Natural Gas, Utility Biz Model Reform, & Just Transition at the Fall 2017 Clean & Affordable Energy Conference

The Fall 2017 Clean & Affordable Energy Conference was held on Thursday, November 2nd at the Seattle Hilton.  More than 200 attendees gathered to explore issues related to energy, climate, and just transition and to network with colleagues from industry, advocacy organizations, and government.  The following is a digest of the conference’s three major sessions as well as the keynote speech by Spencer Reeder of Vulcan Inc. and presentations from advocates promoting carbon pricing legislation in Washington and Oregon.

 

Can there be a bad clean energy future?

Amid the energy and environmental policy horror show that is the Trump administration, we take comfort in the knowledge that market forces, specifically plunging costs for renewable energy, seem to be overwhelming efforts to save the coal and nuclear industries. But, even if the market – and hopefully policy as well someday – drives us inexorably toward a clean energy future, we’re not out of the woods.

That’s because there isn’t just one possible clean energy future. There are good ones, but also bad ones in which the transition doesn’t happen fast enough to avert the worst consequences of global warming, in which the economic benefits of the transition accrue to a few and leave many behind, or in which the transition is only partly completed leaving problems that will afflict us for decades to come.

With that in mind, the Fall 2017 Clean & Affordable Energy Conference explored three questions that must be answered correctly if we’re to avoid a bad clean energy future.

• How can we make the transition to a clean and affordable energy future fair and just for workers and frontline communities?
• What role should natural gas play as the Northwest transitions to clean energy?
• How can utility business models be aligned to support the transition to clean energy?

The conference also heard from Spencer Reeder, chief environmental officer at Vulcan, describe how clean energy policy can be adapted to the lifestyles and politics of places that aren’t on the forefront of energy and environmental progress. And we were introduced to carbon pricing proposals that will soon be considered by legislatures in Washington and Oregon.

 

Panel 1: An equitable transition to a clean energy future

Washington state Senator Rebecca Saldaña summarized the challenge by pointing out that energy policy isn’t just about energy. It’s also about health, the environment, and economics – areas in which neither the costs of polluting resources nor the benefits of clean and renewable energy have been equally shared.

Peter Bloch Garcia of the Latino Community Fund provided detail describing the consequences in frontline communities of fossil fuel-powered electricity and transportation systems including a heightened prevalence of asthma, cancer, and other health conditions, which translate into poor school and work attendance, increased health costs, and a loss of opportunity.

While a transition to clean, renewable electricity will help address some of those issues, Jeff Johnson, of the Washington State Labor Council, identified another challenge the transition may precipitate if it’s not managed well – lost jobs and incomes for workers and communities whose livelihoods are tied to the fossil fuel industry.

The agreed take-away was that it’s essential to not just develop policies that addresses the needs of those communities, but to have the communities actively participate in the formation of those policies.

That need was emphasized by Jo Ann Hardesty, president of the Portland NAACP who called on frontline communities to not only participate in policymaking but, if necessary, “take the table”. At the same time, Hardesty admonished advocacy and policymaking organizations to make participation possible for hard-pressed families by engaging in active outreach, providing convenient meeting times and places, and offering childcare and food. And Senator Saldaña encouraged all in attendance to expand their advocacy to address related issues such as housing and defense of the voting rights act.

That kind of aggressive engagement is necessary, Jeff Johnson and Senator reminded the conference, because, with the ascent of the Trump administration, the fight for clean energy and for frontline community worker rights is taking place on multiple fronts. Work standards, wages, health care, the clean up of toxic lands, and efforts to expand affordable housing are all under assault as are public assets, many of which the Trump administration and its allies want to privatize.

But, Jo Ann Hardesty pointed out that not all of the challenges are the work of political enemies. Even in places like the Northwest where the drive for clean energy and energy efficiency is making great strides, many of the benefits have been concentrated in wealthier communities even though the greatest need and opportunities for improvement are often found in frontline communities.   Johnson added another concern. Despite the proven ability of the clean energy economy to drive economic growth and job creation in local communities, many of those jobs offer low pay and few benefits.

There are, observed panel moderator Shawn Collins of the Energy Project, no easy solutions to so complex a set of issues. And at times there are tensions between environmental, economic, social, and energy imperatives. But ultimately, the only way to resolve those tensions and advance good policy is through purposeful engagement.

 

 Panel 2: Aligning utility business models with the pursuit of a clean energy future

We have a regulatory structure for investor-owned utilities, explained panelist Jeff Goltz of Cascadia Law Group, that was created in 1911 when it could be assumed there would be a single supplier of electricity and that demand would grow indefinitely. They were assumptions upon which utility business models and regulation were premised and they remained true for the better part of a century.

But, now they are being undone by advances in energy efficiency and an associated reduction in per capita consumption of electricity, the increasing prevalence of distributed sources of generation, and the rise of an energy marketplace in which independent power producers sell their product to utilities.

No longer are utilities assured of year-over-year revenue growth. Meanwhile, as Ken Johnson of Puget Sound Energy observed, their costs to maintain the electric grid are increasing and demands for greater energy efficiency, the retirement of fossil fuel resources, and the integration of renewable resources are increasing.

Still, significant progress has been made in the areas of energy efficiency and renewable generation. Bob Jenks of the Oregon Citizen’s Utility Board pointed out that Oregon will be coal-free by 2030. Lauren McCloy, energy policy advisor to Washington Governor Jay Inslee, cited a 6,300 megawatt reduction of consumption in the region due to improved energy efficiency, which represents a $5 billion savings for customers. And Johnson cited significant utility investments in renewable resources including PSE’s commitment to build 800 megawatts of new wind capacity in the next three years. At the same time, improvements in rate design, including the adoption of “decoupling”, have relieved some of the bottom line pressures on utilities that might otherwise arise due to reductions in load.

Many of these advances are attributable legal and regulatory mandates that established renewable portfolio standards and energy efficiency requirements. The question is whether that approach is sufficient to assure continued evolution to a clean energy future and whether all utilities – investor-owned and public alike – should be brought under a more integrated regulatory regime. But, while additional regulatory mandates are probably necessary and viable, political realities probably make it unlikely that regulatory structures will emerge to cover both customer-owned and investor-owned utilities alike.

So, if rewarding investor-owned utilities for building increased capacity is inconsistent with the need for energy efficiency and the rise of independent energy producers, can they be rewarded for maintaining the electric grid and coordinating service?

Bob Jenks cited reforms to utility business models in New York that may have great promise, but which have become bogged down in complication. Ken Johnson fleshed out a few of those complications describing the desire of utilities to have greater regulatory freedom to pursue additional business opportunities. One of those opportunities is in the area of building and managing charging infrastructure for electric vehicles, which are poised to become far more numerous. However, Johnson acknowledged that utilities’ standing as regulated monopolies could distort markets in which they might compete with non-utilities.

When asked whether the requirement that utilities provide electricity using the “lowest reasonable cost” resource inhibits the transition to clean and renewable resources, panelists acknowledged that it may depending on how regulators interpret the public interest standard.

Whether regulators should interpret the requirement narrowly and consider only the current market price for available resources or more broadly to encompass issues such as reliability, long-term fuel price variations and the social cost of carbon can greatly alter the calculation of “least cost”. The response on which all panelists could agree was that there needs to greater definition of the public interest standard so that utilities face less risk and have a greater incentive to innovate.

At the same time, additional legislative efforts to mandate a transition to clean and renewable energy are expected and not unwelcome. Speaking for Puget Sound Energy, Ken Johnson said that in principle his company is receptive to concepts such as carbon pricing and cap and trade proposals, although support would be contingent on the details of specific proposals.

Lauren McCloy, who advises Washington Governor Inslee, was also supportive saying that 2018 is “the year to act”.

 

 Keynote Address: Spencer Reeder, Director of Climate and Energy at Vulcan

The Smart City Challenge is a partnership between Vulcan and the US Department of Transportation in which one city, Columbus, Ohio, was selected in December 2015 as a pilot site for an effort to make a quantum leap in the transition from a fossil fuel-based economy to one that embraces clean and renewable energy, particularly in the transportation sector.

Seventy-eight cities in thirty different states applied for the program. Many, including Portland and Seattle, had already made significantly more progress on the transition than Columbus and commanded more public support. But, as Reeder explained, it was precisely because Columbus represents a part of the country where the commitment to clean and renewable energy isn’t as developed that it stood out. If the program could succeed in Columbus, it might then serve as an inspiration to policymakers in other cities that are not on the forefront of the clean energy movement to sit up and take notice of the economic opportunities and improvements to the quality of life that can accompany the transition.

Columbus managed to parlay $10 million in grant funding from Vulcan and another $40 million from the Department of Transportation into more than $400 million in additional grants from the state of Ohio, the local electric utility, the Ohio State University and other organizations. The funding will be used to integrate self-driving electric vehicles, smart grids, smart streetlights, and collision avoidance sensors into the city’s transportation system. It will also be used to create smart transit corridors for public transportation.

Already Columbus has seen a doubling in the rate of EV adoption and, by the time the grant period ends in 2019, the program will have installed over 1,600 EV charging stations in the city.

 

Special Session: Carbon pricing – What’s afoot in Washington and Oregon?

The upcoming 2018 legislative sessions will see carbon pricing bills brought up in the Washington and Oregon legislatures. And, if the bills fail to win approval there, there is a strong likelihood they will end up on the ballot as citizen initiatives in November 2018.

Becky Kelley of the Alliance for Jobs and Clean Energy and the Washington Environmental Council took the conference audience through the basic provisions of the Washington proposal, which is still in the process of being refined.

The Alliance bill would apply a carbon tax of between $15 and $25 per metric ton to carbon emissions by major emitters including utilities and industrial facilities. The tax would increase annually according to its effectiveness in reducing greenhouse gas emissions. The proceeds from the tax, which Kelley estimated at about $1 billion per year 80% of which would be used to fund emissions reductions and climate resilience programs. The remainder would be used to provide funding for frontline communities, including communities of color, low-income areas, and communities adversely affected by the transition from the fossil fuel economy to adapt to and benefit from the transition.

Precise data concerning the amount of revenue that the tax would generate, how it will be allocated, and the effect it might have on consumer prices for electricity and gasoline has yet to be determined pending completion of the provisions that will make up the proposal.

The Oregon bill, which is being promoted by Renew Oregon, employs a cap and trade mechanism to establish a cap on emissions and allow Oregon businesses to then buy and sell emission credits. As described by David Van’t Hof of Climate Solutions, the cap would apply only to Oregon’s heaviest emitters – those over 25,000 metric tons annually – and the number of available credits would decline gradually until the year 2050. At the same time, Oregon would invest $700 million in community solar and wind turbines, weatherization, efficiency upgrades, transportation infrastructure, and climate preparedness like micro-hydro irrigation systems.

Van’t Hof is optimistic that the Oregon cap and trade proposal will be enacted, citing the support of more than seven hundred Oregon businesses and the fact that more than 43,000 Oregonians now work in the state’s booming clean energy economy.

 

Panel 3: The role of natural gas in the Northwest’s clean energy future

The panel, moderated by Headwaters Award-winner Jay Luboff of Navigant consulting, featured and array of perspectives with Bill Edmonds of Northwest Natural, Oregon’s largest natural gas utility, Tarika Powell of the Sightline Institute who analyzes natural gas policy and economics, and Tony Usibelli of the Washington Department of Commerce.

The fundamental question addressed by the panel was whether natural gas, which is a significantly less polluting fuel than coal, but a polluting one none-the-less, is a valuable or even a viable component either as a “bridge fuel” in the transition to a clean energy future or as an ongoing component of that future.

Bill Edmonds opened said that it is calling for “a big tent” approach to power generation in which natural gas performs an important balancing function to facilitate the integration of renewable energy into the grid while preserving resiliency and reliability. He noted that role is reflected in a study of Washington’s energy future by the Deep Decarbonization Pathways Project, which looked at the mix of resources Washington could optimally adopt to achieve its commitment to emissions reduction under the Paris climate agreement.

Tarika Powell saw things differently. Acknowledging the warning by some to not “throw the baby out with the bathwater” and to not “let the good become the enemy of the perfect” when reducing reliance on fossil fuels, Powell argued that natural gas isn’t even “good”. Pointing to the extreme damage done by methane when emitted into the atmosphere and the absence of reliable reporting on the amounts being emitted from the wellhead to the point at which it is burned to generate electricity, Powell argued that the risk posed by natural gas is immense.

Tony Usibelli countered that, like it or not, natural gas is a “bridge fuel” given that, at present, it is the source of 25% of power consumed in the Northwest and, under any scenario, it will be years before that much can be fully replaced. The challenge according to Usibelli, is to look at natural gas in the context of a three-pronged strategy of, first, maximizing energy efficiency in order to reduce load, second, electrifying the economy to minimize reliance on fossil fuels in other sectors, particularly transportation, and third, transition the electric generating system to carbon-free resources. Ultimately, said Usibelli, the goal in Washington is to reduce greenhouse gas emissions by at least 80% from 1990 levels and perhaps by 90% or more.

Edmonds suggested that part of that goal can be achieved by relying to the degree possible on “renewable” natural gas – natural gas derived from landfills, farms, waste wood, and other sources that are not dependent on drilling and fracking. He acknowledged, however, that even a highly successful program to capture renewable natural gas would probably meet only about 25% of the total requirement. That’s why his company, Northwest Natural, is engaging in a major initiative to reduce emissions of methane, including those that take place “upstream” during the drilling, pumping, and transmission processes.

Still, observed Tarika Powell, today more than 70% of the natural gas produced in the US comes from the technique known as hydraulic fracturing or fracking, a process that is noteworthy for adverse consequences to the local environment including the immense amounts of water it consumes and contaminates, its creation of radioactive waste, and even earthquakes caused by the injection of waste into underground caverns. Meanwhile, the drilling industry has aggressively resisted reporting requirements and other regulations that would allow local and state governments as well as the federal government to assess and take actions to manage emissions.

The immediate risk, Powell concluded, is that decisions we make now to add more natural gas generating capacity are ones with which we will have to live for decades. Or we may have to eat the cost of early retirement if the consequences of climate change become sufficiently devastating.