| THE FUTURE OF ELECTRICITY
Inside energy scoop
What the experts say about balancing efficiency, the environment, and electricity costs
How do we balance our energy needs and a cleaner environment? How do those choices affect the economy?
The annual Kentucky Governor’s Conference on Energy and the Environment is a great place to find out what’s going on at the nuts-and-bolts level. At this nonpartisan event, business leaders, technology experts, engineers, public officials, university researchers, and electric utility managers gather to talk about their work.
My notebook from the most recent conference in October in Louisville is filled with notes about coal, solar power, electricity rates, environmental regulations, and energy efficiency.
As I thumb through the pages, my scribbles seem to fall into three categories:
Who pays for a cleaner environment?
Jim Gardner, vice chairman of the Kentucky Public Service Commission, says, “We are not environmental regulators. We are economic regulators.”
Although its open hearings processes are “squeaky clean,” as one national speaker put it, the Kentucky PSC does not determine how clean the air should be. That job belongs to federal and state lawmakers who set broad policy goals and the environmental regulatory agencies responsible for implementing those policies.
In Kentucky, many old power plants have already been retrofitted with expensive emissions control devices that have dramatically reduced power plant emissions during the past 30 years. The role of the Kentucky PSC is to use the regulatory mechanisms established by state statutes to spread out the costs of those devices among electricity users.
Kentucky PSC Commissioner Linda Breathitt says, “Three external factors are influencing electric rates: the slowdown in the economy, the increased use of natural gas, and regulations on air emissions. Proposed EPA carbon emission regulations make it virtually impossible to build any kind of new coal power plant that is economically competitive.”
John Lyons, director, Kentucky Division for Air Quality, says, “All new fossil fuel electricity generation must meet a very low new standard for emissions. Only a combined-cycle natural gas power plant can meet that standard (for fossil fuel emissions).”
“Kentucky has a relatively old coal-fired fleet,” Breathitt says. “Utilities are replacing some of the old coal units with new gas units. As those 50-year-old plants are being retired, utilities are investing money in newer plants. Rates will rise as old plants are retired and new plants are built. Undeniably, the price of electricity in Kentucky is going up, as it is everywhere else.”
Renewable energy is technically tricky
Although natural gas use is slowly increasing in Kentucky, Breathitt says, “Coal will remain dominant for the foreseeable future.”
Diversifying Kentucky’s energy mix to include more electricity from renewable sources must take into account how the power grid works.
Coal and natural gas are fuels that provide “dispatchable” power. This means that humans can control the amount of electricity flowing into the grid from these sources. For stability, the amount of electricity going into the grid must be an exact match with the amount of power people are using. In Kentucky, coal is typically used to meet “base load” demand throughout the year, with natural gas “peaking units” adding extra electricity to the grid during very hot summers and very cold winters when people use more power.
Two kinds of renewable energy—as the technology functions today—are not controlled by humans. Power engineers call this “nondispatchable” power. Electricity produced by the action of the wind or rays of sunshine comes on—and goes off—according to natural events. Sudden changes in the amount of power going into the grid from these nondispatchable sources can cause unstable conditions and interrupt reliable service.
Rodney Andrews, director at the University of Kentucky’s Center for Applied Energy Research, says, “The grid is the issue. How do you put one megawatt of wind power in without taking down one gigawatt already there from traditional sources? You can’t drop renewables in and expect that to replace base load.
“Large-scale solar will not work here until we figure out energy storage,”
Andrews says. “Although renewable energy cannot replace coal, it is still important to add these things to keep up with increasing demand for electricity.”
Energy efficiency in an economy with higher energy prices
Demand for electricity in Kentucky varies among different sections of the economy. The pattern for electricity consumption includes
• 21 percent for commercial activities
• 31 percent for residential use
• 48 percent for manufacturing and other industries
Kentucky’s rank at the number eight spot for highest industrial electrical consumption in the United States reflects the wide assortment of energy-intensive manufacturing businesses located within the state, and the state’s historically low electricity rates.
The moderator’s opening statement that “energy price increases are putting new pressures on Kentucky industries” set off a lively roundtable discussion among business leaders about the role of electricity in the state’s economic development.
Greg Higdon, president and CEO of the Kentucky Association of Manufacturers, says, “From having the lowest electric rates in past years, Kentucky has now slipped to having the fourth lowest electric rates.” The amount of money a company spends on its energy is a key part of its cost of doing business. Keeping that expense low helps a business stay competitive. Higdon says, “As rates continue to go up, energy efficiency is something our manufacturers are very interested in now.”
David Adkisson, president and CEO of the Kentucky Chamber of Commerce, says, “Our members are just now developing an understanding of the value of energy efficiency, but they still have to figure out how to go about doing it.”
This year’s conference included a separate breakout discussion highlighting energy-efficiency programs that are helping industrial, commercial, and residential electricity consumers throughout Kentucky better manage their energy use.