New state energy strategy focuses on affordability, aims to take a market-based approach
New Hampshire’s Department of Energy released a long-awaited update to New Hampshire’s 10-year energy strategy last week. The document, which is updated every three years, outlines the state’s priorities when it comes to essential matters like how we get around, heat our homes, and keep the lights on.
The strategy’s two major throughlines – affordability and a technology-neutral, market-based approach to energy policy – have largely stayed the same since its 2018 version, along with much of the language and goals. But the update reflects new data and changes in the sector, like the growing prevalence of electric vehicles.
As New Hampshire gets hotter and wetter, the state’s strategy update says climate change is a real and escalating issue that is connected to our energy system, unlike the 2018 document. But clean energy advocates say it lacks specific recommendations about how to address that reality.
“It does seem that the strategy tries to have it both ways, recognizing that we have an environmental crisis at our door, there are causes that are attributable to our energy strategy, but we're not going to make any specific recommendations on how we address that crisis through our energy system and changes to it,” said Chris Skoglund, director of energy transition at Clean Energy New Hampshire.
Who uses this strategy?
This update to the state's energy strategy — the first from New Hampshire's newly created Department of Energy — identifies the principles that should guide energy policy in the state and “establish a framework for policymakers and stakeholders” who engage with those issues.
“It's not part of New Hampshire law, but it is a very important document for its persuasive value. It basically lays out what I think is the administration's approach to energy issues,” said Don Kreis, New Hampshire’s consumer advocate.
What are the state’s goals?
The plan lays out 10 goals for New Hampshire’s energy policy, which are almost identical to the goals laid out by the state in 2018. As many Granite Staters experience spikes in energy costs, at the top of the list is affordability.
“Expensive energy—or pursuing policies that raise the cost of energy—directly and negatively impacts New Hampshire families and businesses and the quality of life in our state. As such, the primary goal of this Strategy is to pursue cost-effective energy policies,” the document says.
For the purpose of the strategy, the state defines cost effectiveness using just the basics, said Josh Elliott, the director of the Division of Policy and Programs at the Department of Energy.
“It's the simple math of it. Will this investment pay off or at least be neutral over the presumed lifetime of the investment?” he said, noting that the decision to include the kinds of costs incurred from climate change in that calculation would fall to the legislature.
The strategy also emphasizes a market-based approach to energy, saying government policies should avoid “preferential quotas and mandates,” and that the state should support regional policies that make sure other states’ energy policies don’t impact costs in New Hampshire.
All New England states besides New Hampshire have mandated greenhouse gas emissions reductions to spur the development of renewable resources.
Read more about where New Hampshire’s energy comes from and how it works with the regional grid system.
The strategy claims other states’ renewable mandates and subsidy programs “create upward pressures on electricity prices,” and the Department of Energy says there’s a chance those costs could be passed along to New Hampshire ratepayers.
But the report also highlights emissions reductions in New Hampshire, without acknowledging that those have largely been achieved through other states’ actions on climate change.
“Other states are seeing their energy consumption and therefore their energy costs go down. We're benefiting from a greenhouse gas standpoint, but overall, our state is still using the same amount of energy as it did before,” said Skoglund.
A market-based approach in a highly-regulated sector
New Hampshire leaders have leaned into a market-based approach to energy policy for the past few years, said Sam Evans-Brown, executive director of Clean Energy New Hampshire. The idea behind this approach is “if we just let the markets act, we’ll get less expensive electricity,” he said.
But that misses the reality that energy is already a highly regulated sector of the economy, Evans-Brown said. New England’s grid operator, ISO-NE, is responsible for designing and overseeing some energy markets, and bodies like state Public Utilities Commissions make rules and regulations that shape those markets. They also give a yes or no to decisions utility companies – the main market actors – want to make.
Skoglund added that the current energy strategy seems to encourage the state to leave existing regulations in place.
“That's not necessarily a free market or an open market. It's a market that's kind of biased towards the old energy system,” Skoglund said. “Without identifying a direction, goals and targets, we can't identify what sorts of policies are needed in order to help the market evolve in that direction.”
Evans-Brown said there needs to be a rethinking of the current regulatory system. The updated strategy points towards such a rethinking, including in a section on grid modernization.
“But if you want to really put meat on the bones of those sort of general nods, there's a lot more work to be done,” Evans-Brown said.
In a section on siting, the strategy also presents a re-thinking of one structure that determines a lot of New Hampshire’s energy future: the process of choosing where new energy projects get built.
The strategy says that the current committee in charge of evaluating sites has a “burdensome structure” and needs work – including clarity on jurisdictional issues and “consistent and knowledgeable membership.”
What about transportation and heating?
Transportation and home heating account for the largest shares of New Hampshire’s greenhouse gas emissions, and advocates for climate action have emphasized a need for progress in those sectors.
One major shift reflected in the update is the adoption of electric vehicles in the last three years across the country.
The Department of Energy emphasized that building out EV charging infrastructure should come from federal funds instead of ratepayer money, and that some of those investments should be focused on rural areas that may not attract private companies to install chargers.
As more people use EVs, the strategy also underscored the need for developing different electricity rate structures that reflect how the charging cost for these vehicles changes over time. During off-peak hours, electricity is less expensive, but charging during peak hours — when people are home from work, turning on lights or cooking — would be more expensive.
In terms of heating, the strategy says use of heat pumps, wood and renewable natural gas will likely increase as a result of “efforts to reduce carbon emissions,” but does not specify whose efforts those will be.
“Replacement of heating systems is an enormous cost to homeowners and business owners. State and local policies should not force early, uneconomic replacement of these systems, or unreasonably interfere with a home or business owner’s choice in fuel source,” the document says.
How does this strategy address climate change?
The Intergovernmental Panel on Climate Change has made it clear that urgent change is needed to reduce greenhouse gas emissions and protect humans from increasingly devastating levels of global warming. We have the tools to limit global warming, the IPCC says, including energy-generating technologies that don’t emit the greenhouse gasses that cause climate change.
The cost of those technologies is also dropping, though in New Hampshire, the Department of Energy asserts, they are not yet able to compete at scale. The strategy maintains that the government should be technology-neutral when making energy policy.
“The most successful way of reducing emissions and protecting our natural resources from climate change is to achieve a market where low-emission resources are economically competitive without government mandates and subsidies,” the strategy says.
Though the document acknowledges the reality of climate change, the actions New Hampshire leaders need to take to address it remain unclear, clean energy advocates said.
The Department of Energy says renewables will continue to grow in importance, and “market selection” should steer investment in those resources.
“Rapid shifts in public policy are difficult, and care must be taken when altering policies and incentives that impact existing investments and resources” the strategy says, but notes that using policy to allow older technologies to “freeze out competition” are not acceptable, and that some new technologies could be “wise investments in the near future when cost curves are more competitive.”
But, the document says carbon-based fuels are “likely to remain the most prominent overall fuel type of New Hampshire’s resource mix for decades,” and says policies should let existing resources compete for market share.