cost recovery mechanisms to support a managed transition. This presents an opportunity to learn from other states and inform the scoping of a new gas planning proceeding that just launched at the California Public Utilities Commission. In a new white paper funded by the Natural Resources Defense Council (NRDC), E3 reviewed gas transition proceedings in other states and identified five focus areas for near-term action (see chart). E3 experts Stephanie Kinser, Ari Gold-Parker, Dan Aas, and Amber Mahone contributed to this white paper, which is available here: https://lnkd.in/gVGhQ_H2 E3 would like to thank NRDC for their support of this study. Find NRDC's blog post here: https://lnkd.in/gzjrKpEd