May
22
2017

Sullivan: Best Energy Policy Is Forged By States

The following commentary comes from Jim Sullivan, a Senior Policy Advisor for the Energy Institute of Alabama. Sullivan served as President of the Alabama Public Service Commission for 25 years and regularly provides regulatory and strategic counseling to utilities and other industries.

The United States is, indeed, the world’s leader in delivery of electricity and natural gas to residential, commercial and industrial users. Our electric providers provide the highest level of national electrification at the overall lowest cost and the highest reliability of any country. For over a century our utility companies have grown and evolved into the premier example of a free economy working within the defined perimeters of fair and reasonable regulatory policy.

Through the decades, U.S. utility regulatory policy has adapted to adjust and accommodate a growing industrial environment as our free enterprise system has grown into the world’s most vibrant, stable and efficient economy. In fact, our utility regulatory process is still evolving to employ the benefits of technological innovations, real time information and the industry’s century-old dependence on coal-fired power plants.

Traditionally, U.S. electric and gas regulation has emanated from the individual states, implementing the policies that best utilize each state’s indigenous natural resources (whether coal, gas, hydro, wind or sun), coupled with real-time economic needs and realities. Many times, the best answers for providing lowest customer costs with highest reliability must be framed in state-specific or regional economic terms. There simply is no way that a uniform, broad-based federally implemented utility regulatory policy can meet the needs of 50 geographically and economically diverse states.

The effective regulation provided by states protects ratepayers through transparent, fair oversight while providing industry with an opportunity to make a fair profit. Additionally, strong, yet flexible, regulation ensures that bad actors cannot take advantage of unsuspecting customers. Moreover, while technological innovations are creating exciting possibilities, many come with extremely high developmental costs. Implementation must be tempered and balanced by the average customer’s ability to pay his or her bill.

States are the quintessential laboratories for experimenting with new policies. Whether implementing market established rates, renewable portfolio standards, smart meters, energy efficiency programs, or other innovative policies, state regulatory control has consistently and repeatedly proven to be the best approach.    State regulators know their constituents best and they are positioned to fairly balance the equities for all affected parties.

 

Again, America is blessed with the best electric and gas delivery systems in the world. And even now, with the advent of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), some regions of our great country are continuing to evolve by employing new transmission and computer technologies to achieve the best results for various geographic regions. Economies of scope and scale have proven themselves in some of these systems, but with the continued oversight of state regulatory agencies.

Our country’s electricity and gas systems are essential components of the critical infrastructure providing our national security and economic vitality. Hopefully, as the new administration explores energy and regulatory policy in the United States, it will take note of the century-long service and oversight provided by our country’s 50 state regulatory commissions. Indeed, the United States regulatory process has been honed to provide all ratepayers with maximum utility and reliability benefits coupled with protections from unreasonable rates and unscrupulous service providers.

I am certain that there are many areas where current United States regulatory energy policies can benefit from review and reform. As the Trump Administration moves forward, I hope they will see the importance of reinforcing the current state-federal structure which has long ensured the fair and efficient regulatory process established to balance the equities of both utility customers and companies.

While I firmly embrace the idea of “cutting unnecessary governmental red tape,” I would hope that the administration’s senior advisors will employ discretion with good judgment as they review utility regulatory policy and set about to implement forward-looking utility regulatory practices.

May
17
2017

Homegrown Biomass: A Great Alternative Energy

The following guest commentary comes from Tim Echols, Vice-Chair of the Georgia Public Service Commission. Echols was re-elected to another six-year term in November, 2016. In July of last year, PACE expressed its support of the wood energy industry as an opportunity for energy export.

This summer Georgia will see the State’s largest renewable energy plant begin full-scale operation in Albany.  Perhaps surprisingly to many, it is not solar or wind, but another important Georgia natural resource—homegrown Georgia biomass.  Here is why it matters.

Using bio-mass is part of a plan by our Georgia Public Service Commission and Georgia Power to keep a diversified renewable energy policy alive and well in Georgia.   This plant represents years of planning and deadline extensions in an effort to utilize pine trees and forest debris in generating electricity.

Forestry in Georgia is the picture of sustainability with 26 million acres of trees planted, grown, harvested and replanted. Utilizing Georgia biomass is smart for a number of reasons.

First, it offers a hedge against rising electric rates that use natural gas, coal and uranium—all commodities that have price fluctuation.  Second, using a homegrown resource like Georgia biomass provides clean-tech job opportunities in Georgia for plant operators, truck drivers and logging crews. Third, because those semi-trucks loaded with chips arrive around the clock, biomass provides a steady supply of electricity whether the sun is shining or the wind is blowing. Finally, biomass preserves Georgia’s environment while supporting Georgia’s rural forests and farms.

It was no easy thing to bring about this biomass power plant. This gigantic Albany energy plant came together through a unique public/private collaboration that brought about the cooperation of no less than six key entities participating in various outputs from the co-generation project.

This dream team includes Georgia Power Company, Sterling Energy Assets, Procter and Gamble, Constellation New Energy, the Marine Base, and our agency, the Georgia Public Service Commission.

Georgia Power is of course known to everyone. Sterling Energy Assets is Georgia’s largest renewable energy supplier and developer of renewable energy plants. Procter and Gamble, a well-known name, hosts the plant on their property, and utilizes part of the steam. The US Marine Logistics Base in Albany agreed to buy the remainder of the steam from the Albany plant—important because having steam users greatly increases the thermal efficiency of the plant and reduces or eliminates the need for use of fossil fuels. Constellation New Energy (a division of Exelon) was recruited by Sterling Energy Assets to the deal to finance, build, own and operate the Albany plant.  Each of these played a critical role.

In addition to the completion of the Albany biomass plant, other biomass projects have entered service or on the drawing board.  Green Power Solutions worked with West Rock in Dublin to build a 30MW project which local leaders say saved the jobs of 300 people; International Paper built a facility on the Flint River near Montezuma at their diaper fluff plant; And on the drawing board is another Sterling biomass plant, in Franklin County, with future owner/operator Georgia Renewable Power, LLC.

With all the new solar power plants being constructed, these biomass plants are important to increase the stability and reliability of Georgia’s electric grid, and they help us preserve Georgia’s rural forests by keeping employment at a high level in the forestry industry and providing long-term economic growth for Georgia’s rural timber farmers.

As we move forward in this new energy economy, expect to see solar on landfills with biogas generation like that of Republic Waste Services in Gwinnett County. Solar and thermal energy combinations may be further combined with generation from alternative biofuels, including construction waste and debris, landfill material, animal waste to energy, and gasification technology.  The possibilities seem endless.

So the next time you wonder, “What is the State’s policy on renewable energy?” Remember it is not just solar.  The Georgia Public Service Commission is busy building a robust renewable energy industry that will bring long-term economic health to the rural forests and farmland, urban and suburban Georgia and help lower electric rates for all.

May
15
2017

OPEC Asks United States to Curtail Oil Production

According to multiple reports from sources such as CNN and Andrew Follett of the Daily Caller News Foundation, the Organization of Petroleum Exporting Countries (OPEC) has asked the U.S. to curtail its oil production. The request came last week as part of OPEC’s monthly report.

According to OPEC, the use of hydraulic fracturing technology, known as fracking, has enhanced American oil production, leading to a sustained period of low oil prices. Current oil prices are hovering just below $50 a barrel, buoyed by talks by Russia and Saudi Arabia that those nations might extend production cuts by an additional nine months, limiting supplies. OPEC has stated that raising oil prices will “require the collective efforts of all oil producers” and should be done “not only for the benefit of the individual countries, but also for the general prosperity of the world economy.” OPEC’s goal is for oil prices to remain between $50 and $60 a barrel.

OPEC’s plea to the U.S. to curtail oil production underscores the new reality that shale production using fracking technology is driving the oil market. In 2015, the U.S. eclipsed Saudi Arabia and Russia as the world’s largest oil producer. According to the U.S. Energy Information Administration, American oil production will surpass 9 million barrels a day in 2017. Whether the public is aware or not, the U.S. now sits alone as the leader in global oil production. Just a decade ago, the U.S. was importing around 60% of its oil. Today, that figure is less than 25%.

“I think [OPEC] are now acutely aware that they don’t have the kind of influence they used to have 10 years ago, and that shale is now the swing producer in the market,” explains Tom Pugh, a commodities economist at Capital Economics.

One of the effects of this shift is that OPEC, led by Saudi Arabia, can no longer control global oil supplies. Oil production from the U.S., Russia, and Iran is simply too abundant. In turn, Saudi Arabia has lost a great deal of market share and influence in the oil marketplace. This loss of influence has caused the Kingdom to run a budget deficit of $140 billion, an amount equal to around 20% of the country’s economy.

“The past decade has been a period of incredible transition in the world’s oil markets, namely due to astonishing breakthroughs in American oil production from fracking technology,” says PACE Executive Director Lance Brown. “This works to the benefit of consumers by increasing supply, placing downward pressure on fuel prices, and ensuring a steady and reliable supply of oil right here at home.”