When PSEG Chairman Ralph Izzo arrives Wednesday at the 2022 United Nations Climate Change Conference (more commonly referred to as COP27), he knows the conversation is going to be different than it has been in years past.
Russia’s invasion of Ukraine – and the energy issues that stem from it – will be top of mind when global energy leaders converge at the conference that started Sunday and runs through Nov. 18 in Sharm El Sheikh, Egypt.
“You can’t talk about climate change without speaking about energy security/independence and energy prices,” he said. “Even though we’re relatively insulated from what happens in Ukraine, we’re not totally insulated.”
Indeed. A year ago, the cost of natural gas in the U.S. was between $2-$3 MMBtu, Izzo said. Now, it’s between $6-$7 because of increased demand in Europe. The good news for the U.S.: that tripling of cost is nothing compared to Europe, which has seen a 20X increase in some cases.
Izzo said the impact of the invasion was the talk of a recent conference he attended in Norway.
“In the past, all we talked about was climate change in different forms – adaptation, avoiding carbon emissions, issues like that,” he said. “This year, it was, ‘OK, how do we make sure we continue to progress on climate change in light of the need to address other issues?’”
Izzo hopes the challenge can become an opportunity.
“(The invasion) may, in fact, limit some of the progress, but I’m hoping we can use it to accelerate the progress,” he said.
That progress, he said, can come from countries looking more urgently at renewable solutions – anything that will help them become more energy independent, Izzo said.
Izzo, an annual attendee, will leave for the conference Tuesday night. He is scheduled to participate on a number of panels and meet with numerous groups.
He said he’s particularly eager to speak with Ceres, a group of investors who favor sustainable companies. And he said he hopes to get more details from a United Nations program called, Business Ambition for 1.5C, an initiative using science-based targets to help companies which pledge to reduce their emissions.
Izzo said PSEG plans to make the pledge next year, but that he wants to get a better understanding of the program – what does and does not count toward the goal.
More than that, Izzo said he’s just looking forward to the unscripted and unplanned conversations that come with other global leaders in the energy space.
“It’s always great to hear what others are doing,” he said.
ROI-NJ caught up with Izzo to discuss all this and more. Here’s a look at more of the conversation, edited for space and clarity.
ROI-NJ: It’s hard to believe how much has changed around the issue of climate change since COP26. Break it down?
Ralph Izzo: There’s no doubt that the world has made some progress. If nothing else, look at the progress we’ve made here in the United States with the bipartisan infrastructure package, which has provided billions of dollars for hydrogen hubs and advanced fuels among other things. And the CHIPS Act, which isn’t directly related to our industry, but is to the extent that the smart thermostats and electric vehicles will need semiconductors, so that’s a huge help.
But the real crowning achievement was the Inflation Reduction Act which provided tax credits for existing nuclear and carbon-free sources of energy and for the resale of electric vehicles. So, there’s been a lot of progress on the framework for where we’re going to go, but …
ROI: We know the but – it’s the Russian invasion of Ukraine. We know its impact on pricing – and inflation. What are some other challenges and opportunities you see as a result of that war?
RI: It may limit some of the progress, but I’m hoping we can use it to accelerate the progress. And I think the two ways you do that are, No. 1) If I’m a country that’s always dependent on somebody else for my fuel, I’ll use Japan as an example, maybe I want to start relying on things that nobody else controls. And in Japan’s case, it’s offshore wind. If you’re a country in Western Europe, maybe it’s LNG (liquified natural gas) from the United States, as opposed to gas from Eastern Russia.
And No. 2) If the United States can see clear to increasing our output of natural gas, so that we can export more, maybe that will convince India and China that they can rely less on coal in the future and rely more on LNG.
ROI: These ideas obviously are part of the global economy; how does that impact New Jersey?
RI: These things matter greatly to New Jersey. We have 150 miles of coastline and 50 miles of bays. Sea level rise has more significant impact on us than it has on other, highly urbanized states. And a lot more heat trapping takes place in New Jersey than in the more rural parts of America.
So, climate change is real. Energy price escalation is real. And when energy prices go up, it’s not just your utility bill that goes up, your cost of goods go up, your food bills go up, everything that requires energy to be produced goes up.
ROI: Your anecdotes beg the question: Why doesn’t the U.S. use energy sources it can control to become energy independent. By that, I obviously mean drilling for more oil and using other fossil fuel solutions. Why can’t we just do that for a few years – until these other issues (war, supply chain) get worked out?
RI: You have to think in terms of different timeframes. If you only pay attention to what matters today, tomorrow can be tougher than it needs to be. If I just skip my exercise today. And I keep skipping it, then eventually those todays add up and I find out tomorrow that I’ve got some health complications because I didn’t take care of myself. If I don’t save for my retirement today, I’ll get to my retirement and find social security isn’t enough.
And if I don’t take care of the planet today, then I’ll find the problems of tomorrow are bigger because we put so much carbon dioxide in the atmosphere. Its retention time is literally measured in centuries, so, oh my gosh, what I have to do to adapt to that tomorrow is far worse than what I would have had to do today.
This wisdom is not new. I think Benjamin Franklin said, ‘An ounce of prevention is worth a pound of cure.’ So, what I’d say to the lay American is, ‘I understand you don’t want to pay more than you have to, but I think you don’t want to pay more than you have to over the whole timeframe, not just today, or tomorrow, or next week or next year.’
So, if we simply say, ‘Let’s go back and dig up those coal mines again.’ First of all, you won’t feel better today because there is mercury and all those nasty particulates that come from that. You will be choking on that air. And then you’ll be setting yourself up for a disastrous future in terms of climate change.
ROI: Then how can we solve these problems?
RI: We have some solutions today that can help – it’s my favorite topic: energy efficiency. It can actually help you not use the stuff that you don’t really care about anyway. Here’s what I mean by that. You want to watch the World Series on TV, you don’t really give a hoot about how that how that electron got to your TV screen, so, let’s be more efficient in getting it there.
And then let’s start looking at those energy technologies that have the combination of lower costs today and lower consequences tomorrow. Right now, that’s natural gas. There’s no question about that. Even at these prices, it’s the optimal solution for the current situation.
But if you don’t invest in solar and wind, they will never catch up to natural gas. And that’s what the IRA helps us do. And that’s good news, because you get a 30%-40% investment tax credit, and suddenly, solar and wind becomes very competitive.
ROI: Very competitive because of subsidies, you mean. Opponents will argue: Why should we support concepts that can’t support themselves?
RI: It’s only fair, because what we haven’t done is penalized natural gas and fossil fuels for the damage they created. So, they’re getting a subsidy that’s much more hidden than the renewables. And of course, the IRA did the thing that I think is second only to energy efficiency, it said: Don’t let these nuclear plants close. They’re getting hit on both sides. They’re getting hit by the hidden subsidy of fossil fuels not having to pay for carbon – and they’re getting hit by the explicit subsidies given to renewables in the form of tax credits.
So, what I’d say to the average American is that we have to use energy more wisely. We’ve been here before. We have to become energy independent. We’ve made phenomenal progress in that regard. But we have to keep investing in those technologies that we’re going to rely on in the future – and that’s things like wind and solar and advanced nuclear and energy efficiency and energy storage.
Don’t let your head explode with that, we’ll get that done as an industry with the current incentive system we have in place.
