Mr. Kiesner

Eco-Friendly Practices

Nation's Electric Companies Advancing Climate Solutions

By Steve Kiesner, Director of National Accounts, Edison Electric Institute

America is moving toward a low-carbon future. The shift is unmistakable. A number of states have already passed laws that will limit their emissions of carbon dioxide (CO2) and other greenhouse gases (GHG) in the near future. Congress is now looking at over a dozen bills to reduce the country's GHG emissions, and all three presidential candidates have gone on record to say that they want legislation as well.

To reduce the nation's GHG emissions, while keeping the cost of electricity and natural gas affordable, will be a challenge. To help guide the country in achieving both goals, the electric power industry has drafted a set of climate change principles. Climate legislation must include the time and incentives necessary to develop and deploy a full suite of "climate-friendly" technologies for generating electricity. Legislation must also take an economy-wide approach. And any climate legislation must not hurt the U.S. economy or harm energy consumers.

Perhaps the most important element is having the technology available to make the needed GHG reductions. As an example, Senators Joe Lieberman (I-CT) and John Warner (R-VA) have introduced one of the leading climate change bills in Congress. Although we agree it is time to move forward on climate, we are deeply concerned about the Lieberman-Warner proposal.

The Lieberman-Warner bill sets aggressive early targets and timetables for reducing emissions. The technologies that will be needed to achieve the carbon reductions, however, will not be ready by the deadlines the legislation sets. With demand for electricity at record levels today and expected to grow 30-percent in the next twenty years, this raises the potential for dramatically higher electricity prices and increased pressure on natural costs.

A recent study of the economic impact of this bill found that the average household will be paying about $2,000 per year more for energy in 2020, and $2,169 per year more in 2050 (in constant 2007 dollars). The impact on the economy would start out large and grow over time. Gross Domestic Product would be reduced by 1.9-percent in 2015 and more than 3.5-percent in 2050 relative to baseline levels.

The impact on natural gas prices would be dramatic as well. Large amounts of natural gas would need to be used for electricity generation to achieve near-term emission reductions and meet demand. By 2020, this added demand is projected to drive wellhead prices up by 18.2-percent compared to currently projected levels.

The full suite of technologies we are calling for to reduce emissions and keep up with the growing demand for electricity includes the one we can expand almost immediately: energy efficiency. Efficiency enables both consumers and electric companies the opportunity to save energy and reduce GHG emissions, until both the nature and extent of carbon regulation has been determined and advanced climate technologies become available.

As an industry, electric companies have been promoting the efficient use of electricity since the first oil embargoes of the early 1970s. And we continue to make significant progress with our efficiency programs. To expand their impact, more electric companies and their state regulators are now working together develop new business models. These models put the promotion of energy efficiency on the same level as building power plants or transmission lines. We are also advocating for new technologies to help us transform the role of energy efficiency in America. For example, advanced electric meters and a new "smart" grid that enables electric utilities and their customers to communicate with each other opens the door to greater savings in energy and money, as well as a variety of potential new services.

Along with increasing our energy efficiency efforts, we are expanding our use of renewable energy sources for generating electricity. Renewables generate electricity with no emissions. Wind, solar, geothermal and new hydro technologies all enjoyed record growth in 2007. A key resource for expanding renewable energy sources is greater transmission capacity. And we are building.

Our sector of the industry plans to invest 55-percent more in the nation's transmission infrastructure between 2007 and 2010 than it did between 2003 and 2006. According to the North American Electric Reliability Corporation's 2007 Long-Term Assessment, the total number of transmission miles is projected to increase by almost nine percent over the next ten years. This is more than a 30-percent increase from the previous assessment.

Greater energy efficiency and renewable energy use are essential for reducing our carbon emissions. But to meet projected electricity demand, we will need new coal-based power plants. Coal today generates about 50-percent of the country's electricity. It is and will remain a vital energy resource for keeping electricity reliable and affordable. We are moving ahead with several advanced coal technologies to begin the development, demonstration and commercialization process. These technologies produce even fewer air emissions.

Technologies that offer the potential for capturing and storing CO2 will also be essential for the transition to a low-carbon future. Keep in mind that plants with carbon capture and storage will cost approximately 20- to 50-percent more to build than traditional coal-based power plants. They will also require that we as a nation create a commercial track record for them as well. While these advanced coal technologies and carbon capture and storage facilities are being developed, we will continue to need to build coal plants that rely on the current best available technologies to continue to provide reliable, low-cost power.

We also expect to see a continued strong demand for natural gas to generate electricity. About 20-percent of the U.S. electric industry's generation capacity is powered today by natural gas. That percentage is expected to remain about the same through 2017, which will continue to put price pressures on natural gas. More importantly, to sustain the use of gas, not only for electric generation, but for all other uses, we must to develop and expand our access to our domestic supplies. We also need to increase our capacity for gas imports.

The industry needs to expand its nuclear capacity and developing advanced nuclear designs as well. New nuclear energy technologies offer electric companies the ability to increase the nation's on-demand power supply with a carbon-free source of energy. However, unresolved questions about how to dispose of spent fuel from nuclear plants and high capital costs are major challenges to the significant deployment of a new generation of nuclear plants. Moreover, nuclear plants take a long time to plan, permit, and build. Several new plants are now being planned, mostly at existing sites. Even with public acceptance, it is reasonable to expect at least 8-10 years for these processes and much longer before there is widespread construction of new nuclear facilities.

The widespread commercialization of plug-in hybrid electric vehicles (PHEVs) is a further component in our strategy to address climate change. A comprehensive study by the Electric Power Research Institute and the Natural Resources Defense Council found that PHEVs would result in significant reductions in GHG emissions and an improvement in overall air quality, with a small increase in electricity demand. PHEVs have the further, very significant, benefit of reducing our dependence on oil and adding to our energy security as well.

Along with developing these technologies, we are also urging the country to adopt an economy-wide approach to any climate legislation it passes. Greenhouse gas emission sources are widespread in the U.S., with electric generation accounting for about a third. Legislation that focuses only on the power sector would create disproportionate increases in energy costs, and would not yield the environmental results of an economy-wide program.

And given the potential cost increases to consumers, any mechanism for reducing CO2 emissions must contain an upper limit on the price of carbon emission allowances. Because electricity prices play a critical role for customers and the economy, this economic safeguard is essential for protecting electricity customers and the economy's international competitiveness. A reasonable economic safeguard provides carbon price certainty at a reasonable cost, helps prevent price volatility and market manipulation of prices, and moderates the severe economic impacts on consumers and the national economy that would otherwise occur.

For more information on the electric power industry's climate change programs and efforts, please visit www.getenergyactive.org

Steve Kiesner is Director of the Edison Electric Institute’s National Accounts Program. Based in Washington, D.C., Edison Electric Institute (EEI) is the association of United States shareholder-owned electric companies, international affiliates and industry associates worldwide. Our U.S. members serve approximately 90 percent of the ultimate customers in the shareholder-owned segment of the industry, and nearly 70 percent of all electric utility ultimate customers in the nation. They generated almost 70 percent of the electricity generated by U.S. electric utilities. Mr. Kiesner can be contacted at 202-508-5000 or skiesner@eei.org Extended Bio...

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