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Massachusetts transit, 4th busiest in U.S., goes 100% renewable
MBTA sets example for New York, Chicago, and Washington D.C., slashing emissions by more than a third
(George Barker is a journalism/CS major at Northeastern University. He’s worked for the Harvard Business Review and as campus and sports editor for The Huntington News.)
BOSTON (Callaway Climate Insights) — The Massachusetts Bay Transit Authority, or MBTA, now runs on 100% renewable electricity, making it the largest public transit agency in the country to run on purely clean energy, thanks to its new energy contracts with BP Energy Company and Direct Energy LLC.
In normal, non-pandemic times, the MBTA powers well over a million trips every weekday, transporting commuters all across the commonwealth via subways, buses, commuter trains and ferries, making it the largest consumer of electricity in the state.
The shift to all renewable energy has been brewing for a few years now, and “the T,” as most Massachusetts residents call it, looked into purchasing renewable energy the last time they signed an energy contract in 2015, said Andrew Brennan, the MBTA’s senior director of energy and environment. Cost was an inhibitor then, but this time, the T was in a financial position to make the switch.
“We’ve sort of known for the last couple of years that when it comes time to procure again, we want to make sure that there’s a sufficient amount of renewables as part of the program,” Brennan said. Even with an extra $854 thousand per year cost to move to all renewable energy, the agency will be saving roughly $3.5 million a year on electricity compared to their previous contract due to lower consumption and cheaper unit prices. Brennan said he didn’t face opposition internally or externally to the higher cost due to the MBTA’s board and general manager’s commitments to making the agency more sustainable.
The MBTA’s monumental move comes at a time where Massachusetts has made national news after Gov. Charlie Baker vetoed a climate bill that was set to lock the state into carbon neutrality by 2050. Baker cited concerns over housing and not enough time to amend the bill as his reasoning for the veto. Last year, he set the state’s 2050 legal limit for greenhouse gas emissions to 0, an order that Brennan said the MBTA board keeps in mind along with their own desires to reduce the agency’s emissions.
Public transit agencies are inherently green organizations, as their efforts contribute to removing commuters in single passenger cars from the road. Transportation accounts for roughly a third of greenhouse gas emissions in the United States, and public transit is a “central strategy” to addressing that sector of emissions in the U.S., said Art Guzzetti, vice president for policy and mobility at the American Public Transportation Association, or APTA.
“[With] the automobile, you burn a gallon of gas to get a quart of milk. With transit-efficient communities, you have walkable communities, and often it’s the trip not taken because the community itself is walkable that creates sustainability,” Guzzetti said. “As we offer ourselves as a sustainability strategy for regions, we also practice what we preach, and we go to great lengths to be sustainable in our own right: in the vehicles we operate, the fuels we use, the buildings we use … and on down the line.”
The APTA runs a sustainability commitment program, to which different transit agencies can sign onto at varying levels. The MBTA, an agency which averaged the fourth most weekday heavy rail trips in the final quarter of 2019 in the U.S., is listed at the gold level of that commitment, putting it as both a national leader in terms of transit trips, but also in sustainability. The New York’s Metropolitan Transportation Authority, the Washington Metro Area Transit Authority and the Chicago Transit Authority were the three transit agencies with more trips than the MBTA, and Washington and Chicago are at the entry level of the program, while New York is unlisted on the APTA’s signatories page.
“We recognize that not only do we provide in some ways a sustainable function, allowing people to get to jobs and medical appointments in an affordable and environmentally friendly way, but we also want to do that in a way that's environmentally friendly and with a system that will last for many years to come,” said Christina Marin, deputy director of treasury services and P3 finance. “It is messaging that we've received from our board that comes through all the ranks of the employees at the MBTA, but it's also in part driven by market demand… All the investor conferences right now have a theme or session or workshop on sustainability or green bonds.”
In 2017, the MBTA served up a product that met investor demand well, issuing the first public sustainability bond in the United States. The $99 million offering received more total bids and more competitive bids than a standard $131 million offering that same year, Marin said. The MBTA conducted a case study to control for outside factors and found that the sustainability bond lowered their cost of borrowing, albeit only slightly. But, she expects wider spreads for their sustainability bonds as interest rates rise.
“You're only going to get a few basis points, not even percentage points for higher credit worthiness,” she said, citing low interest rates that were exacerbated by the pandemic. “There was a difference between the sustainability bonds and the traditional bonds, but it was very slight. We expect to see that if margins widen in the future, that we would see our sustainability bonds more sought after than our traditional bonds.”
Marin said the MBTA will continue to issue their sustainability bonds and expects other public agencies to issue their own as well, with more offerings emerging as greater credit spreads emerge between sustainability bonds and standard bonds.
For the MBTA, the main difference between the two types of bonds is that sustainability bonds require detailed reporting on the environmental and social impacts of the projects that are financed. That’s the biggest challenge Marin faces, as the MBTA has no shortage of renewable energy and sustainability focused projects to spend on. Since they already conduct this type of tracking to comply with state and federal regulations, the cost of reporting required for sustainability bond status is negligible.
“I think that as there's greater demand for those measurements, not only in the investment community but in other communities,” Marin said. “That's really my goal with our sustainability bond program, to just highlight those measurements and I think Andrew [Brennan] is trying to get those numbers too.”
Outside of just transitioning to all renewable electricity, which already cuts their emissions by roughly 36%, the MBTA has a wealth of sustainability focused projects underway with more planned. The T generates some renewable energy of its own, with two wind turbines and three solar canopies already built. Brennan doesn’t expect to generate a majority of its own electricity due to the agency’s scale, but when it’s financially feasible, it’ll continue to grow its on-site electricity generation capacity.
The MBTA is also pursuing power purchase agreements with offsite solar projects, giving both the MBTA and third parties an opportunity to finance additional solar projects in Massachusetts.
“Let's say you're the developer … I would enter into a 20-year agreement or 15-year agreement or something where I buy the power from you, and then that contract is a financing mechanism for you to do the construction,” Brennan said. “You're constructing it, you’re using debt service and I’m paying for your annualized costs on it. But now, we’re also thinking that there may be other ways to do it. There may be ways to [make it even] cheaper if I fronted you some of the capital… but we’re figuring out what makes the most sense, because the markets [are] changing a lot.”
Brennan also places a high priority on projects that increase energy efficiency at the MBTA, saying that “the cleanest kilowatt hour is the one that you never burn.” Incremental savings due to these projects, as well as underwriting support from utility companies, have benefited the agency and given it ammunition to undertake more projects. It’s currently deploying new fleets of trains on two of its subway lines, which will include regenerative braking, a technology that allows the trains to harness heat generated as they grind to a stop. Brennan believes that energy could even be captured to provide some power to train stations as well, not just the cars.
As the agency constructs a new bus maintenance terminal, it’s keeping the goal of an all-electric bus fleet in mind, too. Once battery technology progresses enough to survive harsh New England winters and stay charged long enough to accommodate the MBTA’s all day service, Brennan expects to be ready to house and charge them, which is no small undertaking for a transit authority that averaged 384,000 bus trips every weekday in 2019.
The summation of the MBTA’s renewable energy efforts and years of focus on sustainability projects puts the service ahead of other peer cities like Chicago, New York and Philadelphia, who each have old, similar-sized agencies of their own that must brave the cold, Brennan said.
“I think we're fairly advanced on all this stuff. Certainly on the renewable energy side, we're very advanced. There’re other transit agencies that have gone all renewable, but they're significantly smaller than we are,” Brennan said.
Climate change isn’t just an MBTA and Massachusetts problem, or even just a United States specific issue though, so other public transit agencies worldwide will need to follow suit as the planet looks to cut carbon emissions. Guzzetti said he believes the majority of public transit agencies nationwide share a priority of sustainability, which is shown by the collaboration that their sustainability commitment program offers. Some agencies are farther along than others though.
“Every agency has their own hurdles... There are cost considerations involved,” Guzzetti said. “Although, I think it’s recognized that in the end, you save money through sustainability, through lower energy costs, etc. But everyone has to come to grips with that on their own.”
Guzzetti mentioned the APTA’s partnership with the Alliance to Save Energy, which found that the transportation sector had the most room to improve its energy efficiency. With that in mind, public transit executives nationwide can look to the MBTA’s efforts, both on the construction and financing side, as a roadmap for how to move toward carbon neutrality, while ESG-focused investors can seek out public transit agencies with similar priorities to jumpstart climate change efforts in their own communities or elsewhere.
There’s plenty of trains, buses and ferries to power, and plenty of people to move. The MBTA is figuring out how to do it cleanly, and Guzzetti mentioned the Los Angeles County Metropolitan Transportation Authority and the San Francisco Municipal Transportation Agency as other major transit agencies that have made themselves sustainable. With a federal push to a cleaner country, combined with a need for economic recovery following a pandemic, Guzzetti sees the momentum public transit already has in becoming more sustainable to only increase going forward.
“Think of what might happen this year in a federal agenda: You have a climate focus, you have jobs and economic recovery as a focus, we have a greenhouse gas focus. Might they all sort of blend together?,” Guzzetti said. “There’re common threads there with all of them, and public transportation actually is at the core of it, and then add to that sort of economic recovery from the pandemic... The all clear isn’t there yet, but when the all clear comes, we need to position and we are positioning public transportation to be ready to step up to that call.”