July 8, 2007

Southern utilities lobby against federal RPS legislation

Major Southeastern utilities including the Tennessee Valley Authority, Southern Company, and Duke Energy are lobbying hard against Energy Bill provisions that would establish a federal Renewable Portfolio Standard (RPS). The RPS would mandate that the all U.S. utilities replace 15% of their fossil fuel power generation with renewable alternatives by the year 2020. The utilities are crying foul insisting that their region does not have the same wind and solar power potential of other states and that it is unfair to their consumers to levy extra surcharges for their inability to meet the new standard.

Of course, there are ample woody biomass resources available for conversion to renewable energy (biofuels and electricity) but these assets are, according to the utilities' position, not projected to supply enough electricity to meet RPS goals. In California, its RPS creates high demand resulting in strong investment incentives to develop new renewable generation capacity.

As reported by Carl Levesque of the American Wind Energy Association,in his article featured on Renewable Energy Access titled Slimmed-Down U.S. Energy Bills Raise Major Questions:

High expectations and disappointments have characterized early action on energy legislation. Last month, the U.S. Senate produced an energy bill that includes no tax title -- and, therefore, no production tax credit extension -- and that has no renewable portfolio standard (RPS). In fact, Senate advocates of renewable energy found themselves in a procedural morass that did not even allow for a vote on the RPS issue.

Joe Romm, author of a new book on global water and politics titled Hell and High Water and Climate Progress blogger for the Center for American Progress Action Fund placed the blame on Southern utilities:
In brief, last week the Senate tried to require power companies to generate 15% of their electricity from renewable energy by 2020. That modest renewable portfolio standard (RPS) was killed by the combined efforts of utilities like the Tennessee Valley Authority, Southern Company, and Duke Energy.

Romm cited an article written by Daniel Cusick for Greenwire...

Who Killed the Senate RPS?

Southern utilities played key roles in the effort to undermine plans in the Senate last week to require power companies to generate at least 15 percent of their electricity from renewable energy.

The fingerprints of the Tennessee Valley Authority and those of the Tennessee Valley Power Providers Association, whose members distribute TVA power to nearly 9 million customers in the South, were all over the successful effort to keep the so-called renewable portfolio standard (RPS) out of the sweeping Senate energy bill.

So too were those of other major Southeastern utilities, including Southern Co. here and Duke Energy Corp. of Charlotte, N.C., both of whom pressed the message to lawmakers that a nationwide renewables mandate would undermine the South’s stable electricity market by forcing utilities to draw more power from wind, biomass, geothermal and other forms of energy.

Their message became a mantra for mostly Republican senators from the South. “Forcing Tennesseans to either build 40-story wind turbines on our pristine mountaintops or to pay billions in penalty taxes to the federal government amounts to a judge giving a defendant the choice to be hanged or shot,” warned Sen. Lamar Alexander (R-Tenn.).

Tennessee’s junior senator, Republican Bob Corker, labeled the RPS proposal as a “transfer of wealth” from the Southeast to other regions of the country where wind and solar power are more viable.

Alabama Sen. Jeff Sessions (R), in a June 14 floor speech, said it would not be feasible for utilities in the South to generate enough power from solar, wind or other renewable power sources to meet the RPS goal. He made his case using data provided by TVA, its power distributors in north Alabama, and the state’s other dominant utility, Southern Co.

“In my home state of Alabama, solar is not effective in our area,” Sessions said. Wind power, too, is a non-starter, he said, because the state lacks sufficient wind to drive large turbines.

“I just don’t like to see us require wind turbines where it is not going to work, or solar panels where it won’t work,” Sessions said.

‘Didn’t seem fair for us’
Proponents of the RPS proposal say the region’s lawmakers missed a prime opportunity to expand the South’s renewable energy base, which they say has far more potential than the utilities and their allies suggest.

“We think that’s very unfortunate,” said Stephen Smith of the Southern Alliance for Clean Energy (SACE), a Knoxville-based advocacy group. “And we are going to let the customers in TVA’s service area know that their energy providers were actively working against clean energy.”

The issue is not dead on Capitol Hill. Senate Majority Leader Harry Reid (D-Nev.) said last week he hopes to revive the proposal, and there could be an effort to add an RPS when the House assembles its energy bill next month.

Spokesmen for TVA in Knoxville insist the government-owned utility took no official position on the renewables measure. But its influence was clear in bleak economic projections it offered to lawmakers opposed to the measure. The authority said a 15 percent RPS would have cost the utility an additional $410 million per year by 2020, and most of that tab would have been passed on to consumers.

TVA spokesman Gil Francis said lawmakers requested the information as they sought to take positions on the renewables measure. “We did not take a formal position,” Francis said, “and we did not send a letter.”

Rather, the heavy lobbying came from the 158 distributors of TVA power who buy wholesale electricity from the utility and resell it under retail sale agreements with municipalities and cooperatives.

Jack Simmons, president and CEO of the Tennessee Valley Public Power Association, which represents TVA’s retail distributors, said his organization believes the RPS plan sponsored by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) would impose an untenable mandate upon TVA retailers, forcing them to spend tens of millions of dollars to buy wind and solar power from outside sources.

Specifically, Simmons said, six of the valley’s largest power providers — in areas such as Nashville, Memphis, Knoxville and Chattanooga — have to buy additional renewable power from outside the region at a cost of 2 cents per kilowatt-hour to meet the standard. He and other critics of the proposal likened the mandate to an energy tax on the region’s homeowners and businesses, and a transfer of wealth from the South to other regions.

“Right off the bat, it didn’t seem fair for us to have to pay a 2-cent-per-kilowatt-hour tax when we didn’t have any control over whether we made green power or not,” Simmons said in a telephone interview last week.

Simmons insisted his group is not opposed to greater development of renewable energy resources in the Tennessee Valley. “We were opposing the way the legislation was crafted since it would tax our members without any relief,” he said.

In North and South Carolina, where Duke Energy provides electricity to much of the upstate region, and in portions of Alabama, Georgia, Mississippi and Florida where Southern Co. predominates, the message was much the same.

“A one-size-fits-all approach does not work for us,” said Duke spokesman Tom Williams.

Southern Co. officials said the measure would have driven up annual costs by as much as $745 million by 2020, and much of that increase would have been borne by its 4.32 million customers in Alabama, Florida, Georgia and Mississippi.

“We believe it would be very difficult to comply with a 15 percent RPS from resources here in the Southeast,” said Leonard Haynes, Southern’s executive vice president for supply technologies, renewables and demand side planning.

Call for research
But critics of the utilities’ position, like Smith of SACE, argue the challenges are not insurmountable. Moreover, they say that large power providers in the region will not make a sustained push on expanding renewables unless they are forced by a government mandate.

“The biggest casualty of this debate was the potential for renewables development in the Southeast, and the failure of our utilities to embrace that potential and instead to argue for the status quo,” Smith said.

Smith added that his group and others will work hard to restore a renewables provision through the House, hoping it will be brought back up during the final bill’s conference negotiations.

But George Sterzinger, executive director of the Washington, D.C.,-based Renewable Energy Policy Project, conceded that RPS foes who argued that the South would struggle to meet an RPS mandate have a point. “Using the current set of technologies,” he said, “that’s probably true.”

But, Sterzinger added, even if wind and solar power are not viable in the Southeast, the region has high potential to develop renewable energy resources from biomass such as forest products and switchgrass, a high-yield crop that grows well in the Southern climate.

Southern Co., for example, is already co-firing switchgrass as part of its voluntary “green power” purchase program in Alabama. But the program has failed to draw significant customer interest, in part because of the technological limitations of co-firing with switchgrass, but also because the utility has failed to aggressively market the program (Greenwire, Nov. 2, 2006).

And Southern subsidiary Georgia Power Co. included a biomass provision in its latest filings for additional power supply before the state public service commission.

Sterzinger said utilities wanting to get serious about biomass energy need to invest more heavily in research geared toward burning woody debris and grasses more efficiently, including processes that would gasify biomass materials.

Haynes, the Southern Co. executive, said such R&D efforts are part of the company’s longer-range priorities at its Power Systems Development Facility in Wilsonville, Ala. “Down the road, we think we may have an opportunity to either gasify biomass or introduce biomass along with coal in the gasification process,” he said.

According to Williams, wind power development in western North Carolina is a nonstarter because of restrictions on ridgeline development throughout the Appalachian mountains, which are important to the state’s tourism economy.

“We have potentially very good biomass potential in the Carolinas, but we don’t have the wind potential some others have,” he said.

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