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Convention Highlights—Critical Issue Forums
Huge Investments, Great Uncertainty Complicate Generation Plans
A panel on "Building Generation in a Time of Rising Costs" addressed the difficulty of making decisions involving a large percentage of a company's equity in an environment of deep uncertainty surrounding regulatory structures and potential greenhouse gas emission controls. "The need now is for base load," said David Ratcliffe of Southern Company, noting that much of the new generating capacity built in recent years has been designed to meet peak or intermediate needs. For new base load capacity, he said, the best choice is nuclear. "I believe that is the right technology. I have no certainty on the price, but I don't believe any other technology has any price certainty, either." Tony Earley of DTE Energy commented that "the cost of building a new nuclear plant is going to put a burden on even the healthiest utility." The "starting price" for a new nuclear plant is in the $4 billion to $6 billion range, he said, which amounts to about 10 percent of total capitalization for a large company like Exelon and can exceed half of market cap for many smaller firms. Moreover, even under "streamlined" processes, regulatory approvals for new plants are likely to take many years. Meanwhile, legislation governing greenhouse gases is not expected to coalesce for several more years. Companies facing such potentially enormous investments also face risks associated with the lack of integrity in the political process, said Rowe. "Will the state maintain the model when it gets hard? he asked. Instead, politicians tend to tinker with established policies retroactively for short-term reasons. The result, Rowe said, may be "a few base load plants built very prudently, and a whole lot of ad hoc arrangements that will end up costing our customers money." Rick Kuester of We Generation described how all of the same pressures affect planning and construction of coal-fired plants. He described a recent project in which "almost everything was litigated," and a multitude of review proceedings extended over many years. "We will continue to see sophisticated opposition," he said, "particularly as plants are sited near urban areas. We will see longer cycle times with increased costs and risks. Companies must view any new coal or nuclear program as subject to a public referendum. I cannot over-emphasize the need to build strong public support." No "Magic Bullet" in Greenhouse Gas Regulation
The panel session discussed a variety of mechanisms that have been suggested as means of controlling emissions of greenhouse gases, including a cap and trade program, with or without a "safety valve," along with a carbon fee (or, some speakers said, "tax,") and different combinations of tactics. Moderator Tom Farrell of Dominion outlined the principles adopted by EEI to guide greenhouse gas regulation, including the criteria that any new policy should encourage development and deployment of new technologies, provide for their financing, minimize disruption to the industry and its customers, and be applied across all industries, not just power. Mike Morris of American Electric Power said he tends to support a cap and trade program, coupled with "a realistic timeline," and advocates a system for allocating credits earned under such a program rather than auctioning them to the highest bidder. With allocation, he said, "we will put the credits to good use and ultimately save our customers money." Armando Olivera of Florida Power & Light commented that "a cap and trade program is problematic," and advocated a carbon fee structure instead, as "a certain way to produce measurable greenhouse gas reductions at a reasonable cost." Dick Kelly of Xcel Energy urged that "whatever we come up with should encourage clean energy technology, should not encourage fuel switching, and should reduce emissions at a reasonable cost. Cap and trade programs promote the use of natural gas to generate electricity, where we get very little for a great expense." Time Is Right for PHEVs, Panel Says
Ziegler moderated a panel on "Electric Vehicles: Transforming Transportation." She noted that rising oil prices, concern over greenhouse gas emissions, and other concerns have all come together to help accelerate interest in Plug-in Hybrid Electric Vehicles, or PHEVs. Hank Courtright of the Electric Power Research Institute described ongoing R&D on such topics as battery technologies, charging systems, and interconnection of PHEVs with the power grid. He noted the prospect of reducing gasoline consumption by 20 percent between now and 2030, while increasing electricity consumption by only six percent. With "real time pricing," owners of PHEVs can also choose the optimum times to charge their vehicles, while having the option to sell stored power back to the grid at advantageous prices. Eaton Corporation has been exploring PHEVs for both delivery vehicles and trouble trucks, and Principal Engineer Craig Jacobs described some of the results of these trials. Trouble trucks, for instance, can save a gallon of fuel per hour on job sites by not having to idle their engines to operate equipment. The company has also been tracking actual vehicle use patterns to develop a strategy for optimally managing battery storage and charging. Advanced Energy, a non-profit organization promoting electric vehicles and other initiatives, has been centrally involved in developing a PHEV school bus program, which is expected to have nearly 20 buses in operation in trials around the country. School buses are ideal for PHEVs, said John Morrison, because they follow the same daily routes and have long idle cycles. School districts are also under particular pressure due to rising fuel costs, Morrison said. FOR MORE INFORMATION, E-MAIL BFARRELL@EEI.ORG
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"We are talking about replacing ourselves," said John Rowe of Exelon Corporation, describing the volume of new generation construction that will be required in the near future to the total market capitalization of all EEI member companies.
"We have to develop the technologies that will help us live in a carbon constrained world," said Incoming EEI Chair Jeff Sterba of PNM Resources at a Critical Issue Forum on greenhouse gas regulation. However, he added, "one of the biggest problems is the number of people who think there is a magic bullet."
"There's never been a time when the situation was so set for electric transportation," Lynda Ziegler of Southern California Edison told a Critical Issues Forum during the EEI Annual Convention.