Obama's climate action plan

Tuesday, June 25, 2013

Today President Obama unveiled his climate change action plan.  The outline of his plan was set forth in a 21-page written document, couldpled with a speech delivered at Georgetown University and broadcast online at whitehouse.gov/live, presents his vision for a unilateral approach to controlling carbon emissions and mitigating the effects of climate change.

The Washington Monument.
President Obama's plan has three main focuses.  First, he proposed measures to reduce the emission of carbon dioxide and other greenhouse gases from domestic industry.  These measures include strict standards for carbon emissions from new and existing power plants, promoting investment in renewable energy, and improving energy efficiency in homes, businesses, and industry.  The plan calls for accelerated permitting and development of renewable electricity generation projects on federal lands ranging from Department of Defense properties to lands managed by the Department of the Interior.

Second, he proposed measures to prepare the country for the effects of climate change.  These measures include infrastructure improvements, such as preparing buildings and communities for sea level rise and more intense storms.  These measures are also designed to protect the economy and natural resources, for example conserving land and water resources, preparing for floods and drought, and managing agricultural sustainability.

Third, he called for the U.S. to lead international efforts to address global climate change.  Measures in this category include expanding international use of clean energy and energy efficiency technologies, negotiating global free trade in environmental services and goods, and strengthening global resilience to climate change.

While some of the measures are likely to find widespread support, others such as the power plant emissions standards are controversial.  The plan states that President Obama will issue a Presidential Memorandum directing the U.S. Environmental Protection Agency to "work expeditiously to complete carbon pollution standards for both new and existing power plants.”  The standards, which may be put into place by mid 2015, are likely to hit coal-fired power plants hardest. If they are imposed, the effect may be to force power plants with marginal economics to close or convert to other fuels such as natural gas.  Some fear the impact of new EPA regulations on the cost of electricity, while some proponents of climate action support efforts to price the cost of carbon emissions into electricity produced from coal to encourage a switch to natural gas and other lower-carbon fuels.  Indeed, the plan calls for promoting natural gas as a “bridge fuel” to help domestic and international markets move away from coal and oil, calling for the U.S. to "promote fuel-switching from coal to gas for electricity production and encourage the development of a global market for gas."

Notably, some elements that observers had speculated might be included in the plan were omitted.  For example, the plan does not call for taxing carbon emissions or imposing a federal cap-and-trade regime for carbon.  Likewise, the plan outline does not conclusively address current issues such as whether or not the Keystone XL pipeline or coal export terminals will be approved.  Rather, the outline is relatively bullish about the opportunities to help foreign nations develop projects featuring natural gas, nuclear power, clean coal, and energy efficiency without mentioning the U.S.'s role as importer or exporter.  That said, in his oral remarks, President Obama said that Keystone XL can only be approved if it is found to be in the national interest, including whether or not it exacerbates climate change-related problems.

All eyes are watching whether President Obama is able to implement his plan effectively.  In the coming months, we can expect the federal administration to roll out significant new policies outlined in the plan.  Whether the policies can be put into action, their impacts, and whether they are able to achieve his goals, remains to be seen.

Obama to unveil climate change plan

Monday, June 24, 2013

President Obama is expected to unveil his second-term plan to address climate change tomorrow.  In a video released this past weekend, President Obama announced that he will speak at Georgetown University on Tuesday to present his plan "for the steps we need to take to prepare our country for the impacts of climate change and lead the global effort to fight it."  While the details of his plan are not yet public, its scope and specifics may have a significant impact on both the environment and the economy.

The U.S. House of Representatives.

This is not the first time President Obama has spoken about climate change.  In his second inaugural address, he vowed to "respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations."  Similarly, in his 2013 State of the Union address, he asked Congress to develop a market-based solution, but vowed to take executive action if necessary.

Potential elements of his plan range in scope and impact.  President Obama has already issued an executive order promoting industrial energy efficiency; increasing support for energy efficiency is relatively likely to garner widespread support.  Potentially more impactful -- both in terms of potential to reduce carbon emissions and to increase costs -- are proposals to revise the rules for carbon emissions from existing power plants.  Some Republican Congressional leaders, like House Speaker John Boehner, have already called the climate change plans "absolutely crazy" and certain to increase the cost of energy, driving manufacturing and jobs overseas.

Tomorrow's speech will give us a better sense of Obama's policy direction on carbon emissions and climate change.  It is certain to be followed up a significant dialogue about both the importance of issue and the balancing of costs and benefits that is fundamental to policymaking.  Whether Congress acts, the president uses his executive powers to change policy, or both, remains to be seen.

FERC report shows investment in natural gas

Thursday, June 20, 2013

This week the Federal Energy Regulatory Commission issued its monthly energy infrastructure update covering May 2013.  The report details highlights in expansions of energy assets, ranging from natural gas pipelines to electric generation and transmission facilities.  It provides a monthly snapshot of recent activity, and can be used to spot trends in domestic energy development.  The current report illustrates increased investment in natural gas-related infrastructure, ranging from proposed new liquefied natural gas export terminals to newly installed natural gas-fired power plants.
The iconic U.S Capitol dome, where policies are made that shape energy investment.

Natural gas exports poised for growth.  Last month two facilities to liquefy natural gas for export advanced through the FERC regulatory process:
  • Jordan Cove Energy requested authorization to construct and operate four liquefaction trains and storage facilities at a proposed export terminal in Coos Bay, Oregon.  If authorized and built, the project could export up to 900 MMcf per day of liquefied natural gas (LNG).  This gas would likely be destined for Asian markets.
  • Golden Pass Products proposed a larger project in Texas.  Along with Golden Pass Pipeline, Golden Pass Products commenced the FERC prefiling process to construct and operate a 2,100 MMcf per day liquefaction facility for export at an existing import terminal located in Sabine Pass, Texas.  The Golden Pass project also includes proposed modification of an existing pipeline system to enable 2,500 MMcf per day of bidirectional capacity to the proposed export terminal.
These projects demonstrate increased interest in exporting natural gas to overseas markets.  The boom in domestic shale gas production has led to low natural gas prices in the U.S.  Domestic pricing is roughly one-third of the price that exporters can get by sending LNG to Europe or Asia.  Whether and to what extent the U.S. will allow exports remains to be seen, but in the interim, developers are scrambling to secure permits for export. 

New electric generation, mostly fueled by natural gas.  Last month a total of 33 new electric generation units came online.  Nearly three-quarters of the newly installed capacity is fueled by natural gas, adding 2,529 MW of new natural gas-fired electric generating capacity.  The new gas projects vary widely in scope:
  • The largest, Mitsubishi Corporation’s 850 MW CPV Sentinel Energy Expansion in Riverside County, consists of eight 106.25 MW units.  Mitsubishi’s generation is sold to Southern California Edison under a long-term contract.
  • In the middle, Procter & Gamble Company developed a 64 MW natural gas fired project to produce power for its paper products manufacturing facility in Wyoming County, Pennsylvania.
  • At the opposite end of the scale, two landfill gas-fired projects came online in New York.  Wehran Energy Corp.’s 4.5 MW Brookhaven facility consists of three 1.5 MW Caterpillar Inc. generators.  The Brookhaven project was also joined by a 1.6 MW expansion of Waste Management Inc.’s Oneida-Herkimer project.
These projects illustrate the diversity of new natural gas fired projects being developed this spring.  The abundance of low-cost natural gas drives interest in the utility scale gas projects, while a desire to capture landfill-produced methane and put it to use as biogas supports the smaller projects.  As a result, natural gas’s share of total installed operating generating capacity grew slightly to 42.56%.  Despite a resurgence of coal as a fuel for electric generation, coal remains in second place in the installed capacity race, representing 28.9% of total U.S. installed capacity.

While each monthly energy infrastructure update represents only one data point, in the aggregate, they paint a picture of the direction of U.S. energy infrastructure development.  Natural gas is squarely in the center of this picture.  Based on consensus projections that natural gaswill remain the most cost effective fuel for decades to come, increased expansion of natural related infrastructure is likely to continue for some time.

Vermont, Quebec announce electric vehicle corridor

Tuesday, June 18, 2013

Will a newly announced electric vehicle charging corridor in Vermont and Quebec lead to more electric vehicles in the region?

Solar panels on the roof of the Farm Barn at Shelburne Farms, in Shelburne, Vermont.

Electric vehicles are receiving increased interest, as drivers and policymakers look for ways to reduce the use of gasoline in the transportation sector.  For pure plug-in cars, the vehicle's range and the logistics of recharging the vehicle's battery are critically important.  Electric vehicle manufacturers try to address range anxiety through technological advances, while policymakers focus on ensuring that drivers have access to conveniently-spaced recharging infrastructure.

Today Vermont Governor Peter Shumlin and Quebec Premier Pauline Marois unveiled the first sites of the Vermont-Qu├ębec Electric Charging Corridor.  The 138-mile corridor will eventually connect Burlington, Vermont to Montreal, Quebec, using existing highways including I-89 and Canadian routes A-10, 104 and 133.  The plan calls for over the development of over 20 charging stations along the way.  Some stations are already in place, including charging stations in Sharon, Montpelier, South Burlington and Waterbury.

How quickly charging stations can recharge batteries depends on the technology used.  According to the U.S. Department of Energy's Plug-In Electric Vehicle Handbook, light-duty vehicle charging stations can be broken into three categories.  Level 1 stations offer 2 to 5 miles of added driving range per hour of charging.  Level 2 stations provide 10 to 20 miles of added range per hour of charge.  Much more expensive Level 3 or "DC fast charging" stations can add 60 to 80 miles of range in 20 minutes of charging.

Level 2 stations are proposed for the Vermont-Quebec corridor.  These stations will allow electric vehicle drivers to top off their batteries at the stations, and possibly to fully recharge their batteries overnight.  While the charge rate is still significantly slower than refilling a conventional vehicle's tank with gasoline, Vermont and Quebec hope that the cost and environmental benefits of electric vehicles will drive their greater adoption.

Feds release June 2013 short-term energy outlook

Thursday, June 13, 2013

The U.S. Energy Information Administration has released its updated short-term energy outlook.  The report describes recent trends in fuel and energy resource markets, and predicts future supply, demand, and prices.  Highlights from the June 2013 report include:

  • Gasoline prices to decrease: EIA predicts that the price of regular gasoline will average $3.53 per gallon over the summer driving season.  Noting a decrease from 2012's annual average retail price of $3.63 per gallon, EIA predicts that gasoline will continue to decline in price to $3.49 per gallon in 2013 and to $3.37 per gallon in 2014.  That said, EIA notes significant uncertainty about this forecast based in part on current values of futures and options contracts.

  • Crude oil prices to decrease: EIA predicts similar decreases in the price of crude oil through 2014.  Through much of the world, oil commodity pricing is based on the Brent crude price -- the price paid for a sweet light crude oil produced from Europe's North Sea fields.  Spot pricing for Brent crude bounced around in the first 5 months of 2012, ranging from a low of $97 per barrel in April to a high of $119 per barrel in February.  EIA expects a slow decrease in the Brent crude oil spot price, averaging $102 per barrel over the second half of 2013, and $100 per barrel in 2014. 

  • Electricity usage to decrease while prices increase: EIA's forecasts call for milder temperatures than last summer, driving air conditioning-related demand for electricity downward.  At the same time, EIA expects a 2% increase in average prices for delivered electricity this summer.  Last year, the U.S. residential electricity price averaged 11.9 cents per kWh.  EIA expects this summer's average price to rise to 12.3 cents/kWh, with a 1.1 percent price increase in 2013 and a 1.9 percent in 2014. 

EIA's projections are based on a variety of assumptions about the domestic and global economies, energy project development, and weather-related demand for energy products.  EIA's next short-term energy outlook will be released on July 9, 2013.

Study quantifies New England distributed generation, growth

Wednesday, June 12, 2013

Distributed generation – small-scale electric generation facilities installed at consumer sites – plays a growing role in the resource mix used to meet society’s needs. Typical distributed generation assets include solar photovoltaic panels and co-generation or combined heat and power units developed at homes and businesses. A study released yesterday found that distributed generation capacity in New England could roughly triple in the next decade – and that regional electric grid operator ISO New England Inc. needs to account for distributed generation in its planning.

As New England’s regional transmission organization, ISO New England plans for and coordinates the development of electric transmission infrastructure. In the past decade, New England ratepayers have spent approximately $5 billion on transmission additions and expansions. ISO New England’s 2012 Regional System Plan calls for the investment of another $6 billion in transmission projects in the coming years. As a result, regional transmission rates roughly tripled between 2006 and 2010, and continue to grow.

ISO New England’s plans are based on its forecasts of future system needs, including anticipated load growth and changes in the electric generation portfolio used to satisfy customer demand. But ISO New England may be underestimating the extent to which non-transmission alternatives like distributed generation can satisfy demand at a lower total cost than transmission line development. According to “Forecasting Distributed Generation Resources in New England: Distributed Generation Must Be Properly Accounted for in Regional System Planning”, prepared by Synapse Energy Economics Inc., ISO New England is significantly underestimating the current and potential distributed generation in New England, particularly with respect to solar photovoltaic resources.   According to Synapse, “This practice results in the ISO ignoring likely transmission and reliability benefits and overestimating electricity load—with ratepayers being asked to pay for larger, more expensive transmission upgrades than are needed.”

ISO New England predicts that about 800 MW of solar photovoltaic generation will be installed in New England by 2021, but excludes other types of distributed generation from its projection. But Synapse found that over 980 megawatts of distributed generation assets are already installed in the six New England states. By 2021, Synapse predicts that this could grow to over 2,855 MW based on existing policies and development trends.

Synapse Energy Economics, Inc., Forecasting Distributed Generation Resources in New England: Distributed Generation Must Be Properly Accounted for in Regional System Planning, at page 19.

State policies and the favorable economics of distributed generation projects are driving their adoption on a wider scale than in previous years.  For example, after exceeding its previous solar photovoltaic target, Massachusetts recently increased its target to 1,600 MW.  Renewable portfolio standards, net metering policies, and feed-in tariffs all contribute to the proliferation of distributed generation, as does a cost differential that makes natural gas-fired cogeneration more cost-effective than burning oil for heating and purchasing electricity in commercial and industrial applications.

Synapse’s report concludes, “It is essential that the ISO stop ignoring the impacts DG resources have on system planning—both their benefits and their challenges. This report provides a reasonable estimate of what the future holds for these resources and makes one thing very clear: assuming that these resources do not exist is unacceptable.”

Whether and how ISO New England and the states take distributed generation into account remains to be seen, but if the trends noted in the Synapse report play out to even a modest degree, non-transmission alternatives such as distributed generation may be able to limit further increases in regional transmission rates.

Maine enacts energy bill to promote natural gas, energy efficiency

Tuesday, June 11, 2013

The Maine Legislature has enacted an omnibus energy bill designed to save consumers over $200 million per year.   For reasons ranging from a reliance on oil for home heating to inadequate natural gas pipeline capacity into New England, Maine’s energy costs are well above the national average. In response, a bipartisan group of legislators pulled together a package of measures to cut energy costs.

The Maine State House, Augusta, Maine.

The resulting bill, LD 1559, "An Act To Reduce Energy Costs, Increase Energy Efficiency, Promote Electric System Reliability and Protect the Environment", brings together elements of over ten other bills that came before the Joint Standing Committee on Energy, Utility, and Technology this year.  Last week, the Legislature enacted the bill by wide margins in both chambers: it received a vote of 131-7 in the House, and 29-6 in the Senate.

Highlights of the bill as enacted include:

Requires the Public Utilities Commission to help cut electricity costs:
  • For the first time ever, requires the Public Utilities Commission to work to minimize the cost of energy to Maine’s consumers and to set rates to achieve economic efficiency

Expands heating options:
  • Extends utility pilot programs to offer efficient electric heat pumps

Improves energy efficiency:
  • Gives the Public Utilities Commission and Efficiency Maine Trust a revised policy directive to reduce energy costs and improve security of the state and local economies by pursuing all cost-effective energy efficiency for homes and businesses, including conservation in both electricity and heating fuel consumption
  • Directs Regional Greenhouse Gas Initiative proceeds to lower commercial and industrial energy costs, reduce residential heating energy demand in a fuel-neutral way, and provide rate relief
  • Caps electric efficiency spending at no more than 4% of total retail electricity and transmission and distribution sales in Maine
  • Gives the Public Utilities Commission improved tools for overseeing efficiency programs
  • Uses Maine Yankee litigation settlement funds for energy efficiency investment and rate relief
  • Approves the Trust’s contract with Maine utilities for energy efficiency

Lowers electricity and natural gas costs:
  • Authorizes the Public Utilities Commission to execute or direct utilities to execute energy cost-reduction contracts if necessary and appropriate to reduce the “basis differential” cost of natural gas in New England and thus to reduce the cost of electricity in Maine
  • Protects ratepayers from cost increases resulting from the energy cost-reduction contracts
  • Creates the Energy Cost Reduction Trust Fund to hold energy cost-reduction contract revenues, to be held in trust for the purposes of reducing the energy costs of Maine consumers

Improves controls over the cost of electricity transmission:
  • Establishes a least cost electric transmission policy that gives the Public Utilities Commission improved tools to evaluate whether non-transmission alternatives can   address identified needs at lower cost

Improves the Regional Greenhouse Gas Initiative:
  • Aligns Maine’s carbon emissions budget with other RGGI states’ budgets
  • Adopts the new RGGI reforestation offset to benefit both large and small Maine forest owners.
  • Directs the Department of Environmental Protection and Public Utilities Commission to develop incentives for consumers to reduce greenhouse gas emissions by switching from oil and coal to alternative fuels such as natural gas, biomass, or other renewables

Brings competition into municipal streetlighting:
  • Requires transmission and distribution utilities to give municipalities options to participate in the ownership and management of their own streetlighting systems

Expands ocean energy options:
  • Gives consideration to the University of Maine’s deepwater floating offshore wind pilot project and potential ocean energy projects, in addition to Statoil’s proposal

With the bill enacted as an emergency measure, absent a procedural roadblock it will become law later this month.

TVA to lose largest industrial customer

Monday, June 10, 2013

The Tennessee Valley Authority is losing its largest industrial customer, a government-owned uranium enrichment plant.  When the plant near Paducah, Kentucky closes next year, TVA will lose about 5 percent of its electricity sales, resulting in a loss of about $600 million in annual revenue. What does this mean for TVA and for its fleet of coal-fired electric generating facilities?

The Tennessee Valley Authority is the nation's largest public power provider and a corporation of the U.S. government.  TVA provides electricity for about 9 million people in seven southeastern states: Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee, and Virginia.  TVA is independently financed, meaning it neither receives no taxpayer money nor retains any earnings as profits.  It owns the most operating electric capacity of any utility in the U.S. (33,804 MW as of 2011), and leads the nation in both volume of annual energy sales (167,730 million kilowatt-hours) and annual revenue ($11.841 billion).

TVA's largest customer has been the Paducah Gaseous Diffusion Plant.  Originally built by the U.S. Department of Energy to enrich uranium into fuel for U.S. nuclear power plants, the plant has been leased to and managed by USEC, Inc. since 1993.  Paducah has been the nation's only facility for processing low-enriched uranium since 2001.

Last month, USEC announced that it plans to close the Paducah plant in 2014.  When that happens, TVA will face a new, smaller landscape of demand for its power.  As a result, some observers expect TVA to close the nearby Shawnee Fossil Plant.  The Shawnee facility is a 1,200-megawatt coal-fired power plant built at the same time as the Paducah enrichment plant at a site about 2 miles away.

TVA has not yet indicated whether it will close Shawnee, but in recent months it has announced plans to close 3 other older coal-fired power plants: the Widows Creek Fossil Plant in northeast Alabama, and the John Sevier and Johnsonville fossil plants in Tennessee.  On the other hand, TVA continues to modernize and invest in refurbishing other older coal-fired plants, including the Gallatin Fossil Plant near Nashville, Tennessee.  TVA is investing about $1.1 billion in Gallatin to install pollution controls including sulfur dioxide capture technology.

How TVA responds to the loss of the Paducah uranium plant remains to be seen.  TVA's relatively low rates for power may attract another large industrial customer to the region.  If that happens, it may continue to operate the Shawnee facility and other plants that can be made economical.  Otherwise, TVA may find itself faced with choices to mothball Shawnee or to do something else with its newfound surplus power.

Feds to hold first offshore wind auction

Wednesday, June 5, 2013

The U.S. Department of the Interior has announced plans to hold a competitive lease sale for renewable energy on the Outer Continental Shelf offshore Rhode Island and Massachusetts.  According to a Final Sale Notice published in today's Federal Register, the auction, scheduled to be held by the Bureau of Ocean Energy Management on July 31, will be the first auction of its type for offshore wind site leases in U.S. waters.

Map of the Rhode Island and Massachusetts Lease Areas, courtesy of BOEM.
The auction will cover about 164,750 acres of sea space in a previously defined Wind Energy Area located 9.2 nautical miles south of the Rhode Island shore.  For leasing purposes, the BOEM has divided the area into two leases.  The North Lease Area (Lease OCS-A0486) consists of about 97,500 acres, and is estimated to have the potential for an installed capacity of 1,955 megawatts of electric generation.  The South Lease Area (Lease OCS-A0487) covers about 67,250 acres, and is estimated to have the potential for an installed capacity of 1,440 megawatts.

Based on a review by the National Renewable Energy Laboratory, the Bureau of Ocean Energy Management has concluded that the North and South Lease Areas have significantly dissimilar attributes that make the North Lease area "a more competitive and cost effective area for near term commercial development."  The Bureau thus set the minimum bid for the North Lease Area will be $2 per acre, or $194,996, while the minimum bid for the South Lease Area will be $1 per acre, or $67,252.

BOEM has pre-screened and approved nine companies as bidders in the auction:

  • Deepwater Wind New England, LLC
  • EDF Renewable Development, Inc.
  • Energy Management, Inc.
  • Fishermen’s Energy, LLC
  • Neptune Wind, LLC
  • Sea Breeze Energy, LLC
  • U.S. Mainstream Renewable Power (Offshore) Inc.
  • US Wind Inc.
Bidders' proposals will be evaluated based on a variety of factors, including their cash bids as well as nonmonetary factors including whether a bidder holds a Joint Development Agreement or a Power Purchase Agreement. 

BOEM has described the auction as the "first-ever competitive lease sale for renewable energy on the U.S. Outer Continental Shelf."  How the auction runs -- and its results -- will be informative as to the future of offshore wind in U.S. waters.

Maine launches first grid-connected floating offshore wind turbine

Tuesday, June 4, 2013

The U.S. renewable ocean energy industry achieved a milestone last week with the launch of the nation's first grid-connecting floating offshore wind turbine.  A consortium led by the University of Maine developed and deployed a 1:8-scale prototype in the Gulf of Maine.  What does it mean for ocean energy?

A sailboat catches the wind off the Maine coast.

Offshore wind presents a significant energy resource.  The National Renewable Energy Laboratory has estimated that U.S. waters could host a gross wind power resource of 4,223 gigawatts -- about four times as much generating capacity as the current U.S. electric grid.  If even a fraction of this can be developed in a cost-effective and environmentally friendly way, it could power a significant portion of our electricity needs.

While land-based wind projects represent a relatively established technology -- with over 60,000 megawatts installed in the U.S. by the end of 2012 -- and European waters are home to over 5,000 megawatts of offshore wind, no commercial offshore wind projects have been built in the U.S.  The rigors of the ocean environment create engineering challenges for offshore wind, which drives costs up.  Particularly in U.S. waters, the best wind resources are located in deeper waters farther offshore.  This means that floating wind turbines may be the most cost-effective way to harness offshore winds.

While several prototype floating offshore wind systems have been deployed off Europe, no grid-connected projects have been deployed in U.S. waters.  Using $12 million in funding from the U.S. Department of Energy, the University of Maine and its project partners have developed the VolturnUS prototype.  This unit has several features that may lead to a breakthrough in the cost curve of floating offshore wind.  While most models to date have relied on steel, the VolturnUS semi-submersible platform uses a concrete foundation and composite tower.  While the prototype is just 65 feet tall, its design characteristics are hoped to lead to lower construction costs for larger-scale units closer to 500 feet tall.

The University of Maine is also planning a larger offshore wind demonstration called Aqua Ventus I.  Using a separate $4 million Energy Department grant, the University is engineering and designing a pilot floating offshore wind farm with two 6-megawatt direct-drive turbines on concrete semi-submersible foundations near Monhegan Island. If selected for further funding in 2014, the Aqua Ventus I project could be constructed and installed in several years.