Friday, January 30, 2015

Portland Pioneers In-Pipe Hydro

By Kyra Hill, Energy Fellow

Cities all over the country now have another reason to look to Portland as a model. This time, the city is leading the way as the second in the nation (after Riverside, Calif.) to generate electricity from four small turbines running in a municipal water pipe.

The technology, developed by Portland-based Lucid Energy in part through a $1 million Department of Energy grant and crowd-sourced funding, operates by running turbines in a gravity-fed water pipeline carrying fast-flowing water. While most hydroelectric projects operate in streams and rivers, these in-pipe turbines operate within the confines of a closed, 3.5 foot-diameter pipe system.


Image Courtesy of Lucid Energy 

The LucidPipe™ system has several benefits over traditional hydroelectric power. First, many hydroelectric projects disrupt sensitive aquatic ecosystems. In contrast, because the LucidPipe™  system operates within closed pipelines, it has a much smaller environmental impact. Second, unlike pumped hydroelectric systems that use energy to move water to higher ground, the LucidPipe™ system takes advantage of gravity-the pipe flows from a butte in outer Southeast Portland-requiring no additional energy. Third, unlike other sources of renewable energy like solar and wind power, which are weather-dependent and thus intermittent (without reliable, affordable storage options), the turbine operation is constant and predictable.

The in-pipe technology has several additional benefits. The acquisition of renewable energy can help cities accomplish renewable energy goals, such as those set out in Portland’s Climate Action Plan. The project can also generate sales to fund city infrastructure development. Although the Portland project is small-it will generate only enough electricity to power 150 homes-the city will receive an estimated $25,000 to $50,000 a year through a twenty-year power purchase agreement with Portland General Electric. Interestingly, the presence of these turbines in the pipe could also alleviate costly pipeline leakage by reducing pressure on the pipeline valve head. Considering that leakage and resulting stress on pipeline infrastructure costs an estimated $14 billion each year, the in-pipe technology offers an important opportunity to source renewable energy, reduce waste and minimize costs.

Aiming to capitalize on these potential economic and environmental benefits, several other cities have expressed interest in developing similar systems to the one now operating in Portland. For example, the city of Haifa, Israel, is slated for a project.

States and cities can take an active role in helping pave the way for this technology. Although these projects are currently eligible for the federal Investment Tax Credit and Production Tax Credit, the uncertain future of these credits in the 114th Congress means that credits and incentives at the state level are likely to become more important. States should ensure that in-pipe technologies are eligible to count towards satisfying Renewable Portfoloio Standards and to receive renewable energy incentives such as tax credits.

Additionally, water infrastructure is in dire need of improvement. The U.S. EPA estimates that waste and stormwater management infrastructure upgrades over the next 20 years will cost almost $300 billion, and drinking water upgrades over the same period will likely cost even more. With these costs in mind, municipalities can start planning for the incorporation of this technology by forecasting necessary improvements and building in-pipe technology into their plans.

The in-pipe technology shows promise and could be impactful in some areas. Agricultural irrigation districts and private industry, for example, could make use of the technology and reduce overall energy consumption, waste, and environmental impacts. For now, in-pipe hydroelectric projects are still rare, but the success of the LucidPipe™ system in Portland could demonstrate this technology’s strong potential. If states and cities offer the right incentives and political support for these projects, in-pipe hydroelectric technology could become widespread, helping to hasten the transition to renewable energy.

Wednesday, January 28, 2015

West Virginia’s RPS Repeal is Pure Political Theater, and Probably a Flop

By Nick Lawton, Staff Attorney
Controversy about Renewable Portfolio Standards (RPSs) continued this week with West Virginia becoming the first state to repeal its RPS. I blogged last week about how RPS repeal efforts are fueled by false claims. Last week’s post covered RPS repeal movements in several states, including Kansas, North Carolina, Connecticut, and West Virginia. That effort has now succeeded in West Virginia, where the legislature recently passed a law rescinding a 2009 law requiring 25% of the state’s energy to come from “alternative energy sources.” Additionally, Kansas Representative John Whitmer (R-Wichita) expects to see a renewed challenge to that state’s RPS as well, stating that he is “sure it will come up.”

Although West Virginia is the first state to rescind an RPS (Ohio froze its RPS last year but did not rescind it), the legislative shift will likely have very little impact because West Virginia’s RPS was quite weak to begin with. In the words of West Virginia House Minority Leader Tim Miley (D-Harrison), the law was a “toothless tiger.” Unlike the vast majority of states, which require actual renewable energy to satisfy a Renewable Portfolio Standard, West Virginia allowedcompliance through such dirty technologies as waste coal, natural gas, and tire-derived fuels. Perhaps as a result, West Virginia’s utilities were already well on track to meet the law’s goals, and the law had little impact on coal-related jobs, according to the West Virginia Public Service Commission. Thus, West Virginia’s withdrawal of its weak renewable energy policy is unlikely to significantly change that state’s energy markets.

However, West Virginia’s recent action does illustrate the short-sighted enthusiasm of some renewable energy opponents. Acting unanimously in the State Senate and by a margin of 95-4 in the House, the West Virginia legislature has refused even to consider the economic impacts of repealing the state’s feeble alternative energy standard. The nominal purpose of the repeal is to help the state’s coal industry, but since the RPS had little impact on coal production in the state, the real purpose seems to have more to do with scoring political points. Jeremy Richardson, a senior energy analyst with the Union of Concerned Scientists, describes the new law as “just political theater.” 

As political theater goes, though, fighting renewable energy may prove to be a flop. A bipartisan poll from December 2014 by the Natural Resources Defense Council (NRDC) shows that strong majorities favor laws that promote renewable energy. NRDC polled 500 likely voters in Colorado, Maine, New Hampshire, and Virginia, as well as 700 in Florida. Solid majorities in every state wanted more investment in energy efficiency and renewable sources like wind and solar, while only small minorities wanted more investment in fossil fuels:

These poll results reveal that the American people are strongly in favor of transitioning our energy system away from fossil fuels and toward clean, renewable sources of energy.

Indeed, this sensible attitude by the American public is likely the reason that Renewable Portfolio Standards are in place in most states. Similarly, popular support for renewable energy is leading California to consider increasing its RPS to 50%, leading New York to consider a fundamental change to its energy markets, and leading Illinois to dedicate $30 million to jump-start solar development. States like West Virginia are clinging to increasingly obsolete fossil fuel-fired technologies, and it will be their citizens who pay the price in higher energy bills, local calamities such as pipeline explosions, and severe health impacts (valued at roughly $75 billion annually nationwide from coal). In contrast, states like California are leading the way to a future powered by renewables, and their citizens will benefit from their forward-thinking policies.

Monday, January 26, 2015

The SunZia Transmission Project Should Facilitate Renewable Energy Development and Bolster National Security

By Amelia Schlusser, Staff Attorney

The southwestern United States is one step closer to constructing a new transmission line that would substantially increase renewable energy development in New Mexico and Arizona. On Saturday, January 24, U.S. Department of the Interior (DOI) Secretary Sally Jewell announced that she has approved a Record of Decision (ROD) from the Bureau of Land Management (BLM) authorizing the SunZia Southwest Transmission project. The SunZia project is a proposed 515-mile transmission line that would transport power from northeast New Mexico to southeast Arizona. According to the project’s proponents, the new line will facilitate substantial renewable energy development in the state. The SunZia line is projected to carry at least 3,000 megawatts of mostly wind- and solar-generated electricity. Secretary Jewell noted that this transmission capacity would provide enough renewable energy to power one million homes while reducing carbon emissions by 4.5 million metric tons per year.

In addition to displacing the emissions from 890,000 cars annually, the transmission line’s construction and renewable energy development would provide much-needed jobs for New Mexico and Arizona. The transmission project is expected to create 6,000 construction jobs and 100 permanent jobs. More significantly, the line will open the door to dramatic renewable energy development with the potential to create 40,000 jobs.

“The SunZia Project will help unlock the abundant renewable energy resources in the Southwest, creating jobs and bringing reliable, sustainable power to a growing corner of our country,” said Secretary Jewell. "It's an opportunity really for the state to make an investment in a future that is not tied to commodity prices, the vagaries of oil and gas prices and the boom-and-bust cycle that is so prevalent in that industry," the Secretary explained to the Associated Press.

The National Security Debate

While the SunZia project has tremendous potential to expand renewable energy development in New Mexico, the project’s proposed route has attracted harsh criticism from U.S. Representative Steve Pearce (R-NM). According to a recent Greenwire article, the Congressman fears that the line will compromise national security. Pearce argued that the project’s route near the White Sands missile range “‘will dramatically impair’ the missile range’s mission ‘to test defense systems critical to the protection of our nation and troops.’”

SunZia’s proposed route does not cross the federal White Sands missile range (WSMR) itself, but it does cross the WSMR’s Northern Extension Area, a network of private land and leased public land that the Department of Defense (DOD) often evacuates prior to conducting missile tests in the WSMR. In response to Army concerns that the high-tower line could disrupt testing and training in the range, the BLM worked closely with the DOD to mitigate the project’s impacts. SunZia’s developers ultimately agreed to bury the power line segments that run through the Northern Expansion Area.

The DOD ultimately did not object to the SunZia project, and Katherine Hammock, the Assistant Secretary of the Army for Installations, Energy and Environment, asserted that the project makes America stronger. “It allows for the more rapid uptake of vital renewable energy, stimulates jobs, and preserves mission capability at White Sands Missile Range, one of the most unique training and testing facilities in the world," said Assistant Secretary Hammock.

However, the DOD/BLM compromise did little to pacify Rep. Pearce, who issued a statement opposing the project the day before Secretary Jewell approved the ROD. “It appears that, with one stroke of a pen, Secretary Jewell will permanently damage our national security,” wrote Pearce.

Pearce’s opposition raises a compelling question regarding the nature of “national security” and the actions we take to protect it. Assuming that Rep. Pearce’s doom-invoking contention is even nominally accurate (which is highly unlikely), the threat that the Congressman fears should be outweighed by the benefits the new transmission line can provide. Which scenario realistically presents a greater threat to the security of our country: one in which federal missile testing is temporarily and moderately restricted, or one in which one million homes continue to rely almost exclusively on fossil fuels for electricity?

Evidence suggests that continued reliance on fossil fuels poses the far greater threat. Last year, the Risky Business Project issued a report on the economic impacts of climate change, which projects that the U.S. will lose billions of dollars in the next 5 to 25 years due to property and infrastructure damage, agricultural losses, and increased energy costs resulting from climate change. In October, the Pentagon released a report warning that climate change presents an immediate threat to national security. Aside from emitting mass quantities of greenhouse gases, fossil fuel power plants contribute to both air and water pollution that threaten human health and damage the natural environment. Our existing, fossil fuel-dependent energy system presents a very real, very substantial threat to our national security. Projects that enable us to transition away from our current system towards a more sustainable energy grid may therefore have a far greater impact on our long-term security than modern weaponry. 

Thursday, January 22, 2015

RPS Repeal Efforts Are Fueled by False Claims

By Nick Lawton, Staff Attorney

Efforts to repeal Renewable Portfolio Standards (RPSs) are underway in several states. In Kansas, where the legislature voted down two separate RPS repeal measures in 2013, the addition of five Republicans to the legislature has reinvigorated the RPS repeal effort. The West Virginia legislature is also considering a repeal of its RPS—even though West Virginia’s law does not actually require renewable energy development, instead allowing compliance through “alternative energy resources” including coal and natural gas. In Colorado, two bills have been proposed to either reduce the required amount of renewable energy development or to push back compliance deadlines. In North Carolina, repealing the RPS is the first item on Americans for Prosperity’s (a very conservative advocacy organization funded by the Koch brothers) legislative agenda for 2015. And finally in Connecticut, a report by the Yankee Institute, a conservative think tank, argues for repeal of the state’s RPS.

The repeal efforts in various states are all based on a common strain of misinformation. Calls for repeal frequently repeat the assertion that RPSs cost states money and jobs. For example, the Yankee Institute claims that Connecticut’s RPS adds roughly $1.6 billion to the state’s electricity prices over the next five years, costing each resident roughly $450. That same study also claims that the RPS will cost the state 2,660 jobs and $283 million in lost income during the same period. Opponents of Kansas’s RPS play the same tune, claiming that the RPS will lead to increases in electricity rates. The Colorado lawmaker leading the charge against that state’s RPS, Republican Senator Ray Scott, makes essentially the same argument that the policy has burdened consumers with higher energy bills.

However, the argument that Renewable Portfolio Standards raise rates, as compared with the business-as-usual course of reliance on fossil fuels, is simply—and demonstrably—wrong. For example, the U.S. Energy Information Administration (EIA) reports that the average residential electricity price increased by 3.2% between 2013 and 2014. More specifically, in the Southeast, where every state except South Carolina lacks an RPS, average prices rose by 3.1% in the same period. Meanwhile, an empirical study by Lawrence Berkeley National Laboratory has revealed that Renewable Portfolio Standards in deregulated states have increased electricity rates by 2% or less (except in Massachusetts, which saw a roughly 2.5% increase), while RPSs in regulated states have increased rates by roughly 3% or less. In short, electricity rates have not increased more quickly in states with Renewable Portfolio Standards.

In fact, reliance on fossil fuels seems to be the primary driver for electricity rate increases. EIA reports that states in New England that saw an 11.8% increase in electricity prices can attribute those rate increases not to RPSs, but to volatility in the price of natural gas as a result of high energy demand in a cold winter. Similarly, as of 2012, Kansas’s RPS had increased electricity rates by less than 1%, but a single rate increase to pay for a single environmental upgrade to a coal-fired power plant would have raised rates by 2.3%, more than twice as much.

A similar pattern of debunking is easy to provide for the claims that RPSs kill jobs. For example, the Montana Department of Commerce reported in 2013 that wind energy development in that state had provided $1.5 billion in capital investment and had yielded nearly 20,000 jobs—more than the Keystone XL pipeline. Similarly, there are now twice as many workers nationwide in the solar industry than in coal mines.

Oregon provides the clearest example of the disparity between the claims about RPSs and the truth about RPSs. In 2011, the Beacon Hill Institute & Cascade Policy Institute released a report entitled “Economic Impact of Oregon’s Renewable Portfolio Standard.” That report projected that Oregon’s RPS would cost the state $992 million in 2025, would raise electricity rates by 24%, and would lead to the loss of 24,630 jobs. In fact, none of these predictions have come to pass. In reality, Oregon added 3,067 renewable energy jobs in the second quarter of 2013. More dramatically, LBNL reports that compliance with the RPS has actually saved money: “In Oregon, average utility estimates of incremental compliance costs were actually slightly negative (-$4/MWh); that is, RPS resources were determined to cost less, on a statewide average basis, than the proxy non-renewable resources that would have otherwise been procured.” In short, Oregon’s RPS is actually saving the state money while creating jobs and providing carbon-free energy.

RPS opponents seem to remain blinkered to the fact that Renewable Portfolio Standards work, instead making demonstrably false claims about these policies while refusing to inquire into their actual effects. Republicans in the West Virginia legislature are epitomizing this head-in-the-sand approach to policy-making, opposing economic analysis of the proposed RPS repeal—despite the fact that a local utility believes it could comply with the RPS without increased costs or job losses.

My personal favorite flavor of RPS-related misinformation comes from Colorado. In that state, average electricity rates are well below the national average, but state Senator Ray Scott still claims the RPS is harming ratepayers. Scott laments that the state’s RPS “is being paid for by the ratepayers, not the utilities.” He continues: “And, quite frankly, if it’s such a great idea, the companies should build these systems. It shouldn’t be done on the backs of the ratepayers.” This claim sounds like a populist objection to high electricity prices, but is in fact meaningless. Utilities make money by recovering costs from ratepayers. Thus, utility investments—whether made to comply with an RPS or not—are ultimately paid for by ratepayers. Senator Scott’s objection ignores this fundamental principal of energy markets in an attempt to score political points with a lofty-sounding but vapid sound bite. No one should be fooled.

Renewable Portfolio Standards are good energy policy. They work; the vast majority of states are on track to meet RPS goals. They do not raise electricity rates more than business as usual. They create jobs. And they help transition the nation to a carbon-free energy economy. Claims to the contrary are simply and demonstrably wrong. Hopefully, the latest efforts to repeal RPSs will face the same failure as they did last year.

Tuesday, January 20, 2015

Xcel’s Upper Midwest Resource Plan Illustrates the Difficulties of Creating a Long-term Energy Plan for Multiple States with Divergent Energy Policies

by Amelia Schlusser, Staff Attorney

Last week, my blog post discussed Xcel’s Upper Midwest Resource Plan and the utility’s proposed renewable energy additions over the 2016–2030 planning period. As that post explained, Xcel’s Plan takes a proactive approach to long-term resource planning during a time of significant change in the energy sector. The utility’s Plan deserves recognition for its proposals to dramatically increase the utility’s renewable energy mix and reduce its greenhouse gas emissions. However, it also sheds light onto a considerable, and growing, challenge that utilities face in adapting to the evolving needs and circumstances of the 21st Century electricity industry: How can a multi-jurisdictional utility create a long-term energy plan that complies with the energy policies of each state it serves? More importantly, how should such a utility respond if one state’s policies directly conflict with another state’s policies?

Divergent Policies

Xcel had to confront this issue when it developed its 2016–2030 Upper Midwest Preferred Resource Plan. Xcel’s integrated Northern States Power (NSP) System serves more than 1.8 million electricity customers in Michigan, Minnesota, North Dakota, South Dakota, and Wisconsin. These five states have adopted very different energy policies and goals that influence or guide the utility resource planning process. For example, Michigan, Minnesota, and Wisconsin have all enacted Renewable Portfolio Standards (RPSs) or Renewable Energy Standards (RESs) requiring that utilities operating in these states procure a percentage of their electricity from renewable sources by a certain date. While these three RESs all impose mandatory compliance obligations, they vary in scope. For example, both Michigan’s RES and Wisconsin’s RPS direct the states’ utilities to provide 10% renewable energy by 2015, while Minnesota’s RES mandates that 30% of Xcel’s retail electricity sales come from renewable sources by 2020. North Dakota and South Dakota, on the other hand, have only adopted voluntary objectives that 10% of electricity sales come from either renewable sources or “recycled energy” (i.e. combined heat and power) by 2015. In addition to these renewable energy standards and objectives, Minnesota’s Next Generation Energy Act includes a statewide goal to reduce greenhouse gas (GHG) emissions by at least 80% below 2005 levels by 2050, and utility resource plans must describe the company’s progress in meeting this goal.

In creating its 2016–2030 resource plan, Xcel followed a logical approach to confronting these diverging policy requirements and goals. The utility recognized that Minnesota’s policies were more stringent than those in its neighboring states, so Xcel’s Plan focused on achieving compliance with Minnesota’s RES requirements and GHG reduction goals. In Xcel’s view, this approach would allow all of its customers to benefit from a more diverse, sustainable energy mix in a cost-effective manner. However, the utility also acknowledged that some of the states it serves do not share Minnesota’s energy and environmental priorities, and that it must balance the needs and goals of all the states within its operating area. Xcel realized that it would be increasingly difficult to achieve this balance in the face of “irreconcilable differences” between state policy objectives, as is currently the case between Minnesota and North Dakota.

North Dakota’s Conservative Policy Objectives
According to Xcel’s resource plan, North Dakota adheres to a very conservative, least-cost approach to utility resource planning and procurement. As the largest electric utility operating in North Dakota, Xcel is obligated to comply with the state’s energy policies. In recent years, however, this obligation has become increasingly burdensome for the utility. The North Dakota Public Service Commission (PSC) only permits a utility to recover the value of prudent, cost-effective resource investments that are consistent with the state’s energy policies. And in Xcel’s recent North Dakota rate cases, the PSC has repeatedly indicated that renewable energy investments are potentially inconsistent with North Dakota’s policies.

In 2012, the North Dakota PSC denied Xcel cost recovery for the utility’s Power Purchase Agreement (PPA) in the Prairie Rose Wind Project. According to Xcel’s 2016–2030 resource plan, the PSC had determined that the primary purpose of Xcel’s investment in the wind farm was to comply with Minnesota’s RES, and concluded that Xcel had not demonstrated a need for the farm within North Dakota. In 2013, the PSC determined that Xcel’s investments in the Odell Wind and Pleasant Valley Wind projects—both located in Minnesota—were imprudent and inconsistent with North Dakota’s energy policies. However, the PSC found that Xcel’s investments in the Courtenay Wind and Border Winds projects, which are both located in North Dakota, were prudent.

Xcel’s Attempt to Reconcile Conflicting Policy Directives

When Xcel invests in generating resources and supporting infrastructure, it allocates the costs of these investments between all of its customers. If North Dakota denies Xcel cost recovery for investments in renewable resources, the utility would be forced to disproportionately allocate these costs between its remaining customers. Xcel’s resource plan must therefore consider and attempt to mitigate potential cost allocation conflicts that may emerge during the planning period. In an attempt to comply with North Dakota and Minnesota’s conflicting energy policies, Xcel agreed to a series of procedural changes requested by the North Dakota PSC. Xcel agreed to seek an Advanced Determination of Prudence for investments in resources larger than 50 megawatts. The utility also agreed to undergo a “System Restack,” in which resources determined to be imprudent by the PSC would be replaced with an alternative financial “proxy resource” that meets North Dakota’s policy goals. Finally, Xcel agreed to create a resource plan that would be consistent with North Dakota’s energy policies.

In accordance with this agreement, Xcel’s Upper Midwest Resource Plan includes a North Dakota Plan (NDP), which is designed to identify a resource portfolio that would be compatible with the state’s policies. The NDP assessed portfolio performance under a North Dakota-specific scenario in which carbon emissions were not valuated or constrained, coal was an available resource option, no renewable energy standards or goals were imposed, and it was assumed that small-scale solar development would not increase during the planning period. The resulting resource mix relied predominantly on natural gas generation and did not include future renewable energy additions.

A Sustainable Compromise?

Xcel’s compromises with the North Dakota PSC have enabled the utility to achieve a tentative balance between Minnesota’s and North Dakota’s divergent policy objectives. However, the utility acknowledges that these procedural changes will likely not remain sustainable over the long term. While the procedural changes address the impacts of out-of-state policies on North Dakota energy consumers, they do not address the impact that North Dakota’s policies may have on Xcel’s customers in Minnesota, Wisconsin, and Michigan. “Nor does it address,” according to Xcel’s resource plan, “how the integrated NSP System can develop under fundamentally different policy views.”

Xcel is currently exploring potential long-term solutions to these challenges, including the feasibility of splitting its North Dakota operations off from the remaining NSP System. Under this approach, Xcel would effectively operate as two distinct utilities, one focused on developing and maintaining a more sustainable, diverse energy supply, and the other devoted to conventional, fossil fuel-based generating resources. The problem with this approach is that it would force a portion of the utility’s operations to remain mired in the past, and prevent the utility from swiftly responding to changing circumstances. On the other hand, Xcel’s remaining operations would be free to adapt and respond to the realities of today’s energy landscape.

This proposed approach exposes an additional dilemma for vertically integrated investor-owned utilities in today’s market. Utilities that are best able to adapt and respond to fundamental changes in the energy sector are more likely to remain profitable over the long-term than their static counterparts. However, how should a forward-looking utility respond when their customer base is reluctant to respond to change? Xcel appears poised to evolve into the utility of the future, yet North Dakota seems to believe that it can effectively insulate itself from the shifting conditions of the 21st Century. Xcel is essentially being forced to choose between sustainable and non-sustainable business models, and the choice it makes today will impact its investors and ratepayers for years to come.