Three utility leaders, speaking at a Feb. 15 forum organized by the United States Energy Association, had a message for the public and policymakers: being green isn't easy.
Georgia Power Co. Resource Policy and Planning Director Jeff Burleson spoke of the challenge of meeting environmental standards for a proposed biomass plant, while Indianapolis Power & Light Co.General Counsel and Corporate Secretary William P. Marsan talked about his company's feed-in tariff program being overrun by "speculative developers" and PNM Resources Inc. Federal Affairs Director and Senior Climate Adviser Jeanette Pablo discussed her company's need to seek a waiver from the New Mexico renewable portfolio standard after hitting cost caps.
"Stop the happy talk," Marsan told attendees of the forum, held in Washington, D.C. "In my mind, the public really is woefully uninformed when it comes to energy production and use. We need to have a reasonable, reliable, realistic discussion about what renewable energy can and can't do."
Renewable energy may be popular, he said, but it can also be expensive, even in the Midwest, which has abundant wind resources. Customers accustomed to electricity from coal that costs 6 cents per kWh are going to struggle to adjust to the cost of renewables. For context, he said the utility's renewable energy production tariff offered to buy renewable energy for as much as 24 cents per kWh.
This is not to say there is not room for renewable energy in his vision.
Despite the lack of a renewable energy mandate in Indiana, IPL already purchases some wind generation and, when the Lakefield wind park comes online, the utility will procure 7% of its energy from renewables.
"We think that strikes the right balance, considering there is no Indiana renewable energy standard whatsoever and the prospects for a federal standard seem questionable," he said. "[Renewable energy] has some benefits to us, but sometimes we don't sufficiently value the affordable, reliable energy we have today. Renewable energy will likely be a niche market for our lifetimes."
Policy can also be a challenge. One public failure was IPL's establishment of a feed-in tariff, which at first saw virtually no uptake and then suddenly saw a dramatic increase in interest.
Marsan said the program, called the renewable energy production rate, had very few customers at first. Then, as federal renewable energy incentives were extended and the price of solar panels dropped, interest surged.
"We began at IPL to be inundated with developers wanting to … take advantage of our feed-in tariff," he said, adding that a division of IPL's corporate parent AES Corp. was among those interested. "Within weeks we had a queue that was within our cap for our FIT. This was not what we envisioned at all, so we have since gone to the commission and applied to rescind the feed-in tariff and re-evaluate how it works."
It is a cautionary tale of how a feed-in tariff can work and not work, he said. Initially, it was a program aimed at helping customers who wanted to self-generate, but then it "turned into a speculative program for developers. That's not what we had in mind."
A 'green' plant that requires 160 tractor trailer deliveries a day
Georgia Power's Burleson talked of other challenges, not the least of which is Georgia's limited wind, geothermal and solar resources.
Some resources are available on the ridge tops of the Appalachian Mountains — many of which are considered national forest — and the rest of the resources are many miles offshore in areas frequently affected by hurricanes.
Some companies are now considering offshore wind development in the United States, but Georgia will have to wait for new technologies, Burleson said. The turbines that are rated to withstand hurricanes are not able to take advantage of the state's relatively low wind speeds. "It's not very promising, at least in the near term," he said.
What Georgia does have is biomass. The state produces about 70 million tons of new wood growth per year and only 50 million tons are used by existing industry. "Biomass, we have in abundance," Burleson said. "[It's] one of the renewables we feel that has a great deal of potential for the state."
To take advantage of this resource, the company has proposed to convert its coal-fired Plant Mitchell facility to biomass, creating a 100-MW renewable energy plant.
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Fueling the plant, though, could make some question just how scalable biomass is.
The Southern Co. subsidiary will have to enter into contracts to purchase and haul 1 million tons of wood to the facility, an effort that is expected to require between 160 and 180 tractor trailer truck deliveries each day, six days per week. That is about one truck every 5 minutes or less for 10 hours a day.
To supply the plant, trucks would drive to the facility and onto a "truck tipper," which would then lift the front end into the air and dump the wood into piles. Those piles then must be rotated to ensure that the wood does not begin to rot, or catch fire as the decomposition creates heat.
"The vast majority of the fuel would come from what would otherwise be waste wood," Burleson said. "Either tops and limbs. Go in and get those that would otherwise sit in the forest and rot."
That is a relatively straightforward challenge.
Another challenge may be more daunting. Federal regulatory policies are now calling the plant's environmental attributes into question, and Georgia Power was forced to delay the project in early 2010.
The U.S. Environmental Protection Agency's industrial boiler rule would regulate emissions of hazardous air pollutants from industrial boilers, such as certain acid gases, organics, metals and possibly other pollutants, and would likely affect biomass boilers, including the one planned for the Mitchell plant. An updated version of that rule is expected shortly, which could require the utility to install additional environmental controls that would impact the economics of the project.
The EPA is also considering a ruling on how to calculate net greenhouse gas emissions from biomass, but that decision has been delayed by at least three years.
"We will probably have to make a decision without knowing the outcome of that EPA rulemaking," Burleson said. The Plant Mitchell facility would result in a 90% reduction in carbon assuming the EPA rules that biomass is carbon neutral — "and that's a big if," he said.
Georgia Power also runs a voluntary green power sales program, but participation has been limited at best. Out of the utility's 2.3 million customers, only 5,000 are signed up. Some of these are large customers, but they represent only a small share of the utility's sales.
Even with a significant resource, Georgia Power can only expect so much out of biomass, Burleson noted. "We anticipate having some modest amount of biomass in our portfolio," he said. But the utility does not anticipate biomass will emerge as a major percentage of its generation, even under the best of circumstances relative to production tax credits and EPA environmental rules, he added.
RPS no magic bullet
Unlike Georgia and Indiana, New Mexico does have a renewable portfolio standard, but PNM's Pablo said that policy has not come without complexities.
In 2007, state lawmakers set out a 20% by 2020 RPS for investor-owned utilities. But that legislation also included allocations of each of the major renewable technologies. The result has been that some expensive aspects of the program have run up costs, causing the program to hit cost caps and forcing the utility to seek a waiver from its compliance.
"They didn't silo the reasonable threshold per category," she said, adding that the distributed solar program took up a big part of the allowed costs. "You get less per dollar for your distributed solar than you do for wind."
The utility has also run into challenges with technicalities and paperwork. In one program, the utility buys renewable energy credits from customers. But the Internal Revenue Service considers that income taxable, and PNM has had to issue IRS 1099-MISC Forms to those customers. "That has caused us a big deterioration of all the positive PR that we got," she said.
While New Mexico is rich in renewable resources, she said the infrastructure required to reach those resources is extensive and costly.
"New Mexico is generously endowed with solar and wind, [but] they are not in the same place and they are not in the population centers," she said, adding that this is made even more difficult given PNM's low credit rating. "We are saving every penny, we are teetering on the edge."
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