Last week, Arizona regulators filed a plan to eliminate the state’s energy efficiency program. The Arizona Corporation Commission (ACC) staff submitted the proposal on Tuesday and the five commissioners will vote on the plan.
The ACC adopted the energy efficiency program in 2010 with a 5-0 vote after years of meetings and workshops with stakeholders. After gathering input, the commission ruled that investor-owned utilities in the state must reduce the amount of power sold by 22% by 2020. Electric cooperatives in the state must reduce the amount of power sold by 16.5% by 2020.
The ACC found that energy efficiency programs would not only save money for customers, but it would also help create stable electricity prices, reduce pollution and water usage. This is extremely important in Arizona where water consumption and the on-going drought are a huge concern. The energy efficiency programs are expected to save ratepayers $9 billion through 2020.
Furthermore, population has been increasing in Arizona and the corresponding increase in power demand necessitates significant investments in distribution, transmission, and generation facilities – all of which leads to infrastructure and operational expenses for utility companies. These costs are passed onto the ratepayer, resulting in higher electric bills.
Four four years into the program, Commissioner Gary Pierce believes the program is “not cost effective” although he could not cite examples that supported his belief. Pierce voted in favor of the program in 2010, but now he wants to replace the longer-term energy efficiency plan with a series of two-year goals for utilities.
Pierce attempted to reduce the state’s renewable energy standard last year when he submitted but then withdrew an American Legislative Exchange Council (ALEC) worded proposal. Pierce and three other commissioners have ties to ALEC.
Kris Mayes, a former commissioner from 2003-2010, told The Republic’s Ryan Randazzo that, “Nothing in the record suggests the standard is not working… This is a free pass for utilities to give up on energy efficiency.”
Ratepayers contribute to the energy efficiency program by spending an additional $2-$4 a month on electric bills, which results in millions of dollars saved by preventing power generation and all of its associated capital costs. However, the energy efficiency program is impacting the profits of utility companies such as Arizona Public Service and Tucson Electric Power, because reducing energy usage is the best way to avoid constructing new power plants and selling electricity (which is how utilities generate profit). The utility companies will submit their comments to the ACC regarding the proposed plan to gut the state’s energy efficiency standards.
This attack on energy efficiency in Arizona follows previous fights in Indiana and Ohio, and an on-going fight in Florida.
In March, Indiana Governor Mike Pence allowed the state’s energy efficiency program to be repealed. He was the first governor in the country to repeal an energy efficiency program.
Then in June, Ohio Governor John Kasich signed S.B. 310, which froze the state’s energy efficiency and renewable energy standards.
And in Florida, Duke Energy, Tampa Electric, and Florida Power & Light have submitted proposals to gut the state’s conservation goals arguing it is cheaper to generate electricity than to spend money to save it. The Florida Public Service Commission will decide the case, but the PSC has already given the go-ahead for Duke Energy to build a $1.5 billion natural gas plant – which Duke will charge Florida ratepayers to build.
All of these events are occurring during a time when states are commenting on the Environmental Protection Agency’s proposed Clean Power Plan, which relies significantly on implementing efficiency programs to reduce carbon dioxide emissions. Ironically, the proposed rule in the Federal Register highlights Arizona’s energy efficiency program as a successful one… at least for now.
South Carolina Solar Future
Recent Poll Shows Widespread Support
The results of this recent South Carolina poll echoes support for solar energy across the country. Recent polls show strong, bi-partisan support for solar energy and solar net metering in Colorado, Florida, Arizona, and Massachusetts. Net metering gives solar customers full retail credit for any surplus energy they put back on the grid, and utilities are then able to sell this energy to other homes and businesses at full retail price.
The South Carolina economy could soon see increased investment and new business opportunities after the State Legislature passed a solar energy bill this summer. Signed into law by recently re-elected Governor Nikki Haley, the law will allow solar leasing in the state and asks the Public Service Commission (PSC) to develop new net metering rules. However, the PSC must still decide how distributed solar energy systems will be compensated for electricity they sell back to utilities, a key issue that will impact how great the economic impact of the solar boom will be in the Palmetto State. A new study from nearby Mississippi bodes well for South Carolina as it shows that rooftop solar puts downward pressure on rates and delivers savings to all ratepayers (see more details on the study below).
PSC decisions will either enable solar energy to expand and thrive in South Carolina or limit solar industry growth. Utility companies, including Duke Energy and South Carolina Electric & Gas, will almost certainly pressure the PSC to weaken policies for solar energy. Despite studies from across the country finding a net benefit to all ratepayers from distributed solar energy, utility interests will try to claim that solar energy would negatively impact ratepayers.
Mississippi Study Shows Savings for All Ratepayers
A recent study prepared for the Public Service Commission of Mississippi by Synapse Energy Economics concluded that the benefits of implementing net metering distributed solar energy in the state outweigh the costs. In nearly every scenario, solar net metering provided a net benefit for all ratepayers by reducing the need for infrastructure investments and demand for oil and gas peaking resources, thereby putting downward pressure on rates. The report stated “These benefits will only be realized if customers invest in distributed generation resources. This may never happen if net metering participants are not expected to receive a reasonable rate of return on investment.” In sum, the report found the annual benefits of solar net metering in Mississippi to be $170 per MWh (according to the 25-year levelized avoided cost).
The Mississippi report reconfirms previous reports in Nevada, California, and Arizona. The Public Utility Commission of Nevada study, conducted by Energy and Environmental Economics and released this summer, found a $36 million net benefit to all Nevadans from solar systems installed through 2016. In California, a study by Crossborder Energy found that when California hits its net metering cap, the benefits to the grid of distributed energy will exceed the costs by $92 million annually. And a similar study in Arizona by Crossborder Energy found that net metering will provide Arizona Public Service customers with $34 million in benefits each year.
Atlantic Offshore Drilling Plans Continue: Fossil Fuel Front Groups Meet Privately With Federal Agencies
Oil and gas drilling off the Atlantic coast could begin as soon as July of 2017.
That plan was the topic of discussion yesterday in a private meeting with federal agencies and oil and gas funded groups, according to Michael Biesecker of the Associated Press. State regulators from Virginia, North Carolina, and South Carolina also attended.
The Department of Interior, through the Bureau of Ocean Energy Management (BOEM), is currently writing a five-year leasing plan for offshore oil and gas drilling that would begin in 2017. BOEM was one of many federal agencies representing the Obama administration in the closed-door meeting.
Dan Simmons, the vice president for policy at the Institute for Energy Research (IER) also attended the meeting with federal and state officials. IER is a nonprofit think tank funded and founded by the Koch brothers.
Incorporation filings show the institute [IER] grew out of a Texas-based advocacy group co-founded by Charles Koch, the chief executive officer of Koch Industries. The institute's president, Thomas J. Pyle, previously worked as a lobbyist for Koch Industries, whose subsidiaries include extensive oil and gas operations.
Simmons previously worked at the American Legislative Exchange Council, an industry-funded group that has worked to ease environmental regulations for the extraction and burning of fossil fuels.
In addition to IER speaking at the meeting, Michael Zehr from the Consumer Energy Alliance (CEA) also presented. CEA is run by a public relations firm called HBW Resources. In fact, CEA compensated HBW Resources $1.2 million in 2012 for “management & professional” services. HBW Resources also has close ties to Alberta’s tar sands industry, and helped defeat Obama’s efforts of creating a low carbon fuel standard.
Funding to CEA comes from oil and gas interests. CEA received $282,500 from the American Petroleum Institute (API), the largest trade association for oil and gas industry, from 2008 to 2012. API also funds groups like Americans for Prosperity and the American Legislative Exchange Council.
CEA was recently in the news for having its petition rejected by the Wisconsin Public Service Commission. The petition supported proposals from utility companies Madison Gas & Electric and We Energies for an increase of fixed charges on electricity bills, a way for utility companies to slow the development of solar energy. People that are on CEA’s petition said they were unsure how they ended up on the list when contacted by The Capital Times.
The 2014 midterm elections will have implications on a variety of issues across the country and throughout all levels of government. Many people will be analyzing the events and decisions that occurred during the campaign season. But looking forward, numerous energy and environmental issues will be decided during the next two years by the newly elected and re-elected politicians. Here is a brief outlook of possible energy and environment issues to be debated in Congress, state capitols, and public utility commissions.
Republicans will continue their control over the House of Representatives and also become the majority party in the Senate, as a result of gaining at least seven seats. Federal lawmakers will debate at least three energy issues as a result of this change in power.
First, there are now 61 senators in favor of the Keystone XL pipeline. Approving the pipeline is likely one of the GOP’s first agenda items when the new Congress begins its session.
Second, climate change deniers will control key Senate committees allowing deniers to be in positions that effect agencies and budgets. Lee Fang at Republic Report broke down how the Senate committees would likely change:
- Sen. Jim Inhofe (R-OK) controlling the Environment and Public Works Committee, which oversees the Environmental Protection Agency.
- Sen. Ted Cruz (R-TX) chairing the Subcommittee on Science and Space, which oversees the National Science Foundation and the White House office of Science and Technology Policy.
- Sen. Ron Johnson (R-WI) controlling Homeland Security and Governmental Reform Committee where he would “likely use his perch to harass scientists.”
- Sen. Mike Enzi (R-WY) chairing the Budget Committee and could reduce funding for agencies “attempting to regulate carbon pollution.”
Third, two vital clean-energy policies are potentially in jeopardy: the Production Tax Credit (PTC) and the Investment Tax Credit (ITC).
The PTC is used to incentivize the development of wind energy, but Congress failed to extend the PTC at the end of 2013. In 2014, a PTC extension could be approved as part of a broad tax extenders package during the lame-duck session. The Senate Finance Committee has already passed a bill that extends the PTC for projects that start construction prior to the end of 2015. However, because Republicans know they control both chambers of Congress starting January 3, 2015, the GOP will likely delay any extenders package thereby creating uncertainty for the PTC. In fact, Rep. Boehner and Sen. McConnell write in The Wall Street Journal that the tax code will be one of their priorities next year.
The ITC provides a 30% tax credit for the cost of solar systems and has helped to drive growth in the solar energy industry. While it does not expire until the end of 2016 (when it would be reduced from 30% to 10%), Republicans will still control Congress and thus, determine if it gets extended.
Deutsche Bank recently released a report concluding that solar will reach grid parity (meaning it will be more cost effective than traditional electricity sources) in 47 states by 2016. But if the ITC were to drop to 10%, solar would only have grid parity in 36 states. This is why energy interests aligned with the Koch Brothers want to squash pro-solar policies like the ITC.
Solar Energy Industries Association (SEIA) President Rhone Resch announced a national campaign to extend the ITC beginning when the new Congress is sworn in on January 3, 2015. Resch said it will be an uphill battle fight but “as sure as World War I started in 1914, if the Koch Brothers and their allies come after solar, 2014 will be the beginning of World War III.”
Governors and State Legislatures
More than two-thirds of the states held gubernatorial elections in 2014, which made the midterms important for state-level politics, specifically energy and environment policies. This is because the gridlock in Washington D.C. has made state capitols the place to enact, weaken, or even repeal energy and environment laws.
Furthermore, President Obama’s Clean Power Plan, which is to reduce carbon dioxide emissions by 30 percent by 2030, gives states flexibility in creating plans to reach their individual state targets. This will turn state legislatures into battlegrounds over the next two years. But, this is not the only topic that will be debated in state capitols across the country. There are other renewable energy policies and environmental laws that will be under attack from traditional energy interests at the state level during the next two years.
Renewable Energy Standards
Kansas’ Republican Governor Sam Brownback defeated Democratic challenger Paul Davis. While this specific gubernatorial election can be characterized as a referendum on Brownback’s aggressive tax cutting, the state’s renewable energy standard is also at stake over the next few years. Ari Phillips at ClimateProgress wrote, “the Koch brothers have devoted a significant amount of time and money into repealing the standard and as of late, Brownback has wavered in his support.” Brownback was once in favor of the state’s renewable energy standard but has now singled that he would like to “phase out” the law. Davis said he would veto any bill that repeals the standard. The introduction of a bill designed to repeal the standard seems inevitable in 2015.
Michigan’s Republican incumbent governor, Rick Snyder, defeated Democratic challenger Mark Schauer. Michigan utilities are on track to meet the 10% renewable energy standard by 2015, and Snyder has set a broad energy vision and is looking to have specific legislation in place in 2015. Snyder is looking to have legislation include renewable energy goals to be achieved by 2025. Snyder has also said he wants to reduce the state’s reliance on coal while boosting energy efficiency.
New Mexico’s Republican incumbent governor, Susana Martinez, won a second term and defeated Democratic challenger Gary King. Oil, gas, and other energy-related industries were Martinez’s largest financial backers according to The Santa Fe New Mexican. Martinez is also one of the governors who signed a letter sent to President Obama in September saying the EPA has overstepped its authority with the Clean Power Plan. King was in favor of the Clean Power Plan in addition to enhancing the 20% renewable energy standard to encourage the development of more renewable energy. Martinez will likely ignore any pathways to expand clean energy in the state.
Ohio’s Republican incumbent governor, John Kasich, defeated Democrat Edward FitzGerald. Kasich signed ALEC-influenced Senate Bill 310 in June making Ohio the first state in the country to freeze its renewable energy and energy-efficiency standards. A legislative committee has been established to review the standards and make recommendations. Only three members of this committee voted against SB 310. The remaining nine members voted in favor of the freeze, including ALEC members Sen. Balderson, Faber, and Seitz. The defeat of FitzGerald makes it now more of an uphill battle to reinstate the renewable energy and energy efficiency laws.
Last week, a study published in the journal Nature found that the increase in global natural gas consumption “is not necessarily an effective substitute for climate change mitigation policy.” The study’s conclusion undercuts climate change policies that use natural gas as a key tool in an effort to decrease greenhouse gas emissions.
Five models that integrate energy, economy, and climate systems were used in the study, which concluded that Earth’s global average surface temperature would increase above 2°C (over preindustrial levels) by 2050, which is the agreed upon limit to avoid the risk of runaway climate change. The Earth has warmed 0.85°C from preindustrial times to 2012, according to the Intergovernmental Panel on Climate Change (IPCC), the international body tasked with assessing climate science.
The Pacific Northwest National Laboratory's study, “Limited impact on decadal-scale climate change from increased use of natural gas,” found that the increase in natural gas consumption around the world would decrease the amount of coal being consumed. But, the increased market for natural gas will also weaken the market penetration of additional zero-carbon sources like wind, solar, and nuclear energy. Therefore, despite natural gas infrastructure replacing the use of coal, the increased use of natural gas will still push the world towards climate devastation.
Another study from Stanford University drew similar conclusions last year. The Stanford study, “Changing the Game? Emissions and Market Implications of New Natural Gas Supplies” found that natural gas would displace renewables and nuclear, which would ultimately increase U.S. carbon dioxide emissions through 2050.
However, the Pacific Northwest National Laboratory study in Nature comes at an interesting time for the Obama administration. When speaking at a Barclays Capital energy forum on September 2, EPA Administrator Gina McCarthy said the Environmental Protection Agency (EPA) would issue a methane strategy that could include regulations on oil and gas wells this fall. Over a 100-year timeframe, methane is a greenhouse gas that is about 34 times as potent as change-driving carbon dioxide; over 20 years, it’s 86 times as potent.
But even if the oil and gas industry were to make a concerted effort to reduce methane leakage, decreasing those rates would still not make natural gas a “bridge” fuel to climate-safe economy, according to the study in Nature.
New Science Unlikely to Change Administration’s Climate Policy
Despite the forthcoming strategy on methane, the natural gas industry’s support from the White House shows no signs of disappearing. Administrator McCarthy, Secretary Moniz, and President Obama all continue to echo the ‘All of the above’ talking points and continue to praise the industry, claiming natural gas can be used as a “bridge fuel.” With the construction of new natural gas power plants each year (and because the average age of a natural gas power plant is only 14 years), the U.S. will be locked into using natural gas for decades to come. Even the Administration’s central pillar in reducing greenhouse gas emissions, the Clean Power Plan, projects natural gas will be the leading fuel for power generation in 2030.
To make matters worse, the Obama Administration recently approved a fourth facility to export liquefied natural gas (LNG). Dominion Resources’ Cove Point facility, south of Baltimore, Maryland, is expected to export as many as 1.8 billion cubic feet of natural gas per day (Bcf/d). The other three projects approved (Cameron Parish, Louisiana; Hackberry, Louisiana; and Quintana Island on the Texas Gulf Coast) are projected to export a combined total of 5.9 Bcf/d. And, at least 14 more projects totaling 17.4 Bcf/d are waiting for approval from the Federal Energy Regulatory Commission (FERC).