Hillary’s Last Speech as Secretary of State

In Hillary Clinton’s last speech as Secretary of State, she commented that the US is supporting growth in developing countries’ economies because “weak states represent some of our most significant threats.  We have an interest in strengthening them and building more capable partners that can tackle their own security problems at home and in their neighborhoods.”  (min 15:00)  In a world as closely interconnected as we have become, are win-win solutions more visible and attainable?

The prior portion of Hillary’s speech outlined the true transformation of the role of Secretary of State and the nature of securing our interests abroad.  She compared the changes to the evolution from the architecture of the Parthenon to that of Frank Gehry: Today – many interconnected supports are needed, and the former design of resting on a few pillars (such as relations with a few capitals rather than with the 112 countries Hillary visited during her tenure) is no longer effective.  In this new world, access to knowledge is more democratic, more voices count, and the State Department employs people to help internet-poor regions of the earth get better access to the world wide web!

Building by Frank Gehry, New York, NY

Building by Frank Gehry

Drawing of the Parthenon
Drawing of the Parthenon

In some ways, the increase in media and technology has not helped our society.  The extreme partisanship in Congress can be linked to the ability to find information that backs up any point of view, no matter how extreme.  Even average Democrats or Republicans could spend days online in a wash of similar view points before seeing a portal for the merits of the other side.  It’s easy to think we have the one and only best solution if a hundred people echo our views – despite the fact that there may be millions who disagree.  The views of such active citizens are translated to the inboxes of our Representatives, and hence the dearth of a middle ground in Congress that is as bad as Americans can recall.

This sort of negative impact from the democratization of information is something I hope (and believe) we can learn from and grow out of in time.  Meanwhile, the increasingly real and virtually tangible interconnectedness could eventually make the ‘right’ – most beneficial – choices easy to see and easy to act on.

Seeing win-win solutions is something one can actually improve on and get in the practice of doing, in any day and age.  It requires being very specific about what the goals of different parties are, and suspending disbelief that positive outcomes are possible.  Some of the most effective negotiating strategies are being honest, and giving to the other side what it does not hurt you to give.

I’m pulling for a world where the US chooses to implement fabulous carbon reduction laws because Bangladesh is on the UN Security Council and our political representatives – including but not limited to the Secretary of State – believe that our interests are tied to theirs.  Hillary’s comment is a harbinger that such a world is possible.

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‘Air of Inevitability’ & coal plant updates

As a follow up to my last post, I realize the key issue that has changed, as heralded by Obama’s State of the Union address, is an ‘air of inevitability’ for coal emissions regulations.  What would motivate an industry executive to throw their weight behind preferable coal regulations rather than completely fighting them and ridiculing the EPA to the public?  A feeling that coal will be regulated no matter what, and therefore he or she should lend their voice to construct the most pallatable policies.  Based on my time participating in advocacy groups in DC, this ‘air of inevitability’ is something lobbyists and lawmakers try to create as they know it changes the playing field.   Well, along those lines, I may be able to applaud Obama for making such an onerous public threat of executive controls for emissions.

In addition, two news stories are out this morning that relate to this topic.  First, development of a 1,200MW coal plant in Texas is being halted, as announced by its developer White Stallion Energy LLC (article here), citing EPA regulations and the price of natural gas.  This seems to be a positive societal outcome, of mitigating emissions before relatively significant capital has been spent.  A second article describes that New Mexico’s primary utility, PNM, has come to an agreement with the EPA over the regional haze dispute described in my first post under which it will shut two units of its San Juan power plant, and build a gas unit and install pollution controls.  This may be a reasonable outcome as well, which I hope to look into at another time, and it will certainly add stability to the region to know the path forward for PNM’s major generators that have been under heavy scrutiny from the EPA for several year, Four Corners and San Juan (together 3,700MW).

A third notable development on this topic that I will mention is the EPAs release of a report confirming the ozone/disease link that it toted as support for its 2011 proposal to lower the ozone standard to 60 or 70 ppb from the 75 ppb set in 2008.  This caused the industry to go up in arms, declaring both that it was prohibitively expensive and that the science behind such a reduction was faulty.  There is an article on this topic here.  It will be worthwhile to spend more time on this, see what the tea leaves are saying for the future, and come to a view on how this is being handled.  One thing we can say, writing at 1,200 page report (the length of this reference EPA report) certainly creates some jobs, right?

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State of the Union: Let’s have a win-win climate change conversation

When the words, “no area holds more promise than our investments in American energy” rang out during the State of the Union address, I, for one, was energized.

Obama’s second major topic  from his grand podium last night was climate change.   This was a wonderful turn of events for those of us in America and around the globe who dedicate our careers to mitigating climate change through win-win solutions.  Climate change is every bit as serious a challenge as the many others that face our world, such as the need for healthcare and unstable political regimes, in that it threatens lives, livelihoods and the prosperity of communities.  However, the tool kit necessary to respond is specific, and is one the US has and should use to show leadership on the issue.  Creating and implementing effective solutions to climate change requires technical innovation, enforceable and stable policies, and a well-informed long-term view.  By using these tools, the US can create domestic benefits including jobs and manufacturing leadership.  The US also has sufficient market power to catalyze changes in trade partners outside our borders, which supports a cause that ultimately must be solved globally.  In short, we are well-prepared to provide leadership on climate change, it is a global win-win if we do, and thank you Obama for saying ‘climate change’ at minute 18.

However, his next stanza was onerous, and I hope we will muster the political will to re-direct it: “…If Congress won’t act soon to protect future generations, I will. I will direct my cabinet to come up with executive actions we can take now and in the future to reduce pollution….”  Per my earlier post on EPA regulations impacting 6GW of generation in the Southwest, executive actions through the EPA are very costly, involve complex, lengthy, legal discussions between industry and regulators, and lack specificity and clarity towards the goal of mitigating greenhouse gas emissions.

Effective policies to reduce GHG emissions will directly address their goal, be simple to implement for regulators, and be simple to follow for industry, both in letter and intent.  These are characteristics of an honest, open, and trusting relationship between key stakeholders in our energy future.  The result will be climate policies that create revenue for the government and market opportunities for the private sector, with minimal societal costs.

To take it one step further, a dialogue towards win-win solutions is what we need for a ‘fabulous energy industry’ (per my blog tagline), which is one that supplies cheap, reliable energy, and supports our societal goal of a stable and productive natural environment.  Meanwhile, this fabulous sector will generate domestic industry and national energy security.

How could we move towards effective energy policies that create such a fabulous sector?  Industry groups can inform their representatives that among the options for creating a clean energy industry, EPA regulations, such as through the Clean Air Act as they’ve recently been used, are some of the most expensive and painful ways to create change.  Industry leaders can recognize and embrace the opportunity to create new business based on a known, simply enforced, climate-change-mitigating trajectory.  In these and additional ways, we can restart a sensible, win-win conversation on a serious issue that the US can, and should, take leadership on.  Per Obama’s message, this will make our government smarter and the state of our union stronger.

Posted in Coal Retirement, EPA, Politics, Win-win | 1 Comment

Against Chinese Dumping: Solar and Auto Industry Similarities

Election politics, solar, domestic jobs are all hot topics whether because of radiation or large amounts of cash and hot air.  On September 17th, Obama announced he would file suit with the World Trade Organization against China for unfairly subsidizing auto and auto parts exports to the US. (1) This is reminiscent of the trade case American solar panel makers filed with the Commerce Department in October 2011.  There were fewer election politics then, but it clearly reflects the same sentiment as Obama’s announcement today.  Since I understand the solar business far better than the auto business, I will take this opportunity to round out some thoughts on the US solar tariff against China.

  1. Renewables and auto manufacturing have taken similar tactics of protecting and promoting domestic manufacturing.  A significant part of the draw for a new ‘green’ energy industry in the current administration, as evidenced by the headlines in most renewable lobbying efforts.  When I participated in industry meetings in DC in 2009 and 2010, this was the familiar tune for both renewable and coal groups (AWEA and “Generators for Affordable Power”, a merchant coal advocacy group).
  2. Interestingly, the large breakthrough in solar installations globally, and particularly in the US (since we lagged behind Europe on Feed-in-Tariff type policies), stemmed from China’s large-scale entry into panel and silicon manufacturing and the ensuing drop in prices.
  3. The effect of Obama’s anti-dumping move in solar is likely to be a substantial increase in the price of solar panels in the US.  On May 17th, the US Commerce department announced the antidumping tariffs of over 31% on solar panels from China. (2)  How will this impact price points for solar? And how sensitive is the US market to that potential increase?
  4. Most importantly, will the anti-dumping move have its intended effect of promoting domestic jobs in solar?  It’s possible these policies could simply accelerate Chinese companies setting up solar manufacturing in the US.  History shows this will create blue collar jobs in the US, but feed our domestic demand for panels off of well-paid foreign engineers and management, rather than creating those highly-desirable jobs on domestically. (3)
  5. How else could the US spur the domestic solar manufacturing industry, become more competitive with China, and create additional jobs?  Perhaps we could extend tax credits for manufacturing. The 2009 recovery act (ARRA) included a tax credit capped at $2.3 billion in total tax expenditures for advanced energy manufacturing projects (Section 48C). Over 500 applications were submitted, totaling over $8 billion and oversubscribing the program by more than 3 to 1.  Currently, no federal incentives are available to companies trying to build manufacturing facilities in the US, although these may exist on a state level. (4)
  6. China has successfully used EXIM financing: “Chinese state-owned banks have extended nearly $41 billion in loans and lines of credit to the country’s solar panel manufacturers, according to the trade case against them.”(3)  Could the US do the same? How much cheaper is EXIM debt than US private debt? Are there existing public, subsidized, cheaper sources of debt available, such as those provided by loan guarantees from the DOE?  How does the delta in debt costs compare to other key inputs that make the Chinese panels so much cheaper? Labor? Cheaper materials ?  Lower taxes? Other?
  7. One frequent complaint about Chinese business is that they it doesn’t adhere to intellectual properties laws.  Is this a significant part of why they have been successful in solar manufacturing?  Would it be useful to the solar industry to improve enforcement at this point?

Overall, I believe in using green initiatives to spur economic development as well as sustainability in the US.  Energy production has always been inextricably tied with economic development, and it would be ideal to design the green revolution with that in mind – particularly in the increasingly globalized and free-trade world.

So – What types of jobs do we ultimately want to encourage in the US economy? High-paying jobs that offer upward mobility in growing business areas.  There were nearly 100,000 jobs in solar in 2011, half of which were in installation, and a quarter of which were in manufacturing. (2) How do we create a solar GM?  Protectionist, cost-increasing policies are likely a net-negative, and we should focus instead on encouraging of domestic innovation and improving finance parameters for domestic manufacturing facilities.

Sources:

(1) http://thecaucus.blogs.nytimes.com/2012/09/17/filing-trade-suit-obama-raps-romney-on-china/?hp

(2) http://www.nytimes.com/2012/05/18/business/energy-environment/us-slaps-tariffs-on-chinese-solar-panels.html?pagewanted=all

(3) http://www.nytimes.com/2011/10/21/business/chinese-solar-trade-case-has-clear-targets-not-obvious-goals.html?pagewanted=all

(4) http://www.seia.org/policy/manufacturing-trade/solar-manufacturing-incentives

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How could a career in electricity most change the world?

This is a perennial question for me: what is the biggest impact I could make, say, in the next 5 years by working in electricity?  The US power market has in some ways particularly inspired me.  At my first internship in 2005, I felt like a fringe zealot hoping and pushing for wind and solar energy, and by the time I am (now) 3 years into my career post undergrad, wind and solar are each is multi-billion dollar industries of its their right – both nationally and globally.  Suffice to say – in some ways, the electricity industry is a fast-changing, nimble machine that it is exciting to be a part of.  On the other hand, I’m observing first hand that it can take years, or more than a decade in some cases, to get good ideas off the ground – even on the project level, not to mention on the level of sea-changing policy.

So, as I consider the question of how to make the most impact, part of me is excited simply to understand the drivers and nuances that have made the past 7 years in the US electricity industry exciting and green, and I hope that with more time I could apply this accumulated knowledge mixed with some cultivated vision and be a leader in the next chapters of the US electricity market.  Could I be part of the crew that comes up with the next tax break to birth an entire industry?  Would I have the technical and financial creativity to dream up what it should be? Or would I be level-headed enough to help construct something that can pass muster in this bipartisan world.  Perhaps, perchance.

On the other hand, what seems truly exciting right now is applying the lessons of our electric industry, interconnected grid, and semi-functioning capacity markets to new territory.  Could Liberia – which had its nascent grid destroyed in years of war when the copper wires became a valuable item to steal – leap frog our ‘modern’ system for something far more elegant, more flexible and more green?  Are there game-changers out there, like some imagine, where individual choices to use renewable energy could have the same viral penetration as Facebook, changing the industry from the bottom up?

These are the questions I ponder today.  Just how big of an impact would it have to turn on lights for half the country of Uganda (e.g. Sithe Bujagali Hydro plant)?  Or is struggling along with the die-hard, red-taped Californians as they work to design an unprecedentedly green market (at the least in the US) the real way to learn lessons that will be applicable and inspiring for the rest of my to-be-storied career?

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Summary of Romney Energy Plan

Romney’s campaign published a whitepaper describing his energy plan on August 23, 2012. It focuses primarily on oil, and does not give much guidance relevant to electricity. One news source quipped, “’oil’ is mentioned 154 times; ‘climate’ zero”. Notable positions that would impact electricity can be gleaned from additional sources, including the Romney website and other articles, and these are summarized at the end of this document.

In a later post, I will comment on and consider the impacts of the Romney & Obama energy policies, particularly as they relate to electricity.

Summary of Romney Energy Independence Plan:

  1.  A cheap supply of energy would have the impacts of revitalizing domestic manufacturing, creating income for the Treasury, reducing our trade deficit, and strengthening the US dollar.
    1. Manufacturing of steel, fertilizer and petrochemicals is notably intensive in oil-based feedstock and energy consumption. Therefore cheap supply of oil & natural gas could have the impact of revitalizing domestic manufacturing through cheaper inputs and need for materials
      1. e.g. Steel mill in Youngstown, OH to reopen in 2012 to supply parts for fracking.
    2. Cheap energy would give the US a competitive advantage over trade partners
      1. e.g. Natural gas prices are 7 times higher in Beijing (acc to T. Boone Pickens)
    3. Expansion in extraction and export of oil would increase income to Treasury through lease payments, royalties and taxes
    4. Deficit to decrease and dollar to strengthen due to fewer energy imports and more manufacturing exports.
  2. Main proposals to create and ensure cheap domestic energy:
    1. Streamline onshore energy development through giving states control over permitting, especially on federal land (mainly oil and fracking, but will extend to renewables (transmission?) on federal lands also)
    2. Open offshore areas for development and resource evaluation (oil)
    3. Facilitate cross-border energy trade and investment with Canada and Mexico (oil)
    4. Reform permitting and regulatory process (mainly oil, gas and coal; also renewables, transmission
    5. Facilitate private-sector development of new technologies: equip NRC to revitalize nuclear investment & development; encourage natural gas as transportation fuel; “don’t pick winners”/Solyndra reaction

Romney vs Obama on Electricity Policies:
Source: Yahoo News, “Obama vs. Romney 101: 7 ways they differ on energy issues,” Aug 31, 2012; Available: http://ca.news.yahoo.com/obama-vs-romney-101-7-ways-differ-energy-165630258.html

  1. Coal:
    1. Obama pushed for cap & trade. After its failure, EPA went ahead with other regulatory mechanisms, such as the first standard limiting mercury and other toxins from coal plants
    2. Obama has a goal to deploy cost-effective clean coal in 10 years, and have commercial demonstration plants operating in 4 years.
    3. Romney would amend the Clean Air Act to exclude greenhouse gases from its purview.
      1. Under Obama, the EPA found that GHGs threaten human health and welfare (Endangerment Finding, Dec 2009), and therefore began to regulate it under the CAA.  Power plant GHG emissions are regulated under New Source Performance Standards.  Good info available here: http://en.wikipedia.org/wiki/Regulation_of_Greenhouse_Gases_Under_the_Clean_Air_Act
      2. On March 27, 2012, the EPA proposed GHG standards for new power plants, proposing that new fossil‐fuel‐fired power plants meet an output‐based standard of 1,000 pounds of CO2 per megawatt‐hour (lb CO2/MWh gross).
    4. Romney would ensure that all environmental laws account for cost in regulatory process
      1. [My guess is this affects MACT standards (“maximum available control technology”), as these don’t take into consideration costs because they mandate the EPA to impose “maximum” standards.  Meanwhile, BACT standards (“best available control technology”, as discussed my previous post), do take cost and other impacts into account with the intent to seek the “best” solution.  Notably, the recent mercury and air toxics rule for utilities, aka MATS, regulates power plants using MACT.]
  2. Nuclear
    1. Romney aims to allow further nuclear power development
      1. Expand NRC capabilities for approval of additional nuclear reactor designs
      2. Streamline NRC processes, particularly for reactors on or adjacent to approved sites using approved designs
  3. Gas
    1. Romney aims to increase gas production through streamlined regulations and permitting.
  4. Renewables
    1. Romney would concentrate alternative energy funding on basic research
      1. Would not extend PTC or ITC
      2. Supports Renewable Fuel Standard that subsidizes development of advanced biofuels. “Ethanol is an important part of our energy solution for this country.”
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EPA decision on the Navajo Generating Station: Regulate for the real reason

The EPA is playing a very significant role in shaping our resource portfolio, especially when you think in terms of capacity affected – i.e. residential solar legislation is awesome, but it takes a ton of effort to impact the grid on a large scale through that path.  Meanwhile, a 2.3GW resource might be shut down with the stroke of a pen when you’re considering the EPA and coal.  I have a deep understanding of the Arizona-New Mexico power market right now due to current assignments, and in that region, 6.0GW of baseload capacity (all of which is operating at 70-80% capacity factors) is facing potential retirement decisions due to decisions to be released by the EPA in the next few months.

I’ll introduce myself a little bit before I go on – I’m from Vermont, went to Brown, and majored in environmental studies.  They called me flaming liberal quite a lot when I went to my first job with New Yorkers and other jaded types.  I cried when I got my first assignment related to coal.  Nonetheless, I’m glad that I’m now getting closer to the fossil fuel part of the business because it is the other side to the renewable/green coin, and you can’t go anywhere without dealing with it.  (I’ve also stopped crying about assignments.)

I want to see immediate reductions in carbon emissions because I believe in the science of global warming and want to mitigate its impacts as much as possible.   I also believe we also need to address the issue head-on, because the price of using patchwork regulations to squeeze this change out of the market is ultimately going to be high.

In the case of the Navajo Generating Station in Arizona (2.3GW), it appears the EPA is  using its power under the Regional Haze provision of the Clean Air Act to require the plant to add one or both of SCR and baghouses to each of the three units, projected to cost over $1bn.  Specifically, the EPA is in the process of issuing a rule to control emissions from Navajo that contribute to haze at the Grand Canyon and other national parks and wildness areas (Class 1 Areas under the Clean Air Act).  NOx particularly contribute to haze, and they can be mitigated with SCR, SNCR, and low NOx burners.  Of these, SCR is much more expensive that SNCR, and also more effective.

The EPA’s rule will be based on what it determines is the best available retrofit technology (BART) for the plant.  The Clean Air Act requires BART decisions to take into account the cost of compliance, existing control technology at the source, the remaining useful life, and the degree of improvement in visibility anticipated to result from installation of BART.  Not all EPA technology standards require taking economic impacts into account, such as MACT.

The EPA allowed NREL to conduct a study addressing the economic and other issues connected with the Navajo case.  NREL acknowledges that NOx emissions from Navajo are a likely contributor to haze at the Grand Canyon, however, “whether the incremental contribution is significant or even perceptible is a matter of debate among experts in the field of visibility science”.  Meanwhile, controlling emissions using SCR would raise power rates for the Central Arizona Project, which a major water delivery project,  by $0.004 to $0.005 per kWh, causing water rates for agricultural users to increase by 13% to 16%, and 5% to 7% for other users.  This is a significant increase for a debatable improvement in the purported objective of the EPA.

As we aim to be more responsible in our power procurement, both in terms of the environment and health, we are likely to see rates rise.  In my view, this is acceptable, however it needs to be done honestly (is reducing regional haze the EPA’s true primary objective in this case, or is this just a mechanism that allows them to take action?).  Let’s be transparent in the objectives we are after as we make changes that will increase the cost of one of the most basic goods in our country.  And then let’s strive for a more perfect power supply.

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