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No free lunch

The Washington Post has a good article about the tough decisions that face lawmakers and renewable energy system planners regarding wildlife protection, other environmental concerns, and economic feasibility. It highlights a new transmission line, the SunZia line, that would connect New Mexico's renewable energy potential in wind and solar with Arizona's large cities' demand for electricity. The line would provide additional electricity to consumers that would prevent the need for new coal-fired plants, but its location threatens wildlife - its path is set to cross the Rio Grande, acres of grassland, and go along two national wildlife refuges.

One of the biggest challenges renewable-energy projects pose is that they often take up much more land than conventional sources, such as coal-fired power plants. A team of scientists, several of whom work for the Nature Conservancy, has written a paper that will appear in the journal PLoS One showing that it can take 300 times as much land to produce a given amount of energy from soy biodiesel as from a nuclear power plant. Regardless of the climate policy the nation adopts, the paper predicts that by 2030, energy production will occupy an additional 79,537 square miles of land.

The impact will be "substantial," said Jimmie Powell, the Nature Conservancy's national energy leader and one of the paper's co-authors. "It's important to know where the footprint is going to be."

In some cases, scientists are just beginning to discover the unintended effect of projects such as wind turbines. Grassland birds such as the lesser prairie chicken and the greater sage grouse, both of which are candidates for listing under the Endangered Species Act, appear to avoid vertical structures such as wind turbines and transmission-line towers. This is proving to be a problem in states such as Kansas, an ideal site for wind power, because as more turbines are built, lesser prairie chickens will confine themselves to narrow ranges, fragmenting a population that must be connected to survive.

The more impacts and effects that are taken into account, the harder solving these problems seems to be.

Renewable Energy's Environmental Paradox

Big Stone II

So I've been planning this post for a while, and during that time, the story has changed a bit....

In a somewhat unexpected move, the Minnesota PUC unanimously approved the transmission for the project on January 15. The provisions they placed on the project were:

  • Using a $26/ton carbon dioxide cost cap.
  • Using a $3,000/kw construction cost cap.
  • Adhering to the mercury, water, C-Bed, and other agreements made with the OES in the August 2007 settlement.
  • Closing Hoot Lake Plant as a coal-fired generation station no later than the end of 2018, unless it is later determined as necessary to cost-effectively meet customer needs (including environmental costs)
  • Evaluating the feasibility and prudence of building Big Stone II as ultra-super-critical rather than as a super-critical pulverized coal plant. If cost-effective, ultra-super-critical could result in an additional two percent efficiency gain. (see World Coal Institute for definitions)
  • Committing to building Big Stone II as carbon-capture retrofit-ready

So, I was disappointed in the project's progress, disappointed that the PUC is allowing it to go forward, and was prepared to post as such.

But then...

The EPA blocked it! They are questioning the permit that South Dakota gave the plant proposers last year. The EPA objects to the emission levels for sulfur dioxide and nitrous oxide, as well as the strength and appropriateness of the suggested emissions monitoring program. Thus, the plant needs a new, revised permit.

This will make the plant more expensive to build and could create problems with their recent approval of transmission from the MPUC (see construction cost cap). We'll just have to wait and see whether this determination by the EPA makes the project defunct or just prolongs the process.

But it sure is nice to have an environmentally-minded EPA again.

For more information, see:

Big Stone II coal-plant debate turns to carbon regulation

The group of utilities backing the Big Stone II power plant, slated to be built near Milbank, S.D., filed new documents with Minnesota utility regulators Tuesday. The filing includes, for the first time, cost estimates for electricity prices that assume some type of carbon tax, cap-and-trade program or other regulation will add to the cost of generating power. An environmental lawyer representing the project's opponents said they're skeptical about a figure used by the utilities, though. The hypothetical cost of carbon regulation used in their report is $9 per ton of carbon dioxide emitted. http://www.tcdailyplanet.net/article/2007/11/14/big-stone-ii-coal-plant-debate-turns-carbon-regulation.html  

ElectroCity - Game your way to Green

New Zealand company, Genesis Energy wanted to educate the public about how difficult it is to manage the electricity demands of a growing population without destroying the environmental health of the community, so they created Electrocity, a web-based Sim City style game that puts you in charge of a small but growing city on the coast. You get to decide to build mines or wind turbines, keep your city small, or let it grow. I thought you gamers might like it.

News Breeze

newspaper

A drive-by look at interesting news stories just now...

Governor Pawlenty signed the omnibus ag bill. Mostly. Agri News covered the bill and its broad details.

As ethanol plants come off the state subsidy, other ag programs will receive that funding, Juhnke said. The money is going toward value-added research and NextGen ethanol now.

For whatever reason, Agri News does not talk about the Governor's two line-item vetos that eliminated spending on sustainable agriculture. Fortunately, Loon Commons covered it.

Nationally, the U.S. Senate is looking to improve fuel efficiency standards in cars.

Finally, on the West Coast, California has some problems with their solar industry. The L.A. Times covered the problem on May 8.

The problem appears to be that the rebate program requires customers to enroll in a variable pricing program. The program charges more for electricity during peak times than during periods of low demand. These higher prices means that people have to build a large enough system to cover all their electricity needs during those peak hours or risk making their investment uneconomical due to the increased cost of the electricity (though less is purchased overall).

Their electricity prices are stunningly high, with peak residential charges more 3 times higher than ours. Compare that with recent claims that businesses will flee MN if the cost of electricity rises by a few cents per kilowatt-hour (claimed during committee hearings around the climate change bill). Seems to me that California remains an economic powerhouse despite its high energy prices. It also conserves far more electricity than any other state.

I'm a supporter of time-of-day pricing. I think people should understand the impact of their energy usage - if they want to use lots of electricity during high demand, they should pay extra because that usage stresses the system far more than during periods of low-medium demand. The grid has a limited capacity and increasing that capacity is costly. Perhaps we can delay investments to increase the capacity of the grid by forcing people to pay for their usage.

However, pushing more usage to low demand periods will likely increased coal-based generation. That is why I think the variable pricing system should heavily encourage renewable energy with an artificial floor. Thus, the price of electricity would not drop below $.08 per kilowatt-hour regardless of demand unless there was a lot of wind on the grid at the time. As this floor would generate excess profits, that money could be diverted into conservation funds or revolving loan programs to encourage renewable development.

Trading fish for carbon emissions

The NY Times has an interesting article today on the debate in the Pacific Northwest over removing hydroelectric dams to restore wild salmon populations. The article talks about how Indians and commercial fishermen have been hurt by the decimated salmon populations, and how farmers could stand to lose if the dams are removedBonneville Dam My personal position is this should be carefully evaluated on a case by case basis. If the dam is fairly small, then it may be worth removing. If the dam is relatively large, then firm plans must be developed to replace it with other renewable sources. Simply saying replace it with solar or wind is not sufficient since those are intermittent sources. If dams are haphazardly removed, it is likely they will be replaced with more coal or natural gas plants.

Mesaba Halted?

A super quick post - word has it that the Administrative Law Judge has released findings of fact, conclusion of law, and recommendation on the potential IGCC power plant in northern Minnesota. Conclusion: not so much.

The Administrative Law Judges conclude that it is not an "Innovative Energy Project" within the meaning of Minn. Stat. §216B.1694, subd. 1. Therefore, we also conclude that Excelsior Energy is not entitled to enter into a Power Purchase Agreement (PPA) to provide baseload capacity and energy to Xcel.

Additionally,

The Administrative Law Judges conclude that neither the technology nor the Project is or is likely to be a least-cost resource. Therefore, we also conclude that the Project is not entitled to supply Xcel with at least two percent of the electric energy Xcel Energy provides to its retail customers.

The Star Tribune covered this story, noting that the PUC will decide this plant's fate in the summer.

Big Stone II

The Star Tribune recently ran an editorial on Big Stone II that covers much of what I planned (but never had time) to write about it. The Supreme Court's Environmental Defense v. Duke Energy decision should hurt Big Stone II's chances of survival.

Big Stone II is affected because it has been justified by claiming it will not increase emissions of any criteria pollutants (those regulated explicitly by name under the Clean Air Act) due to retrofits of the existing Big Stone I plant that will lower its emissions by an amount comparable to the new emissions from Big Stone II. Big Stone II will greatly increase GHG emissions however even though it will be more efficient than nearly all other existing plants.

From the Strib:

The existing Big Stone plant has been retrofitted several times, most significantly in 1995, without seeking new permits from the Environmental Protection Agency. The Sierra Club has served notice that it intends to sue the Big Stone operator for that failure, and the practicality of a suit gained ground Monday in the court's decision in Environmental Protection Agency vs. Duke Energy. Duke had argued, much as Big Stone has argued, that its retrofitting of existing coal-fired power plants was too "minor" to trigger a requirement for new permits. Numerous American utilities have used that subterfuge to avoid seeking permits obviously required under the Clean Air Act. In the Duke case, the Supreme Court finally slammed the door on that behavior.

If it were only that easy! A press release from Duke Energy suggests they do not agree that the door has been slammed shut.

The U.S. Supreme Court considered only whether an hourly emissions standard was appropriate to use when triggering NSR – and did not review what constitutes routine repair and replacement activities under NSR.

Depending on how the courts interpret "routine repair and replacement activities," Big Stone I may be forced to upgrade its pollution abatement equipment regardless of whether it builds Big Stone II or not. If that happens, the justification for building Big Stone II is much weaker because it will increase all pollutants rather than just GHGs.

We'll see what the courts find on this, but it looks like the issue is not over. Big shocker there.

MN Leg Update

Lightbulb

Energista has been sagging in its MN Legislature coverage over the past two weeks, but Loon Commons has continued with great weekly updates. The Leg has the week off and I hope to catch up with their antics over the next couple of days. I have no clue what is happening in the Leg in relation to biofuels and would be thrilled if someone else can help us out with that.

Looks like the Global Warming Mitigation Act is pretty much dead in the Senate. At this point, I can do little more than quote the Loon Commons story:

The final curveball from the Senate this week was some significant struggles around passage of the Global Warming Mitigation Act we have been promoting. We were informed by Sen. Yvonne Prettner-Solon (DFL-Duluth), chair of the Energy, Utilities, Technology and Communications Policy Committee that the Global Warming Mitigation Act (SF192 authored by Sen. Ellen Anderson) would not be receiving a vote in her committee. The most significant power a committee chair holds is setting the agenda for the committee. She indicated that any global warming provisions would be in her omnibus bill, but the language we were initially provided this week was a far cry from anything in the Sen. Anderson legislation we support.

The little more I can add is that I have heard that Chair Prettner-Solon is herself the stumbling block in her desire to forge consensus on this issue. She appears poised to move a do-nothing climate change bill through rather than proceed with a close vote (though I don't know that there are enough votes for the Global Warming Mitigation Act to survive). As someone who applauded her efforts to create consensus on the RES issue, I am disappointed that she feels consensus is needed on this bill as well. I'm tired of rhetoric suggesting Minnesota will be in the dark if new coal plants are forced to pay to offset their greenhouse gas emissions. The reality is that a worst-case scenario involves higher prices, not rolling blackouts. This is not trivial, but neither are massive investments into long-lived power plants that may not be economical in a carbon-constrained future.

How many states have Republican governors who will sign a bill requiring new large sources of GHGs to offset their emissions? That our Senate Energy Committee cannot move a strong bill out of committee is hugely disappointing.

The news is not all bad as the energy conservation bill pushed by Dibble in the Senate and Kalin in the House has passed the whole Senate and made it out of the House Finance Committee. The bill is not as aggressive as proposed, but should still encourage more conservation that we currently have. The switch from a spending mandate to a savings mandate should help and the decoupling part should provide better incentives for utilities to conserve. All in all, these are significant steps - ratcheting up the conservation requirement can be done overtime if there is evidence the utilities are capable of reaching higher targets.

I'm curious to see what I have been missing over the last two weeks of House Energy Finance Committee hearings. Chair Hilty has moved his (really the Governor's) Next Generation Energy Act of 2007 out of committee but Magnus (climate-change denier) has been stricken as an author. I'm curious to learn what happened there and what purpose the bill serves at this point (several pieces of it having already been passed in the RES and conservation piece I just mentioned).

Finally, the omnibus energy bills are hitting the committees soon. The House Energy Finance & Policy (H.F. 1392) is available for energy-obsessed masochists everywhere. The Senate Energy & Utilities Committee appears to have turned the Governor's Next Generation Energy Act of 2007 (S.F. 145) into their omnibus bill.

Decoupling

Light bulb

The House Energy and Finance Committee had several discussions centering around decoupling sales from revenues for gas and electric utilities. Decoupling enables removes the disincentives for energy efficiency and conservation that utilities currently face.

Wayne Shirley from the Regulatory Assistance Project testified in front of both this House Committee (on February 28) and in front of the Senate Energy Committee (on February 27 I think).

Decoupling is a feature that Governor Pawlenty has mentioned and one that Representative Kalin has included in his bill on the conservation improvement programs (CIPs). House Research has a summary of that whole bill - but I am focusing on the decoupling aspect here. If I understand it correctly, H.F. 1221 requires the Public Utility Commission to establish standards for decoupling. Utilities may then enter into pilot projects to see what happens when revenues are decoupled.

So what does decoupling mean? That summary has a good definition of decoupling:

"Decoupling" means separating a utility's revenues from its fluctuations in sales in order to remove utility disincentives to promote energy efficiency.

I'll explore what this means by summarizing Shirley's testimony. If you want to hear his words, I have isolated his audio presentation (6 MB mp3, 36 minutes long) to the House as well as a 15 minute clarification from discussion in the Senate Committee (6 MB mp3).

Currently, the ratemaking process for utilities involves the utility (Xcel for instance) and the Public Utilities Commission determining the appropriate rates for selling electricity (or gas) based on "cost of service regulation." All operating expenses are summed with the necessary returns on capital investments to get the revenue requirement. This is divided by the sales to get the price that at which electricity will be sold.

In the real world, sales will be different from what is expected based on many factors. This may mean higher or lower sales than expected. If the sales are insufficient (over time, perhaps several years later) to recover costs and the needed rate of return, it starts the process over.

As the utilities generally have high fixed costs, it cannot lower costs to make more money. They make more money based upon sales. Higher sales than expected during the ratemaking mean more profits (or higher dividends for cooperatives). This a significant disincentive to encouraging customers to lower consumption.

Decoupling changes the ratecase procedure by adding another step. After the revenue requirement is divided by the expected sales, they compute the average revenue per customer in each class (industrial, commercial, and residential). This is done more frequently (somewhat automatically) than traditional ratecases. For instance, the rate might be adjusted based upon actual consumption every month.

He uses this example:

A utility is determined to require $1 million from a given rate class. They are selling 25 million kilowatt hours of energy over that period. Under the existing system, this means the utility will charge $.04 per kilowatt hour. ($1,000,000/25,000,000 kWhrs).

If many customers became more efficient and reduced overall consumption in that rateclass by 1.5%, the utilities revenues would decline by $15,000.

Under a decoupling arrangement, the rate is adjusted for the next time period so that all ratepayers in that class are now paying $.0406 per kWhr.

At this point, you may be thinking, "Whaaaaa? How is it that the rates go up because people are conserving?" The utilities have to cover their costs and necessary returns on investments. If they are selling less power, they need to price it higher. Bear in mind that those who conserve power and use less of it will see smaller bills even if the rate increases slightly. In the example above, that was a fairly major (and unlikely) sudden reduction in consumption. In real life, the reduction would be smaller and also balanced partially by a growing customer base.

The important part about all of this is that utilities no longer have an incentive to increase their sales. If they increase their sales, the rates will drop in the next period (again, perhaps monthly or quarterly) and they will not profit from those increases (because their rate of return remains fixed). When combined with other aspects of Representative Kalin's improved CIP bill, the utilities have a strong incentive to encourage conservation and efficiency.

Decoupling has the effect of stabilizing the revenue stream of the utilities because its revenues are no longer dependent on sales. Thus, a mild winter will no longer hurt the profits of energy companies whereas a cold winter will no longer boost profits (due to higher than expected sales).

New Xcel Rates

Xcel Energy has quietly raised the rates for their Windsource program, bumping up from 2 cents to 3.5 cents per kilowatt-hour. While their website mentions the change, that seems to have been the only advertising of the new rate; I was unaware of it until I got my bill a few days ago. Interestingly, the bill insert touting Windsource lists the program's cost at the old rate. Maybe they just had a lot of old paper to get rid of.

There's also the interesting fact that the ordinary electric rates listed on my bill don't match the rates quoted in their flyer about the new rates coming into effect, but that's another question.

Market and Coal

In a sign that the market is increasingly moving against coal and other technologies responsible for high Greenhouse Gas (GHG) emissions, TXU is being bought out and its plans to build many more coal plants have been scaled back. TXU is an energy company that serves 2.5 million customers in Texas.

If the investors succeeded in taking over TXU, Mr. Reilly said, they would commit themselves to scale back significantly on TXU’s plan to build 11 new coal plants and adhere to a strict set of environmental rules.

I have not been following this story closely, but I take it to be good news that a company looking to build more coal plants was punished by the market.

Within TXU, the controversial plan to build a raft of coal plants had become so damaging to its stock price that its board had been privately weighing a plan to scrap part of the project, said people involved in the talks, bringing the number of new plants to 5 or 6 from 11. Shareholders had sent the stock on a roller coaster ride from more than $67 a share to as low as about $53 over concerns about the risk and vast expenditure; the stock closed at $60.02 on Friday.

The article is not totally clear, but it appears that TXU will still build three coal plants and cancel plans for the other eight. Of the three plants still going forward, at least one is being fought by locals and may not be approved. As of now, this action does not seem to have impacted other utilities who still want to invest in coal facilities.

As for where TXU is going, this seems like a good start.

The group, which included Mr. Reilly, Mr. Bonderman and Frederick Goltz of Kohlberg Kravis, worked out a "10-point plan" that included a commitment by the investors to return the carbon-dioxide emissions by TXU to 1990 levels by 2020 and support a $400 million energy efficiency program.

Though I am thrilled to see the market acting on signals from people and government actions (signals pointing to a rising price to emit GHGs), we still have a lot of work to do to make government policies correctly inform the market and line up the incentives correctly.

Introducing Green Options!

If you are looking for ways to "green the good life," then start today, because you now have a fantastic tool at your fingertips. Green Options is a site that provides practical, personal information on ways we can all live a more efficient, healthy, and eco-friendly lifestyle. I'm blogging daily there as well, covering the national renewable energy scene.

In addition to a blog hosted by a stable of writers covering issues like green business, politics (the site is strictly nonpartisan), and Do-It-Yourself (DIY) posts, Green Options features a Green Life Guide, discussion forums, daily green news, and other tools.

We haven't even been live for a full month yet, but we're adding more tools all the time and still have more to come. In response to suggestions that we cover more geographic areas then just green living in the United States, we've added a blogger from Israel and may be adding more. And stay tuned for more practical, applicable tools coming out in the near future to help you incorporate renewable energy into your life.

Australia moving to ban incandescent bulbs

A California legislator isn't the only person proposing a ban on incandescents. The Australian government recently announced a plan to gradually ban the sale of incandescent bulbs. The plan is supported by Prime Minister John Howard, who is cited in the article as a recent global warming convert. The plan would supposedly reduce Australia's GHG emissions by 12 million tons by 2012 and cut household power bills by up to 66 percent.

The article talks about a different tactic that Gov. Pawlenty and other US policymakers may want consider... In Cuba, Castro formed "youth brigades" which went from household to household replacing incandescents with fluorescents in a move to stem the blackouts which afflicted the island. That's one way to "encourage" conservation!

Personally, I'm not sure I would support an outright ban. A lot of people are very sensitive to light quality and prefer incandescents in some locations. Does anyone know which brands of CFLs have the softest light? The best I've found are GE Soft Lights.

Climate Change Legislation

The Minnesota Senate Energy Committee is taking up bills that deal with global climate change. From what I can tell, there are 2 major bills - one advanced by Chair Prettner Solon on behalf of Governor Pawlenty and one authored by Senator Anderson. I'll discuss the Governor's bill now and Anderson's later if no one beats me to it.

S.F. 145 has H.F. 436 as its House companion bill (also introduced by that Energy Committee's Chair) and has many components Article 5 is entitled "Climate Change" and is summarized as follows

Defining nonrenewable resource power purchase agreement; modifying the certificate of need issuance standards, allowing the PUC to modify proposals for nonrenewable projects or nonrenewable resource power purchase agreements; requiring the commissioner of commerce to develop a climate change action plan in conjunction with the pollution control agency (PCA), departments of natural resources (DNR), agriculture, employment and economic development (DEED) and transportation (DOT) to identify and invite an independent expert entity to conduct a review of potential policies and initiatives to reduce greenhouse gas emissions

The bill first increases the power of the Public Utilities Commission (PUC) by enlarging the scope of certificates of need. Previously, building large energy facilities required the PUC to find that it was necessary after weighing a number of other options. Now the PUC must also issue a certificate of need for a "nonrenewable resource power purchase agreement."

This includes any power purchase agreement (for instance, if a utility wants to buy power from Big Stone II) of more than 50MW or with a term of longer than 5 years if the generation facility is powered by nonrenewable fuel.

In order to get a PPA certificate of need, the utility must have arranged

(i) to offset the carbon dioxide and other greenhouse gas emissions from the nonrenewable resource through:

(A) capture and geologic sequestration of those emissions;
(B) the purchase of greenhouse gas emission reduction credits issued by a tracking and crediting organization approved by the commission; or
(C) another method approved by the commission after notice and opportunity to comment; and

(ii) it has explored the possibility of generating power by means of renewable energy sources and has demonstrated that the alternative selected is less expensive, including environmental costs and the costs of compliance with item (i), than power generated by a renewable energy source.

The PUC is also given power to modify proposals for nonrenewable projects or PPAs in order to require conservation or renewable energy projects.

The other major section of this article calls upon the commissioner of commerce to "conduct a structured, broadly inclusive stakeholderbased review of potential policies and initiatives that can be implemented in Minnesota to reduce greenhouse gas emissions from activities in this state." The plan will cover all sectors.

Governor Pawlenty previously announced his desire to bring in the Center for Climate Strategies. This is what they do:

We enable governors and other state leaders to lead state-wide climate action planning processes that result in a comprehensive set of effective policies, broad bipartisan stakeholder support, and successful implementation. We help achieve results with our process that would likely have been impossible for states to otherwise realize.

The commissioner of commerce will coordinate this plan's development and present it by Jan 1, 2008.

Senator Anderson's bill is a bit more complicated, but I hope we have some information up about it within the next few days.

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