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Let's Spend Our Energy Developing an Energy Policy

Robert P. Powers, Executive VP and COO, American Electric Power
December 16, 2011  |  25 Comments

Print

As a nation, we are spending way too much energy arguing about energy. With all the energy-related debates going on today about everything from environmental regulations to the role of government subsidies, it is time to step back and remember that all of us in the energy space share many of the same long-term objectives. We ultimately want to develop new technologies, cleaner energy and a more robust grid while using energy more efficiently. If we can join together and focus our energy on supporting a balanced national energy policy, we can achieve the goal of a cleaner, more secure energy future.

This is a time when our industry should be assisting Washington policymakers in developing a much-needed comprehensive national energy policy instead of being polarized over what the country's energy priorities should be. Rather than argue about renewables versus fossil fuels; competitive markets versus regulation; the need for new generation versus environmental concerns, we need to recognize that we are spending more energy debating the merits and politics rather than finding solutions. We get so wrapped up in disagreements and an unwillingness to compromise that there is a lack of focus on making any element of energy policy work. This tone does little to help our companies, our customers or our country.

Instead, we need to visualize what we want our nation's energy landscape to look like decades down the road - setting lofty goals much like President Kennedy did in 1961 when he challenged us to put a man on the moon by the end of the decade. Once we define the long-term objectives, we can put in place the structure and incentives to spur the development of the new technologies and infrastructure to get us there.

In the past, efforts to create a national energy plan have focused on responding to the news of the day. A sudden increase in gasoline prices leads to policy decisions designed to wean the nation from dependence on foreign oil, a stated - but unachieved - goal of every president since Richard Nixon. Piecemeal policy efforts that attempt to fix yesterday's problems do little to put the nation on the path to a secure, diversified and cleaner energy future.

Adoption of a comprehensive, long-term energy strategy would be a movement toward economic growth and job creation. It would help balance the security and reliability of the nation's current energy resources with the integration and capability of newer, cleaner technologies. It would also balance the nation's energy and economic security needs with the always important desire for continued environmental improvement. And it would give us a framework to follow when making decisions today that move us a step closer to the objectives for tomorrow.

In our view, a comprehensive energy policy would help transform the way we produce and use energy, making the system more efficient and further diversifying our fuel mix. It also would remove the barriers that are holding back the development of a more robust grid to bring this cleaner, more efficient energy to our homes and businesses.

Instead of following a common-sense energy plan that takes into account today's economic realities, tomorrow's energy needs and the nation's environmental goals, the utility industry is facing a slew of new regulations from the U.S. Environmental Protection Agency that will unnecessarily raise the cost of electricity and further hamper our economic recovery. These rules are also being put forth in a piecemeal fashion, with no consideration of the compliance costs or impact on electric reliability when power plants are forced to retire early without enough time to make retrofits or secure replacement generation.

We know there is a better way to achieve the same long-term environmental goals without stifling our economic recovery and causing electricity prices to skyrocket in many of the states still reeling from the recession. AEP has long advocated for a legislative approach to reducing greenhouse gas emissions and transitioning our nation's generation mix to cleaner fuels - in a way that balances the environmental needs and economic impacts of this energy transformation.

A comprehensive national energy policy would go a long way in addressing the challenges facing the electric industry today. It would provide the certainty that we all need to invest in the future - creating jobs and propelling our economy forward. There has never been a better time to work together to shape our energy future, ensuring safe, reliable, cleaner energy and a stronger economy for decades to come. That would be a much better use of our collective energy.

Robert P. Powers is executive vice president and chief operating officer for American Electric Power (AEP), responsible for power generation, commercial operations and AEP's electric utility operations that serve more than 5 million customers in 11 states.

25 Comments

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Norma McDonald
Norma McDonald
December 27, 2011
"balance the nation's energy and economic security needs with the always important desire for continued environmental improvement"

With the above statement, Mr. Powers evidences the misconception that there is an inherent tradeoff between the nation's energy and economic security needs and environmental improvement. This is simply not the case in all instances. Our industry association would welcome AEP into the dialogue on how to integrate distributed generation of renewable electricity and production of biomethane from biogas plants across their territory. We are ready to work with AEP to direct their investments into substations which have been neglected for years in order to allow for these plants to provide clean, cost-effective electrical and thermal energy to rural and small communities.

To echo the thoughts in a few other comments, new generation capacity of any type - conventional or RE - is more expensive than the fully-depreciated existing capacity. The comparison needs to be made between the next MW or GW of capacity - what and where should it be. Our energy policy needs to erase the "bias for big" and as other commenters have stated, allow and facilitate a system where individuals, independent producers have equal and fair access to the grid and marketplace. We advocate an energy policy that provides all players the same advantages of securitization that regulated utilities enjoy, and a policy that ensures that the non-utility developer paying for infrastructure (e.g. interconnection costs) is able to treat these costs in a GAAP-consistent manner (i.e. take depreciation, tax credits, etc.).

We look forward to a constructive dialogue in 2012.

Norma McDonald
Vice Chair, American Biogas Council
Kevin Fooce
Kevin Fooce
December 26, 2011
The last panels I purchased was from China for $.78 per watt. The next to last was the last of the Evergreens I paid $.92 per watt for them. Companies like SunElectric have multiple lines for under $2 while compaies like FirstSolar has been selling theirs for several year to large installs for under a a dollar per watt. Inverter cost are also coming down. And if one may notice I have been saying panel not installed. The size and location of a system has everything to do with cost. Americian SW is near nothing while NY City is high cost both because of labor and site.
Kevin Fooce
Kevin Fooce
December 26, 2011
The short story here is simple. As an example WV which is #2 in US for coal production is near the turning point on coal production with all the state, USGS, and even the industry looking at step declines in the near term. Our #1 coal producing state is looking at this within 25 years when one is looking at the USGS surveys. Neither are good when it comes to long term prospects.
Next what I was trying to say is the taxpayers already pay a large amount of cost which these industries should be paying, and if they did pay this cost we would already be seeing a much higher energy rate. This would in itself result in a turnign away from some of these sources.
Next you walk about 2,000 megawatts of electricity is actually 2,000,000 * .25 * 4 * 365 is actually $730,000,000 per year if we assume a 30 year life span we are now looking at $21.9 billion in energy production. Do you also want to look at what a coal fired plant will cost to build and operate for that period of time. 2,000 megawatt plant something like $6 billion. Tons of coal burnt per hr 875 tons cost of eastern low sulfer coal high steam grade todays price $108 per ton at mine site shipping cost per ton about $4 per ton so we are now at $112 * 875 tons per hr or $98,000 per hr in coal cost multi by 4 hrs per day * 365 days per year as a comperison $14,308,000 and 30 year life span $4,292,400,000 in direct fuel cost along not including labor rebuild energy cost to operate etc. So in short $10 billion without operational or inflation cost just building and fuel, so when one looks at actual cost one see in a 30 year term the cost of solar today being near the cost of coal for the same time period.
Whe one look at wind we are already seeing items look a lot different. As an example on wind TX has periods when wind supplies as much as 30% of the TX grid capacity. TX is the both the largest power producing and consuming state amounting for about as much consumption as the bottom 15 states combined.
Tim Dolan
Tim Dolan
December 26, 2011
Referring to the 50 billion numbers
I think someone,s math is wrong,

First some acquaintance just put in a solar system at under $2.5 a watt. While the labor was cheap, the panels were not at the lowest cost/efficiency either, so $2.5 is probably a good number per watt. I also note the same panels I have on my roof are going for under $500 for 280 watts (mine are 270watt versions) or less then $2 per watt. 0.50 to install and add inverters is not unreasonable with a skilled team.

Using my system for production (it is fixed roof system)
Given a price of $0.12 and a life expectancy of 30 years, I come up with $105 billion in electricity produced or it will payback twice what it cost to produce it.

If it could be sold at $0.25 per kWh, that is $219 billion even more return.
Alex White
Alex White
December 26, 2011
@Kevin: $50 billion invested in solar today would produce less than 2,000 mWh or about $500,000,000 worth of electricity at $.25 a kWh. This amount of actual production wouldn't even meet new demand.

Oxy-fuel combustion is not the answer, affordable renewables are - some day. It's the "bridge" to that day.

I would take a 50% reduction in CO2 emissions now and continue R+D on solar, wind, tidal etc.
Kevin Fooce
Kevin Fooce
December 26, 2011
People want to talk about cost coming into line with coal or natural gas. Let us look at a few items. In 1990 when I first got into solar we had $10 - $12 per watt prices for panels old panels at $6 - $7. Now I can buy any panal below $2 and some in the $.50 range. Has cost came down. Many times. We are now looking at cost in the next few years in the $.20-$.25 range so are we near a point when solar becomes a better price the coal. For at the least daytime use. Now people also talk about what has been installed, 20 years ago we had a few megawatts of manufaturing cap today we are at a few gigawatts. Again solar is starting to come of age. Next we look at the facts of coal it will continue to increase in cost if we do nothing to start replacing the use. Should this product be used to it's best use. Say make oxy-fuels etc or coke for the steel industry? Should gas not be used as a transpertaion fuel or home heating source? As a home heating source gas can be used at 95+% no other source can be used at near that rate, should this not be happening?
Sad part is we have so many good ideas so much good going on and people still want to talk about how cheap coal or gas is when the tax payers are paying for the associated cost. When was the last time AEP paid to have a barge float on the Ohio river is an example. We the taxpayers pay to keep this river and so many others open for barge traffic, while AEP take advantage of this. They are even starting a advertising campaign to increase this resource at tax payers expense. They are calling for $50 billion to be spent within the next 10 years. How much solar would this install?
Karl-Friedrich Lenz
Karl-Friedrich Lenz
December 25, 2011
AlexWhite

I understand you propose doing some oxy-fuel process instead of renewable. I looked at a couple of Wikipedia pages on that and could not find that this technology has any record of providing much in the way of electricity generation. If it is at over 1% anywhere now, I must have missed that report.

So, by your own logic, does that make your proposal "not practical"?
Alex White
Alex White
December 25, 2011
@ Karl:

It's great for the EU and others to have "goals," but they're not practical. Despite a feeding-frenzy of subsidies, solar electricity generation in the world is less than 1%.

Until wind and solar are affordable and they have sufficient storage capacity, they're just not going to make a difference.

Switching from coal and conventional natural gas generated electricity to oxy-fuel combustion eliminates ALL NOX and SOX emissions, while cutting CO2 by 70%. It can be done NOW. It is proven technology and it will NOT raise the price of electricity. This isn't a hopeful goal, it is real and can be done now.
Karl-Friedrich Lenz
Karl-Friedrich Lenz
December 25, 2011
The EU long term energy plan "roadmap 2050" discusses five different scenarios for getting at least 80% less CO2 until 2050. Each of them has renewable at 55% or more primary energy supply, one of them at 75%.

And they don't even count anything from Desertec in these projects and have numbers for solar photovoltaic that estimate costs in 2020 higher as they were already this fall, that is way too high.
Kurt Grossman
Kurt Grossman
December 25, 2011
http://www.eia.gov/forecasts/aeo/ is a must read for anyone serious about understanding our current and future energy needs. The clear bias of the US Department of Energy is for RENEWABLE ENERGY!
When I say "bias" I do not mean it in the negative sense. DOE is set on pushing the USA towards renewable energy.
The data however slanted towards renewable energy shows a HUGE chasm between government subsidies, higher prices for renewable energy, and the devastating economic crisis the USA and global economies face today.
If your energy policy doesn't take into account that elderly on fixed retirement face the possibility of freezing to death if they cannot pay their heating bill then you are not taking into account the different problems a politician faces.

http://www.surfrider.org/coastal-blog/entry/ocean-energy-interview-with-kurt-grossman-of-genergy

"Surfrider: Many Surfrider members and supporters are interested in alternative sources of energy. What do you think is the best way for them to get involved, learn more about these types of energy, and support appropriate projects?

Kurt: There are 3 levels of involvement.

Level 1 is to get educated. There are a number of websites that go through the science of energy; renewable energy; and alternative energy. By far the best website to go to is the United States, Department of Energy. http://www.eia.doe.gov/

Editor's note: Surfrider also has a great resources on ocean energy on Beachapedia.

Level 2 is to look at alternatives to the energy supply that a person is using. Once you take a look at how you use energy you can find ways to save without really cramping your lifestyle

Level 3 is to invest in alternative energy. You can choose to invest money or time. When choosing how you will invest your money use your normal criteria but begin by comparing investments in Green, Cleantech, or Alternative Energy. You can invest time volunteering"
Alex White
Alex White
December 25, 2011
@ Eric.

Clarified. Thanks.

I just believe we should make whatever progress we can in the near-term, even if that means a cleaner use of natural gas. Oxy-fuel is a proven technology and it can make a significant difference now.

I wish solar and wind made more economic sense, but they're not there yet. But, we still need to do something.
Eric Mathis
Eric Mathis
December 25, 2011
@ Alex White

"solar/wind cheerleaders simply hate the use of fossil fuels no matter what."

Perhaps you are correct for the majority of RE advocates but as far as I stand, as a RE developer and cheerleader for sustainable development, I assure you that I do not hate fossil fuels. In fact, they are the very reason why we have the free time, electricity and most importantly democratic/free-market institutions that allows for this discussion to happen.

Just wanted to clarify...
Alex White
Alex White
December 25, 2011
I think the author is trying to be helpful, but I think he's missing an important point: solar/wind cheerleaders simply hate the use of fossil fuels no matter what.

It's time to tell the truth about solar power – it isn't making ANY difference. In the last 10 years more than $1 trillion was spent worldwide and yet new demand outpaced this solar capacity by 3:1.

It's clear something needs to be done, but even if we spent $500 billion on solar in the next few years the reduction in CO2 emissions would be less than 3%. Insignificant.

We should be looking at burning natural gas cleaner with the proven technology of oxy-fuel combustion (replacing coal and conventional NG), which has very low emissions of CO2 and no NOX. $500 billion invested in that idea would cut CO2 by +70%.

I'm following a guy in Austin, TX that makes a lot of sense. He has a solution. The Introduction is here:

http://www.solutioneur.com

Let's make some real progress and stop pretending solar is going to solve the problem – it cannot.
ANONYMOUS
December 22, 2011
" the utility industry is facing a slew of new regulations from the U.S. Environmental Protection Agency that will unnecessarily raise the cost of electricity and further hamper our economic recovery." Really?

The time for the implementation of these 'new' rules is long past. 'Transition' time turned into ... run the old plants until they die cause that offers the greatest profit. Will the utility companies now plan for a future with dramatically reduced grid demand? Their role in the future will be different.
ANONYMOUS
December 21, 2011
Honestly, the sad part about all this arm waving is really about money and not the future of solar as a renewable resoucre. I agree we need to spend our energy devloping an energy policy, but let's make that policy about the energy itself without the slush funds and greed attached to it, regardless of any extreme politcal party.
Kevin Fooce
Kevin Fooce
December 21, 2011
Mr. Powers I believe we all like what you say for the most part. And yes you are correct, we do need a long term policy. But you are not the only one who needs to make this policy, it does need to bring into play all forms of energy and how this energy will transition from one form to another. It does involve cost, but it should also involve how this cost is to be shared, and strict deadlines to enforce this policy.

You see you company was built on regulations, regulations that built your power plants, expanded the power lines, require the price to be set at a level you can make a profit. Also regulation that in many instances do not allow competetion do not allow for like subsidies to go to other forms of energy, or allow for these other forms of energy to be put onto power lines which you own but was built with regulations requiring citizens to pay for these lines.

You see you set on a fence as you know. Without regulations you would not be in business, your company would never had existed in the form it does today. It would have either been a national company controlled by the state, or existed of may smaller companies which do specialized task. You would not have the transportaion divisions, production, construction, distrubtion divisions it would be different.

So when one talkes regulations one needs to understand the whole story. Regulations keep you in business and regulations help make money for your company. But regulations which you fear are the ones which demand you diversify your production base, for this type of power production can then be put into the individuals hands and not a large regulated utility.
ANONYMOUS
December 21, 2011
An energy policy is certainly a noble goal, but practically unachievable with people and companies and organizations that are self centered and protective of their own interests. Who will lead the effort -- a dysfunctional Congress whose members make decisions that will keep them in office or a government agency that is trying to maintain its position, a trade or environmental organization whose members have their own diverse interests, or some ad hoc group? The bottom line is that resolution of a national energy policy requires people to put aside their own interests and compromise some near-term economic/political benefits to achieve loftier goals for society as a whole. Who's up to the task?
Ralph Perez
Ralph Perez
December 21, 2011
Yes Robert. Start with the most aggressive F.I.T. the world has ever seen. Get the millions of consumer owned rooftops in place immediately. Jobs? Yes. Economy Boost. Yes (millions of $0 utility bills allows more spendable income). Less transmission losses. Yes. Electric vehicle charging via solar? Yes. This also allows for more spendable income via $0 gasoline needed.
Health care savings (cleaner air), military cutbacks in the mid east, etc. etc. etc.. Less nuclear waste dumping. Yes. Lets do it!!
Tim Dolan
Tim Dolan
December 20, 2011
To establish a viable policy, everyone must agree on the eventual goals of that policy. The goals likely should not just be make as much money as possible.
One realistic goal would perhaps be:

1. minimize the use of non-renewable energy sources - purpose of Goal, to conserve resources for future generations who may need it for purposes we are not yet aware of.

with a secondary goals of:
1A: Do it in a manner to minimize its impact on the economy.
1B: Minimize the time needed to improve the environment.
1C: Do it as low a cost manner as possible.

I have too much to do tonight to come up with all of the goals for an energy policy, but until a majority can agree to the goals, we will never have a valid & Functioning policy.

And commenting on someone's comments with a related opinion: One way to at least pull the energy companies out of the 1800's and into the 2000's is to de-regulate the monopoly power of the electric company's in much the same manner cell phone service was deregulated and the monopolies became extinct.

Separate the power lines from the electricity produced. until you do that we can not move from the current energy production model.
Gerry Wootton
Gerry Wootton
December 20, 2011
The US has an energy policy ... 'drill baby drill' & 'burn baby burn'. The official projections by federal agencies is that energy consumption in the US will continue to go up and, in particular, fossil fuel consumption will increase. That's the plan. Don't think Joe Public or the voter is invited into the board room where the big decisions are made. Don't ever look at the man behind the curtain.
Consider the following: a well known republican suggests $2/gallon gas while opposing the lifting of special tax considerations to the oil and gas industry that amount to $0.26 per gallon of gas sold. Meanwhile, other 'representatives' are trying to trash EPA regulations that would restrict dirty coal power; on the one hand thousands of cases of lung disease and worse, on the other campaign contributions and government funded TV adds. Meanwhile, the dems agree to cut back R&D spending in renewable energy research behind secretary Chu's PR that attempts to make less seem like more. Approvals for solar farms on government land proceed at a fraction of the pace of permits for drilling.
Americans need to do a lot more than just be in favor of green energy to effect real change. A truly public policy would indeed be welcome.
Eric Mathis
Eric Mathis
December 20, 2011
Mr. Powers,

I for one, applaud your efforts in 'bridging the gap' so to speak. Reading this from the perspective of a RE developer based in the Heart of the Billion Dollar Coalfield as well as a customer of AEP, I expect that we will be meeting in the near future in order to test the waters of commitment. We will be providing you with a long term, comprehensive plan for rapidly transitioning WV to a distributed energy base. This move benefits both traditional as well as emerging energy production technologies. To use your words, we are in the midst of developing a comprehensive energy policy for West Virginia that 'would help transform the way we produce and use energy, making the system more efficient and further diversifying our fuel mix.'

Furthermore, I could not agree more when you state that if 'we can join together and focus our energy on supporting a balanced national energy policy, we can achieve the goal of a cleaner, more secure energy future.' To this end, by providing a strong market signal in the 2nd largest coal producing state in the US, we can put your words into action by identifying a mutually beneficial approach that will 'give us a framework to follow when making decisions today that move us a step closer to the objectives for tomorrow.'

In closing, you stated that 'there has never been a better time to work together to shape our energy future, ensuring safe, reliable, cleaner energy and a stronger economy for decades to come. That would be a much better use of our collective energy.' I look forward to speaking with you in 2012 in order to lay the framework for your companies vision.

Thank you for your encouraging article!
Curt Sommer
Curt Sommer
December 20, 2011
Mr. Powers conspicuously leaves out the role of citizen from the discussion of a national energy policy. I personally think of myself as a citizen first and consumer a distant second. And the only reason there is any disagreement about renewables vs. fossil fuels is because the fossil fuel industry is so heavily entrenched in Washington. Surveys consistently show that Americans want renewable energy, but renewables do not lend themselves to centralized production because they are site specific and not easily transported. But decentralization is what democracy is all about. So maybe we shouldn't be looking to corporations to lead the way in a discussion of our national energy policy. Speaking for myself, I know I don't want to be completely beholden to a corporation that probably has no interest in the well-being of my family or even my community.
Karl-Friedrich Lenz
Karl-Friedrich Lenz
December 17, 2011
The EU just published a energy roadmap to 2050. Do you have something like that in mind?
V. Bruce Stenswick
V. Bruce Stenswick
December 17, 2011
Of course we argue, that is part of being a democracy. Is the current electrical system going to embrace PV's? Probably not, because they lose control. The same applies to fuel cells, if and when they become viable. Appeals to quit arguing is just a subtle "Trust us, we'll take care of it" approach to stifle competition.
Kurt Grossman
Kurt Grossman
December 16, 2011
When we offered AEP 4 GW of clean renewable energy at $80 MWh we were not taken seriously. When we speak of providing renewable energy for drilling operations at a lower price we have met resistance. The only way that you can "work together" is if you have regular dialogue with different people with different ideas. My definition of regular is more than once a year with hundreds of vendors who have the primary concern of "selling" their ware.
AEP could go a long way to LEADING the "working together" by holding monthly discussions open to the public, vendors, politicians, and academics. After a year put something in paper that represents a consensus.
If that works I will believe there is a possibility of "working together."
The stark reality is that would take time and money which NO one wants to invest in our "Energy Policy."

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