Implementation: Recutting the social security pie (Part 3 of 3)

 Hello Readers,

In this series so far, I introduced a premise for (and reasoning behind) a policy, which would involve dividing up the social security funding allocation pie. I believe that we should divide up the pie into four separate (but not necessarily equal) slices:

1. Funds paid out all to current retirees
2. Funds reserved for specific generations of retirees
3. Funds diverted to personal investment funds
4. Funds diverted to paying down any outstanding national debts

In this post, I will put forth a possible mechanism or strategy for implementing this pie-cutting process in a manner that will be fair to current social security beneficiaries but also address the needs of current (and future) generations of workers.

To begin this process in a politically tenable and socially agreeable manner, we need to start at the current baseline and move incrementally toward the goal(s) of this reform.

Currently, the social security pie is nominally set to give 100% of the funding allocation pie to slice number 1 (Funds paid out to all current retirees). However, the baseline according to ssa.gov's 2012 annual report summary:

"...The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086."

In essence, social security will not survive in its current form past 2033 (before anyone born in the 1970's or later starts collecting). Thus, it does not seem unreasonable to aim for reform to be fully implemented by 2030. In the graph below, I have offered one possible trajectory for social security fund allocations.

I would recommend implementing the various slices slowly at a rate of roughly 1% per year. I would introduce slices 2 and 3 (the generational and personal slices) starting in 2014, and I would cap their percentages at 15% and 10% respectively. In this way, no more than 15% of an individual worker's social security payments would go to their generational trust fund. Likewise, no more than 10% of an individual worker's social security payments could be diverted to a personal retirement account. 

Similarly, I would recommend introducing slice 4 (the national debt slice) starting in 2018 at a capped rate of 1% and let the cap grow to 10% in 2028. Starting in 2029 and beyond, I would recommend allowing slice 4 to fluctuate between 0% and 10% based on some reasonable measure of the federal government's deficit spending over the preceding decade.

While I am not in a position to determine which metric this slice 4 percentage is tied to, I would simply hope that the calculations would be clearly defined in such a manner that deficit spending results in a reduction in the amount of money allocated to social security spending. Thus, Congress would be heavily incentivized to reduce deficit spending (and thereby proportionately increase the amount of spending allocated to current retirees). Similarly, it would encourage current retirees to hold members of Congress accountable for short-term deficit spending.

***

In summary, I believe that each of these implementation timelines should be slow enough that there will not be any huge/unexpected shock to the economic system. Also, in the long-term, this will: (1) ensure that at least some small part of an individual's retirement funding will be secured regardless of when they are born or how many current workers there are, and (2) ensure that reducing the national debt is no longer simply an exercise in letting future generations resolve the issues of today.

I look forward to your thoughtful criticisms and suggestions on this matter.

Regards,
Sean

This "Recutting the social security pie" series:
Introduction: Recutting the social security pie (Part 1 of 3)
Reasoning: Recutting the social security pie (Part 2 of 3)
Implementation: Recutting the social security pie (Part 3 of 3)

Reasoning: Recutting the social security pie (Part 2 of 3)

 Hello Readers,

In the previous post, I introduced a premise for a policy, which would involve dividing up the social security funding allocation pie. I believe that we should divide up the pie into four separate (but not necessarily equal) slices:

1. Funds paid out all to current retirees
2. Funds reserved for specific generations of retirees
3. Funds diverted to personal investment funds
4. Funds diverted to paying down any outstanding national debts

In this post, I will discuss why I believe that social security funds should start to be divided into these four slices. Then, in the next post, I will put forth a possible mechanism for implementing this pie-cutting process in a manner that will be fair to current social security beneficiaries but also address the needs of current (and future) generations of workers.

1. Funds paid out to all current retirees

The reasoning behind the first slice "Funds paid out to all current retirees" is perhaps the most obvious. This appears to be the original intent of the social security program, allowing funds from the actively working body politic to help support the currently retired. This helps senior citizens mitigate the negative impacts of any short-term personal financial hardships during or immediately before retirement.

Thus, as long as social security survives, a certain share of any social security funds will need to be spread across all current retirees, who are actively receiving benefits. Perhaps this slice might appropriately be renamed the "we (the living) are all in this together" slice... to indicate that we are not going to leave senior citizens to fend for themselves.

2. Funds reserved for specific generations of retirees

The reasoning behind the second slice "Funds reserved for specific generations of retirees" is a new, subtle adjustment to the current social security scheme. Originally, (when social security was created) there would have been an expectation that with most citizens not surviving long enough to collect social security (or not surviving long enough to collect it more than a few years) that there would always be a sufficient number of active workers to fund the needs of living retirees.

However, today, with the 20/20 vision afforded to us by basically 80 years of practice, it is clear that for social security to function in perpetuity from generation to generation: each individual generation needs some certainty about their own retirement. By immediately spreading all incoming social security funding across the needs of current retirees, we will inevitably encounter situations (such as the crashing of the baby-boom retirement wave) where the working generations cannot reasonably be expected to support the needs of current retirees without putting in peril their own needs in the future.

Thus, I would suggest that one way to mitigate the impact of these fluctuations over time is to move away from a current workforce supporting current retirees model toward a current workforce supporting future retirees model. In this way, each generation would more directly be supporting itself, and (likewise) the size of each generation of retirees will be proportionately supported by a generation of roughly the same size (i.e. the younger version of itself). As such, perhaps this slice might appropriately be renamed the "we (our generation) are all in this together" slice... to indicate that we should not forget about our future selves even as we work to support the ones we love.

3. Funds diverted to personal investment funds

While the original version of the social security program appears to have had provisions that limit the level of benefits an individual is eligible to receive based on the amount of money they paid into the program during their working life, it does not appear that the program was ever intended to give individuals any autonomy over how their own funds were invested. As a result, citizens, who do not (whether by choice or circumstance) set up other retirement plans (e.g. pensions, 401k's, IRA's) for themselves, have little-to-no direct control over the future of their own retirement funds.

Understandably, this format runs contrary to the 'spirit of rugged individualism' upon which many citizens pride themselves, and I believe that ultimately the degree to which this 'spirit' is real or perceived (a not uncommon point of contention) is irrelevant. Politicians (typically on the left) will ignore this popular sentiment at the peril of the program they support.

I believe that for social security to have any real chance at surviving in the long-term that: (1) it is necessary to offer some autonomy to those who desire it, and naturally (2) the government should only offer up such a concession under auspices of a mutual understanding that - for those who opt for autonomy - there is some risk of failure (and some risk of loss).

In practical terms, I am suggesting that individuals be able to designate (each year they are working) a certain portion of the social security funds (that would otherwise be withheld from their pay) to be diverted to some sort of personal retirement account. Then, in a complementary manner, whatever portion of a retiree's pay had been diverted to their personal retirement account over the course of their working life would be deducted from the pay-out they would otherwise receive from the more traditional social security fund(s).

At this point, I do not have any preference regarding who would run such an account (whether run by the government or -more likely- the private sector), and I do not think that the administration of such a program would need to be any more complicated than the current system of claiming a tax credit for money deposited in an IRA at the end of each tax year. Instead, it is more important that Congress just settle on something that works - politically and practically.

All things considered, this slice of the pie might easily be renamed the "rugged individual" slice of the pie... allowing those who would desire it, the ability to take a chance to earn (or lose) a little bit more than their neighbors.

4. Funds diverted to paying down the national debt

The reasoning to include this "Funds diverted to paying down the national debt" slice of the pie may be much less obvious (and much more controversial) than any of the others. However, this slice of the pie stands firmly on principles of sustainability and inter-generational equity.

It has been rightly pointed out (no pun intended) that the United States federal government is spending a large amount of money that it does not have by borrowing money from other countries... and in essence from future generations, who will be forced to pay off that debt (or possibly go to war to avoid paying the debt if it is too burdensome). In any case, it is a fundamental issue of inter-generational equity that each generation do their best to pay for the governmental programs (especially those with one-off benefits) they benefit from in their own lifetime, rather than leaving that burden to those that follow them.

Also, in perhaps a more tangible way (especially for those born of since 1970 and/or those familiar with the Greek debt crisis): what good is it to have retirement benefits promised to you in the future, if the overall functionality of your government may come into question due to astronomical national debt?

I believe that by tying the overall pool of social security benefits to the amount of national debt (or lack thereof) incurred by each generation, every generation will be incentivized to manage government spending more prudently. While this concept may seem intimidating - and I can't promise that it isn't - it may be less intimidating than trying to address the national debt issue from fiscal year to fiscal year.

****

I have offered the best (brief) reasoning that I can muster for including each piece of the social security funding scheme that I am proposing. In the next post, I will do my best to offer a good way to implement the social security reforms that I am proposing.

Regards,
Sean

This "Recutting the social security pie" series:
Introduction: Recutting the social security pie (Part 1 of 3)
Reasoning: Recutting the social security pie (Part 2 of 3)
Implementation: Recutting the social security pie (Part 3 of 3)

Introduction: Recutting the social security pie (Part 1 of 3)

Hello Readers,

Earlier this month, I offered a letter to the newly re-elected president, in which I discussed the need for swift and decisive action on climate change and the national debt crisis. I reasoned that by taking action on issues that will greatly impact my grandchildren's grandchildren, we can see immediate improvements in the short-term while moving in the right direction overall.

This week, I would like to take some time to see if we cannot help future generations and current generations (old and young) all at the same time. To do so, I propose that we dance on another third rail (perhaps the sixth rail?) of politics: social security reform.

Over a year ago, in the summer of 2011, I offered a detailed '3 year plan' proposal for implementing automatic adjustments to the social security retirement age. With much clarification provided in the posts (links provided at the bottom of this post), the proposal boiled down to this:

The United States government should enact legislation that implements an automatically adjustable retirement age for social security retirement benefits, such that: during the decade in which citizens turn 50 their retirement age will be set at an age that is 3 years less than the average United States life expectancy at the time.

After carefully re-reading and re-considering my thoughts from last year, I stand by that proposal, and I would like to offer up some more thoughts to President Obama and the Congress as they swerve to avoid the so-called "fiscal cliff" at the end of this year.

Before I start to layout my new proposal to re-cut the social security pie, I would like to point out that I know that my idea will not be perfect (and will need a lot of collective thought and will-power to implement effectively). Thus, I strongly encourage my readers to consider the spirit of my proposal fundamentally set while considering the numbers in my proposal to be entirely negotiable.

Now, as I understand it, many people have argued about the merits of whether or not the 'social safety net' of social security should exist (even if some elected officials equivocate in public for the benefit of gaining senior citizen votes). However, for the sake of moving towards action, it is important to come to an understanding that whether or not you believe that social security should exist or not, it does exist.

It exists, and millions of people now depend on it as at least one of their primary sources of income.  It exists, and it will not be politically feasible to (safely) dismantle it (even if you would like to see it go). It exists, and it directly impacts most of the country (whether they are paying into it whenever they are working or they are receiving payouts now or are expecting to receive payouts soon).

As such, I hope that all of my readers, will concede that social security exists, so it is important to address its viability now to avoid potentially devastating financial consequences that will span generations. To address this viability in the fairest and most politically actionable manner, I propose that we start in the middle of the middle of all reasonable proposals for social security reform (at least of those that I have come across) and then add a little bit more.

In essence, I suggest that we begin to divide up the social security funding allocation pie.** While this may superficially seem to make the process more complicated, please stay with me and hopefully it will make sense at the end. I believe that we should divide up the pie into four separate (but not necessarily equal) slices:

1. Funds paid out all to current retirees
2. Funds reserved for specific generations of retirees
3. Funds diverted to personal investment funds
4. Funds diverted to paying down any outstanding national debts

In the next post, I will discuss why I believe that social security funds should start to be divided into these four slices. Then, in another post, I will put forth a possible mechanism for implementing this pie-cutting process in a manner that will be fair to current social security beneficiaries but also address the needs of current (and future) generations of workers.

Regards,
Sean

**Throughout this entire series I am focusing solely on the social security program as it pertains to retirees, and I am not proposing to make any adjustments to parts of social security benefits for the disabled or other non-retirees.**

This "Recutting the social security pie" series:
Introduction: Recutting the social security pie (Part 1 of 3)
Reasoning: Recutting the social security pie (Part 2 of 3)
Implementation: Recutting the social security pie (Part 3 of 3)

The previous "Adjustable Retirement Age" series:
Proposal: Social Security Reform - Adjustable Retirement Age
Response: Social Security Reform - Adjustable Retirement Age
Discussion: Social Security Reform - Adjustable Retirement Age (Part 1)
Discussion: Social Security Reform - Adjustable Retirement Age (Part 2)

The Challenge of Returning Veterans

Hello Readers,

I found a very interesting TED talk, which seems especially appropriate on this (observed) Veteran's Day.



As the speaker suggests, a program or organization like this might be a crucial step in helping veterans returning from Iraq and Afghanistan to re-integrate themselves into society. Also, it could be an intelligent model for implementing a climate change adaptation policy or program, and I would suggest that it might not necessarily need to be limited to post-disaster relief. It could also be extended to include pre-disaster preparations and overall disaster mitigation strategies.

Respectfully,

Sean

A letter to the president

Hello President Obama,

I obviously want to start off by congratulating you on a well fought electoral campaign and, of course, your re-election. On Tuesday, I voted for you for a second time, and I wanted to let you know why.

I believe that we need to leave the planet and society in better shape than they were given to us.

I am not (especially) worried about myself, because I have been given the opportunity to share in a rich and on-going human experience: the opportunity to grow and learn and live. My main concern is that I leave the planet and society in such a state that my grandchildren’s grandchildren (which – for the record – are hypothetical, as are any children I may have in the future) will have the opportunity to say the same thing. I believe that if I live my life like this – asking for nothing that will detract from the human experience of my grandchildren’s grandchildren – my life, my neighbors’ lives, and my children’s lives will be enriched all the more.

I understand that none of our country's problems (financial, social, or environmental) materialized overnight nor could many of them be easily predicted (or avoided even if they were clearly predicted). Instead, the issues we face are the result of an accumulation of decades of (and in some cases generations of) complex decisions made with the best intentions.

I also understand that there are indeed limits to presidential power, and that it is necessary for a president to work with (or in some cases against) the Congress as well as many other parties. I understand that the social cost of not addressing our country's health-care system in your first term would have been great.

In short, I am very understanding. However, I voted for your re-election, because I believe that you genuinely care, speak and act sincerely, and possess the fortitude to that will be required to work through the issues at hand.

That being said, I must demand two things of you. The first, of which you are no doubt well aware, is that you do whatever it takes to get our nation's debt under control. The second, which you only mentioned in passing during your campaign and which in my mind is absolutely paramount, is that you put a truly unprecedented effort forward to implement substantial measures that address climate change - both its mitigation and (due to the unfortunately modest progress made on this issue thus far) our adaptation in response to the effects that can no longer be avoided.

You have been given 4 more years to accomplish both of these demands; however, the impact of your actions will determine the course of our history for the next 40 years or more. While others will demand necessary and useful short-term actions to fix the economy and provide more jobs over the next couple of years, any such short-term gains will be completely negated soon after the end of your term if a comprehensive long-term strategy is not initiated.

I have waited four years with patience and understanding. We cannot wait another four years. We need serious and comprehensive action now. We need to find solutions that work - whether they are government-based solutions or private-sector solutions or a little of both, I frankly do not care... whether it requires raising more taxes or making thoughtful spending reductions, I do not care. It simply needs to work. The rest of the details will sort themselves out over time, just make it work!

With high hopes and best wishes,

Sean Diamond
A member of the Warmest Generation

TED Talk - smart building materials

Hello Readers,

I thought you might enjoy watching this TED Talk about smart building materials, which provide passive air conditioning (reducing energy consumption).



Cheers,
Sean

Sandy: a footnote in history

Hello Readers,

Unless you have been living under a flooded rock, you know that hurricane Sandy started hitting the east coast of the US one week ago. There have been a flurry of articles in the news media discussing how climate change played a role in Sandy's strength...

Bloomberg Businessweek:
http://www.businessweek.com/articles/2012-11-01/its-global-warming-stupid

 ...among many others. And yet, climate change has just begun to take effect (according to basically any credible scientific climate model). Just imagine what the 14' storm surge in New York City could have been if the baseline sea-level had already risen 1-3' (as it may within the next several decades). What would the IKE be...

Washington Post:
http://www.washingtonpost.com/blogs/capital-weather-gang/post/sandy-packed-more-total-energy-than-katrina-at-landfall/2012/11/02/baa4e3c4-24f4-11e2-ac85-e669876c6a24_blog.html

...if the global temperatures were a few degrees warmer, and the atmospheric humidity was just a little bit higher (holding a little bit more rain water), which would add to the amount of rain that fell in the span of just a few days...

Washington Post (again):
http://www.washingtonpost.com/blogs/capital-weather-gang/post/hurricane-sandy-recap-historic-storm-from-storm-surge-to-snow/2012/10/31/9a7c56d8-2362-11e2-ac85-e669876c6a24_blog.html

So yes, the impact of hurricane Sandy was (and still is) devastating, and I certainly hope that those still living through those impacts the best of luck, but please take a moment to consider that this storm may be considered mild or average in two or three decades (if climate change plays out how the models predict).

After you consider that, let's have a discussion about what we can do to avoid a worst-case-scenario. (Again, sorry for implying that the current situation is nowhere near the worst-case-scenario, but it is not even close.) Let's start talking about how we can reduce our greenhouse gas emissions nationally (reducing the long-term impacts of climate change) and how we can increase the baseline-resilience of our local communities (increasing our tolerance for extreme weather events). This is the two-pronged approach that we need to take in order to ensure our place in history as the Warmest Generation.

Regards and best wishes,

Sean Diamond

Before you vote, watch this...

Hello Readers,

I have finally gotten a chance to get settled in after my move into my new apartment and beginning my new job, so it appears that it is time to come out of blog-itudinal hibernation. Given that it is the last weekend before election day, I must urge that you at least take climate change in mind before you vote!

Here is a Frontline PBS special about climate change and politics...



I can't promise that everything that they say in the video is right or wrong, but at least they are talking about it... unlike the presidential campaigns!

Once you are done watching, GO VOTE!!!

~Sean

Coming Unscrewed

Hello Readers,

A couple of weeks ago, I was hired to work at a new job after a summer of unemployed job searching. I am still working in the renewable energies industry, but I have moved from one end of the industry to the other. As I've mentioned in the past, I was working as a solar PV installer and developer. However, now, I am working at National Grid as a Technical Support Consultant, which is code for a reviewer of renewable energy interconnection applications.

Over the past few weeks, I have been quickly learning and re-learning the regulations, requirements, background, and software systems needed to process complex interconnection applications. (Thus, my lull in posts on this blog.)

I also bought a car, and had to deal with an internal struggle regarding my own preference for avoiding car ownership and using walking, biking, and public transportation. However, as I was facing a choice between a public transportation based commute that is over 90 minutes each way (and twice as long as a car based commute) I had to relent and make the purchase. Hopefully, in the next few weeks I will be able to post some thoughts on that struggle.

In the meantime, this car based commute did result in me hearing a frustrating interview on NPR, which I have embedded below, entitled Are Today's Millennials The 'Screwed Generation'?.

In this interview, Michel Martin (NPR) and Joel Kotkin discuss the book and concept of the 'Screwed Generation' - a derogatory, underwhelming description of the Warmest Generation (otherwise known as Millennials). Kotkin does point out a few systemic issues that the Warmest Generation has had to deal with as they enter college and later the workforce. However, he also makes relatively discouraging claims about the motivations of those of us born in the 80's and 90's.

I recommend listening to the interview, but I certainly would not take Kotkin's opinions as facts (or even correct in many cases). Instead, I would take his bashes against the character of our generation as untrue, and the burdens and debts laid upon us by older generations as a challenge of which we were all well aware and working to overcome. Furthermore, I would like to stress that the interview fell far short by only focusing on the economic challenges faced by our generation, rather than mentioning the social and environmental challenges that our generation has already started to address.

Regards,

Sean Diamond

Gardening in Towns

Hello Readers,

I thought I would follow up the Gardening in Schools TED Talk post from Monday with a TED Talk from Pam Warhurst about turning towns into edible public spaces.

Please enjoy,

Sean

Gardening in Schools

Hello Readers,

Here is a great TED Talk about combining schools with green urban agriculture.

Enjoy,

Sean

Permaculture and Summer Social

Hello Readers,

I have not had too much time to prepare a post for today, but I thought you might be interested in two things:

For those of you who were following the MBTA Series and live in Boston: tomorrow (Thursday, August 2nd, 2012) there is a Summer Social hosted by Livable Streets at the BSA Space.

Event Details
Thursday, August 2, 5:30-7:30pm
At the BSA Space
290 Congress Street, Boston
Free and open to the public

The BSA (or Boston Society of Architects) is providing the space, and visitors can check out their current exhibit "Let's Talk About Bikes."

For those of you not living in Boston, I have found a thorough article explaining what Permaculture is: Taking the Permaculture Path to Community Resilience, which should be interesting for any aspiring sustainable community planners who want to take their calling to the next level!

Welcome to August!

~Sean

How to Discuss Climate Change

Hello Readers,

This is the level of discussion that we, the Warmest Generation, need to be having. If you don't understand climate change (or don't think that you do), please watch this:



It is time to understand that 'increased probability' means that climate change is happening! Anyone who tries to spin the message of 'increased probability' as anything other than climate change is happening, is misinformed (or trying to misinform).

Sincerely,

Sean Diamond

Proposal: Reducing the MBTA Debt (Part 3)

Hello Readers,

Earlier in this series, I provided some background on the MBTA debt crisis and offered some justification for introducing a Parking Space Tax (PST) as part of a comprehensive transportation policy for the greater Boston metro area. I also suggested that any possible solution to the MBTA debt crisis must meet three criteria: (1) effectively addressing the debt itself (rather than merely shuffling it around), (2) improving the overall commuter experience, and (3) increasing MBTA revenues without unfairly burdening individual riders through constantly increasing fares.

In this final post in the series, I will offer some specific stipulations and suggestions regarding the structure and scope of any PST introduced in Massachusetts. I offer each of these recommendations with the hope that they ensure that the financial burden of the PST is spread equitably and that the corollary transportation incentives of the PST are targeted effectively.

PST Considerations

First and foremost, I feel compelled to acknowledge that there are many legitimate uses of cars and that as a result there is some legitimate need for parking spaces. Growing up in suburban Pennsylvania, I experienced innumerable situations where attempting to use any other form of transportation would have been simply impractical. I can only assume that in Massachusetts there are analogous issues that must be considered. With this concession in mind, here are some principles worth considering:

1. Handicap Access - No matter how many elevators, ramps, and kneeling buses a mass transit system may introduce, there will be instances where forcing handicapped individuals not to drive (or have access to parking) will put an unreasonable burden on those individuals and their families. Thus, I recommend any PST or similar program waive all fees, costs, and limitations related to handicap parking spaces.
   
   
2. Population Density - That is to say that in areas with especially low population densities, a mass transit system may not be a viable option. In some situations, a rural population may only have enough people traveling to a shopping center each day to fill a bus three times per day. Of course, only having access to the shopping center three times per day or running a half-filled bus six times per day would not be helpful for the shopping center businesses, convenient for the local residents, or economical for a bus company or transit authority. In these areas, personal cars and parking spaces truly are the best option.
   
   At the same time, there are numerous suburban and urban areas where personal cars may seem like a necessity. However, this perceived necessity is typically much greater than the actual utility of personal cars. Specifically, by improving current transportation alternatives or introducing new alternatives, the local population could easily and effectively make (better) use of a mass transit system to the benefit of commuters as well as local residents and businesses.
   
   Thus, understanding the relationship between population density and the utility of personal car use, I strongly urge that any PST or similar program be directly correlated with population density, such that areas with higher population densities bare a larger burden than areas with lower population densities. In fact, areas with sufficiently low population densities should not bare any PST or mass transit burden.
   
   
3. Free over Fare - While there may be no right to parking, I would contend that there is a right to free travel. That is, no matter how rich or poor someone is, they should never be trapped by the cost of transportation or overwhelmingly obstructed by the infrastructure of non-free transportation (i.e. no mode of transportation that costs money should prevent someone from using free modes of transportation).
   
   Despite how beneficial cars, subways, buses, or any other mode of transportation may be, it should not trump the needs of cyclists and pedestrians. On the contrary, improvements to fare-based transportation should only serve to augment the ability of people looking to walk or bike to their destination. Thus, bike racks, bike lanes, wider sidewalks, and benches should all be considered alternatives to parking spaces, and in related policies the introduction of new free-travel improvements should be an opportunity to reduce a community's PST burden.
   
   
4. Validated Parking - Often urban shopping centers, entertainment venues, and groceries stores 'validate parking' to alleviate the burden of the cost of parking for their customers. I would like to reconsider this concept in two ways in order to address some potential criticisms of a PST.
   
   Rather than validating parking in densely populated neighborhoods and towns, why don't stores 'validate' mass transit costs? Stores with parking lots or garages might easily charge a dollar or more per hour for parking, because in these cases, the stores have spent (or are spending) money to build or maintain the parking spaces, a cost that could be passed on to customers directly. However, they realize that it is beneficial to their bottom-line to subsidize this parking cost for customers that may be spending hundreds of dollars during a shopping trip. Wouldn't it make as much sense (or more sense) for those stores to validate mass transit fares instead and fore-go the expense of maintaining a parking lot or garage? Just imagine if for every $20 you spent on groceries, you could have a quarter added to your Charlie Card!
   
   On the other hand, many people live in the city where mass transit exists but work in the suburbs and country side in massive office complexes, which are not accessible (or barely accessible) via public transportation and are well out of the range of an average cyclist. In these cases, someone's livelihood may depend on their ability to have access to a car for their daily commute, which may mean that a hefty PST at home needs to be paid solely so they can get to work. As such, it would be entirely feasible for employers (especially large corporate employers), who have decided to locate their operations in a suburban locations, to validate their employee's residential parking costs. This may seem outlandish at first, but consider that many urban employers already offer similar commuter benefits to encourage their employees to utilize mass transit services.
   
   
5. Other Concerns - While I do not have a catchy name for this point, I would discourage any stipulations that taxed the use of private driveways at residences. Part of my justification for PST legitimacy is the over-use of public spaces, which admittedly has been stretched somewhat to include commercial spaces, as parking spaces. However, it seems inappropriate to try to assess parking taxes on farms or private residences. The purpose of the PST is not to make car ownership impossible, it is only to discourage excessive car use and encourage alternative forms of transportation whenever appropriate. Thus, I would also consider making provisions for car share programs, taxis, parking spaces at commuter rail stations, and even car dealerships and some long-term vehicle storage facilities.

One Possible PST Structure

One way to structure a PST would include calculating the rate of taxation at the municipal level on a per parking space basis, which is scaled to the local population density. For example, the tax could be designed such that the PST rate in each municipality is equal to $0.01 per day for each taxable parking space, multiplied by the local population density divided by 1000. In this calculation, a municipality's population density would be rounded down to the nearest thousand. The tax rates for the most densely populated municipalities in Massachusetts under such a scenario are listed in the box below.

Municipality	Pop. Density Per Sq. Mi.	Daily PST Rate Per Parking Space	Annual PST Cost per Parking Space
Somerville	18,448	$0.18	$65.70
Cambridge	16,358	$0.16	$58.40
Chelsea	16,081	$0.16	$58.40
Boston	12,753	$0.12	$43.80
Everett	12,314	$0.12	$43.80
Malden	11,716	$0.11	$40.15
Lawrence	10,974	$0.10	$36.50
Winthrop	8,803	$0.08	$29.20
Revere	8,750	$0.08	$29.20
Brookline	8,649	$0.08	$29.20

Population density figures based on 2010 census data posted on the arlington-mass.com website.

Each of the municipalities listed in the table above are already served in some way by the MBTA and would most greatly benefit from improvements to T service. Of course, there are some densely populated areas that are not served by the MBTA, see the map below. However, each of these areas could probably make use of some mass transit funding in the future. Furthermore, as you may note in the map below, there are also large regions of the state with population densities below 1,000 residents per square mile, which would not be subject to any PST rate at all.

Of course, as every urban planner and policymaker knows, every location is different. With this in mind, I will suggest that a state-wide PST follow the guidelines listed in the above section and establish a rate structure similar to the one in this section. Then, as long as the related legislation clearly defines what is and is not considered a taxable parking space, the actual administration and collection of the PST may be left up to the municipal authorities (with some small percentage of the revenues being returned to the municipalities to cover their administrative costs).

This will offer municipalities and local residents the ability to determine how to divide up the financial burden of the PST and develop innovative ways of reducing the number of parking spaces in their own municipality - while still meeting the needs of citizens and businesses. For example one town may decide to collect the revenues through residential parking permit fees, whereas another may elect to put the burden on commercial properties by increasing real estate taxes or charging a parking lot fee. Likewise, some municipalities may decide to erect new no-parking signs on certain streets, replace parking spaces with bike racks, or allow restaurants to block off old parking spaces for use as outdoor seating.

In any event, implementing a Parking Space Tax will involve a little bit of creativity. However, if done right, it can meet the three criteria necessary to solve the MBTA debt crisis and offer a sustainable alternative to the current de facto transportation policy in Massachusetts.

Sincerely,

Sean Diamond

Click Here to go back to the First Post in the MBTA Debt series

Proposal: Reducing the MBTA Debt (Part 2)

Hello Readers,

In an earlier post, I introduced the issue of the overwhelming debt that is burdening Boston's mass transit system, the MBTA. In that post, I also suggested that a Parking Space Tax (PST) is a possible solution that will meet three criteria: (1) effectively addressing the debt itself (rather than merely shuffling it around), (2) improving the overall commuter experience, and (3) increasing MBTA revenues without unfairly burdening individual riders through constantly increasing fares.

In this post, I shall offer justification for taxing parking spaces as a means of meeting these three criteria. In the next post, I shall suggest some features and stipulations of a PST that ensure its equity and effectiveness as a part of a comprehensive transportation policy.

The Right to Parking

I recently watched the documentary Urbanized, a film directed by Gary Hustwit about urban planning. In the film, the former mayor of Bogota, Columbia (Enrique Peñalosa) drove home a point that stuck with me. He asked, essentially, where in the [Columbian] constitution is there a right to parking? Obviously, the answer is that there is no 'right to parking' in any constitution in the world, that a 'right to parking' does not exist. He also went on to suggest that in a democracy that it is the people who should be treated equally, not the cars. Thus, a bus that holds 50 people should have 50 times more priority and access to a roadway than a car that holds 1 person.

Building on the concept that there is no 'right to parking' (and preferring people's equity rather than cars' equity), I would like to suggest that parking is indeed a privilege and not a right. Furthermore, the existence of on-street parking spaces and public/commercial parking lots and garages (and the associated side effects of their existence) tend to put a significant burden on the public as a whole. Therefore, parking spaces should be subject to a tax.

Some Burdens of Parking Spaces on the Public

1. Physical Space - The most obvious and direct impact of parking spaces and parking lots is that their physical presence prevents the allocation of that space for other uses. Just imagine if every building in Boston had an additional 9' wide patch of green space in front of it or if restaurants and cafes could provide ample outdoor seating without obstructing the sidewalk! Likewise, consider what might be possible if the neighborhood grocery store had half of its parking spaces replaced with parks that included community gardens, bike racks, or even a public pool or ice rink.
   
   Instead, massive parking lots and on-street parking take up a lot of space. If on-street spaces were privately owned, you can be sure that the landlords would be charging rent for that space. However, since many parking spaces are publicly owned, car owners can use them rent free or nearly rent free.
   
   Even metered parking spaces are 'rented' at rates that are low compared to the surrounding land. For example in the City of Boston, a metered parking space is charged at a rate of $1.25 per hour. For each space, this works out to a maximum of $4,692.85 per year or just over $390 per month (after considering there is no charge on Sundays and at night) for a 216 square foot space (or roughly the size of a modest studio apartment). In other words, these spaces have a maximum financial return to the public of <$22/sq. ft each year, even in areas that may have a land values of over $200/sq. ft, which pay a property tax of well over 10%!
   
   
2. Increased Congestion - For decades, policymakers have been attempting to address congestion and traffic by adding lanes to highways and streets. During each of those same decades, congestion has continued to get worse (or at the very least not better) in most places. Why is this?
   
   The reasoning is that adding traffic lanes provides more opportunities for cars to pass one another. The counter-intuitive result is that more people are encouraged to drive more often rather than using other modes of transportation. In effect, adding lanes of traffic to roads makes other modes of transportation seem more dangerous (e.g. by increasing the curb-to-curb distance for pedestrians and forcing cyclists to cross multiple lanes of traffic to turn left from a bike lane) and more difficult (e.g. putting obstructions and vehicles between places that are physically close together), which encourages more people to drive - causing more congestion.
   
   However, it is not simply the additional traffic lanes (or increased danger for alternative transportation methods) that significantly affect congestion. Instead, it is the availability of parking spaces at the end of the journey.
   
   Consider, for a moment, if there were zero parking spaces available in Boston. How many people would drive into Boston? Basically none. Granted, there would still be some traffic through the city, and perhaps occasionally someone might drop off a friend and return without needing to park. Yet, this would certainly amount to very little congestion compared to the daily rush hour in Boston today.
   
   Now, consider a less extreme case, where there were simply fewer parking spaces and those that were available were a little more expensive or otherwise reserved for handicapped citizens, car share programs, and bike racks. While driving would still be an option, it would probably be reserved for special occasions. Theoretically, such a scenario would decrease congestion. Thus, conversely, allowing parking spaces to be relatively cheaper and more available (the current situation) encourages more driving and more congestion than is necessary.
   
   
3. Environmental Impacts - In my mind, the environmental impacts associated with parking spaces are relatively obvious even if they are somewhat indirect, so I will not dedicate too much discussion to this burden. Most directly, paved parking spaces cause increased storm-water runoff, compared to an equal amount of green space. Additionally, the vehicles parked on the spaces leak and leach fluids and oils that are often swept away with the storm-water into the rivers and harbors in Boston. Finally, as a corollary, all of the increased congestion related to parking spaces (as described above) means that each vehicle is spewing more pollutants per mile traveled.

So far, I have only discussed the issues and problems related to parking spaces and commuting by car. In the next post, I shall make a few concessions regarding the benefits of cars and parking spaces, as I offer some recommendations about the structure and limitations of any Parking Space Tax that may be introduced in Massachusetts.

Sincerely,

Sean Diamond

Click Here to go to the Next Post in the MBTA Debt series

Proposal: Reducing the MBTA Debt (Part 1)

Hello Readers,

Earlier this summer I moved to the Boston area and began to search for local sustainably minded organizations and investigate the local sustainability issues. As I did so, I quickly ran into one issue in particular that seems to be on everyone's mind: the MBTA.

For anyone not living in Massachusetts, the MBTA stands for Massachusetts Bay Transportation Authority, which is the entity responsible for operating all commuter and mass transit services in the greater Boston metropolitan area, including local buses, ferries, subway lines, and commuter rail lines. According to the MBTA website (and the 2010 US Census), the MBTA services a territory with a population of 4,817,014 in a state with a population of 6,547,629 (i.e. nearly 75% of the population of Massachusetts). Though most often used in reference specifically to the subway system, the MBTA is commonly known as simply as the T.

The Issue

Unfortunately, from what I can surmise based on my discussions with people and searching through recent news articles, the MBTA is deeply in debt. So far in debt in fact that according to a BostInno article by Denise Provost, "Payment of interest on its debt eats up over 30 percent of MBTA’s entire budget."

According to an online Boston Magazine article, the total debt (at least as of February 2012) is $5.2 billion, which is attributable to three sources:

• $1.85 billion - debt from MBTA improvement projects since 2000
• $1.65 billion - debt from MBTA improvement projects prior to 2000
• $1.7 billion - debt from the 'Big Dig' project

To explain the reasoning behind this breakdown, a little bit of modern history is required.

In 2000, the state legislature restructured the MBTA, requiring it to annually balance its budget under a so-called "Forward Funding" scheme. As part of the scheme, the MBTA was required to payback debts that the state had previously incurred due to MBTA maintenance and improvement projects. The scheme also required the MBTA to take on debt related to the environmental mitigation projects related to the Big Dig.

The Big Dig is the unofficial name of a now infamous highway project in Boston that was designed to re-route I-90 and I-93 through underground tunnels as they passed through downtown Boston. As part of the environmental mitigation for the massive amount of environmental disturbance that the Big Dig would cause, the state legislature agreed to implement several upgrades to the T system. The highway construction of the Big Dig took nearly a decade longer than expected and the actual cost was billions of dollars over-budget.

For an extensive overview of how the MBTA got so far into debt, see the 2009 MBTA Advisory Board report (pdf).

The Proposed Solution

The default response to this issue by the MBTA has been to raise fares and/or cut back on services: the two aspects of its budget over which the Advisory Board has control. Of course, both of these responses discourage T ridership by making mass transit trips more expensive and less convenient. Simultaneously, this makes other forms of commuting such as driving relatively more attractive, and it puts an additional burden on those most reliant on the T as their only means of transportation.

I have found many other potential solutions floating around on the internet, including absurd suggestions like selling liquor on subway cars to more serious suggestions. For example, the 2009 MBTA Advisory Board report recommended that the state simply take back the debt from the MBTA and put it back on the state budget. Also, one proposal currently on the table would require selling the naming rights to the busiest stations, but it would only make $147 million dollars over 8 years (less than one fifth of the annual budget deficit - note not the whole annual budget, just the deficit).

However, I cannot find any suggestions (at least none with any significant description) that include: (1) effectively addressing the debt itself (rather than merely shuffling it around), (2) improving the overall commuter experience, and (3) increasing MBTA revenues without unfairly burdening individual riders through constantly increasing fares. Thus, I would like to propose a solution that may ruffle a lot of feathers but should fulfill all three of these criteria and be relatively straight forward to implement.

The proposed solution is this: a Parking Space Tax.

Now, Republicans and Libertarians please hear me out before stonewalling the very notion of a tax. I could have very easily tried to call it a 'service fee' or something else, but I shall call it what it is. The Parking Space Tax (or hereafter PST) will have some features and stipulations that I will describe in a later post. However, in the next post, I will explain my reasoning behind a policy connecting parking and mass transit.

Also, while you are waiting for the next post in the series, you can take a look at a related Boston Globe article that was published as I was editing this series. The article is actually based on a similar premise but has a limited focus: downtown parking garages.

Sincerely,

Sean Diamond

Click Here to go to the Next Post in the MBTA Debt series

Don't Frack My Mother - song

Hello Readers,

After my string of long, detailed, and serious posts, I thought that I would provide everyone with a little bit of humor this Friday. Below is a song "Don't Frack My Mother" as performed by Sean Lennon and Yoko Ono on Late Night with Jimmy Fallon.



(The posting is from Hulu, so if it stops working Hulu took down the clip.)

Have a good weekend. Next week, I have a series of posts prepared about Boston's mass transit system, the MBTA, so check back on Monday.

Cheers,

Sean Diamond

How much is a kWh?

Hello Readers,

As I was writing my series on Net Metering, it was pointed out to me that most people are not especially familiar with some of the units that I used in the article. Thus, in this post, I would like to offer a primer on units that are commonly used when talking about electricity (and how they relate to renewable energy and energy use). At the bottom of this post, I have also included a glossary of Energy Industry Terminology that you may encounter while reading about renewable energy and energy use.

What's a Watt?

A Watt (W) is a basic unit of power measurement. Watts are used to measure how quickly energy is consumed by or generated by a system.

But what about all of the prefixes?

Unit Name	Abbr.	Meaning	At This Scale
Microwatts	μW	1/1,000,000th Watts	Wrist Watches
Milliwatts	mW	1/1,000th Watts	Laser Pointers
Watts	W	1 Watt	LEDs
Kilowatts	kW	1,000 Watts	Average US Households
Megawatts	MW	1,000,000 Watts	Aircraft Carriers
Gigawatts	GW	1 Billion Watts	Medium Size Cities
Terawatts	TW	1 Trillion Watts	Large Countries

Note: whether a prefix is capitalized or not can alter its meaning in some cases.

How about a Watt-hour?

A Watt-hour (Wh) is a basic unit of energy measurement. Watt-hours are used to measure how much energy is consumed by or generated by a system.

1 Watt-hour is the amount of energy that would be consumed by or generated by a system if the system operated at power level of 1 Watt for a time period of 1 hour. Note that, all of the prefixes listed above apply to Watt-hours the same way that they apply to Watts (e.g. 1 kWh = 1,000 Wh).

Energy Used	At This Scale
15 Wh	Compact Fluorescent Bulb for 1 hour
250 Wh	Xbox 360 and LCD Television for 1 hour
1 kWh	Average US Household for 1 hour
23 kWh	Nominal Rating of Electric Vehicle Battery
12 MWh	Average US Household for 1 year
20 GWh	Small US Town for 1 year
57 TWh	Total Massachusetts Electricity Consumption (2010)
3,750 TWh	Total US Electricity Consumption (2010)

Watts or Watt-hours?

Despite the similarity in name a Watt-hour is very different from a Watt!

For example, If I asked you, "How much power are the appliances in your house using right now?" Your response should be something like, "They are consuming 800 W."

Likewise, If I asked you, "How much energy do the appliances in your house use in a year?" Your response should be something like, "They normally consume about 9,000 kWh."

If you used the two units interchangeably (such as answering the first question as "800 Wh" instead of "800 W), it would be the same as confusing any other two units.

For example, if I asked you, "How fast were you driving when the cop pulled you over?" and you answered, "About 30 miles." In this case, your answer simply does not make sense!

Appliance Power

The more Watts an appliance is rated at, the more energy it consumes. You can think of this as describing how 'hungry' an appliance is. That is, how much energy does the appliance need to consume in order to do its job? In many cases, a higher power rating means an appliance can work more effectively. Of course, a higher rating does not necessarily mean that an appliance is doing a better job, sometimes it can mean a lack of efficiency. To put this in perspective, let me offer two familiar examples.

Example 1: Microwaves A 600 W microwave will typically take longer to cook your TV dinner than a 900 W microwave. In this case, the 900 W microwave is 50% more powerful than the 600 W microwave, which allows 50% more energy to be applied toward cooking your TV dinner each second that the microwave is running. In this example, the added power means the job is done more effectively. Example 2: Light bulbs A 100 W incandescent light bulb can often be replaced with a 25 W compact fluorescent light bulb and essentially the same amount of light will be provided. With each light bulb, enough light is provided to read a book each second that the light is turned on. In this example, the incandescent bulb is more powerful but less efficient, so a lot of energy is wasted by heating up the coils in the bulb.

Reading an appliance's power rating can also, sometimes, be a bit misleading. Some appliances - such as microwaves - have straight forward power ratings. (e.g. A 900 W microwave should be using 900 Watts of power when it is in use.) However, other appliances have power ratings listed that represent their maximum energy use.

Refrigerators, for example, are typically plugged in and 'turned on' all of the time, but a 720 W refrigerator is not constantly using 720 Watts of power. Instead, refrigerators may use their rated power for 5 minutes and then use no power for 25 minutes before switching back on again. In this case, a 720 W refrigerator would have a peak power consumption of 720 W and an average power consumption of 120 W (or 720 W x 5 minutes/30 minutes).

Generator Power

The more Watts a generation system is rated at, the more powerful it is. You can think of this as describing how 'strong' the generator is. That is, would energy being generated feel like a blast from a fire hose? Or, would it feel more like a squirt from a small water pistol?

Electric generator power ratings can also be a little tricky. For most types of generators (such as coal power plants, nuclear power plants, wind turbines, etc.), the so-called nameplate capacity indicates the maximum possible power generation under optimal conditions. However, solar photovoltaic (PV) generation systems can be especially confusing, because they have two nameplate capacities: an AC nameplate capacity and a DC nameplate capacity.

The AC nameplate capacity of a PV generator is relatively straightforward; it indicates the maximum AC power output that the system's inverter(s) can produce. On the other hand, the DC nameplate capacity of a PV generator indicates the expected cumulative DC power output for all of the solar PV modules under Standard Test Conditions (STC) without applying any derates, which in some cases compound to result in an actual output that is much higher than the DC nameplate capacity (see description below).

Solar PV Industry: Standard Test Conditions (STC)

In the PV industry Standard Test Conditions (STC) describe the production of a solar PV module at 25°C (77°F) at sea level with 1000 W/m² of incoming solar radiation (irradiance). While changes in atmospheric pressure can contribute minor changes in the actual output, changes in temperature and irradiance significantly alter the actual output of a solar PV module at different locations and throughout the year (and even throughout a single day). Depending on the location and time (and the amount of moisture and other particulates in the atmosphere) an array of solar PV modules may receive 100-1400 W/m² of solar irradiance during the daytime. This range includes irradiance both less than and greater than the STC irradiance. Greater irradiance will allows for a derate ratio that is greater than 1. Also, the cells in solar PV modules are better able to transfer electricity in cooler temperatures, which also allows for a derate ratio that is greater than 1. As a result, on a hot (cloudy) summer day a solar PV module will probably have  much lower output than the DC nameplate capacity. Conversely, on a cold (sunny) winter day a solar PV module is likely to have an actual output that is much higher than the DC nameplate capacity.

In any case, it is important to remember that the nameplate capacity of a generator is a nominal power rating, so it alone will not tell you how much energy a generator produces in a year. To determine a generator's annual energy production, you will need to multiply the nameplate capacity by the capacity factor and the amount of time in a year (i.e. Nameplate Capacity [W]x Capacity Factor x 8,766 hours = Energy Production [Wh]).

Other Terminology

Well, unfortunately, it would take an entire book or a semester course to explain all of the nuances of power, energy, voltage, and current related to energy generation and consumption. However, to help you along, I have put together a brief glossary of terms that are commonly used in the energy industry. I decided to put them in a logical (rather than alphabetical) order, so that you can read the glossary a bit like a book.

Glossary of Energy Industry Terminology

Nameplate Capacity	The maximum* potential power output or consumption for which a generator or appliance is rated to operate under optimal conditions (so called because this is often the nominal value listed on the name plate of the system).
Derate	A multiplier that describes what portion of a nominal system output remains intact after the effect of a non-optimal or non-standard condition is considered (often used to calculate the impact of changes in operating temperature or other environmental variables).
Capacity Factor	The Actual Power Output compared to the Nameplate Capacity over a period of time (typically as a %).
Availability Factor	The portion of time that a generator is physically able to operate (as opposed to being offline for maintenance; typically as a %).
Peak Power	The maximum amount of power that is actually generated or consumed during a defined period of time.
Average Power	The total amount of energy generated or consumed during a defined period of time divided by that amount of time.
Load Factor	The Average Power divided by the Peak Power for a defined amount of time (normally used to describe how well a utility grid is utilized; typically as a %).
Direct Current (DC)	Refers to power that is generated, consumed, or transferred at a steady voltage during normal operation (commonly used in batteries and solar photovoltaic modules).
Alternating Current (AC)	Refers to power that is generated, consumed, or transferred using a fluctuating voltage, which causes the current to alternate directions (commonly used in household appliances and long distance utility lines).
AC Voltage (VAC)	The voltage range over which AC power fluctuates (in the US, household electrical outlets nominally operate at ~120VAC, which means the actual voltage fluctuates between +120V to -120V many times per second).
Grid Voltage	Refers to the AC Voltage that must be maintained on a utility grid in order to ensure safe and reliable operation (neighborhood utility lines typically operate between a few hundred volts and several thousand volts).
Grid Frequency	Refers to frequency with which Grid Voltage fluctuates each second (in the US, household electrical outlets nominally operate at ~60Hz, which means that each second the Grid Voltage fluctuates through 60 cycles from +120V down to -120V and back up to +120V).
Inverter	A device that turns Direct Current (DC) power into Alternating Current (AC) power (a common component of solar photovoltaic generation systems).
Converter	A device that turns Alternating Current (AC) power into Direct Current (DC) power (often referred to as "AC Adapters" and are used in appliances and electronic devices that run DC power or rechargeable batteries).
Transformer	A device used to increase or decrease voltage (higher voltages are used to transport power over long distances with minimal losses; lower voltages are needed to operate common appliances).

*For solar photovoltaic modules, the Nameplate Capacity typically indicates the DC power output during standard test conditions of the module during its first year of operation.

I hope that you found this post useful. In the future, I will try to link to this post whenever I have included one of the terms listed above.

Cheers,

Sean Diamond

Massachusetts Utility Net Metering Cap

Hello Readers,

Earlier in this series, I described how utility net metering caps conflict with renewable energy installation goals. In this post, I will build upon the context established in the previous post about the Massachusetts Renewable Portfolio Standard (RPS), and I will explore the purpose of and issues with the net metering cap in Massachusetts.

To begin, let us consider the question: What is the purpose of capping net metering rules in the first place? There are two possible reasons why a net metering cap would have been introduced into the regulations: (1) there are physical safety concerns related to allowing significant percentages of net metered systems to interconnect or (2) utility companies lobbied for its introduction.

Safety Concerns with Net Metering

As I described in my graduate dissertation, the addition of a large percentage of intermittent renewable generation, such as solar and wind DG systems, has the potential to cause power quality problems on a non-smart utility grid. In other words, without sufficient demand response and/or energy storage capacity incorporated into grid, the modern utility grid infrastructure may not be able to handle large swings in power output (such as those that may be associated with changing wind speeds or clouds passing over a photovoltaic system) especially if intermittent renewable systems account for roughly 20% or more of a utility company's annual peak demand.

Even so, it is important to note that both DG-scale and large-scale (non-DG) intermittent renewable systems have the potential to cause physical stress on the utility grid infrastructure. In fact, the spikes and falls in production that can be problematic for the grid as a whole have a tendency to average-out across an aggregate of many DG systems, and therefore provide more stable grid voltages compared to a single large-scale system. Again, renewable DG systems should theoretically be favorable for the grid and provide a reason to encourage as much net metering as possible.

So, again, why put a cap on net metering? Understandably, no one wants huge swings in grid voltages to cause rolling brown-outs and damage to appliances, so perhaps a cap at 15-20% of the annual peak demand may be warranted if the grid is too 'dumb' to handle the input of renewable DG systems. However, in Massachusetts the cap has been established at 1% of annual peak demand for homeowners and businesses and at 2% of annual peak demand for municipalities and other government entities (for at total cap of 3% of annual peak demand).

National Grid's Net Metering Cap

National Grid’s historical peak load of 5,131 MWs occurred on August 2, 2006 in Massachusetts Electric territory; making the 1% limit 51.31 MWs and the 2% limit 102.62 MWs. As of July 5, 2012 in Massachusetts, there are 45,244 KWs with net-metering service under the 1% limit and 11,291 KWs with net-metering service under the 2% limit. As of July 5, 2012, there are 443,588 KWs with applications in the process of being interconnected under the 1% limit and of those 64,211 KWs have returned the Schedule Z.

Excerpt from National Grid Net Metering Website

Keeping in mind that 1,000 kW equals 1 MW, it is clear that, utility companies such as National Grid, already have more applications to interconnect net metered DG systems than they have room under their 1% private cap. This begs two questions:

• Why is there a larger set aside for public entities (i.e. a 2% cap for municipalities and other government entities) in Massachusetts?
• What is going to happen to all of the private entities that are applying to interconnect DG systems in Massachusetts?

As it turns out, the Massachusetts DPU is already arranging for the creation of a waiting list for entities attempting to interconnect DG systems after the cap limit is reached (see pdf). However, what good will this do if the net metering cap does not increase? The answer is appears to be little-to-no good at all.

Lobbying for a Net Metering Cap

Ostensibly, it is plausible that utility companies would have lobbied the state legislature on the issue in order to protect their profit margins. That is, logically, offering more net metering credits to DG system owners results in a proportionate decrease in the revenue that a utility company is able to collect, and therefore a proportionate decrease in profit margins. Thus, it would be equally logical in most cases for utility companies to lobby the legislature in support of a cap on net metering credits, thereby protecting utility company profit margins.

As I said, in most cases this would be logical, and in many states this may very well be the case. However, in Massachusetts in particular this makes very little sense due to a provision known as decoupling, which connects utility company profits with the number of customers served rather than the amount of electricity consumed.

Decoupling

The Department of Public Utilities (DPU) [...] issued an Order that will begin the process of "decoupling" rates from sales volume for all of the state's electric [...] distribution utilities, in order to encourage utilities to help their customers reduce their energy consumption and take advantage of on-site renewable energy, as required by the Green Communities Act, the comprehensive energy reform law [...] signed by Governor Deval Patrick. [E]lectric utilities will file rate plans that separate, or decouple, their sales of electricity [...] from the revenues they need to collect in order to maintain the electricity [...] distribution system they are responsible for. [...] Utilities are expected to file decoupled rate plans with the [DPU] as existing rate plans expire - for most companies, by 2012 - though companies can file sooner on a voluntary basis.

Excerpt from Mass DPU Press Release

Thanks to Massachusetts' implementation of decoupling, there is little-to-no direct financial incentive for utility companies to obstruct customers looking to take advantage of renewable DG systems. Under current regulations, utility company profits will remain the same regardless of how much electricity is consumed.

Unfortunately, I do not have the personal resources to thoroughly investigate the lobbying practices of the utility companies on this matter. However, given this understanding of decoupling, it is tough to imagine that utility companies would have invested much effort or money into lobbying in favor of a net metering cap.

Although, on a related note: in a personal, off-the-record discussion with an employee of a utility company, it was suggested that part of the reasoning behind the net metering cap may simply be a lack of qualified personnel. That is, in Massachusetts, which has only recently seen a significant private sector interest in renewable DG systems with the introduction of the Solar Carve-Out of the RPS, utility companies in Massachusetts do not have enough qualified staff to safely and responsibly handle the incoming interconnection requests in a timely manner.

A Possible Solution

To summarize, capping net metering may be providing utility companies some breathing room needed to retrain current staff and/or hire qualified staff. Likewise, it may also be providing the utility companies with an opportunity to figure out how to make the smart-grid smarter (i.e. better able to handle high percentages of intermittent renewable systems).

If either of the above justifications for a net metering cap are the case in Massachusetts, that ought to be made clear to the public and the policymakers. Also, instead of setting a single net metering cap, which provides homeowners and businesses no opportunity to make plans beyond the limits of the current cap, legislators should layout a growth schedule for the net metering cap.

This growth schedule should be clearly defined and - importantly - must lead the growth of the RPS goals by at least a year. If the net metering cap remains stagnant or does not out-pace the RPS in Massachusetts: DG installers, financiers, and potential DG system hosts will continue to be frustrated and delayed by an inability to plan ahead, which will be detrimental to everyone interested in meeting the RPS goals or holding a job in the green energy industry in Massachusetts.

Requiring the utility companies to increase the net metering cap at a pre-defined rate will offer everyone involved some project planning certainty. Also - if implemented correctly - a scheduled net metering cap increase will provide utility companies the incentive they need to safely and responsibly implement beneficial smart-grid technologies, which will improve grid efficiency and reliability regardless of the success of the RPS in Massachusetts.

Sincerely,

Sean Diamond

Click Here to go back to the First Post in the Net Metering series

What is a MW or a kWh? Click Here to find out!

Massachusetts Renewable Portfolio Standard

Hello Readers,

In an earlier post, I described how, in general, the low caps on utility net metering rules undermine the goals established in a state's Renewable Portfolio Standard (RPS). Now, I will take a look at the specific case of Massachusetts, which has an aggressive RPS program and already has utility companies running into the net metering cap.

In this post, I shall provide some background on the Massachusetts RPS. Then, in the next post, I will delve deeper into some of the reasoning behind putting a cap on net metering rules in the first place before finally discussing a possible solution to the issue.

Class I Resources

In Massachusetts, eligible Class I resources include: photovoltaics (PV); solar thermal-electric energy; wind energy; ocean thermal, wave or tidal energy; fuel cells utilizing renewable fuels; landfill gas; energy generated by certain new hydroelectric facilities, or certain incremental new energy from increased capacity or efficiency improvements at existing hydroelectric facilities; low-emission advanced biomass power conversion technologies using fuels such as wood, by-products or waste from agricultural crops, food or vegetative material, energy crops, algae, biogas, liquid biofuels; marine or hydrokinetic energy; and geothermal energy.

As described by DSIREUSA.ORG

Since 2003 Massachusetts has had an RPS, which has been increasing by 1% per year since 2008 and shall continue to increase by 1% per year without a legislated limit. By the end of 2012, the Massachusetts RPS requires that utility companies ensure at least 7% of the electricity they sell is produced by Class I resources.

Also, since 2010, the Massachusetts RPS has included a Solar Carve-Out, which specifies that a certain portion of the RPS must be met using energy produced by in-state solar photovoltaic (PV) generation systems that are 6 MW or less. Under the current legislation, the Solar Carve-Out in Massachusetts is ultimately limited to 400 MW of total installed capacity.

However, the requirement that each system must be 6 MW or less means that at least 400 MW of solar distributed generation (DG) systems (officially defined as generation systems 20 MW or less) will need to be installed over the next several years. As we discussed in the previous post, the primary means of DG installation is through net metering interconnection with the local utility company, so it is likely that the 400 MW of solar DG systems will be net metered. Furthermore, even after the Solar Carve-Out is fulfilled, solar DG systems may still be used to meet the general Class I requirement of the RPS.

1% Per Year

The Massachusetts RPS quota is mandated to continue to grow at an overall rate of 1% per year. This breaks down to roughly 580,000 MWh of additional Class I electricity generated per year.1 If the entire Class I requirement were met only through solar PV systems, roughly 482 MW of new solar PV generation capacity would need to be installed each year.2 Likewise, if the entire Class I requirement were met only through wind turbine systems, roughly 265 MW of new wind generation capacity would need to be installed each year.3

It is unlikely that any single Class I technology will fulfill the entire annual RPS increase during any particular year. Instead, each year a combination of new Class I technologies will need to be installed on a massive scale. But what does that mean? Consider some examples of renewable energy installation projects at a scale comparable to the annual increase in the RPS:

• If the Cape Wind project (420 MW) were fully operational, it would only fulfill roughly one and half years worth of the increase in the RPS requirement.
• When the entire Solar Carve-Out (400 MW) is met, it will not cover an entire year of the increase in the RPS requirement.
• The Sihwa Tidal Power Plant (254MW) is the largest wave powered generator in world, which produces 552,000 MWh per year. It is located in South Korea and is part of a tidal barrier that stretches nearly 8 miles in length across a tidal inlet creating an artificial lake.

In general, all renewable energy projects have the potential to provide a variety of benefits to system owners, those seeking domestic green energy jobs, and utility companies attempting to comply with the RPS. Of course, larger individual projects (such as the Cape Wind project and the Sihwa Tidal Power Plant) involve especially complex installation and pre-installation processes, which may involve a multitude of stakeholders and may require years of studies and permitting.

As a result, such mega-scale renewable projects can take years before they begin and can cause massive, localized environmental disruptions. On the other hand, hundreds of micro-scale DG projects (such as those mandated by the Solar Carve-Out) can be installed with relative ease, provided that they make financial sense and the regulatory hurdles do not turn into stone walls.

Unfortunately, even before the Solar Carve-Out requirement has been met, utility companies - such as National Grid - have already received enough DG interconnection applications to cause concern about their net metering cap. In this case, the net metering cap regulatory hurdle may simultaneously stonewall projects and make them less financially viable. In the next post, I will take a look at the net metering cap in Massachusetts.

Sincerely,

Sean Diamond

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Notes from the "1% Per Year" Box:

1)	Estimate based on available data from the US Energy Information Administration (EIA) Electricity Data website - spreadsheet: Retail Sales of Electricity by State by Sector by Provider (EIA-861).
2)	Estimate based on the PV Watts generation calculator, which suggests that 1 MW of solar PV capacity aligned south at a 20 degree inclination can produce about 1,202 MWh/MW per year in Boston, Massachusetts.
3)	Estimate based on information provided on the National Wind Watch website, which suggests a generation rate of 2,190 MWh/MW per year is not unreasonable given a 25% capacity factor.