The Interview Issue: PSEG’s Izzo offers ringing endorsement of energy efficiency plans — and stern warning (with more than a hint of frustration) about climate change

Ralph Izzo, chairman, CEO and president, PSEG.

Ralph Izzo is able to take complex energy issues and speak to them in ways everyone can understand.

And, if you read on, you’ll see the chairman and CEO of Public Service Enterprise Group explain how the math proves energy efficiency plans are a far more cost-effective way to reduce carbon than turning to solar or wind (and, note, PSEG just bought into the first major wind program in the state).

Izzo also will explain why the country needs to rejoin the Paris accords — and why developing countries need to be cut a break on emissions — and why a national energy plan would be a more efficient way to meet our goals of reducing our carbon output.

But it is his warnings on global warming that struck us the most. His biggest concern: That so many people refuse to believe the warnings despite overwhelming evidence. It’s analogous to another global crisis, he said.

“You know what scares me the most about climate change,” he asked, and then answered. “COVID-19.

“There was a media outlet recently that broadcast a video of a nurse who was streaming tears, because she has people dying who are still in denial that this is a real virus. And we’re talking about, ‘Are people in denial that climate change is real?’” 

Izzo discussed all this and more with ROI-NJ for the Interview Issue, our annual year-end give-and-take with some of the most inspiring and intriguing people around the state.

Here’s a look at the conversation, edited for space and clarity:

ROI-NJ: In September, the state’s Board of Public Utilities approved Public Service Electric & Gas’ energy efficiency plan — one that will cost $1 billion, which essentially will be paid by consumers. That’s a big commitment; explain why it makes sense in dollars and cents?

Ralph Izzo: We’re going to be allowed to invest a billion dollars in the next three years. In the analysis we did with the BPU staff — and it’s just coincidental that it’s round numbers — the net savings is a billion dollars. The gross savings is over $2 billion. And it’s expected to remove 8 million tons of carbon.

So, bills will go down by a billion dollars and carbon goes down by 8 million tons. If you do the arithmetic, that means you’re saving $125 per ton of carbon you remove. You’re saving $125 per ton of carbon.

ROI: How does that compare to solar and wind and other options?

RI: Let’s compare that to rooftop solar. Forget the federal tax subsidy — I’ll ignore it and imagine that grows on trees somewhere. The SREC (Solar Renewable Energy Credits) says it’s $220 per megawatt. New Jerseyans have to pay that much extra for every megawatt hour of rooftop solar. And, just the general rule of thumb, that avoids a natural gas plant emitting half a ton of carbon. So, we’re paying $220 to avoid half a ton of carbon, which means we’re paying $440 to remove a ton of carbon, compared to saving $125 and removing more carbon. It’s crazy. And, somehow, we think solar is a vibrant industry. It is not. 

The only jobs that this industry supports in New Jersey are what I would call installer jobs. So, with all due respect to those folks, they do their installation this week and then New Jerseyans pay the subsidy for that installation for the next 20 years. That’s not a viable industry. 

ROI: How does it compare to wind energy? And, we should note, PSEG is partnering with Ørsted North America on the state’s first offshore wind project, Ocean Wind, and recently acquired 25% of the project.

RI: Offshore wind, at this point, even though we’re a participant, is a little better than solar. Its subsidy is about $50 per megawatt hour. So, its cost is about $100 per ton, compared to an energy efficiency savings. 

ROI: We get the dollars — but we also know we have to do something to reach net-zero carbon emissions. Isn’t this just a down payment on a green energy future?

Izzo’s favorite New Jerseyan

“John Nash. Do you remember the movie, ‘A Beautiful Mind,’ about John Nash, a Princeton math professor? Can you imagine battling schizophrenia and becoming a renowned mathematician? While I like Bruce (Springsteen) the most, I think I’m inspired by John Nash.

Izzo’s favorite thing about New Jersey

“Bruce Springsteen: I was just listening to his new album, so it would have to be Bruce. I’ve been a fan since I saw him as the warmup act for a band called the Chicago Transit, which then became Chicago. I guess that was kind of mid-’70s. I’ve never met him. I just admire his politics and the personal struggles he has had to overcome.”

RI: The argument against what I’m saying is: ‘If you don’t do these things, those prices never come down. The prices used to be higher.’ And that’s a fair criticism. But the question comes: At what pace are we doing that at? We’re $600 million a year deep into subsidizing solar, I think we’ve gone fast and far enough. The very first offshore wind farm that gets built will add $300 million a year to that subsidy. We’re in the process of putting out an RFP for two more of those wind farms. I think that’s great. Let’s see if the price comes down. If the price doesn’t come down, let’s have a conversation about whether or not that’s a good thing for consumers or business. 

So, clearly, if we’re saving $125 per ton of carbon (with energy efficiency actions), we’re probably just picking off low hanging fruit. If we do more than that, are we going to save $120 per ton of carbon, $10 per ton of carbon? As long as the word is still ‘Save,’ why don’t we just keep doing it? Why don’t we do it all the way up to spending $50 per ton of carbon, which is what the National Academy says is a reasonable amount. 

ROI: How does this fit with Gov. Phil Murphy’s master energy plan, which aims to reduce carbon emissions to zero by 2050?

RI: I’m a big fan of Gov. Murphy and his energy master plan. I’m a big fan of the BPU and (its president) Joe Fiordaliso. The plan has all the tools and things we need to do. But we need to make sure that we have the timing in sync with economic readiness. I would like there to be more national leadership so that we can have an effective scale ruler, a measuring stick to tell you at what pace you should do these different things. 

ROI: With President-elect Joe Biden coming into office, there has been talk of such a national energy plan. How would that work?

RI: If you have a national plan, you can avoid the fact that the states are doing things that may not be optimal from an economic sense. Let me be more specific. If you had a national plan that said, ‘We’re going to put carbon at $50 per ton,’ then what would happen is you would immediately get competitive advantages for wind and solar versus fossil fuels — but, in those places where it makes sense. It’s the same thing for nuclear. All of the sudden, the subsidies for nuclear could evaporate. 

You would have a situation where you would see people building wind farms in Pennsylvania, and we wouldn’t have to pay RECs (renewable energy certificates) and subsidies. Why are we doing these things in New Jersey and having to pay RECs and subsidies? Let’s just buy from a wind farm in Pennsylvania. And the transmission system, by and large, could handle that. 

ROI: What would happen then?

RI: Policymakers, consumers and interest groups would see the low-cost way for us to reduce carbon and really maximize the environmental dollar — not the capitalist, but the environmental dollar — is to go buy the energy from what will result in the Adirondacks or from the Smoky Mountains, where the wind resources are abundant, and the price is justified. So that national program expands the visibility of the efficient market. Whereas right now, you don’t have that visibility. 

We want solar in New Jersey, but solar’s not competitive with natural gas in this region. Now, solar in this instance (under a national plan) would be a tougher stretch, because I think transmission distances will have to be longer, but what you’ll get is a rational regional deployment of carbon-free sources.

ROI: Let’s go one step further and talk about a global energy plan — or the Paris accords, the global treaty on climate change that President Donald Trump pulled the country out of. Should we rejoin the agreement? And global treaties are nice, but how do we make sure everyone is participating, especially in developing nations where they are catching up to the industrialized world?

RI: That’s a tougher question, but there are answers for that, too. For example, you can set up carbon-trade tariffs. And, there is an element of fairness that I think we have to come to grips with in the developing world. Their attitude is going to be: ‘Wait a minute, let me see if I got this right. For the past hundred years, you’ve taken the atmosphere from 150 parts per million of carbon to 450 parts per million carbon, and now that we’re ready to be industrialized, you want us to stop.’ 

It seems a little bit unfair to me in South America and India and China. They don’t need for me to defend them. They make that argument themselves. And they’ve committed, to date, to lowering their carbon intensity. We are being asked to go ahead of them. People call that unfair. Fair is in the eyes of the beholder. I think if it gets them to commit to a trajectory that eventually turns over, we should take that deal and run with it.

ROI: How does that make economic sense for us?

If you were business czar for a day, what would you do?

“I think you’ve got to lower the tax rate. I’m not a registered Democrat, nor a registered Republican, for obvious reasons, we’re so highly regulated. But Ronald Reagan used to talk about the fact that, ‘Don’t people understand that companies are people — and, when you exact a cost from them, they just pass it on to their customers? We are a regulated company, so our taxes are in our rates. This isn’t parochial. This isn’t anything that has to do with (Public Service Electric & Gas). But I did think that, when you take 2.5%, 3%, 1% off a company more than others do, you just create a disincentive. Now, if you need the money — and we do — perhaps you can replace that with something like a carbon fee. Something that I think is good. I think wealth creation is good and taxing it is bad. I think polluting is bad and taxing it is good. So, I like to tax bad things. Because I think that’s a good thing to do.

“Fortunately, we have talented people with a great K-12 education system. We have a range of places where you can live, whether it’s a city or a suburban area — I live in a pretty rural area. So, we’ve got that going for us. We’ve got the Shore, we’ve got plenty of sports and entertainment. So, we have a lot going for us. But we don’t have a lot of businesses flocking to the state, and I think there’s got to be a reason for that.”

RI: If we get ahead of the curve, and if we, in fact, develop the technologies that can make us a more carbon-friendly economy — whether that’s carbon capture and storage, which I think is an important part of benefiting from the consumer dividend associated with low-cost natural gas here in this country, whether it’s less expensive, larger wind turbines, whether it’s more efficient conversion ratios of solar panels, whether it’s small modular reactors, all the things that a price on carbon would incentivize — then we, instead of China, become the exporter of that technology to other places. 

We’re buying solar panels from China. And they’re burning coal. What are we, out of our minds? So, if we develop the technology through a price on carbon creating the market, then we can become the center of that future economy. If, in fact, we get that price low enough, I believe that we can assure ourselves that these countries would turn to these technologies on a timescale that the Paris Accords say they will. 

ROI: So, do you think President-elect Biden can implement these ideas?

RI: I don’t worry about President-elect Biden or the White House, I worry that getting the Senate to agree to legislation will be a challenge. But, in the Obama-Biden administration, there was no legislation, either. But, there were some tools that could be used — the Clean Air Act, appliance standards and things like that —to just stimulate some of this kind of development effort.

ROI: All of this goes to the bigger question of climate change and its impact on the globe. Forget the debate about whether it’s real — that has been settled. Where are we in the game? How close are we to falling off the proverbial cliff? And do you think people really understand this reality?

RI: Think about the earth as a human being. And think about that human being out in the weather. If they wear a heavy coat to keep themselves protected, but then the temperature goes up, they will start to sweat and start to dehydrate. They could get heat exhaustion — and they are not even aware that they’re getting heat exhaustion until they pass out and hit the floor. 

Unfortunately, I don’t think we fully understand the behavior of the planet when it starts getting to what I’ll call — and forgive me if I get geeky here — the kind of the nonlinear part of the models. 

ROI: This should be good … please simplify?

RI: We have models that we believe are accurate for certain levels of parameters. And we vet those models against the data that we have, and the data we have confirms the models, so we gain confidence in the model. Once you start deviating from known conditions, you don’t really know what other phenomena will kick in. 

Now, some will argue, maybe there will be a corrective mechanism that might kick in. Well, no. Usually when you go unstable, when you deviate from a known equilibrium condition, the system finds an entirely different equilibrium, and you have no clue if it will be one that you like — and that may not be a risk you’re willing to take. The whole point behind probability theory is, ‘What’s my outcome and what’s my probability of achieving it?’ I multiply those two, and that’s my expected value.

Do you really want to risk, given the fact that we are seeing indications of more extreme weather — we’re seeing indications of temperature rise, we’re seeing indications of the ice sheets melting — and we know that, when those things happen, some of the reflective mechanisms that the Earth has in place are diminished, and some of the absorption capability of the oceans are diminished. So, all these things tend to take a trend and make it even worse. 

ROI: Where does that end up? 

RI: The models predict some pretty catastrophic outcomes.

ROI: Which takes us back to the top — and the COVID deniers.

RI: There are people out there today who don’t believe COVID-19 is a serious threat, and 300,000 Americans have died. And we have to get them to believe that climate change is a threat to their grandchildren.